S&P Raises Endurance Specialty Outlook to Positive; Affirms Ratings; Company Comments

December 14, 2004

Standard & Poor’s Ratings Services announced that it has revised its outlook on Bermuda-based Endurance Specialty Holdings Ltd. and its subsidiaries (Endurance Specialty Insurance Ltd., Endurance Worldwide Insurance Ltd., and Endurance Reinsurance Corp. of America) to positive from stable.

S&P also affirmed its ‘BBB’ counterparty credit rating on Endurance Specialty Holdings Ltd. and its ‘A-‘ counterparty credit and financial strength ratings on the subsidiaries (collectively referred to as Endurance).

“The ratings on Endurance are based on its strong competitive position, which is supported by a diversified business platform,” S&P said. “In addition, Endurance maintains strong capital adequacy and strong operating performance. Offsetting these positive factors are concerns about Endurance’s exposure to large losses, unproven performance of newly acquired books, and minimal reinsurance protections, which increase the risk of volatile earnings and capital adequacy.”

Endurance Chairman and CEO Kenneth J. LeStrange commented: “We are pleased by S&P’s affirmation of the progress we have made in the development of our business platforms. It is particularly gratifying to receive this positive outlook change in an environment marked by negative rating activity and heightened scrutiny by all of the rating agencies.”

S&P noted: “Endurance is expected to have a debt-to-capital ratio of 20 percent or less in support of nonstandard notching. This figure was 13 percent as of the third quarter of 2004. The nonstandard notching is further based on the view that Endurance has diversified operations and interest coverage well above levels required for the rating at 44x through the third quarter of 2004 and 58x at year-end 2003. Interest coverage is expected to be 31x at year-end 2004. Endurance writes business on a global basis and is diversified by product line, sector, and location. The company is expected to maintain interest coverage above 10x in support of nonstandard notching.”

The rating agency explained that it had revised its outlook on Endurance based on its performance through the recent hurricane season, “whereby the company has performed well versus peers in terms of capital and earnings, as well as from a volatility standpoint.”

S&P added: “Endurance recognized deteriorating pricing at the July 1, 2004, renewals for some property catastrophe exposures and reduced some peak exposures roughly 10 percent, including Florida exposures.”

It also noted that the company “has significantly mitigated any potential perceived conflict with its previously large ownership by Aon Corp. Aon has recently sold 9.8 million shares of Endurance” [See IJ Website Dec. 3 and 6].

“Endurance is expected to maintain strong earnings and capital adequacy is expected to remain strong at more than 155 percent,” S&P continued. “In addition, the company is expected to exhibit the risk-management skills and underwriting discipline to control the volume and profitability of business appropriately in a softening market, but this still remains to be proven over the next few years.”

Details of the ratings attributions are as follows:
— Endurance Specialty Holdings Ltd. Counterparty credit rating to BBB/Positive/– from BBB/Stable/– Senior debt rating BBB.

— Endurance Specialty Insurance Ltd. Endurance Worldwide Insurance Ltd.
Endurance Reinsurance Corp. of America Counterparty credit rating to A-/Positive/– from A-/Stable/– Financial strength rating to A-/Positive from A-/Stable

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