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MANAGEMENT'S DISCUSSION AND ANALYSIS OF

The following is a discussion and analysis of the financial condition and results of operations for the three months ended March 31, 2012 of Endurance Specialty Holdings Ltd. and its wholly-owned subsidiaries. Endurance Holdings was organized as a Bermuda holding company on June 27, 2002 and has seven wholly-owned operating subsidiaries:.

Edgar Online, Inc.

FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The following is a discussion and analysis of the financial condition and
results of operations for the three months ended March 31, 2012 of Endurance
Specialty Holdings Ltd. ("Endurance Holdings") and its wholly-owned subsidiaries
(collectively, the "Company"). This discussion and analysis should be read in
conjunction with the unaudited condensed consolidated financial statements and
related notes contained in this Quarterly Report on Form 10-Q (this "Form 10-Q")
as well as the audited consolidated financial statements and related notes for
the fiscal year ended December 31, 2011, the discussions of critical accounting
policies and the qualitative and quantitative disclosure about market risk
contained in Endurance Holdings' Annual Report on Form 10-K for the fiscal year
ended December 31, 2011 (the "2011 Annual Report on Form 10-K").

Some of the information contained in this discussion and analysis or set forth
elsewhere in this Form 10-Q, including information with respect to the Company's
plans and strategy for its business, includes forward-looking statements that
involve risk and uncertainties. Please see the section "Cautionary Statement
Regarding Forward-Looking Statements" below for more information on factors that
could cause actual results to differ materially from the results described in or
implied by any forward-looking statements contained in this discussion and
analysis. You should review the "Risk Factors" set forth in the 2011 Annual
Report on Form 10-K and this Form 10-Q for a discussion of important factors
that could cause actual results to differ materially from the results described
in or implied by the forward-looking statements contained herein.

Overview

Endurance Holdings was organized as a Bermuda holding company on June 27, 2002 and has seven wholly-owned operating subsidiaries:

Endurance Specialty Insurance Ltd. ("Endurance Bermuda"), domiciled in

Bermuda with branch offices in Zurich and Singapore;




     •   Endurance Reinsurance Corporation of America ("Endurance U.S.
         Reinsurance"), domiciled in Delaware;



Endurance Worldwide Insurance Limited ("Endurance U.K."), domiciled in

England;



Endurance American Insurance Company ("Endurance American"), domiciled in

Delaware;




     •   Endurance American Specialty Insurance Company ("Endurance American
         Specialty"), domiciled in Delaware;



Endurance Risk Solutions Assurance Co. ("Endurance Risk Solutions"),

Foresters Advantage Plus: Participating Whole Life Insurance

         domiciled in Delaware; and




     •   American Agri-Business Insurance Company, domiciled in Texas and managed

by ARMtech Insurance Services, Inc. (together "ARMtech").



The Company writes specialty lines of property and casualty insurance and
reinsurance on a global basis and seeks to create a portfolio of specialty lines
of business that are profitable and have limited correlation with one another.
The Company's portfolio of specialty lines of business is organized into two
business segments, Insurance and Reinsurance.

In the Insurance segment, the Company writes agriculture, professional lines,
casualty, property, healthcare liability and surety and other specialty
insurance. In the Reinsurance segment, the Company writes catastrophe, casualty,
property, aerospace and marine and surety and other specialty reinsurance.



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The Company's Insurance and Reinsurance segments both include property related
coverages which provide insurance or reinsurance of an insurable interest in
tangible property for property loss, damage or loss of use. In addition, the
Company's Insurance and Reinsurance segments include various casualty insurance
and reinsurance coverages which are primarily concerned with the losses caused
by injuries to third parties, i.e., not the insured, or to property owned by
third parties and the legal liability imposed on the insured resulting from such
injuries.

Application of Critical Accounting Estimates


The Company's condensed consolidated financial statements are based on the
selection of accounting policies and application of significant accounting
estimates which require management to make significant estimates and
assumptions. The Company believes that some of the more critical judgments in
the areas of accounting estimates and assumptions that affect its financial
condition and results of operations are related to the recognition of premiums
written and ceded, reserves for losses and loss expenses, other-than-temporary
impairments within the investment portfolio and fair value measurements of
certain portions of the investment portfolio. For a detailed discussion of the
Company's critical accounting estimates, please refer to the 2011 Annual Report
on Form 10-K and the Notes to the Unaudited Condensed Consolidated Financial
Statements in this Form 10-Q. There were no material changes in the application
of the Company's critical accounting estimates subsequent to that report.
Management has discussed the application of these critical accounting estimates
with the Company's Board of Directors and the Audit Committee of the Board of
Directors.



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Consolidated Results of Operations - For the Three Months Ended March 31, 2012 and 2011


Results of operations for the three months ended March 31, 2012 and 2011 were as
follows:



                                                  Three Months Ended March 31,
                                                   2012                    2011            Change(1)
                                                  (U.S. dollars in thousands, except for ratios)
Revenues
Gross premiums written                       $       1,061,649          $ 1,000,358               6.1 %
Ceded premiums written                                (218,593 )           (201,486 )             8.5 %

Net premiums written                                   843,056              798,872               5.5 %

Net premiums earned                                    411,635              382,833               7.5 %
Net investment income                                   57,075               52,501               8.7 %
Net realized and unrealized gains                        5,203                3,775              37.8 %
Net impairment losses recognized in
earnings (losses)                                         (219 )             (1,647 )           (86.7 )%
Other underwriting loss                                   (335 )             (1,069 )           (68.7 )%

Total revenues                                         473,359              436,393               8.5 %

Expenses
Losses and loss expenses                               262,767              401,853             (34.6 )%
Acquisition expenses                                    68,489               65,618               4.4 %
General and administrative expenses                     66,041               65,961               0.1 %
Amortization of intangibles                              2,777                2,798              (0.8 )%
Net foreign exchange gains                             (18,137 )             (6,918 )           162.2 %
Interest expense                                         9,047                9,054              (0.1 )%
Income tax benefit                                        (167 )            (14,556 )           (98.9 )%

Net income (loss)                            $          82,542          $   (87,417 )              NM (2)

Net loss ratio                                            63.9 %              105.0 %           (41.1 )
Acquisition expense ratio                                 16.6 %               17.1 %            (0.5 )
General and administrative expense ratio                  16.0 %               17.2 %            (1.2 )

Combined ratio                                            96.5 %              139.3 %           (42.8 )




(1) With respect to ratios, changes show increase or decrease in percentage

Foresters Advantage Plus: Participating Whole Life Insurance

    points.


(2) Not meaningful.


Premiums

Gross premiums written in the three months ended March 31, 2012 were $1,061.6
million, an increase of $61.3 million, or 6.1%, compared to the same period in
2011. Net premiums written in the three months ended March 31, 2012 were $843.1
million, an increase of $44.2 million, or 5.5%. The change in net premiums
written was driven by the following factors:



• An increase in the property line of the Reinsurance segment in the quarter

ended March 31, 2012 compared to 2011 as a result of new premiums and

growth in renewal premiums written by the Company's Zurich branch together

with improved pricing on renewals across the Company's other property

         businesses;




     •   Growth in the agriculture line of the Insurance segment arising from an
         increase in policy count and increased premium levels per policy,
         partially offset by lower commodity prices;



• Growth in the aerospace and marine line of the Reinsurance segment

resulting from new marine business written at the Company's Zurich branch;




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• Growth in the casualty line of the Reinsurance segment arising from a

         single large positive premium adjustment; and




     •   A decline in the property line of the Insurance segment in the quarter

ended March 31, 2012 compared to 2011 as the Company significantly

curtailed premiums in several products within this line of business in an

effort to reallocate capital to more profitable lines of business.



