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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 and six months ended June 30, 2012 of Endurance Specialty Holdings Ltd. and its wholly-owned subsidiaries. This discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and related...

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FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The following is a discussion and analysis of the financial condition and
results of operations for the three and six months ended June 30, 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 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 Form 10-K
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 Switzerland 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"),
             domiciled in Delaware; and




        •    American Agri-Business Insurance Company, domiciled in Texas and
             managed by ARMtech Insurance Services, Inc. (together,

"ARMtech").

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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 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 the 2011 Form 10-K. 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.

Consolidated Results of Operations - For the Three Months Ended June 30, 2012 and 2011


Results of operations for the three months ended June 30, 2012 and 2011 were as
follows:



                                                      Three Months Ended June 30,
                                                       2012                    2011             Change(1)
                                                      (U.S. dollars in thousands, except for ratios)
Revenues
Gross premiums written                           $         604,076          $   502,924               20.1 %
Ceded premiums written                                    (119,663 )            (61,166 )             95.6 %

Net premiums written                                       484,413              441,758                9.7 %

Net premiums earned                                        519,340              486,578                6.7 %
Net investment income                                       31,766               39,842              (20.3 )%
Net realized and unrealized investment gains                14,958               21,532              (30.5 )%
Net impairment losses recognized in earnings                  (407 )               (932 )            (56.3 )%
Other underwriting income                                       19                1,088              (98.3 )%

Total revenues                                             565,676              548,108                3.2 %

Expenses
Net losses and loss expenses                               345,897              361,970               (4.4 )%
Acquisition expenses                                        72,128               67,887                6.2 %
General and administrative expenses                         62,609               65,886               (5.0 )%
Amortization of intangibles                                  2,777                3,026               (8.2 )%
Net foreign exchange (gains) losses                           (336 )              3,348                 NM (2)
Interest expense                                             9,044                9,057               (0.1 )%
Income tax expense (benefit)                                 1,074               (4,143 )               NM (2)

Net income                                       $          72,483          $    41,077               76.5 %

Net loss ratio                                                66.5 %               74.4 %             (7.9 )
Acquisition expense ratio                                     13.9 %               14.0 %             (0.1 )
General and administrative expense ratio                      12.1 %               13.5 %             (1.4 )

Combined ratio                                                92.5 %              101.9 %             (9.4 )




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

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    points.


(2) Not meaningful.






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Premiums


Gross premiums written in the three months ended June 30, 2012 were $604.1
million, an increase of $101.2 million, or 20.1%, compared to the same period in
2011. Net premiums written in the three months ended June 30, 2012 were $484.4
million, an increase of $42.7 million, or 9.7%. The change in net premiums
written was driven by the following factors:



• An increase in the catastrophe line of the Reinsurance as a result of

             improved pricing on renewals in both the U.S. and International
             markets;




        •    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 casualty line of the Reinsurance segment resulting from

             one large contract being expanded at renewal, an increase in positive
             premium adjustments compared to the prior year, and one contract
             having the renewal date transitioned to the second quarter; and




        •    A decline in the property line of the Insurance segment 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 June 30,
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 as a result of the growth in gross premiums written and increased
cessions of risks.

Net premiums earned for the three months ended June 30, 2012 were $519.3 million, an increase of $32.8 million, or 6.7%, from the second quarter of 2011. The increase in net premiums earned resulted principally from growth in net written premiums recorded in more recent periods.

Net Investment Income


The Company's net investment income of $31.8 million decreased by 20.3% or $8.1
million for the quarter ended June 30, 2012 as compared to the same period in
2011. Investment income generated from the Company's fixed income investments,
which consist of fixed maturity investments and short-term investments, declined
by $7.2 million for the three months ended June 30, 2012 compared to the same
period in 2011. This decline resulted primarily from lower reinvestment rates
over the past 12 months driven by lower market yields. Net investment income
during the second quarter of 2012 included net mark to market losses of $0.1
million on Other Investments, comprised of alternative funds and specialty
funds, as compared to mark to market gains of $1.2 million in the second quarter
of 2011. Investment expenses, including investment management fees, for the
three months ended June 30, 2012 were $3.2 million compared to $3.5 million for
the same period in 2011.



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The annualized net earned yield and total return of the investment portfolio for
the three months ended June 30, 2012 and 2011 and market yield and portfolio
duration as of June 30, 2012 and 2011 were as follows:



                                                 Three Months Ended June 30,
                                                    2012               2011
     Annualized net earned yield(1)                      2.06 %           

2.62 %

     Total return on investment portfolio(2)             0.90 %           
1.32 %
     Market yield(3)                                     1.63 %            2.18 %
     Portfolio duration(4)                         2.60 years        2.28 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 second 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 1.12% and
a low of 0.62%. Trading activity in the Company's portfolio during the second
quarter included reductions in short-term investments, U.S. government and
government agencies securities, government guaranteed corporate securities,
corporate securities and non-agency residential mortgage-backed securities, and
increased allocations to agency mortgage-backed securities, U.S. state and
municipal securities, foreign (non-European) government bonds, non-agency
commercial mortgage-backed securities, asset-backed securities, equity
securities and other investments. The duration of the fixed income investments
increased to 2.60 years at June 30, 2012 from 2.39 years at December 31, 2011,
partly due to lower cash balances.

