Exhibit 99.2
[LOGO]
Endurance
Endurance Specialty Holdings Ltd.
INVESTOR FINANCIAL SUPPLEMENT
FIRST QUARTER 2004
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Endurance Specialty Holdings Ltd.
Wellesley House, 90 Pitts Bay Rd.
Pembroke HM 08, Bermuda
Massa B. Cressall
Strategic Planning and Investor Relations
Phone: (441) 278-0988
Fax: (441) 278-0929
email: mcressall@endurance.bm
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This report is for information purposes only. It should be read in
conjunction with other documents filed by Endurance Specialty Holdings
Ltd. pursuant to the Securities Act of 1933 and the Securities Exchange
Act of 1934.
Financial Supplement Table of Contents
Page
i. Basis of Presentation i
ii. Organizational Chart of Executive Management ii
iii. Organizational Chart of Corporate Structure iii
I. Financial Highlights 1
II. Consolidated Financial Statements
a. Consolidated Statements of Income 2
b. Consolidated Balance Sheets 3
c. Segment Data Distribution 4
d. Consolidated Segment Data 5
III. Other Financial Information
a. Unrealized Gains and Operating Cash Flow 6
b. Return on Equity Analysis 7
c. ROE Component Analysis - Operating and Investment Leverage 8
d. Investment Portfolio Information 9
IV. Loss Reserve Analysis
a. Activity in Reserve for Losses and Loss Expenses 10
b. Analysis of Unpaid Losses and Loss Expense 11
V. Share Analysis
a. Dilutive Shares Outstanding 12
b. Earnings Per Share Analysis -- As Reported 13
c. Dilutive Shares Sensitivity Analysis 14
d. Book Value Per Share Analysis 15
VI. Regulation G 16
Application of the Safe Harbor of the Private Securities Litigation Reform Act
of 1995:
Some of the statements in this financial supplement may include forward-looking
statements which reflect our current views with respect to future events and
financial performance. Such statements may include forward-looking statements
both with respect to us in general and the insurance and reinsurance sectors
specifically, both as to underwriting and investment matters. Statements which
include the words "expect," "intend," "plan," "believe," "project,"
"anticipate," "seek," "will," and similar statements of a future or
forward-looking nature identify forward-looking statements in this financial
supplement for purposes of the U.S. federal securities laws or otherwise. We
intend these forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements in the Private Securities Litigation
Reform Act of 1995. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only to the date on which they are made.
We undertake no obligation to publicly update or review any forward looking
statement, when as a result of new information, future developments or
otherwise.
All forward-looking statements address matters that involve risks and
uncertainties. Accordingly, there are or may be important factors that could
cause actual results to differ from those indicated in the forward-looking
statements. These factors include, but are not limited to, competition, possible
terrorism or the outbreak of war, the frequency or severity of unpredictable
catastrophic events, changes in demand for insurance or reinsurance, rating
agency actions, uncertainties in our reserving process, a change in our tax
status, acceptance of our products, the availability of reinsurance or
retrocessional coverage, retention of key personnel, political conditions,
changes in accounting policies, changes in general economic conditions and other
factors described in our Annual Report on Form 10-K for the year ended December
31, 2003.
ENDURANCE SPECIALTY HOLDINGS LTD.
BASIS OF PRESENTATION
DEFINITIONS AND PRESENTATION
o All financial information contained herein is unaudited, except December
31, 2003 and December 31, 2002 full year balance sheet and income
statement data.
o Unless otherwise noted, all data is in thousands, except for per share,
percentage and ratio information.
o As used in this financial supplement, "common shares" refers to our
ordinary shares and class A shares, collectively.
o Endurance Specialty Holdings Ltd., along with others in the industry, uses
underwriting ratios as measures of performance. The loss ratio is the
ratio of claims and claims adjustment expense to earned premiums. The
acquisition expense ratio is the ratio of underwriting expenses
(commissions, taxes, licenses and fees, as well as other underwriting
expenses) to earned premiums. The general and administrative expense ratio
is the ratio of general and administrative expenses to earned premiums.