Growth in ceded premiums written by the Company in the quarter ended March 31,
2012 as compared to the same period in 2011 was primarily driven by increased
cessions in the agriculture Insurance line to the Federal Crop Insurance
Corporation associated with both the growth in gross premiums written and from
increased cessions of risks in drought plagued areas of the southern United
States.

Net premiums earned for the three months ended March 31, 2012 were $411.6 million, an increase of $28.8 million, or 7.5%, from the first quarter of 2011. The increase in net premiums earned resulted principally from growth in net written premiums recorded in more recent periods.

Foresters Advantage Plus: Participating Whole Life Insurance

Net Investment Income


The Company's net investment income of $57.1 million increased 8.7% or $4.6
million for the quarter ended March 31, 2012 as compared to the same period in
2011. Net investment income during the first quarter of 2012 included net mark
to market gains of $23.1 million on Other Investments, comprised of alternative
funds and specialty funds, as compared to mark to market gains of $13.8 million
in the first quarter of 2011. Investment income generated from the Company's
fixed income investments, which consist of fixed maturity investments and
short-term investments, declined by $5.2 million for the three months ended
March 31, 2012 compared to the same period in 2011. This decline resulted from
lower reinvestment rates over the past 12 months driven by lower market yields,
partially offset by a higher average investment portfolio balance. Investment
expenses, including investment management fees, were $3.4 million at March 31,
2012 and $3.6 million at March 31, 2011.

The annualized net earned yield and total return of the investment portfolio for
the three months ended March 31, 2012 and 2011 and market yield and portfolio
duration as of March 31, 2012 and 2011 were as follows:



                                                 Three Months Ended March 31,
                                                    2012                2011
     Annualized net earned yield(1)                       3.76 %           

3.51 %

     Total return on investment portfolio(2)              1.38 %           
0.90 %
     Market yield(3)                                      1.69 %            2.54 %
     Portfolio duration(4)                          2.64 years        2.44 years



(1) The actual net earned income from the investment portfolio after adjusting

for expenses and accretion of discount and amortization of premium from the

purchase price divided by the average book value of assets.

(2) Includes realized and unrealized gains and losses.

(3) The internal rate of return of the investment portfolio based on the given

market price or the single discount rate that equates a security price

(inclusive of accrued interest) for the portfolio with its projected cash

flows. Excludes Other Investments and operating cash.

(4) Includes only cash and cash equivalents and fixed income investments managed

by the Company's investment managers.



During the first quarter of 2012, the yield on the benchmark three year U.S.
Treasury bond fluctuated within a 49 basis point range, with a high of 1.20% and
a low of 0.71%. Trading activity in the Company's portfolio during the first
quarter included reductions in government guaranteed corporate securities and
non-agency residential mortgage-backed securities, and increased allocations to
U.S. government securities, foreign government securities, corporate securities,
non-agency commercial mortgage-backed securities and asset-backed securities.
The duration of the fixed income investments increased to 2.64 years at
March 31, 2012 from 2.39 years at December 31, 2011, primarily due to lower cash
balances.



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Net Realized and Unrealized Gains


The Company's investment portfolio is managed to generate attractive economic
returns and income while providing the Company with liquidity. Movements in
financial markets and interest rates influence the timing and recognition of net
realized investment gains and losses as the portfolio is adjusted and
rebalanced. Proceeds from sales of investments classified as available for sale
during the three months ended March 31, 2012 were $833.3 million compared to
$1,017.2 million during the same period a year ago. Net realized investment
gains increased during the three months ended March 31, 2012 compared to the
same period in 2011 as fewer securities were sold at a loss compared to the
prior period. Realized investment gains and losses and the change in the fair
value of derivative financial instruments for the three months ended March 31,
2012 and 2011 were as follows:



                                                           Three Months Ended March 31,
                                                           2012                   2011
                                                           (U.S. dollars in thousands)
Gross realized gains on investment sales               $       7,248          $      11,573
Gross realized losses on investment sales                     (2,347 )               (7,708 )
Change in fair value of derivative financial
instruments                                                      302                    (90 )

Net realized and unrealized gains in earnings $ 5,203

$ 3,775

Net Impairment Losses Recognized in Earnings


During the three months ended March 31, 2012, the Company identified available
for sale securities that were considered to be other-than-temporarily impaired.
The Company considered whether it intended to sell or would be more likely than
not required to sell its fixed income investments in an unrealized loss position
at March 31, 2012. The Company did not identify any such securities meeting
these criteria. As such, the Company performed various analyses and reviews,
which are described in "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Critical Accounting Estimates" in our 2011
Annual Report on Form 10-K, to determine whether the investments in an
unrealized loss position were other-than-temporarily impaired as a result of
credit related factors or non-credit related factors. Net impairment losses
recognized in earnings for the three months ended March 31, 2012 and 2011 were
as follows:



                                                          Three Months Ended March 31,
                                                        2012                     2011
                                                          (U.S. dollars in thousands)
Total other-than-temporary impairment losses         $        -             $        (1,256 )
Portion of loss recognized in other
comprehensive income                                        (219 )                     (391 )

Net impairment losses recognized in earnings $ (219 ) $ (1,647 )




The $0.2 million and $1.6 million of other-than-temporary impairment ("OTTI")
losses recognized by the Company in the first quarters of 2012 and 2011 relating
to specific credit events for its fixed income investments were primarily due to
reductions in expected recovery values on residential and commercial
mortgage-backed securities during the period. A total of $0.2 million was
shifted from a non-credit OTTI loss previously recognized in comprehensive
income (loss) to a credit OTTI loss recorded in net income (loss) for the first
quarter of 2012.

The Company assessed its intent and ability to hold certain equity securities
that were in an unrealized loss position at March 31, 2012 and determined it did
not need to recognize any OTTI losses in the three months ended March 31, 2012.



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Net Foreign Exchange Gains and Losses


For the three months ended March 31, 2012, the Company remeasured its monetary
assets and liabilities denominated in foreign currencies, which resulted in a
net foreign exchange gain of $18.1 million compared to a net foreign exchange
gain of $6.9 million for the same period of 2011. The net foreign exchange gain
in the quarter ended March 31, 2012 resulted from a decrease in the value of
Japanese Yen denominated net liabilities as the U.S. dollar and British Sterling
strengthened against the Yen and an increase in the value of net asset positions
in other key currencies as the U.S. dollar generally weakened during the period.
In addition, foreign exchange gains were recognized in income as revaluations on
investments recorded in other comprehensive income were realized. In the prior
year, the net foreign exchange gain was due to offsetting exposures across the
Company as the U.S. dollar weakened against other major currencies.

Net Losses and Loss Expenses


The Company's reported net losses and loss expenses are characterized by various
factors and are significantly impacted by the occurrence or absence of
catastrophic events and subsequent loss emergence related to such events. For
the three months ended March 31, 2012, the Company incurred catastrophe losses
arising from windstorms in Kentucky, which impacted the Company's net loss ratio
in the Reinsurance segment. The Company recorded losses, net of reinsurance,
reinstatement premiums and other loss sensitive accruals, of $22.5 million in
relation to these events, which added 5.8 percentage points to the Company's net
loss ratio for the first quarter of 2012. For the three months ended March 31,
2011, the Tohuko, Japan earthquake and tsunami, Christchurch, New Zealand
earthquake and floods experienced in Queensland, Australia adversely affected
the Company's net loss ratio in the Reinsurance segment. The Company recorded
losses, net of reinstatement premiums and other loss sensitive accruals, of
$184.8 million in relation to the three events, which added 48.8 percentage
points to the Company's net loss ratio for the first quarter of 2011. In
addition, the Company recorded lower reserves for attritional losses across the
Insurance segment lines of business in the first quarter of 2012 compared to
2011.