Net Realized and Unrealized Investment Gains


The Company's investment portfolio is actively managed on a fair value basis to
generate attractive economic returns and income. 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 June 30, 2012 were $719.6 million compared to $799.5 million
during the same period a year ago. Net realized investment gains decreased
during the three months ended June 30, 2012 compared to the same period in 2011.
Realized investment gains and losses and the change in the fair value of
derivative financial instruments for the three months ended June 30, 2012 and
2011 were as follows:



                                                           Three Months Ended June 30,
                                                           2012                   2011
                                                           (U.S. dollars in thousands)
Gross realized gains on investment sales               $      15,613          $      22,086
Gross realized losses on investment sales                       (822 )                 (485 )
Change in fair value of derivative financial
instruments                                                      167                    (69 )

Net realized and unrealized investment gains in
earnings                                               $      14,958          $      21,532





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Net Impairment Losses Recognized in Earnings


During the three months ended June 30, 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 the securities in an unrealized loss position at June 30,
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 Form 10-K, to determine
whether the securities 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 June 30, 2012 and 2011 were as follows:



                                                            Three Months Ended June 30,
                                                            2012                     2011
                                                            (U.S. dollars in thousands)
Total other-than-temporary impairment losses            $        (148 )            $   (484 )
Portion of loss recognized in other
comprehensive income                                             (259 )                (448 )

Net impairment losses recognized in earnings            $        (407 )     

$ (932 )




The $0.4 million and $0.9 million of other-than-temporary impairment ("OTTI")
losses recognized by the Company in the second quarters of 2012 and 2011,
respectively, relating to specific credit events occurred primarily due to
reductions in expected recovery values on residential mortgage-backed securities
during the period. A total of $0.3 million was shifted from a non-credit OTTI
loss previously recognized in comprehensive income to a credit OTTI loss
recorded in net income for the second quarter of 2012.

The Company assessed its intent and ability to hold certain equity securities that were in an unrealized loss position at June 30, 2012 and 2011 and determined it did not need to recognize any OTTI losses in the three months ended June 30, 2012 and 2011.

Net Foreign Exchange Gains and Losses


For the three months ended June 30, 2012, the Company remeasured its monetary
assets and liabilities denominated in foreign currencies, which resulted in a
net foreign exchange gain of $0.3 million compared to a net foreign exchange
loss of $3.3 million for the same period of 2011. This gain resulted from
offsetting exposures across the Company as the U.S. dollar weakened against the
Japanese Yen and strengthened against other major currencies in the period. 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 June 30, 2012, the Company incurred lower levels of
catastrophe losses compared to the prior year. The Company recorded losses, net
of reinsurance, reinstatement premiums and other loss sensitive accruals, of
$14.4 million in relation to an earthquake in Italy and windstorms in the United
States, which added 2.8 percentage points to the Company's net loss ratio for
the second quarter of 2012. For the three months ended June 30, 2011, the
Company recorded losses, net of reinsurance, reinstatement premiums and other
loss sensitive accruals, of $61.8 million in relation to tornadoes in the United
States, which added 13.0 percentage points to the Company's net loss ratio for
the second quarter of 2011. In addition, the Company recorded lower reserves for
attritional losses relative to earned premiums in the Insurance segment overall
in the second quarter of 2012 compared to 2011.



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Favorable prior year loss reserve development was $19.6 million for the second
quarter of 2012 compared to $44.8 million during the same period in 2011. In the
second 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 second quarter of 2012
was less than the second 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 half 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 June 30, 2012 was generally consistent with the acquisition expense ratio for the same period in 2011.

General and Administrative Expenses


The Company's general and administrative expense ratio for the second 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 and agriculture line
of the Insurance segment together with a reduction in expenditure. General and
administrative expense was lower in the second quarter of 2012 compared to 2011
due to increased third party ceding commissions and expense reimbursement
offsets in the agriculture line of the Insurance segment and favorable
compensation cost adjustments generally arising from a lower headcount and a
lower concentration of more senior staff. Lower expenditure was partially offset
by increased consulting and facilities costs. At June 30, 2012, the Company had
a total of 849 employees compared to 856 employees at June 30, 2011.

Income Tax Expense (Benefit)


The Company recorded a tax expense for the quarter ended June 30, 2012 of $1.1
million compared to a tax benefit of $4.1 million for the quarter ended June 30,
2011. The current period tax expense resulted from income generated in the
current period by the Company's United States taxable jurisdictions that were
impacted by the higher levels of catastrophe losses in the same period of 2011.

Net Income


The Company produced net income of $72.5 million in the three months ended
June 30, 2012 compared to net income of $41.1 million in the same period of 2011
primarily as a result of higher earned premiums and a decrease in catastrophe
losses during the current period.