The combined ratio is the sum of the loss ratio, the acquisition expense
ratio and the general and administrative expense ratio. These ratios are
relative measurements that describe for every $100 of net premiums earned
or written, the cost of losses and expenses, respectively. The combined
ratio presents the total cost per $100 of earned premium. A combined ratio
below 100% demonstrates underwriting profit; a combined ratio above 100%
demonstrates underwriting loss.
o GAAP combined ratios differ from statutory combined ratios primarily due
to the deferral of certain third party acquisition expenses for GAAP
reporting purposes and the use of net premiums earned rather than net
premiums written in the denominator when calculating the acquisition
expense and the general & administrative expense ratios.
o NM - Not meaningful; NA - Not Applicable; LTM - Latest twelve months.
i
ENDURANCE SPECIALTY HOLDINGS LTD.
ORGANIZATION CHART
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Endurance Specialty Holdings Ltd.
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Chairman, President and Chief Executive Officer - Kenneth LeStrange
Chief Financial Officer - James Kroner Chief Actuary and Chief Risk Officer - David Cash
General Counsel - John Del Col Head of Claims - William Fawcett
=========================================================================================
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- -------------------------- ------------------------- ---------------------------- --------------------------
Endurance Reinsurance Endurance Specialty Endurance Endurance Worldwide
Corporation of America Insurance Ltd. Services Limited Insurance Limited
(Primary (Primary Operation - (Primary Operation - (Primary Operation -
Operation - Bermuda) New York) London)
New York)
President - President - President - Chief Executive Officer -
William Jewett Thomas Bell Steven Carlsen Mark Boucher
- -------------------------- ------------------------- ---------------------------- --------------------------
ii
ENDURANCE SPECIALTY HOLDINGS LTD.
CORPORATE ORGANIZATION CHART
-------------------
Endurance Specialty
Holdings Ltd.
(Bermuda)
-------------------
___________________|____________________
| |
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Endurance Specialty Endurance
Insurance Ltd. Services Limited
(Bermuda) (U.K.)
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__________________|__________________
| |
----------------- ----------------------
Endurance U.S. Endurance
Holdings Corp. Worldwide Holdings
(U.S.) Limited (U.K.)
----------------- ----------------------
| |
| |
----------------- ----------------------
Endurance Endurance Worldwide
Reinsurance Insurance Limited
Corporation of (U.K.)
America
----------------- ----------------------
iii
ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED FINANCIAL HIGHLIGHTS
QUARTER ENDED
MARCH 31, Previous
-------------------------- Quarter
2004 2003 Change
---------- ---------- --------
----------
HIGHLIGHTS Net income $ 100,872 $ 51,201 97.0%
Operating income [a] 98,685 44,869 119.9%
Gross premiums written and acquired 720,631 362,115 99.0%
Net premiums earned 415,826 189,653 119.3%
Total assets 4,127,517 2,585,455 59.6%
Total shareholders' equity 1,763,103 1,468,547 20.1%
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PER SHARE Basic earnings per share
AND SHARES DATA Net income (as reported) $ 1.57 $ 0.88 79.7%
Operating income (as reported) [a] $ 1.54 $ 0.77 100.6%
Diluted earnings per share
Net income (as reported) $ 1.47 $ 0.86 71.5%
Operating income (as reported) [a] $ 1.44 $ 0.75 91.4%
As Reported Weighted average common shares outstanding 64,084 58,458 9.6%
Weighted average common shares outstanding
and dilutive potential common shares 68,555 59,672 14.9%
Book Value Book value [b] $ 27.48 $ 22.69 21.1%
Per Share Diluted book value (treasury stock method) [b] $ 25.51 $ 22.06 15.6%
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FINANCIAL RATIOS ROAE, net income [c] 5.9% 3.8% 2.1%
ROAE, operating income [c] 5.8% 3.3% 2.4%
Annualized ROAE, net income 23.7% 15.3% 8.4%
Annualized ROAE, operating income 23.2% 13.4% 9.8%
Annualized investment yield 3.5% 3.4% 0.2%
Loss ratio 53.4% 54.9% -1.5%
GAAP Acquisition expense ratio 20.6% 18.2% 2.4%
General and administrative expense ratio 7.6% 10.3% -2.7%
---------- ---------- -------
Combined ratio 81.6% 83.4% -1.8%
STAT Acquisition expense ratio 20.0% 20.5% -0.5%
General and administrative expense ratio 4.4% 5.4% -1.0%
---------- ---------- -------
Combined ratio 77.8% 80.8% -3.0%
----------
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[a] Operating income represents after-tax operational results excluding, as
applicable, after-tax net realized capital gains or losses and after-tax
net foreign exchange gains or losses. Please see page 13 for a
reconciliation to net income.