Favorable prior year loss reserve development was $16.9 million for the first
quarter of 2012 compared to $48.7 million during the same period in 2011. In the
first quarter of 2012, prior year loss reserves emerged favorably across each
line of the Insurance segment and the short and long tail lines of the
Reinsurance segment. Favorable reserve development in the first quarter of 2012
was less than the first quarter of 2011 principally due to the agriculture line
of business, which experienced a later and stronger harvest in the 2010 crop
year than in the 2011 crop year. The impact of the later and stronger harvest in
the 2010 crop year was an extension of claims settlements into the first quarter
of 2011, which consequently experienced significant favorable development.

The Company participates in lines of business where claims may not be reported
for many years. Accordingly, management does not believe that reported claims
are the only valid means for estimating ultimate obligations. Ultimate losses
and loss expenses may differ materially from the amounts recorded in the
Company's consolidated financial statements. These estimates are reviewed
regularly and, as experience develops and new information becomes known, the
reserves are adjusted as necessary. Reserve adjustments, if any, are recorded in
earnings in the period in which they are determined. The overall loss reserves
were established by the Company's actuaries and reflect management's best
estimate of ultimate losses. See "Reserve for Losses and Loss Expenses" below
for further discussion.

Acquisition Expenses

The acquisition expense ratio for the three months ended March 31, 2012 was
lower than that for the same period in 2011 because of a shift in business mix
in the Reinsurance segment as the catastrophe line of business increased its
share of earned premiums and has lower relative acquisition costs and the
casualty line of business has seen a decline in its share of earned premiums and
has higher relative acquisition costs.

General and Administrative Expenses


The Company's general and administrative expense ratio for the first quarter of
2012 decreased compared to the same period in 2011 due to higher earned premiums
primarily in the property line of the Reinsurance segment. General and
administrative expense was comparable in the first quarter of 2012 compared to
2011. A reduction in annual incentive expense caused by a lower payout of 2011
annual incentive than accrued was offset by higher severance payments and
increased consulting and facilities costs. At March 31, 2012, the Company had a
total of 840 employees compared to 836 employees at March 31, 2011.



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Income Tax Benefit


The Company recorded a tax benefit for the quarter ended March 31, 2012 of $0.2
million compared to a tax benefit of $14.6 million for the quarter ended
March 31, 2011. The decline was due to significant net losses experienced in the
Company's United States taxable jurisdictions in 2011.

Net Income (Loss)

The Company produced net income of $82.5 million in the three months ended March 31, 2012 compared to a net loss of $87.4 million in the same period of 2011 primarily as a result of the decrease in catastrophe losses during the current period.




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Reserve for Losses and Loss Expenses


In order to capture the key dynamics of loss development and expected volatility
that may arise within the disclosed amounts for the reserve for losses and loss
expenses, the key lines of business within each business segment are aggregated
based on their potential expected length of loss emergence. The period over
which loss emergence occurs is typically referred to as the tail. The Company
has classified its lines of business as either having a "short," "long" or
"other" tail pattern. The Company views short tail business as that for which
development typically emerges within a period of several quarters while long
tail business would emerge over many years. The Company's lines of business are
generally included in the following reserving categories:

Insurance Segment - Short Tail Line



  •   Property




  •   Surety

Insurance Segment - Long Tail Lines



  •   Casualty




  •   Healthcare liability




  •   Professional lines




  •   Workers compensation (discontinued)

Insurance Segment - Other Tail Lines



  •   Agriculture

Reinsurance Segment - Short Tail Lines



  •   Catastrophe




  •   Property




  •   Aerospace and marine




  •   Surety

Reinsurance Segment - Long Tail Lines



  •   Casualty




  •   Other specialty

Reinsurance Segment - Other Tail Lines



  •   Agriculture


As of March 31, 2012, the Company had accrued losses and loss expense reserves
of $3.8 billion (December 31, 2011-$3.8 billion). This amount represents
management's best estimate of the ultimate liability for payment of losses and
loss expenses related to loss events. During the three months ended March 31,
2012 and 2011, the Company's net paid losses and loss expenses were $153.6
million and $183.4 million, respectively.

As more fully described under "Reserving Process" in the Company's Management's
Discussion and Analysis of Financial Condition and Results of Operations in the
2011 Annual Report on Form 10-K, the Company incorporates a variety of actuarial
methods and judgments in its reserving process. Two key inputs in the various
actuarial methods employed by the Company are initial expected loss ratios and
expected loss reporting patterns. These key inputs impact the potential
variability in the estimate of the reserve for losses and loss expenses and are
applicable to each of the Company's business segments. The Company's loss and
loss expense reserves consider and reflect, in part, deviations resulting from
differences between expected loss and actual loss reporting as well as judgments
relating to the weights applied to the reserve levels indicated by the actuarial
methods. Expected loss reporting patterns are based upon internal and external
historical data and assumptions regarding claims reporting trends over a period
of time that extends beyond the Company's own operating history.



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Differences between actual reported losses and expected losses are anticipated
to occur in any individual period and such deviations may influence future
initial expected loss ratios and/or expected loss reporting patterns as the
recent actual experience becomes part of the historical data utilized as part of
the ongoing reserve estimation process. The Company has demonstrated the impact
of changes in the speed of the loss reporting patterns, as well as changes in
the expected loss ratios, within the table under the heading "Potential
Variability in Reserves for Losses and Loss Expenses" in the Company's
Management's Discussion and Analysis of Financial Condition and Results of
Operations in the 2011 Annual Report on Form 10-K.

Losses and loss expenses for the three months ended March 31, 2012 are
summarized as follows:



                                  Incurred related to:
                                                                   Total incurred
                             Current year       Prior years            losses
                                         (U.S. dollars in thousands)
        Insurance:
        Short tail          $        7,808     $      (4,447 )    $          3,361
        Long tail                   61,227              (331 )              60,896
        Other                       52,514            (3,069 )              49,445

        Total Insurance            121,549            (7,847 )             113,702

        Reinsurance:
        Short tail                 103,401     $      (6,150 )              97,251
        Long tail                   52,561            (4,982 )              47,579
        Other                        2,157             2,078                 4,235

        Total Reinsurance          158,119            (9,054 )             149,065

        Totals              $      279,668     $     (16,901 )    $        262,767



Losses and loss expenses for the three months ended March 31, 2012 included
$16.9 million in favorable development of reserves relating to prior accident
years. This favorable loss reserve development benefited the Company's reported
net loss ratio by approximately 4.1 percentage points. The net reduction in
estimated losses for prior accident years reflects lower than expected loss
emergence in all of the Company's reserve categories within the Insurance
segment and the short and long tail categories within the Reinsurance segment.

For the three months ended March 31, 2012, the Company did not materially alter
the two key inputs utilized to establish reserve for losses and loss expenses
(initial expected loss ratios and loss reporting patterns) related to prior
years for the insurance and reinsurance reserve categories as the variances in
reported losses for those reserve categories were within the range of possible
results anticipated by the Company.

