Endurance Posts $113 Million Q4 Net Income; 37.6% Increase for Full Year to $356 Million

February 17, 2005

Bermuda-based Endurance Specialty Holdings Ltd. reported net income of $113.1 million or $1.71 per diluted share for the fourth quarter of 2004 versus net income of $88.9 million or $1.31 per diluted share in the fourth quarter of 2003.

Q4 operating income, which excludes after-tax realized investment gains and losses and foreign exchange gains and losses, was $108.4 million or $1.64 per diluted share versus $86.5 million or $1.28 per diluted share in the fourth quarter of 2003.

For the year ended December 31, 2004, net income was $355.6 million or $5.28 per diluted share versus net income of $263.4 million or $4.00 per diluted share for the year ended December 31, 2003. Operating income for the year ended December 31, 2004 was $348.4 million or $5.18 per diluted share, up 37.6 percent from the year ended December 31, 2003.

Annualized return on average equity was 24.9 percent during the fourth quarter of 2004 and return on average equity for the year ended December 31, 2004 was 20.3 percent. Operating return on average equity for the year ended December 31, 2004 was 19.9 percent and operating return on beginning equity for the year was 21.2 percent.

Chairman and CEO Kenneth J. LeStrange commented: “I am pleased to be reporting another set of outstanding financial results for Endurance in the fourth quarter of 2004. We significantly exceeded our return on equity guidance of 15.5% to 17.5% in a year marked by substantial catastrophic losses, demonstrating the strength of our
multi-line approach, technical underwriting and liability management. We finished the year with excellent underwriting profitability and generated $1.2 billion in cash flow. Based on the strong businesses we have built, subject to normal catastrophe losses, we estimate that Endurance will generate an operating return on equity in 2005 of
16 percent.”

LeStrange continued: “We made significant progress in diversifying our shareholder base and increasing the public float of Endurance’s equity during 2004. With the successful completion of our secondary public offering in March and the sale of Aon’s direct stake in Endurance in December, over half of our equity is now publicly traded.”

Endurance’s announcement also noted the following earnings highlights:
— Gross premiums written were $272.2 million for the quarter ended December 31, 2004, an increase of 3.8 percent from the $262.2 million in gross premiums written for the fourth quarter of 2003.
— For the year ended December 31, 2004, Endurance had gross premiums written of $1.7 billion, an increase of 6.8 percent from the $1.6 billion of gross premiums written in 2003.
— Earned premiums in the quarter were $411.3 million, an increase of 15.5 percent from the fourth quarter of 2003.
— The combined ratio was 81.6 percent in the fourth quarter of 2004 compared to 82.5% in the fourth quarter of 2003. The loss ratio was 53 percent in the quarter compared to 54.9 percent in the fourth quarter of 2003.
— The Company benefited from $25.7 million in positive reserve development for the fourth quarter of 2004 from prior years, compared to $8.5 million in the fourth quarter of 2003. This reduction in the Company’s estimated losses for prior years was heavily driven by lower than anticipated frequency in the Property Per Risk Treaty Reinsurance and Property Catastrophe Reinsurance segments.

Endurance noted: “Most segments of the business performed well in 2004. In the fourth quarter, based on reported claims activity and the distribution of claims between the four hurricanes that struck the Southeastern United States in the third quarter, the Company increased its gross estimate of claims related to those events by $12.3 million. This increase was split roughly evenly between the U.S. Property Treaty segment and the Bermuda-based Property Catastrophe Reinsurance segment. The Company does not believe it has material losses as a result of the Southeast Asian Tsunami.”

Endurance will host a conference call on Thursday, February 17, 2005 at 8:30 AM EST to discuss its financial results. The conference call can be accessed via telephone by dialing (800) 810-0924 (toll-free) or (913) 981-4900 (international). A telephone replay of the conference call will be available through March 2, 2005 by dialing (888) 203-1112 (toll-free) or (719) 457-0820 (international) and entering the pass code: 214536.

The public may access a live broadcast of the conference call at the “Investors” section of Endurance’s website: www.endurance.bm.

A copy of the Company’s financial supplement for the fourth quarter of 2004 will be available on the Company’s website at: http://www.endurance.bm shortly after the release of earnings.

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