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Consolidated Results of Operations - For the Six Months Ended June 30, 2012 and 2011


Results of operations for the six months ended June 30, 2012 and 2011 were as
follows:



                                                  Six Months Ended June 30,
                                                2012                     2011               Change(1)
                                                 (U.S. dollars in thousands, except for ratios)
Revenues
Gross premiums written                    $       1,665,725         $     1,503,282               10.8 %
Ceded premiums written                             (338,256 )              (262,652 )             28.8 %

Net premiums written                              1,327,469               1,240,630                7.0 %

Net premiums earned                                 930,975                 869,411                7.1 %
Net investment income                                88,841                  92,343               (3.8 )%
Net realized and unrealized
investment gains                                     20,161                  25,307              (20.3 )%
Net impairment losses recognized in
earnings                                               (626 )                (2,579 )            (75.7 )%
Other underwriting (loss) income                       (316 )                    19                 NM (2)

Total revenues                                    1,039,035                 984,501                5.5 %

Expenses
Losses and loss expenses                            608,664                 763,823              (20.3 )%
Acquisition expenses                                140,617                 133,505                5.3 %
General and administrative expenses                 128,650                 131,847               (2.4 )%
Amortization of intangibles                           5,554                   5,824               (4.6 )%
Net foreign exchange gains                          (18,473 )                (3,570 )               NM (2)
Interest expense                                     18,091                  18,111               (0.1 )%
Income tax expense (benefit)                            907                 (18,699 )               NM (2)

Net income (loss)                         $         155,025         $       (46,340 )               NM (2)


Net loss ratio                                         65.4 %                  87.9 %            (22.5 )
Acquisition expense ratio                              15.1 %                  15.4 %             (0.3 )
General and administrative expense
ratio                                                  13.8 %                 15.1  %             (1.3 )

Combined ratio                                         94.3 %                 118.4 %            (24.1 )




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

    points.


(2) Not meaningful.


Premiums

Gross premiums written in the six months ended June 30, 2012 were $1,665.7
million, an increase of $162.4 million, or 10.8%, compared to the same period in
2011. Net premiums written in the six months ended June 30, 2012 were $1,327.5
million, an increase of $86.8 million, or 7.0%, compared to the same period in
2011. The increase in net premiums written was driven by the following factors:



        •    Growth in the Reinsurance segment where property premiums were higher
             due to new premiums and growth in renewals, particularly at the
             Company's Zurich branch;



• Increased catastrophe premiums as a result of improved pricing during

             mid-year renewals;




        •    Growth in casualty premiums due to increased participation on a large
             contract, an increase in positive premium adjustments and the
             transition of a significant renewal to the second quarter;



• Increase in the agriculture line of the Insurance segment where policy

             count and increased premium levels per policy, partially 

offset by the

             impact of lower commodity prices; and




        •    Decline in the property line of the Insurance segment as the Company
             significantly curtailed premiums in several products in an effort to
             reallocate capital to more profitable lines of business.




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Net premiums earned for the six months ended June 30, 2012 were $931.0 million,
an increase of $61.6 million, or 7.1%, from the six months ended June 30, 2011
principally due to growth in net premiums written experienced over the last
twelve months compared to the same period last year.

Net Investment Income


The Company's net investment income of $88.8 million decreased by 3.8% or $3.5
million for the six months ended June 30, 2012 as compared to the same period in
2011. Net investment income during the first six months of 2012 included net
mark to market gains of $23.1 million on Other Investments, comprised of
alternative and specialty funds, as compared to mark to market gains of $14.9
million in the first six months of 2011. Investment income generated by the
Company's fixed income investments declined by $12.4 million in the first six
months of 2012 compared to the same period in 2011 primarily due to lower
reinvestment rate driven by lower market yields, partly offset by a higher
average investment portfolio balance. Investment expenses for the six months
ended June 30, 2012, including investment management fees, were $6.6 million
compared to $7.1 million for the same period in 2011.

The annualized net earned yield, total return on the investment portfolio for the six months ended June 30, 2012 and 2011 and market yield and portfolio duration as of June 30, 2012 and 2011 were as follows:



                                                  Six Months Ended June 30,
                                                    2012              2011
      Annualized net earned yield(1)                    2.89 %           

3.02 %

      Total return on investment portfolio(2)           2.29 %           
2.23 %
      Market yield(3)                                   1.63 %            2.18 %
      Portfolio duration(4)                       2.60 years        2.28 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 to 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 held by

the Company's investment managers.



During the six months ended June 30, 2012, the yield on the benchmark three year
U.S. Treasury bond fluctuated within a 58 basis point range, with a high of
1.20% and a low of 0.62%. Trading activity in the Company's portfolio for the
six months ended June 30, 2012 included reductions in short-term investments,
government guaranteed corporate securities and non-agency residential
mortgage-backed securities, and increased allocations to agency residential
mortgage-backed securities, foreign (non-European) government bonds, corporate
securities, non-agency commercial mortgage-backed securities, asset-backed
securities, equity securities and Other Investments.

Net Realized and Unrealized Investment Gains


The Company's investment portfolio is managed on a fair value basis to generate
attractive economic returns and income. 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 six months
ended June 30, 2012 were $1,552.9 million compared to $1,816.7 million during
the same period a year ago. Net realized investment gains decreased during the
six months ended June 30, 2012 compared to the same period in 2011.