Insurance

Short Tail Insurance. For the three months ended March 31, 2012, the favorable
loss development in the short tail insurance reserve category was primarily due
to lower than expected claims reported and favorable case reserve development in
the Company's property line of business.

Long Tail Insurance. For the three months ended March 31, 2012, the Company
recorded a modest amount of favorable loss emergence within this reserve
category primarily due to lower than expected claims activity within the
healthcare liability, casualty and professional lines of business. This
favorable loss emergence was partially offset by adverse loss development within
the workers' compensation and U.S. based casualty lines of business. The Company
exited the workers' compensation insurance line of business in 2009.

Other Insurance. For the three months ended March 31, 2012, the Company recorded favorable loss emergence within this category due to lower than anticipated agriculture claims settlements for the 2011 crop year.

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Reinsurance


Short Tail Reinsurance. For the three months ended March 31, 2012, the Company
recorded overall favorable loss emergence within this reserve category primarily
due to lower than expected claims activity and favorable case reserve
development within the catastrophe, aerospace and marine and surety and other
specialty lines of business, partially offset by adverse loss development within
the property line of business.

Long Tail Reinsurance. For the three months ended March 31, 2012, the Company
recorded favorable loss emergence within this reserve category primarily due to
lower than expected claims reported within the casualty line of business.

Other Reinsurance. For the three months ended March 31, 2012, the Company
recorded a modest amount of adverse loss emergence within this reserve category
primarily due to higher than expected European agriculture claims that resulted
from challenging weather conditions in 2011.

Losses and loss expenses for the three months ended March 31, 2011 are
summarized as follows:



                                  Incurred related to:
                                                                   Total incurred
                             Current year       Prior years            losses
                                         (U.S. dollars in thousands)
        Insurance:
        Short tail          $       13,334     $      (9,274 )    $          4,060
        Long tail                   65,207            (2,560 )              62,647
        Other                       54,907           (22,778 )              32,129

        Total Insurance            133,448           (34,612 )              98,836

        Reinsurance:
        Short tail                 259,738           (14,163 )             245,575
        Long tail                   55,003               275                55,278
        Other                        2,369              (205 )               2,164

        Total Reinsurance          317,110           (14,093 )             303,017

        Totals              $      450,558     $     (48,705 )    $        401,853



Losses and loss expenses for the three months ended March 31, 2011 included
$48.7 million in favorable development of reserves relating to prior accident
years. This favorable development benefited the Company's reported net loss
ratio by approximately 12.7 percentage points. This net reduction in estimated
losses for prior accident years resulted primarily from lower than expected
claims emergence across all lines of business included within the Insurance
segment and in the short tail and other lines of business in the Reinsurance
segment.

For the three months ended March 31, 2011, the Company did not materially alter
the two key inputs utilized to establish reserve for losses and loss expenses
(initial expected loss ratios and loss reporting patterns) related to prior
years for the insurance and reinsurance reserve categories as the variances in
reported losses for those reserve categories were within the range of possible
results anticipated by the Company.

Insurance

Short Tail Insurance. For the three months ended March 31, 2011, the favorable
loss emergence in the short tail insurance reserve category was primarily due to
lower than expected claims reported within the property line of business.

Long Tail Insurance. For the three months ended March 31, 2011, the Company
recorded overall favorable loss emergence within this reserve category primarily
due to lower than expected claims activity within the Bermuda based healthcare
and casualty lines of business. This favorable loss emergence was partially
offset by adverse loss development within the professional, workers'
compensation and U.S. based casualty lines of business. The Company exited the
workers' compensation insurance line of business in 2009.



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Other Insurance. For the three months ended March 31, 2011, the Company recorded favorable loss emergence within this reserve category due to lower than anticipated agriculture claims settlements for the 2010 crop year.

Reinsurance


Short Tail Reinsurance. For the three months ended March 31, 2011, the Company
recorded overall favorable loss emergence within this reserve category primarily
due to lower than expected claims activity and favorable case reserve
development within the catastrophe line of business, partially offset by adverse
loss development within the property line of business.

Long Tail Reinsurance. For the three months ended March 31, 2011, the Company
recorded a modest amount of adverse loss emergence within this reserve category
primarily due to higher than expected claims reported within the casualty line
of business, partially offset by favorable loss development in the professional
liability portion of the casualty line of business.

Other Reinsurance. For the three months ended March 31, 2011, the Company recorded a modest amount of favorable loss emergence within this reserve category primarily due to lower than expected claims reported within the agriculture line of business.

The total reserves for losses and loss expenses recorded on the Company's balance sheet were comprised of the following at March 31, 2012:



                                                                  Reserve for losses
                          Case Reserves       IBNR Reserves       and loss expenses
                                         (U.S. dollars in thousands)
     Insurance:
     Short tail          $        29,993     $        26,270     $             56,263
     Long tail                   408,703           1,233,227                1,641,930
     Other                        52,447             119,696                  172,143

     Total Insurance             491,143           1,379,193                1,870,336

     Reinsurance:
     Short tail                  531,683             356,644                  888,327
     Long tail                   292,812             702,068                  994,880
     Other                         3,081               4,205                    7,286

     Total Reinsurance           827,576           1,062,917                1,890,493

     Totals              $     1,318,719     $     2,442,110     $          3,760,829





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The total reserves for losses and loss expenses recorded on the Company's balance sheet were comprised of the following at December 31, 2011:




                                                                  Reserve for losses
                          Case Reserves       IBNR Reserves       and loss expenses
                                         (U.S. dollars in thousands)
     Insurance:
     Short tail          $        31,408     $        26,313     $             57,721
     Long tail                   404,377           1,219,844                1,624,221
     Other                       203,844              51,757                  255,601

     Total Insurance             639,629           1,297,914                1,937,543

     Reinsurance:
     Short tail                  497,218             405,274                  902,492
     Long tail                   284,619             694,788                  979,407
     Other                           403               4,379                    4,782

     Total Reinsurance           782,240           1,104,441                1,886,681

     Totals              $     1,421,869     $     2,402,355     $          3,824,224


Underwriting Results by Business Segments

The determination of the Company's business segments is based on the manner in which management monitors the performance of the Company's underwriting operations. As a result, we report two business segments - Insurance and Reinsurance.


Management measures the Company's results on the basis of the combined ratio,
which is obtained by dividing the sum of the losses and loss expenses,
acquisition expenses and general and administrative expenses by net premiums
earned. The Company's historic combined ratios may not be indicative of future
underwriting performance. When purchased within a single line of business, ceded
reinsurance and recoveries are accounted for within that line of business. When
purchased across multiple lines of business, ceded reinsurance and recoveries
are allocated to the lines of business in proportion to the related risks
assumed. The Company does not manage its assets by business segment;
accordingly, investment income and total assets are not allocated to the
individual business segments. General and administrative expenses incurred by
the business segments are allocated directly. Remaining general and
administrative expenses not directly incurred by the business segments are
allocated primarily based on estimated consumption, headcount and other
variables deemed relevant to the allocation of such expenses. Ceded reinsurance
and recoveries are recorded within the business segment to which they apply.



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Insurance


The following table summarizes the underwriting results and associated ratios
for the Company's Insurance segment for the three months ended March 31, 2012
and 2011.