[b] For detail calculations please refer to page 15.
[c] Average equity is calculated as the arithmetic average of the beginning
and ending equity balances for the stated periods.
1
ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED STATEMENTS OF INCOME
QUARTER ENDED
MARCH 31
-------------------------- YEAR ENDED
2004 2003 DEC. 31, 2003
--------- --------- -------------
UNDERWRITING REVENUES
Gross premiums written and acquired $ 720,631 $ 362,115 $ 1,601,997
Premiums ceded (3,624) (2,061) (4,153)
--------- --------- -----------
Net premiums written and acquired 717,007 360,054 1,597,844
Change in unearned premiums (301,181) (170,401) (423,897)
--------- --------- -----------
Net premiums earned $ 415,826 $ 189,653 $ 1,173,947
--------- --------- -----------
UNDERWRITING EXPENSES
Losses and loss expenses 222,009 104,145 $ 663,696
Acquisition expenses 85,518 34,560 230,549
General and administrative expenses 31,767 19,466 100,657
--------- --------- -----------
Total underwriting expenses 339,294 158,171 994,902
--------- --------- -----------
Underwriting income $ 76,532 $ 31,482 $ 179,045
--------- --------- -----------
OTHER OPERATING REVENUE/EXPENSES
Net investment income 24,675 14,356 71,010
Interest expense (828) (1,207) (4,238)
Amortization of intangibles (944) (405) (3,237)
--------- --------- -----------
Total other operating revenue/expenses $ 22,903 $ 12,744 $ 63,535
--------- --------- -----------
INCOME BEFORE OTHER ITEMS 99,435 44,226 242,580
OTHER
Net foreign exchange (losses) gains (3,159) 2,506 9,883
Net realized gains on investments 5,176 4,404 5,718
Income tax (expense) benefit (580) 65 5,256
--------- --------- -----------
NET INCOME $ 100,872 $ 51,201 $ 263,437
========= ========= ===========
KEY RATIOS/PER SHARE DATA
Loss ratio 53.4% 54.9% 56.5%
Acquisition expense ratio 20.6% 18.2% 19.6%
General and administrative expense ratio 7.6% 10.3% 8.6%
--------- --------- -----------
Combined ratio 81.6% 83.4% 84.7%
========= ========= ===========
Weighted average basic shares outstanding 64,084 58,458 62,933
Weighted average dilutive shares outstanding 68,555 59,672 65,900
Basic EPS $ 1.57 $ 0.88 $ 4.19
Diluted EPS $ 1.47 $ 0.86 $ 4.00
ROAE [a] 5.9% 3.8% 18.4%
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[a] Average equity is calculated as the arithmetic average of the beginning
and ending equity balances for the stated periods.
2
ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2004 DEC. 31, 2003
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ASSETS
Cash and cash equivalents $ 274,001 $ 150,923
Fixed maturity investments available for sale 2,706,914 2,523,309
Premiums receivable, net 781,463 518,539
Deferred acquisition costs 241,960 183,387
Securities lending collateral 30,620 --
Prepaid reinsurance premiums 4,643 2,335
Accrued investment income 23,515 20,434
Intangible assets 31,463 32,407
Other assets 32,938 27,630
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TOTAL ASSETS $4,127,517 $3,458,964
========== ==========
LIABILITIES
Reserve for losses and loss expenses $1,019,318 $ 833,158
Reserve for unearned premiums 1,129,102 824,685
Reinsurance balances payable 25,324 23,977
Securities lending payable 30,620 --
Bank debt 103,029 103,029
Net payable for investments purchased 24,705 --
Other liabilities 32,316 29,300
---------- ----------
TOTAL LIABILITIES $2,364,414 $1,814,149
---------- ----------
SHAREHOLDERS' EQUITY
Common shares
63,943,486 issued and outstanding (2003 - 63,912,000) $ 63,943 $ 63,912
Additional paid-in capital 1,192,908 1,189,570
Accumulated other comprehensive income 71,699 46,068
Retained earnings 434,553 345,265
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TOTAL SHAREHOLDERS' EQUITY $1,763,103 $1,644,815
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,127,517 $3,458,964
========== ==========
Book value per share $ 27.48 $ 25.68
Diluted book value per share (treasury stock method) $ 25.51 $ 24.03
RATIOS
Debt-to-capital 5.5% 5.9%
3
ENDURANCE SPECIALTY HOLDINGS LTD.