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Realized investment gains and losses and the change in the fair value of
derivative financial instruments for the six months ended June 30, 2012 and 2011
were as follows:



                                                                 Six Months Ended June 30,
                                                                 2012                 2011
                                                                (U.S. dollars in thousands)
Gross realized gains on investment sales                     $     22,861         $     33,659
Gross realized losses on investment sales                          (3,169 )             (8,193 )
Change in fair value of derivative financial instruments              469                 (159 )

Net realized and unrealized investment gains in earnings $ 20,161

$ 25,307

Net Impairment Losses Recognized in Earnings (Losses)


During the six months ended June 30, 2012, the Company identified available for
sale securities that were considered to be other-than-temporarily impaired. The
Company initially considered whether it intended to sell or would be more likely
than not required to sell the securities in an unrealized loss position at
June 30, 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 Form 10-K, to
determine whether the securities in an unrealized loss position were
other-than-temporarily impaired as a result of credit factors or other factors.
Net impairment losses recognized in earnings (losses) for the six months ended
June 30, 2012 and 2011 were as follows:



                                                            Six Months Ended June 30,
                                                          2012                   2011
                                                           (U.S. dollars in thousands)
Total other-than-temporary impairment losses           $     (148 )          $      (1,740 )
Portion of loss recognized in other
comprehensive income                                         (478 )         

(839 )


Net impairment losses recognized in earnings
(losses)                                               $     (626 )          $      (2,579 )



The $0.6 million of OTTI losses recognized by the Company in the six months
ended June 30, 2012 relating to specific credit events occurred primarily due to
reductions in expected recovery values on residential and commercial
mortgage-backed securities during the period, along with certain credit related
downgrades in corporate securities. Of this total, $0.5 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 2012.

For the six months ended June 30, 2011, the Company recorded $2.6 million of
OTTI losses in earnings (losses). This amount related to specific credit events
occurring primarily due to reductions in expected recovery values on mortgage
and asset backed securities during the period, along with certain credit related
downgrades in corporate securities. Of this total, $0.8 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 2011.

The Company assessed its intent and ability to hold certain equity securities
that were in an unrealized loss position at June 30, 2012 and determined it did
not need to recognize any OTTI losses in the six months ended June 30, 2012
(2011-$35,000).

Net Foreign Exchange Gains


For the six months ended June 30, 2012, the Company remeasured its monetary
assets and liabilities denominated in foreign currencies, which resulted in a
net foreign exchange gain of $18.5 million compared to a $3.6 million gain for
the same period of 2011. The current period net foreign exchange gain resulted
from a decrease in the value of Japanese Yen net liabilities as the U.S. dollar
strengthened against the Yen and other net gains realized as the U.S. dollar
fluctuated against other currencies over 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 resulted from the strengthening of Euro denominated assets held as
the U.S. dollar weakened during 2011.



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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 six months ended June 30, 2012, the Company incurred catastrophe losses
arising from windstorms in the U.S. and an earthquake in Italy, 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 $36.9 million in relation to these events which added 4.2
percentage points to the Company's net loss ratio for the six months ended
June 30, 2012. For the six months ended June 30, 2011, multiple events adversely
affected the Company's net loss ratio in the Reinsurance segment. These included
the Tohuko, Japan earthquake and tsunami, the Christchurch, New Zealand
earthquake, Queensland, Australia floods, Midwest United States tornadoes and
multiple storms in the Midwest, which when accumulated triggered certain
aggregate catastrophe contracts. The Company recorded losses, net of
reinsurance, reinstatement premiums and other loss sensitive accruals, of $250.8
million in relation to these events, which added 29.3 percentage points to the
Company's net loss ratio for the six months ended June 30, 2011. In addition,
the Company recorded lower reserves for attritional losses in the Insurance
segment's agriculture, property and professional lines and the Reinsurance
segment's casualty line in the six months ended June 30, 2012 compared to the
same period in 2011, which were partially offset by a higher attritional loss
rate in the casualty line of the Insurance segment.

Favorable prior year loss reserve development was $36.5 million for the six
months ended June 30, 2012 as compared to $93.5 million for the same period in
2011. In the six months ended June 30, 2012 and 2011, prior year loss reserves
emerged favorably across each line of the Insurance segment and in the short and
long tail lines of the Reinsurance segment. Favorable reserve development in the
first half of 2012 was less than the first half 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 half of 2011, which consequently experienced significant
favorable development.

The Company participates in lines of business in which 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 six months ended June 30, 2012 was comparable to that of the same period in 2011.

General and Administrative Expenses


The Company's general and administrative expense ratio for the six months ended
June 30, 2012 was lower than the same period in 2011 as a result of increased
earned premiums in the current period, lower compensation costs and an increase
in third party commissions and expense reimbursement offsets in the agriculture
line of the Insurance segment. Personnel costs were down particularly as a
result of lower annual incentive expense as the actual payout of 2011 annual
incentive compensation was lower than previously accrued. At June 30, 2012, the
Company had a total of 849 employees compared to 856 employees at June 30, 2011.

Income Tax Expense (Benefit)


The Company recorded a tax expense for the six months ended June 30, 2012 of
$0.9 million compared to a tax benefit of $18.7 million for the same period in
2011 due to significant net losses experienced in its United States taxable
jurisdictions in 2011.