                                                 Three Months Ended March 31,
                                                   2012                  2011              Change(1)
                                                  (U.S. dollars in thousands)
Revenues
Gross premiums written                        $      635,347          $   625,831                 1.5 %
Ceded premiums written                              (207,566 )           (193,535 )               7.2 %

Net premiums written                                 427,781              432,296                (1.0 )%

Net premiums earned                                  161,630              162,492                (0.5 )%
Other underwriting income                                 -                    -                   -  %

                                                     161,630              162,492                (0.5 )%

Expenses
Losses and loss expenses                             113,702               98,836                15.0 %
Acquisition expenses                                  16,214               16,308                (0.6 )%
General and administrative expenses                   34,435               36,806                (6.4 )%

                                                     164,351              151,950                 8.2 %

Underwriting (loss) income                    $       (2,721 )        $    10,542                  NM (2)

Net loss ratio                                          70.4 %               60.8 %               9.6
Acquisition expense ratio                               10.0 %               10.0 %                -
General and administrative expense ratio                21.3 %               22.7 %              (1.4 )

Combined ratio                                         101.7 %               93.5 %               8.2




(1) With respect to ratios, changes show increase or decrease in percentage

     points.


(2)  Not meaningful.


Premiums. Gross premiums written for the first quarter of 2012 in the Insurance
segment increased by $9.5 million over the first quarter of 2011. Gross and net
premiums written for each line of business in the Insurance segment for the
three months ended March 31, 2012 and 2011 were as follows:



                                               Three Months Ended March 31,
                                            2012                         2011
                                     Gross          Net          Gross           Net
                                   Premiums      Premiums      Premiums       Premiums
                                    Written       Written       Written        Written
                                               (U.S. dollars in thousands)
      Agriculture                  $ 533,667     $ 354,920     $ 508,705      $ 346,472
      Professional lines              36,345        30,205        35,469         31,124
      Casualty                        37,827        26,463        38,882         25,759
      Property                         9,844           833        24,690         12,585
      Healthcare liability            16,653        14,348        18,137         16,406
      Surety and other specialty       1,011         1,012           (52 )          (50 )

      Total                        $ 635,347     $ 427,781     $ 625,831      $ 432,296





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The decrease in the Insurance segment's net premiums written for the three months ended March 31, 2012 compared to 2011 was driven by the following factors:

• A decline in the property line of the Insurance segment in the quarter

ended March 31, 2012 compared to 2011 as the Company significantly

curtailed premiums in several products within this line of business in an

         effort to reallocate capital to more profitable lines of business; and




     •   Growth in the agriculture line of the Insurance segment arising from an

increase in policy count offset by the impact of reduced commodity prices

on premiums.



Ceded premiums written by the Company increased in the quarter ended March 31,
2012 as compared to the same period in 2011 because of increased cessions in the
agriculture line to the Federal Crop Insurance Corporation associated with the
growth in gross premiums written and from increased cessions of risks from the
southern United States.

Agriculture insurance writings are seasonal in nature with the majority of net
premiums written recorded in the first and third quarters of the year. The net
premiums earned by the Company in the Insurance segment reduced marginally in
the three months ended March 31, 2012 compared to 2011.

Net Losses and Loss Expenses. The loss ratio in the Company's Insurance segment
for the three months ended March 31, 2012 increased 9.6 percentage points
compared to the same period in 2011. The current accident quarter loss ratio
decreased by 8.2 percentage points for the three months ended March 31, 2012
compared to the same period in 2011 due to lower loss ratios in the Company's
agriculture, property, casualty and professional lines. In the agriculture line,
lower accident year loss ratios were due to improved growing conditions in the
southern U.S. year over year. In the property line, a few large losses from
winter storms contributed to the higher loss ratio in the prior period compared
to the first quarter of 2012.

During the first quarter of 2012 the Company's previously estimated loss and
loss expense reserve for the Insurance segment for prior accident years was
reduced by $7.8 million, which decreased the net loss ratio by 4.9 percentage
points, as compared to reductions of $34.6 million, which decreased the net loss
ratio by 21.3 percentage points, for the three months ended March 31, 2011. The
higher level of favorable loss development in the first quarter of 2011 compared
to 2012 was driven by the agriculture line of business. The higher development
in the first quarter of 2011 resulted from the combination of strong performance
during the 2010 crop year with a delayed harvest that extended claims
settlements until the first quarter of 2011 compared to the 2011 crop year,
which did not experience the same level of harvest delays or extension of claim
settlements into the first quarter of 2012.

Acquisition Expenses. The Company's acquisition expenses and acquisition ratio
in the Insurance segment in the first quarter of 2012 were comparable to the
same period in 2011.

General and Administrative Expenses. The general and administrative expense
ratio in the Insurance segment for the first quarter of 2012 decreased 1.4
percentage points compared to the same period in 2011 as a result of reduced
staffing and higher third party commissions and expense reimbursement offsets in
the agriculture line of business.



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Reinsurance

The following table summarizes the underwriting results and associated ratios for the Company's Reinsurance business segment for the three months ended March 31, 2012 and 2011.



                                                  Three Months Ended March 31,
                                                  2012                  2011              Change(1)
                                                  (U.S. dollars in thousands)
Revenues
Gross premiums written                        $     426,302        $       374,527              13.8 %
Ceded premiums written                              (11,027 )               (7,951 )            38.7 %

Net premiums written                                415,275                366,576              13.3 %

Net premiums earned                                 250,005                220,341              13.5 %
Other underwriting loss                                (335 )               (1,069 )           (68.7 )%

                                                    249,670                219,272              13.9 %

Expenses
Losses and loss expenses                            149,065                303,017             (50.8 )%
Acquisition expenses                                 52,275                 49,310               6.0 %
General and administrative expenses                  31,606                 29,155               8.4 %

                                                    232,946                381,482             (38.9 )%

Underwriting income (loss)                    $      16,724        $      (162,210 )              NM (2)

Net loss ratio                                         59.7 %                137.5 %           (77.8 )
Acquisition expense ratio                              20.9 %                 22.4 %            (1.5 )
General and administrative expense ratio               12.6 %                 13.2 %            (0.6 )

Combined ratio                                         93.2 %                173.1 %           (79.9 )




(1) With respect to ratios, changes show increase or decrease in percentage

     points.


(2)  Not meaningful.


Premiums. In the first quarter of 2012, net premiums written in the Reinsurance
segment increased by 13.3% over the first quarter of 2011. Gross and net
premiums written for each line of business in the Reinsurance segment for the
three months ended March 31, 2012 and 2011 were as follows:



                                               Three Months Ended March 31,
                                             2012                        2011
                                      Gross          Net          Gross          Net
                                    Premiums      Premiums      Premiums      Premiums
                                     Written       Written       Written       Written
                                                (U.S. dollars in thousands)
       Catastrophe                  $ 143,182     $ 133,718     $ 138,247     $ 131,123
       Casualty                       121,674       120,437       116,352       115,554
       Property                       106,746       106,746        70,087        70,087
       Aerospace and marine            25,629        25,593        20,838        20,839
       Surety and other specialty      29,071        28,781        29,003        28,973

       Total                        $ 426,302     $ 415,275     $ 374,527     $ 366,576


The net increase in net premiums written in the Reinsurance segment for the current quarter compared to the same period in 2011 was primarily due to the following factors:

• An increase in the property line in the quarter ended March 31, 2012

compared to 2011 as a result of new premiums and growth in renewal

premiums written by the Company's Zurich branch together with improved

pricing on renewals across the Company's other property businesses;




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• Growth in the aerospace and marine line resulting from new marine business

         written by the Company's Zurich branch;




     •   Growth in the casualty line arising from a single large positive premium
         adjustment; and




     •   Premium rate increases in certain internationally exposed parts of the

catastrophe line of business.