SEGMENT DISTRIBUTION
FOR THE THREE MONTHS ENDED MARCH 31, 2004
Gross Premiums Written = $721 million
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[THE FOLLOWING TABLE WAS DEPICTED AS A PIE CHART IN THE PRINTED MATERIAL.]
Source of Business
Property Casualty Other Specialty
50% 39% 11%
Type of Business
Reinsurance Insurance
82% 18%
Broker Distribution
Aon Marsh Benfield Other Willis Towers
30% 23% 14% 20% 9% 4%
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4
ENDURANCE SPECIALTY HOLDINGS LTD.
CONSOLIDATED SEGMENT DATA
FOR THE QUARTER ENDED MARCH 31, 2004
Aerospace
and
Property Per Property Casualty Property Casualty Other
Risk Treaty Catastrophe Treaty Individual Individual Specialty Total
Reinsurance Reinsurance Reinsurance Risk Risk Lines Company
---------- ---------- ---------- ---------- ---------- --------- ----------
UNDERWRITING REVENUES
Gross premiums written and acquired $ 206,413 $ 128,538 $ 187,178 $ 29,534 $ 50,091 $ 118,877 $ 720,631
---------- ---------- ---------- ---------- ---------- --------- ----------
Net premiums written $ 206,413 $ 128,538 $ 184,428 $ 28,660 $ 50,091 $ 118,877 717,007
---------- ---------- ---------- ---------- ---------- --------- ----------
Net premiums earned $ 118,125 $ 53,373 $ 106,055 $ 22,855 $ 54,675 $ 60,743 415,826
---------- ---------- ---------- ---------- ---------- --------- ----------
UNDERWRITING EXPENSES
Losses and loss expenses $ 60,616 $ 2,913 $ 69,285 $ 6,154 $ 38,572 $ 44,469 222,009
Acquisition expenses 30,040 6,195 28,040 2,681 6,130 12,432 85,518
General and administrative expenses 8,123 5,294 8,306 2,321 3,855 3,868 31,767
---------- ---------- ---------- ---------- ---------- --------- ----------
Total expenses 98,779 14,402 105,631 11,156 48,557 60,769 339,294
---------- ---------- ---------- ---------- ---------- --------- ----------
UNDERWRITING INCOME (LOSS) $ 19,346 $ 38,971 $ 424 $ 11,699 $ 6,118 ($26) $ 76,532
========== ========== ========== ========== ========== ========= ==========
GAAP RATIOS
Loss ratio 51.3% 5.5% 65.3% 26.9% 70.5% 73.2% 53.4%
Acquisition expense ratio 25.4% 11.6% 26.4% 11.7% 11.2% 20.5% 20.6%
General and administrative expense ratio 6.9% 9.9% 7.8% 10.2% 7.1% 6.4% 7.6%
---------- ---------- ---------- ---------- ---------- --------- ----------
Combined ratio 83.6% 27.0% 99.5% 48.8% 88.8% 100.1% 81.6%
========== ========== ========== ========== ========== ========= ==========
STATUTORY RATIOS
Loss ratio 51.3% 5.5% 65.3% 26.9% 70.5% 73.2% 53.4%
Acquisition expense ratio 26.3% 12.3% 22.5% 12.1% 11.4% 18.9% 20.0%
General and administrative expense ratio 3.9% 4.1% 4.5% 8.1% 7.7% 3.3% 4.4%
---------- ---------- ---------- ---------- ---------- --------- ----------
Combined ratio 81.5% 21.9% 92.3% 47.1% 89.6% 95.4% 77.8%
========== ========== ========== ========== ========== ========= ==========
5
ENDURANCE SPECIALTY HOLDINGS LTD.
PERIOD END UNREALIZED GAINS AND QUARTERLY OPERATING CASH FLOW
1Q 2003 2Q 2003 3Q 2003 4Q 2000 1Q 2004
-------- -------- -------- -------- --------
Unrealized holding gains on investments, period end $ 46,058 $ 56,287 $ 39,616 $ 26,230 $ 47,176
Operating cash flow $161,704 $225,641 $286,765 $269,127 $269,756
6
ENDURANCE SPECIALTY HOLDINGS LTD.
