Endurance Specialty Holdings Reports 2ndQ 2003 Results

July 30, 2003

Endurance Specialty Holdings Ltd. reported second quarter 2003 net income of $66.8 million or $0.99 per diluted share versus net income of $31.3 million or $0.52 per diluted share in the second quarter of 2002. In the second quarter 2003, operating income, which excludes after-tax realized investment gains and foreign exchange gains, was $61.3 million or $0.91 per diluted share, 111 percent higher than for the second quarter of 2002. For the six months ended June 30, 2003, net income was $118.0 million or $1.85 per diluted share. Operating income for the first half of 2003 was $106.2 million or $1.66 per diluted share, up 226 percent from the first half of 2002. Annualized operating return on average equity during the second quarter of 2003 was 16.3 percent.

Gross premiums written and acquired were $652.7 million in the quarter ended June 30, 2003, an increase of 147 percent from the $264.3 million in gross premiums written and acquired for the second quarter of 2002. For the first half of 2003, Endurance had gross premiums written and acquired of $1.0 billion. Earned premiums in the quarter were $292.5 million, an increase of 289 percent from the second quarter of 2002.

Gross premiums in the quarter included $396 million in gross premiums acquired as part of the Company’s acquisition of the majority of the in-force assumed reinsurance business underwritten by HartRe Company L.L.C. In the second quarter of 2002, Endurance acquired the property catastrophe portfolio of LaSalle Re Limited, which added $88 million in gross premiums during the period.

The combined ratio was 84.2 percent in the second quarter of 2003 compared to 75.0 percent in the second quarter of 2002. The loss ratio was 56.6 percent in the quarter compared to 48.3 percent in the second quarter of 2002, reflecting an increasing mix of casualty insurance, casualty treaty reinsurance, and working layer property reinsurance business. The business mix in the second quarter of 2002 included a relatively high proportion of property catastrophe business as a result of the LaSalle Re transaction.

The acquisition expense ratio increased from 16.1 percent in the second quarter of 2002 to 19.7 percent in the second quarter of 2003 as a result of an increase in the portion of the Company’s business underwritten as reinsurance. During the quarter, Endurance’s reinsurance business grew both organically and also from the reinsurance business acquired from HartRe. The general and administrative expense ratio fell to 7.9 percent in the second quarter of 2003, reflecting a significant increase in premiums earned from business in prior periods.

At June 30, 2003, the Company’s GAAP shareholder’s equity was $1.55 billion or $22.68 per diluted share. Total assets were $3.3 billion and cash and invested assets were $2.34 billion, up over $1.1 billion since the Company’s formation in December 2001. Operating cash flow was $226 million in the second quarter of 2003 and $387 million in the first half of 2003, reflecting the continued strong cash flows from Endurance’s businesses.

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