Ceded premiums written by the Company increased in the quarter ended March 31,
2012 as compared to the same period in 2011 because of increased cessions of
risks in the Company's catastrophe reinsurance line of business. Net premiums
earned by the Company in the Reinsurance segment for the three months ended
March 31, 2012 increased compared to the first quarter of 2011 as a result of
the growth in net premiums written in the last twelve months.

Net Losses and Loss Expenses. The net loss ratio in the Company's Reinsurance
segment for the three months ended March 31, 2012 decreased compared to the
first quarter of 2011 as a result of the lower catastrophe losses incurred in
the period. The Company recorded losses, net of reinstatement premiums and other
loss sensitive accruals, of $22.5 million in relation to the Kentucky windstorms
that occurred during the period. The net losses from these events added 9.7
percentage points to the Reinsurance segment's net loss ratio for the first
quarter of 2012. During the three months ended March 31, 2011, the Company
incurred losses of $184.8 million related to the Tohuko, Japan earthquake and
tsunami, Christchurch, New Zealand earthquake and floods experienced in
Queensland, Australia. The net losses from those events added 84.8 percentage
points to the Reinsurance segment's net loss ratio for the first quarter of
2011.

The Company recorded $9.1 million or 3.6 percentage points of favorable prior
year loss reserve development in the first quarter of 2012 compared to $14.1
million or 6.4 percentage points in the same quarter last year. During the first
quarter of 2012, lower favorable loss reserve development emanated from the
Reinsurance segment's short tail line of business compared to the first quarter
of 2011, due to lower than expected claims emergence in the prior year within
the catastrophe line of business.

Acquisition Expenses. The Company's acquisition expense ratio in the Reinsurance
segment decreased for the first quarter of 2012 as compared to the first quarter
of 2011. The decrease in the acquisition expense ratio for the first quarter was
generally due to a shift in business mix as the catastrophe line of business,
which incurs lower relative acquisition costs, increased its share of earned
premiums and the casualty line of business, which incurs higher relative
acquisition costs, has seen a decline in its share of earned premiums.

General and Administrative Expenses. The general and administrative expense ratio experienced by the Reinsurance segment in the three months ended March 31, 2012 reduced in comparison to the same period in 2011 as modest growth in expenditures was more than offset by an increase in net earned premiums.

Significant Transactions and Events


Credit Facility. On April 19, 2012 the Company and certain designated
subsidiaries of the Company entered into a $700.0 million four-year revolving
credit facility with JPMorgan Chase Bank, N.A. as administrative agent (the
"Credit Facility"). Upon entering into the Credit Facility, the Company
terminated its existing $1,175.0 million amended and restated credit agreement
dated May 8, 2007 with JPMorgan Chase Bank, N.A. as administrative agent. As of
March 31, 2012, there were no borrowings under this facility and letters of
credit outstanding under the facility were $375.8 million. See "Liquidity and
Capital Resources - Credit Facility" below.

Liquidity and Capital Resources

Endurance Holdings is a holding company that does not have any significant
operations or assets other than its ownership of the shares of its direct and
indirect subsidiaries. Endurance Holdings relies primarily on dividends and
other permitted distributions from its subsidiaries to pay its operating
expenses, interest on debt and dividends, if any, on its ordinary shares, its
7.75% Non-Cumulative Preferred Shares, Series A ("Series A Preferred Shares")
and its 7.5% Non-Cumulative Preferred Shares, Series B ("Series B Preferred
Shares"). There are restrictions on the payment of dividends by the Company's
operating subsidiaries to Endurance Holdings, which are described in more detail
below.

Ability of Subsidiaries to Pay Dividends. The ability of Endurance Bermuda to
pay dividends is dependent on its ability to meet the requirements of applicable
Bermuda law and regulations. Under Bermuda law, Endurance Bermuda may not
declare or pay a dividend if there are reasonable grounds for believing that
Endurance Bermuda is, or would after the payment be, unable to pay its
liabilities as they become due, or the realizable value of Endurance Bermuda's
assets would thereby be less than the aggregate of its liabilities and its
issued share capital and share premium accounts. Further, Endurance Bermuda, as
a regulated insurance company in Bermuda, is subject to additional regulatory
restrictions on the payment of dividends or distributions. As of March 31, 2012,
Endurance Bermuda could pay a dividend or return additional paid-in capital
totaling approximately $571.6 million (December 31, 2011 - $605.6 million)
without prior regulatory approval based upon the Bermuda insurance and corporate
regulations. In 2011, Endurance Holdings loaned Endurance Bermuda $200 million,
which remains outstanding and is callable on demand.



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Endurance U.S. Reinsurance, Endurance American, Endurance American Specialty and
Endurance Risk Solutions are subject to regulation by the State of Delaware
Department of Insurance and ARMtech is subject to regulation by the Texas
Department of Insurance. Dividends for each U.S. operating subsidiary are
limited to the greater of 10% of policyholders' surplus or statutory net income,
excluding realized capital gains. In addition, dividends may only be declared or
distributed out of earned surplus. At December 31, 2011, Endurance U.S.
Reinsurance, Endurance American, Endurance Risk Solutions and Endurance American
Specialty did not have earned surplus; therefore, these companies are precluded
from declaring or distributing dividends at March 31, 2012 without the prior
approval of the applicable insurance regulator. At March 31, 2012, ARMtech (with
notice to the Texas Department of Insurance) could pay dividends of $3.9 million
without prior regulatory approval from the applicable regulators. In addition,
any dividends paid by Endurance American, Endurance American Specialty and
Endurance Risk Solutions would be subject to the dividend limitation of their
respective parent insurance companies.

Under the jurisdiction of the United Kingdom'sFinancial Services Authority
("FSA"), Endurance U.K. must maintain a margin of solvency at all times, which
is determined based on the type and amount of insurance business written. The
FSA regulatory requirements impose no explicit restrictions on Endurance U.K.'s
ability to pay a dividend, but Endurance U.K. would have to notify the FSA 28
days prior to any proposed dividend payment. Dividends may only be distributed
from profits available for distributions. At March 31, 2012, Endurance U.K. did
not have profits available for distributions.

Cash and Invested Assets. The Company's aggregate invested assets, including
fixed maturity investments, short term investments, equity securities, other
investments (consisting of alternative and specialty funds), cash and cash
equivalents and pending securities transactions, as of March 31, 2012 totaled
$6.3 billion which is consistent with the aggregate invested assets of $6.3
billion as of December 31, 2011.

The Company's aggregate direct exposure to the indebtedness and equity
securities of those countries whose currency is the Euro or whose sovereign debt
rating is below AAA (except the U.S.) was $208.7 million at March 31, 2012,
compared to $239.8 million at December 31, 2011. On April 26, 2012, Standard &
Poor's downgraded the sovereign ratings of Spain from "A" to "BBB-plus". If this
downgrade was in effect at March 31, 2012, the total fair value of the Company's
securities having an "A" rating would have declined by $0.3 million, while
securities having a "BBB" rating would have increased by the same amount. The
Company does not have any direct exposure to sovereign debt issued by Ireland,
Greece or Portugal.

In addition to the direct exposures above, the Company has indirect exposure to
sovereign and non-sovereign investments whose currency is the Euro or whose
sovereign debt rating is below AAA through a hedge fund with a primary focus on
European indebtedness, principally focused on benefitting from the declining
value of European sovereign indebtedness. The Company's investment in the hedge
fund was $20.0 million and its fair market value as of March 31, 2012 was in
excess of that amount.