RETURN ON EQUITY ANALYSIS
THREE MONTHS
ENDED
MAR. 31, 2004
-------------
Average equity [a] $ 1,703,959
Net premiums earned $ 415,826
Combined ratio 81.6%
Operating margin 18.4%
Premium leverage 0.24x
------------
Implied ROAE from underwriting activity 4.5%
------------
Average invested assets at amortized cost $ 2,781,759
Investment leverage 1.63x
Year to date investment income yield, pretax 0.8870%
------------
Implied ROAE from investment activity 1.4%
------------
------------
Implied Pre-tax Operating ROAE, for period 5.9%
------------
------------
Implied Pre-tax Operating ROAE, annualized 23.8%
============
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[a] Average equity is calculated as the arithmetic average of the beginning
and ending equity balances for the stated periods.
7
ENDURANCE SPECIALTY HOLDINGS LTD.
ANNUALIZED OPERATING LEVERAGE & INVESTMENT LEVERAGE
Year Ended
1Q 2003 2Q 2003 3Q 2003 4Q 2003 1Q 2004 Dec. 31, 2003
---------- ---------- ---------- ---------- ---------- ----------
Average equity $1,343,024 $1,508,175 $1,556,224 $1,604,731 $1,703,959 $1,431,158
Net premiums earned $ 189,653 $ 292,466 $ 335,830 $ 355,998 $ 415,826 $1,173,947
Operating leverage 0.14x 0.19x 0.22x 0.22x 0.24x 0.82x
----------------------------------------------------------------------- ----------
Annualized operating leverage 0.56x 0.78x 0.86x 0.89x 0.98x 0.82x
----------------------------------------------------------------------- ----------
Avg. invested assets at amortized cost $1,708,810 $2,020,052 $2,277,742 $2,490,349 $2,781,759 $2,124,518
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Investment leverage 1.27x 1.34x 1.46x 1.55x 1.63x 1.48x
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8
ENDURANCE SPECIALTY HOLDINGS LTD.
INVESTMENT PORTFOLIO
AS OF MARCH 31, 2004
Type of Investment Fair Value Percentage
---------- ----------
Cash and equivalents $ 249,296 8.4%
U.S. government and agencies 701,754 23.7%
Corporate securities 458,740 15.5%
Foreign government 185,584 6.3%
Municipals 76,675 2.6%
Asset-backed securities 305,651 10.3%
Mortgage-backed securities 978,510 33.1%
---------- ----------
Total $2,956,210 100.0%
========== ==========
Ratings Fair Value Percentage
---------- ----------
U.S. Government and government agencies $ 701,754 23.7%
AAA/Aaa 1,803,037 61.0%
AA/Aa 109,444 3.7%
A/A 341,975 11.6%
BBB and below -- --
---------- ----------
Total $2,956,210 100.0%
========== ==========
Performance
Total return, annualized 8.61%
Duration 2.74
Year Ended Quarter Ended
Investment Income Dec. 31, 2003 March 31, 2004
------------- --------------
Taxable net investment income $ 68,952 $ 24,449
Tax-exempt net investment income 2,058 226
---------- ----------
Total net investment income $ 71,010 $ 24,675
========== ==========
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Note: Cash, cash equivalents and short terms are shown net of investments
pending settlement.
9
ENDURANCE SPECIALTY HOLDINGS LTD.
ACTIVITY IN RESERVE FOR LOSSES AND LOSS EXPENSES
QUARTER QUARTER QUARTER QUARTER QUARTER
ENDED ENDED ENDED ENDED ENDED
MARCH 31, 2003 JUNE 30, 2003 SEPT. 30, 2003 DEC. 31, 2003 MARCH 31, 2004
-------------- ------------- -------------- ------------- --------------
Incurred related to:
Current year $ 111,011 $ 174,578 $ 210,143 $ 203,881 $ 241,381
Prior years (6,866) (9,047) (11,478) (8,526) (19,372)
--------- --------- --------- --------- ---------
Total incurred 104,145 165,531 198,665 195,355 222,009
--------- --------- --------- --------- ---------
Paid related to:
Current year -- (8,871) (8,131) (29,315) (2,752)
Prior years (7,116) (12,852) (10,473) (10,091) (32,819)
--------- --------- --------- --------- ---------
Total paid (7,116) (21,723) (18,604) (39,406) (35,571)
--------- --------- --------- --------- ---------
10
ENDURANCE SPECIALTY HOLDINGS LTD.