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Net Income (Loss)


The Company produced net income of $155.0 million for the six months ended
June 30, 2012 compared to a net loss of $46.3 million in the same period of 2011
primarily due to the decrease in catastrophe losses and growth in net premiums
earned.

Subsequent Event

During July 2012, high temperatures and low rainfall created drought conditions
in certain parts of the Midwestern United States. The drought conditions have
the potential to cause material losses within the agriculture insurance and
reinsurance industry generally and the Company specifically. In the event that
these conditions persist, the Company may need to establish related loss
reserves in the second half of 2012, which may have a material adverse effect on
the Company's third and fourth quarter results of operations.

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 June 30, 2012, the Company had accrued losses and loss expense reserves of
$4.0 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 six months ended June 30, 2012
and 2011, the Company's net paid losses and loss expenses were $389.9 million
and $402.0 million, respectively.



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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 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.

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 Form 10-K.

Losses and loss expenses for the three and six months ended June 30, 2012 are
summarized as follows:



       Three Months Ended         Incurred related to:             Total incurred
       June 30, 2012         Current year       Prior years            losses
                                         (U.S. dollars in thousands)
       Insurance:
       Short tail           $        9,730     $      (2,618 )    $          7,112
       Long tail                    70,805            (8,249 )              62,556
       Other                       141,602            (2,766 )             138,836

       Total Insurance             222,137           (13,633 )             208,504

       Reinsurance:
       Short tail                   75,921            (7,095 )              68,826
       Long tail                    58,656            (3,287 )              55,369
       Other                         8,735             4,463                13,198

       Total Reinsurance           143,312            (5,919 )             137,393

       Totals               $      365,449     $     (19,552 )    $        345,897





        Six Months Ended          Incurred related to:             Total incurred
        June 30, 2012        Current year       Prior years            losses
                                         (U.S. dollars in thousands)
        Insurance:
        Short tail          $       17,538     $      (7,065 )    $         10,473
        Long tail                  132,032            (8,580 )             123,452
        Other                      194,116            (5,835 )             188,281

        Total Insurance            343,686           (21,480 )             322,206

        Reinsurance:
        Short tail                 179,322           (13,245 )             166,077
        Long tail                  111,217            (8,269 )             102,948
        Other                       10,892             6,541                17,433

        Total Reinsurance          301,431           (14,973 )             286,458

        Totals              $      645,117     $     (36,453 )    $        608,664





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Losses and loss expenses for the three and six months ended June 30, 2012
included $19.6 million and $36.5 million in favorable development of reserves
relating to prior accident years, respectively. The favorable loss reserve
development experienced during the three and six months ended June 30, 2012
benefited the Company's reported loss ratio by approximately 3.8 and 3.9
percentage points, respectively. This net reduction in estimated losses for
prior accident years resulted primarily from lower than expected claims
emergence for the three and six months ended June 30, 2012 across all reserving
groups included within the Insurance segment and the short tail and long tail
reserving groups in the Reinsurance segment.

During the three months ended June 30, 2012, as part of the Company's periodic
review of key parameters and in order to recognize accumulated historical
experience and other relevant industry information, the Company adjusted the
initial expected loss ratios for a number of business units within the Insurance
and Reinsurance segments. Within the Insurance segment, initial expected loss
ratios were lowered for historical years for the healthcare liability and
professional lines of business, and raised for the workers' compensation line of
business that is included in the surety and other specialty line of business.
The initial expected loss ratios were raised and lowered in specific sectors of
the casualty line of business. Within the Reinsurance segment, initial expected
loss ratios were lowered for historical years for the catastrophe line of
business. For the three and six months ended June 30, 2012, the Company did not
materially alter any other 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 and six months ended June 30, 2012, the
favorable loss emergence within the short tail insurance reserve category was
primarily due to lower than expected reported claims and favorable case reserve
development related to the property line of business.

Long Tail Insurance. For the three and six months ended June 30, 2012, the
Company recorded 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. Favorable loss emergence was
partially offset by adverse development within the workers' compensation line of
business that the Company exited in 2009.

Other Insurance. The Company recorded favorable loss emergence within this
reserve category for the three and six months ended June 30, 2012 primarily due
to lower than anticipated agriculture claims settlements for the 2011 crop year,
which resulted from 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 half of 2011,
which consequently experienced favorable development.

Reinsurance


Short Tail Reinsurance. For the three and six months ended June 30, 2012, the
Company recorded 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
development within the property line of business.

Long Tail Reinsurance. For the three and six months ended June 30, 2012, the
Company recorded favorable loss emergence within this reserve category primarily
due to lower than expected claims reported within the Company's casualty and
surety and other specialty lines of business.

Other Reinsurance. For the three and six months ended June 30, 2012, the Company
recorded unfavorable loss emergence within this reserve category primarily due
to higher than expected claims reported within the international agriculture
business that is part of the surety and other specialty line of business.