Cash Flows



                                                                   Three Months Ended
                                                                       March 31,
                                                                2012                  2011
                                                              (U.S. dollars in thousands)
Net cash provided by operating activities                  $       24,905          $  181,282
Net cash (used in) provided by investing activities              (210,336 ) 

115,189

Net cash used in financing activities                             (25,758 )          (341,943 )
Effect of exchange rate changes on cash and cash
equivalents                                                           (91 )             4,390

Net decrease in cash and cash equivalents                        (211,280 )           (41,082 )
Cash and cash equivalents, beginning of period                    890,914   

609,852


Cash and cash equivalents, end of period                   $      679,634   

$ 568,770




In the three months to March 31, 2012, the Company's cash and cash equivalents
decreased $211.3 million to $679.6 million. In the three months to March 31,
2011, cash and cash equivalents decreased by $41.1 million to $568.8 million.

Cash flows provided by operating activities for the three months ended March 31,
2012 were $24.9 million compared to $181.3 million for the three months ended
March 31, 2011. The decrease in cash flows provided by operating activities
during 2012 was primarily due to higher claim payments and decreased premium
collections, offset by an increase in net income.

During the three months ended March 31, 2012, cash flows used in investing
activities were $210.3 million, compared to cash flows provided by investing
activities of $115.2 million for the same period in 2011. The Company manages it
investment portfolio to generate attractive economic returns and income while
providing the Company with liquidity. Movements in financial markets and
interest rates influence the timing of investment sales and purchases. The cash
flows used in investing activities in 2012 principally reflected $198.7 million
in net purchases within our investment portfolio, while 2011 reflected net
proceeds of $132.9 million from the sale and maturity of investments.



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Our cash flows used in financing activities for the three months ended March 31,
2012 were $25.8 million, compared to cash flows used in financing activities of
$341.9 million for the same period in 2011. The cash flows used in financing
activities in 2011 was significantly higher than in 2012 principally due to the
repurchases of common shares in 2011.

During the three months ended 2012, the Company repurchased $1.0 million of its
6.15% Senior Notes due October 15, 2015. During the three months ended March 31
2011, the Company used its capital to repurchase its ordinary shares and share
equivalents in open market and private transactions. On January 28, 2011, the
Company repurchased 7,143,056 ordinary shares and options to purchase 10,000
ordinary shares from two affiliated funds of Perry Corp., a founding shareholder
of Endurance. The aggregate repurchase price for the shares and the options was
$321.5 million. The ordinary shares acquired by the Company represented
approximately 15% of its ordinary shares outstanding at December 31, 2010.
Endurance Holdings funded the repurchase of these shares primarily from calling
an outstanding loan between Endurance Holdings and Endurance Bermuda. Endurance
Bermuda funded the settlement of the loan from its existing cash and
investments. The repurchase did not impact the disclosed dividend payment
capacity of Endurance Bermuda as of December 31, 2011.

As of March 31, 2012 and December 31, 2011, the Company had pledged cash and
cash equivalents and fixed maturity investments of $175.1 million and $171.4
million, respectively, in favor of certain ceding companies to collateralize
obligations. As of March 31, 2012 and December 31, 2011, the Company had also
pledged $435.1 million and $517.2 million of its cash and fixed maturity
investments to meet collateral obligations for $375.8 million and $447.3 million
in letters of credit outstanding under its credit facility, respectively. In
addition, at March 31, 2012 and December 31, 2011, cash and fixed maturity
investments with fair values of $361.6 million and $370.4 million were on
deposit with U.S. state regulators, respectively, and cash and fixed maturity
investments with fair values of $1.3 million and $7.6 million were on deposit
with Canadian regulators, respectively.

Credit Facility. On April 19, 2012 the Company and certain designated
subsidiaries of the Company entered into a $700.0 million four-year revolving
credit facility with JPMorgan Chase Bank, N.A. ("JPMorgan") as administrative
agent (the "Credit Facility"). Upon entering into the Credit Facility, the
Company terminated its existing $1,175.0 million amended and restated credit
agreement dated May 8, 2007 with JPMorgan Chase Bank, N.A. as administrative
agent. As of March 31, 2012, there were no borrowings under this facility and
letters of credit outstanding under the facility were $375.8 million.

The Credit Facility consists of two tranches: (i) a tranche 1 secured credit
facility in an aggregate principal amount of $560.0 million (the "Tranche 1
Facility"), which is secured on a several basis by the respective entity
incurring such obligation by cash and securities deposited into collateral
accounts from time to time with Deutsche Bank Trust Company Americas and (ii) a
tranche 2 unsecured facility in an aggregate principal amount of $140.0 million
(the "Tranche 2 Facility"). The proceeds of the Credit Facility may be used for
general corporate purposes, to finance potential acquisitions and for the
repurchase of the Company's outstanding publicly or privately issued securities.
So long as the Company is not in default under the terms of the Credit Facility,
the Company may request that the size of the Credit Facility be increased by
$350.0 million, provided that no participating lender is obligated to increase
its commitments under the Credit Facility.

For letters of credit issued on a collateralized basis under the Tranche 1
Facility, the Company is required to pay a fee of 0.45% on the daily stated
amount of such letters of credit. For letters of credit issued on an
uncollateralized basis under the Tranche 2 Facility, the Company is required to
pay a fee ranging from 1.125% to 1.750% over LIBOR on the daily stated amount of
such letters of credit based upon the Company debt ratings as issued by Moody's
or Standard & Poor's. The interest rate for revolving loans under the Tranche 2
Facility is (a) the highest of (i) 0.5% in excess of the federal funds effective
rate, (ii) the prime rate as announced by JP Morgan and (iii) the Eurodollar
rate applicable for an interest period of one month plus 1%, plus a margin
ranging from 0.125% to 0.750% depending upon the type of loan and the Company's
ratings as issued by Moody's and S&P or (b) LIBOR plus a margin ranging from
1.125% to 1.750%. In addition, the Credit Facility requires the Company to pay
to the lenders a commitment fee.



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The Credit Facility requires the Company's compliance with certain customary
restrictive covenants. These include certain financial covenants, such as
maintaining a leverage ratio (no greater than 0.35:1.00 at any time) and a
consolidated tangible net worth (no less than $1.8 billion at any time). In
addition, each of the Company's regulated insurance subsidiaries that has a
claims paying rating from A.M. Best must maintain a rating of at least B++ at
all times. The terms of the Credit Facility restrict the declaration or payment
of dividends if the Company is already in default or the payment or declaration
would cause a default under the terms of the Credit Facility.

The Credit Facility also contains customary event of default provisions,
including failure to pay principal or interest under the Credit Facility,
insolvency of the Company, a change in control of the Company, a breach of the
Company's representations or covenants in the Credit Facility or a default by
the Company under its other indebtedness. Upon the occurrence of an event of
default under the Credit Facility, the lenders can terminate their commitments
under the Credit Facility, require repayment of any outstanding revolving loans,
give notice of termination of any outstanding letters of credit in accordance
with their terms, require the delivery of cash collateral for outstanding
letters of credit and foreclose on any security held by the lenders under the
Credit Facility.