ANALYSIS OF UNPAID LOSSES AND LOSS EXPENSE
Aerospace
and
Property Per Property Casualty Property Casualty Other
Risk Treaty Catastrophe Treaty Individual Individual Specialty Total
Reinsurance Reinsurance Reinsurance Risk Risk Lines Company
------------ ----------- ----------- ---------- ---------- --------- ----------
AT MARCH 31, 2004
Case reserves $ 66,083 $29,322 $ 40,926 $14,081 $ 0 $ 44,782 $ 195,194
Total reserve for losses and
loss expense 227,173 63,045 301,644 39,756 191,045 196,655 1,019,318
Case reserves / reserve for losses and -----------------------------------------------------------------------------------------
loss exp. 29.1% 46.5% 13.6% 35.4% 0.0% 22.8% 19.1%
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11
ENDURANCE SPECIALTY HOLDINGS LTD.
DILUTIVE SHARES FOR EPS CALCULATION
QUARTER ENDED
MARCH 31,
-----------------------
2004 2003
-------- --------
DILUTIVE SHARES Quarterly average market price per share $ 34.20 $ 22.87
OUTSTANDING:
AS REPORTED Basic weighted average common shares outstanding 64,084 58,458
Add: weighted ave. unvested restricted share units 74 --
Weighted average exercise price per share -- --
Proceeds from unrecognized restricted share unit expense $ 5,762 --
Less: restricted share units bought back via treasury method (74) --
Add: weighted ave. dilutive warrants outstanding 7,243 7,243
Weighted average exercise price per share $ 19.50 $ 20.00
Less: warrants bought back via treasury method (4,130) (6,334)
Add: weighted ave. dilutive options outstanding 3,423 3,363
Weighted average exercise price per share $ 19.79 $ 20.03
Proceeds from unrecognized option expense $ 2,882 $ 2,567
Less: options bought back via treasury method (2,065) (3,058)
-------- --------
Weighted average dilutive shares outstanding 68,555 59,672
======== ========
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Note: Warrants and options that are anti-dilutive are not included in the
calculation of diluted shares outstanding. Restricted share units are
included in the calculation of basic and diluted weighted shares
outstanding. The treasury stock method assumes that the proceeds
received from the exercise of options or warrants will be used to
repurchase the Company's common shares at the average market price
during the period of calculation. SFAS No. 123 also requires that any
unrecognized stock based compensation expense that will be recorded in
future periods be included as proceeds for purposes of the treasury
stock repurchases.
12
ENDURANCE SPECIALTY HOLDINGS LTD.
OPERATING INCOME RECONCILIATION
EARNINGS PER SHARE INFORMATION - AS REPORTED, GAAP
QUARTER ENDED
MARCH 31,
-----------------------------
2004 2003
----------- -----------
Net income $ 100,872 $ 51,201
Add (Less) after-tax items:
Net foreign exchange losses (gains) 2,415 (2,331)
Net realized (gains) on investments (4,602) (4,001)
----------- -----------
Operating income $ 98,685 $ 44,869
=========== ===========
Weighted average common shares outstanding
Basic 64,084 58,458
Dilutive 68,555 59,672
Basic per share data
Net income $ 1.57 $ 0.88
Add (Less) after-tax items:
Net foreign exchange losses (gains) 0.04 (0.04)
Net realized (gains) on investments (0.07) (0.07)
----------- -----------
Operating income $ 1.54 $ 0.77
=========== ===========
Diluted per share data
Net income $ 1.47 $ 0.86
Add (Less) after-tax items:
Net foreign exchange losses (gains) 0.04 (0.04)
Net realized (gains) on investments (0.07) (0.07)
----------- -----------
Operating income $ 1.44 $ 0.75
=========== ===========
13
ENDURANCE SPECIALTY HOLDINGS LTD.
DILUTIVE SHARES SENSITIVITY ANALYSIS
DILUTIVE SHARES OUSTANDING
===================================================================================================================
Market Price per Share
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$35.00 $36.00 $37.00 $38.00 $39.00 $40.00 $41.00 $42.00 $43.00 $44.00 $45.00
===================================================================================================================
69,031 69,196 69,352 69,500 69,640 69,774 69,900 70,021 70,136 70,246 70,351
14
ENDURANCE SPECIALTY HOLDINGS LTD.