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Losses and loss expenses for the three and six months ended June 30, 2011 are
summarized as follows:



       Three Months Ended         Incurred related to:             Total incurred
       June 30, 2011         Current year       Prior years            losses
                                         (U.S. dollars in thousands)
       Insurance:
       Short tail           $       13,723     $      (5,150 )    $          8,573
       Long tail                    69,420            (5,490 )              63,930
       Other                       131,443           (12,550 )             118,893

       Total Insurance             214,586           (23,190 )             191,396

       Reinsurance:
       Short tail                  127,257           (19,245 )             108,012
       Long tail                    58,876               335                59,211
       Other                         6,032            (2,681 )               3,351

       Total Reinsurance           192,165           (21,591 )             170,574

       Totals               $      406,751     $     (44,781 )    $        361,970





        Six Months Ended          Incurred related to:             Total incurred
        June 30, 2011        Current year       Prior years            losses
                                         (U.S. dollars in thousands)
        Insurance:
        Short tail          $       27,057     $     (14,424 )    $         12,633
        Long tail                  134,627            (8,050 )             126,577
        Other                      186,350           (35,328 )             151,022

        Total Insurance            348,034           (57,802 )             290,232

        Reinsurance:
        Short tail                 386,995           (33,408 )             353,587
        Long tail                  113,879               610               114,489
        Other                        8,401            (2,886 )               5,515

        Total Reinsurance          509,275           (35,684 )             473,591

        Totals              $      857,309     $     (93,486 )    $        763,823


Losses and loss expenses for the three and six months ended June 30, 2011 included $44.8 million and $93.5 million in favorable development of reserves relating to prior accident years, respectively. The favorable loss reserve development experienced during the three and six months ended June 30, 2011 benefited the Company's reported loss ratio by approximately 9.2 and 10.8 percentage points, respectively. This net reduction in estimated losses for prior accident years resulted primarily from lower than expected claims emergence across all reserving groups included within the Insurance and Reinsurance segments.


For the three and six months ended June 30, 2011, the Company did not materially
alter the two key inputs utilized to establish its reserve for losses and loss
expenses (initial expected loss ratios and loss reporting patterns) for business
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.



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Insurance

Short Tail Insurance. For the three and six months ended June 30, 2011, the
favorable loss emergence within the short tail insurance reserve category was
primarily due to lower than expected reported claims and favorable case reserve
development related to the property line of business.

Long Tail Insurance. For the three and six months ended June 30, 2011, the
Company recorded favorable loss emergence within this reserve category primarily
due to lower than expected claims activity within the professional lines and
healthcare liability lines of business. Favorable loss emergence was partially
offset by modest adverse development within the U.S. casualty business and
adverse loss emergence within the workers' compensation line of business that
the Company exited in 2009.

Other Insurance. For the three and six months ended June 30, 2011, the Company
recorded favorable loss emergence within this reserve category primarily due to
lower than anticipated agriculture claims settlements for the 2010 crop year.

Reinsurance


Short Tail Reinsurance. For the three and six months ended June 30, 2011, the
Company recorded favorable loss emergence within this reserve category primarily
due to lower than expected claims activity and favorable case reserve
development within the catastrophe and surety and other specialty lines of
business.

Long Tail Reinsurance. For the three and six months ended June 30, 2011, the
Company recorded a modest amount of unfavorable loss emergence within this
reserve category primarily due to higher than expected claims reported within
the Company's self insured risks business which is a part of the surety and
other specialty line of business.

Other Reinsurance. For the three and six months ended June 30, 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 business that is part of the surety and other specialty line of business.

The total reserves for losses and loss expenses recorded on the Company's balance sheet were comprised of the following at June 30, 2012:



                                                                  Reserve for losses
                          Case Reserves       IBNR Reserves       and loss expenses
                                         (U.S. dollars in thousands)
     Insurance:
     Short tail          $        30,243     $        27,239     $             57,482
     Long tail                   391,391           1,272,509                1,663,900
     Other                       242,751             149,690                  392,441

     Total Insurance             664,385           1,449,438                2,113,823

     Reinsurance:
     Short tail                  522,767             327,517                  850,284
     Long tail                   305,735             700,372                1,006,107
     Other                         7,144               7,264                   14,408

     Total Reinsurance           835,646           1,035,153                1,870,799

     Totals              $     1,500,031     $     2,484,591     $          3,984,622





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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 and six months ended June 30,
2012 and 2011.



                                         Three Months Ended June 30,              Six Months Ended June 30,
                                           2012                 2011               2012                 2011
                                                   (U.S. dollars in thousands, except for ratios)
Revenues
Gross premiums written                $      292,659         $  225,750        $     928,006         $  851,581
Ceded premiums written                      (106,000 )          (52,244 )           (313,566 )         (245,779 )

Net premiums written                         186,659            173,506              614,440            605,802

Net premiums earned                          266,085            249,397              427,715            411,889
Other underwriting loss                       (1,300 )               -                (1,300 )               -

                                             264,785            249,397              426,415            411,889

Expenses
Losses and loss expenses                     208,504            191,396              322,206            290,232
Acquisition expenses                          17,545             15,861               33,759             32,169
General and administrative
expenses                                      32,819             36,227               67,254             73,033

                                             258,868            243,484              423,219            395,434

Underwriting income                   $        5,917         $    5,913        $       3,196         $   16,455