Historically, the operating subsidiaries of the Company have generated
sufficient cash flows to meet all of their obligations. Because of the inherent
volatility of the business written by the Company, the seasonality in the timing
of payments by ceding companies, the irregular timing of loss payments, the
impact of a change in interest rates on the Company's investment returns as well
as seasonality in coupon payment dates for fixed maturity investments, cash
flows from the Company's operating activities may vary significantly between
periods. The Company expects to continue to generate positive operating cash
flows through 2012, absent the occurrence of additional significant catastrophic
events. In the event that paid losses accelerate beyond the ability to fund such
payments from operating cash flows, the Company would use its cash balances
available, liquidate a portion of its investment portfolio, access its existing
credit facility, or arrange for additional financing. However, there can be no
assurance that the Company will be successful in executing these strategies.

Currency and Foreign Exchange


The Company's functional currencies are U.S. dollars for its U.S. and Bermuda
operations and British Sterling for its U.K. operations. The reporting currency
for all operations is U.S. dollars. The Company maintains a portion of its
investments and liabilities in currencies other than the U.S. dollar. The
Company has made a significant investment in the capitalization of Endurance
U.K, which is subject to the FSA's rules concerning the matching of the currency
of its assets to the currency of its liabilities. Depending on the profile of
Endurance U.K.'s liabilities, it may be required to hold some of its assets in
currencies corresponding to the currencies of its liabilities. The Company may,
from time to time, experience gains or losses resulting from fluctuations in the
values of foreign currencies, which could have a material adverse effect on the
Company's results of operations.

Assets and liabilities of foreign operations whose functional currency is not
the U.S. dollar are translated at exchange rates in effect at the balance sheet
date. Revenues and expenses of such foreign operations are translated at average
exchange rates during the year. The effect of the translation adjustments for
foreign operations is included in accumulated other comprehensive income (loss).

Other monetary assets and liabilities denominated in foreign currencies are revalued at the exchange rates in effect at the balance sheet date with the resulting foreign exchange gains and losses included in earnings. Revenues and expenses denominated in foreign currencies are translated at the prevailing exchange rate on the transaction date.

Effects of Inflation


The effects of inflation could cause the severity of claims to rise in the
future. The Company's estimates for losses and loss expenses include assumptions
about future payments for settlement of claims and claims handling expenses,
such as medical treatments and litigation costs. To the extent inflation causes
these costs to increase above reserves established for these claims, the Company
will be required to increase the reserve for losses and loss expenses with a
corresponding reduction in its earnings in the period in which the deficiency is
identified. In addition, inflation could lead to higher interest rates causing
the current unrealized gain position on the Company's fixed maturity portfolio
to decrease or become an unrealized loss position. The current short duration of
the Company's fixed maturity portfolio has the potential to help reduce the
negative effects of higher interest rates on the Company's fixed maturity
portfolio. The Company may also choose to hold its fixed income investments to
maturity which would result in the unrealized gains largely amortizing through
net investment income.



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Cautionary Statement Regarding Forward-Looking Statements


Some of the statements under "Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations" and elsewhere in this Quarterly
Report on Form 10-Q may include forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 ("PSLRA"). The PSLRA
provides a "safe harbor" for forward-looking statements. These forward-looking
statements reflect our current views with respect to us specifically and the
insurance and reinsurance business generally, investments, capital markets and
the general economic environments in which we operate. 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 for the purposes of the PSLRA or otherwise.

All forward-looking statements address matters that involve risks and
uncertainties. Accordingly, there are or will be important factors that could
cause actual results to differ materially from those indicated in such
statements. We believe that these factors include, but are not limited to, the
following:


• the effects of competitors' pricing policies, and of changes in laws and

         regulations on competition, industry consolidation and development of
         competing financial products;



• greater frequency or severity of claims and loss activity, including as a

result of natural or man-made catastrophic events, than our underwriting,

         reserving or investment practices have anticipated;




     •   greater frequency or severity of loss activity, as a result of changing
         climate conditions;




     •   changes in market conditions in the agriculture industry, which may vary

depending upon demand for agricultural products, weather, commodity

prices, natural disasters, technological advances in agricultural

practices, changes in U.S. and foreign legislation and policies related to

         agricultural products and producers;



• termination of or changes in the terms of the U.S. multiple peril crop

insurance program and termination or changes to the U.S. farm bill,

including modifications to the Standard Reinsurance Agreement put in place

by the Risk Management Agency of the U.S. Department of Agriculture;

• decreased demand for property and casualty insurance or reinsurance or

         increased competition due to an increase in capacity of property and
         casualty insurers and reinsurers;




     •   changes in the availability, cost or quality of reinsurance or
         retrocessional coverage;



• the inability to renew business previously underwritten or acquired;

• the inability to obtain or maintain financial strength or claims-paying

         ratings by one or more of our subsidiaries;




     •   our ability to effectively integrate acquired operations and to continue
         to expand our business;




     •   uncertainties in our reserving process, including the potential for

adverse development of our loss reserves or failure of our loss limitation

         methods;




     •   the ability of the counterparty institutions with which we conduct
         business to continue to meet their obligations to us;




     •   the failure or delay of the Florida Citizens Property Insurance

Corporation, the Florida Hurricane Catastrophe Fund or private market

participants in Florida to promptly pay claims, particularly following a

         large windstorm or of multiple smaller storms;




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• our continued ability to comply with applicable financial standards and

restrictive covenants, the breach of which could trigger significant

         collateral or prepayment obligations;



Endurance Holdings or Endurance Bermuda becomes subject to income taxes in

         jurisdictions outside of Bermuda;



• changes in tax regulations or laws applicable to us, our subsidiaries,

         brokers or customers;




     •   state, federal and foreign regulations that impede our ability to charge
         adequate rates and efficiently allocate capital;



• changes in insurance regulations in the U.S. or other jurisdictions in

which we operate, including the establishment of the Federal Insurance

Office and other regulatory changes mandated by the Dodd-Frank Wall Street

Reform and Consumer Protection Act of 2010 in the United States and the

         implementation of Solvency II by the European Commission;




  •   reduced acceptance of our existing or new products and services;



• loss of business provided by any one of a few brokers on whom we depend

for a large portion of our revenue, and our exposure to the credit risk of

         our brokers;




     •   actions by our competitors, many of which are larger or have greater
         financial resources than we do;



• assessments by states for high risk or otherwise uninsured individuals;




  •   the impact of acts of terrorism and acts of war;




  •   the effects of terrorist related insurance legislation and laws;




  •   loss of key personnel;




  •   political stability of Bermuda;



• changes in the political environment of certain countries in which we

         operate or underwrite business;




  •   changes in accounting regulation, policies or practices;




  •   our investment performance;



• the valuation of our invested assets and the determination of impairments

         of those assets, if any;




     •   the breach of our investment guidelines or the inability of those
         guidelines to mitigate investment risk;



• the possible further downgrade of U.S. or foreign government securities by

credit rating agencies, and the resulting effect on the value of U.S. or

foreign government and other securities in our investment portfolio as

         well as the uncertainty in the market generally;




     •   the need for additional capital in the future which may not be available
         or only available on unfavorable terms;



• the ability to maintain the availability of our systems and safeguard the

security of our data in the event of a disaster or other unanticipated

         event; and




     •   changes in general economic conditions, including inflation, foreign

currency exchange rates, interest rates, and other factors.



The foregoing review of important factors should not be construed as exhaustive
and should be read in conjunction with the other cautionary statements that are
included in our 2011 Annual Report on Form 10-K, including the risk factors set
forth in Item 1A thereof. We undertake no obligation to publicly update or
review any forward-looking statement, whether as a result of new information,
future developments or otherwise.



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