BOOK VALUE PER SHARE
MARCH 31,
----------------------------
2004 2003 DEC. 31, 2003
----------- ----------- -------------
DILUTIVE SHARES Price per share at period end $ 35.54 $ 24.19 $ 33.55
OUTSTANDING:
AS-IF CONVERTED [a] Basic common shares outstanding [b] 64,159 64,733 64,047
Add: unvested restricted share units 196 -- 11
Add: dilutive warrants outstanding 7,243 7,243 7,243
Weighted average exercise price per share $ 19.50 $ 20.00 $ 19.68
Add: dilutive options outstanding 3,372 3,403 3,437
Weighted average exercise price per share $ 19.76 $ 20.06 $ 19.95
Book Value $ 1,763,103 $ 1,468,547 $ 1,644,815
Add: proceeds from converted warrants 141,236 144,858 142,540
Add: proceeds from converted options 66,629 68,274 68,578
----------- ----------- -----------
Pro forma book value $ 1,970,969 $ 1,681,679 $ 1,855,933
Dilutive shares outstanding 74,970 75,379 74,737
---------------------------------------------------------------------------------------------------
Basic book value per share $ 27.48 $ 22.69 $ 25.68
Diluted book value per share $ 26.29 $ 22.31 $ 24.83
---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
DILUTIVE SHARES Price per share at period end $ 35.54 $ 24.19 $ 33.55
OUTSTANDING:
TREASURY STOCK Basic common shares outstanding [b] 64,159 64,733 64,047
METHOD
Add: unvested restricted share units 196 -- 11
Add: dilutive warrants outstanding 7,243 7,243 7,243
Weighted average exercise price per share $ 19.50 $ 20.00 $ 19.68
Less: warrants bought back via treasury method (3,974) (5,988) (4,249)
Add: dilutive options outstanding 3,372 3,403 3,437
Weighted average exercise price per share $ 19.76 $ 20.06 $ 19.95
Less: options bought back via treasury method (1,875) (2,822) (2,044)
----------- ----------- -----------
Dilutive shares outstanding 69,121 66,569 68,445
---------------------------------------------------------------------------------------------------
Basic book value per share $ 27.48 $ 22.69 $ 25.68
Diluted book value per share $ 25.51 $ 22.06 $ 24.03
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- --------------------------------------------------------------------------------
[a] The as-if converted method assumes that the proceeds received upon
exercise of options and warrants will be retained by the Company and the
resulting common shares from exercise will remain outstanding.
[b] Basic common shares include vested restricted share units.
15
ENDURANCE SPECIALTY HOLDINGS LTD.
REGULATION G
In presenting the Company's results, management has included and discussed
certain non-GAAP measures. Management believes that these non-GAAP measures,
which may be defined differently by other companies, better explain the
Company's results of operations in a manner that allows for a more complete
understanding of the underlying trends in the Company's business. However, these
measures should not be viewed as a substitute for those determined in accordance
with GAAP.
Operating income is an internal performance measure used by the Company in the
management of its operations. Operating income represents after-tax operational
results excluding, as applicable, after-tax net realized capital gains or losses
and after-tax net foreign exchange gains or losses because the amount of these
gains or losses is heavily influenced by, and fluctuates in part, according to
the availability of market opportunities. The Company believes these amounts are
largely independent of its business and underwriting process and including them
distorts the analysis of trends in its operations. In addition to presenting net
income determined in accordance with GAAP, the Company believes that showing
operating income enables investors, analysts, rating agencies and other users of
its financial information to more easily analyze the Company's results of
operations in a manner similar to how management analyzes the Company's
underlying business performance. Operating income should not be viewed as a
substitute for GAAP net income. Please see page 13 for a reconciliation of
operating income to net income.
Return on Equity (ROE) is comprised using the average equity calculated as the
arithmetic average of the beginning and ending equity balances for stated
periods. The Company presents ROE as a measure that it is commonly recognized as
a standard of performance by investors, analysts, rating agencies and other
users of its financial information.
Investment yield is provided by the Company's investment managers and is
calculated by dividing net investment income by average invested assets at
amortized cost. The Company utilizes and presents the investment yield in order
to better disclose the performance of the Company's investments and to show the
components of the Company's ROE.
The Company has included diluted book value per share because it takes into
account the effect of dilutive securities; therefore, the Company believes it is
a better measure of calculating shareholder returns than book value per share.
Please see page 15 for a reconciliation of diluted book value per share to basic
book value per share.
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