Net loss ratio                                 78.4  %            76.7  %              75.3  %            70.5  %
Acquisition expense ratio                       6.6  %             6.4  %               7.9  %             7.8  %
General and administrative
expense ratio                                  12.3  %            14.5  %              15.7  %            17.7  %

Combined ratio                                 97.3  %            97.6  %              98.9  %            96.0  %



Premiums. Gross premiums written for the three and six months ended June 30,
2012 in the Insurance segment increased by 29.6% and 9.0% over the same periods
in 2011, respectively. Gross and net premiums written for each line of business
in the Insurance segment were as follows:



                                               Three Months Ended June 30,
                                            2012                         2011
                                     Gross          Net          Gross           Net
                                   Premiums      Premiums      Premiums       Premiums
                                    Written       Written       Written        Written
                                               (U.S. dollars in thousands)
      Agriculture                  $ 133,439     $  67,249     $  57,125      $  46,049
      Professional lines              51,019        42,832        49,181         37,624
      Casualty                        68,088        43,549        63,178         43,811
      Property                        18,182        11,990        35,904         25,996
      Healthcare liability            19,922        19,031        20,454         20,115
      Surety and other specialty       2,009         2,008           (92 )          (89 )

      Total                        $ 292,659     $ 186,659     $ 225,750      $ 173,506





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                                                Six Months Ended June 30,
                                            2012                         2011
                                     Gross          Net          Gross           Net
                                   Premiums      Premiums      Premiums       Premiums
                                    Written       Written       Written        Written
                                               (U.S. dollars in thousands)
      Agriculture                  $ 667,106     $ 422,169     $ 565,830      $ 392,521
      Professional lines              87,364        73,037        84,650         68,748
      Casualty                       105,915        70,012       102,060         69,570
      Property                        28,026        12,823        60,594         38,581
      Healthcare liability            36,575        33,379        38,591         36,521
      Surety and other specialty       3,020         3,020          (144 )         (139 )

      Total                        $ 928,006     $ 614,440     $ 851,581      $ 605,802



The increase in the Insurance segment net premiums written for the three and six
months ended June 30, 2012 compared to the same periods in 2011 was driven by
the following factors:



        •    Growth in agriculture net premiums written arising from an increase in
             policy count and increased premium levels per policy,

partially offset

             by the impact of lower commodity prices; and




        •    A decline in the property line 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.


Net premiums earned by the Company in the Insurance segment increased in both
the three and six months ended June 30, 2012 compared to the same periods in
2011. The increases were primarily due to the increase in net premiums written
in the agriculture line in 2012 compared to 2011 and the growth in net premiums
written in the casualty line through 2011 emanating from the Company's contract
binding authority business which was launched at the end of 2010.

Losses and Loss Expenses. The increases in the net loss ratios in the Company's
Insurance segment for the three and six months ended June 30, 2012 compared to
the same periods in 2011 reflected lower levels of favorable prior year reserve
releases in the agriculture line than in 2011. During the second quarter and
first six months of 2012, the Company's previously estimated loss and loss
expense reserves for the Insurance segment for prior accident years were reduced
by $13.6 million and $21.5 million, respectively, which decreased the net loss
ratio by 5.1 and 5.0 percentage points, as compared to reductions of $23.2
million and $57.8 million, which decreased the net loss ratio by 9.3 and 14.0
percentage points, for the three and six months ended June 30, 2011. The higher
level of favorable loss development in the first half of 2011 compared to 2012
was driven by the agriculture line of business. The higher development in the
first half 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 two quarters 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 half of 2012. Partially offsetting the impact of lower favorable
development was improved current accident year results for the agriculture and
professional lines. The professional line benefitted in the current period from
lower levels of attritional losses compared to 2011. In the first half of 2012,
crop conditions improved, including a significantly improved harvest of winter
wheat and much better planting conditions for spring crops compared to the first
half of 2011, when the winter wheat harvest was adversely impacted by drought
conditions in the Southwest United States, and excess moisture in the Midwest
United States delayed planting of the spring crops.

During July 2012, high temperatures and low rainfall created drought conditions
in certain parts of the Midwestern United States. The drought conditions have
the potential to cause material losses within the agriculture insurance and
reinsurance industry generally and the Company specifically. In the event that
these conditions persist, the Company may need to establish related loss
reserves in the second half of 2012, which may have a material adverse effect on
the agriculture line.



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Acquisition Expenses. The Company's acquisition expense ratios in the Insurance
in the second quarter and first six months of 2012 were comparable to the same
periods in 2011.

General and Administrative Expenses. The decrease in general and administrative
expenses and expense ratios in the Insurance segment in the second quarter and
first six months of 2012 compared to the same periods in 2011 was a result of
lower annual incentive expense and higher third party commissions and expense
reimbursement offsets.

Reinsurance

The following table summarizes the underwriting results and associated ratios for the Company's Reinsurance business segment for the three and six months ended June 30, 2012 and 2011.



                                         Three Months Ended June 30,             Six Months Ended June 30,
                                          2012                 2011                2012               2011
                                                  (U.S. dollars in thousands, except for ratios)
Revenues
Gross premiums written                $     311,417        $     277,174       $    737,719        $  651,701
Ceded premiums written                      (13,663 )             (8,922 )          (24,690 )         (16,873 )

Net premiums written                        297,754              268,252            713,029           634,828

Net premiums earned                         253,255              237,181            503,260           457,522
Other underwriting income                     1,319                1,088                984                19

                                            254,574              238,269            504,244           457,541

Expenses
Losses and loss expenses                    137,393              170,574            286,458           473,591
Acquisition expenses                         54,583               52,026            106,858           101,336
General and administrative
expenses                                     29,790               29,659             61,396            58,814

                                            221,766              252,259            454,712           633,741

Underwriting income (loss)            $      32,808        $     (13,990 )  

$ 49,532 $ (176,200 )


Net loss ratio                                54.2  %              71.9  %            57.0  %          103.5  %
Acquisition expense ratio                     21.6  %              22.0  %            21.2  %           22.1  %
General and administrative expense
ratio                                         11.8  %              12.5  %            12.2  %           12.9  %

Combined ratio                                87.6  %             106.4  %            90.4  %          138.5  %



Premiums. In the second quarter of 2012, net premiums written in the Reinsurance
segment increased by 11.0% over the same period of 2011. In the six months ended
June 30, 2012, net premiums written in the Reinsurance segment increased by
12.3% over the same period in 2011. Gross and net premiums written for each line
of business in the Reinsurance segment for the three and six months ended
June 30, 2012 and 2011 were as follows:



                                                Three Months Ended June 30,
                                             2012                        2011
                                      Gross          Net          Gross          Net
                                    Premiums      Premiums      Premiums      Premiums
                                     Written       Written       Written       Written
                                                (U.S. dollars in thousands)
       Catastrophe                  $ 172,222     $ 158,865     $ 146,249     $ 139,337
       Casualty                        58,897        58,895        45,619        45,617
       Property                        54,026        54,033        52,185        52,185
       Aerospace and marine            18,288        18,287        26,743        24,726
       Surety and other specialty       7,984         7,674         6,378         6,387

       Total                        $ 311,417     $ 297,754     $ 277,174     $ 268,252





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                                                 Six Months Ended June 30,
                                             2012                        2011
                                      Gross          Net          Gross          Net
                                    Premiums      Premiums      Premiums      Premiums
                                     Written       Written       Written       Written
                                                (U.S. dollars in thousands)
       Catastrophe                  $ 315,404     $ 292,583     $ 284,496     $ 270,460
       Casualty                       180,571       179,332       161,971       161,171
       Property                       160,772       160,779       122,272       122,272
       Aerospace and marine            43,917        43,880        47,581        45,565
       Surety and other specialty      37,055        36,455        35,381        35,360

       Total                        $ 737,719     $ 713,029     $ 651,701     $ 634,828



The movements in net premiums written in the Reinsurance segment for the second
quarter and six months ended June 30, 2012 compared to the same periods in 2011
were primarily due to the following factors:



• Increased catastrophe premiums as a result of improved pricing during

             the mid-year renewals in both the Asian and U.S. markets;




        •    Growth in the property line 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; and




        •    Higher casualty premiums due to an increased participation in a large
             contract, growth in positive premium adjustments and the

transition of

             a significant renewal to the second quarter.


Net premiums earned by the Company in the Reinsurance segment for the three and
six months ended June 30, 2012 increased compared to the same period in 2011 due
to the growth in gross premiums written in more recent periods.

Losses and Loss Expenses. The net loss ratio in the Company's Reinsurance
segment for the three and six months ended June 30, 2012 decreased compared to
the same periods in 2011 as a result of lower catastrophe losses incurred in the
period. The Company recorded losses, net of reinstatement premiums and other
loss sensitive accruals, of $14.4 million and $36.9 million in the quarter and
six months ended June 30, 2012 in relation to Kentucky and other Midwest
windstorms and an Italian earthquake. The net losses from these events added 5.8
and 7.8 percentage points to the Reinsurance segment's net loss ratio for the
second quarter and six months ended June 30, 2012, respectively. During the
second quarter and six months ended June 30, 2011, the Company incurred losses
of $61.8 million and $250.8 million related to the Tohuko, Japan earthquake and
tsunami, the Christchurch, New Zealand earthquake, Queensland, Australia floods,
Midwest United States tornadoes and multiple storms in the Midwest which when
accumulated triggered certain aggregate catastrophe contracts. The net losses
from those events added 27.1 and 55.8 percentage points to the Reinsurance
segment's net loss ratio for the second quarter and six months ended June 30,
2011, respectively.

The Company recorded $5.9 million and $15.0 million of favorable prior year loss
reserve development in the three and six months ended June 30, 2012 compared to
$21.6 million and $35.7 million in the three and six months ended June 30, 2011.
During the three and six months ended June 30, 2012, the majority of the
favorable loss reserve development emanated from the short tail lines of
business, in particular the catastrophe line, as claims emergence in these lines
was less than originally estimated by the Company.

Acquisition Expenses.The Company's acquisition expense ratios in the Reinsurance segment for the three and six months ended June 30, 2012 were comparable to those of the same periods in 2011.

General and Administrative Expenses. The general and administrative expense ratios in the Reinsurance segment for the three and six months ended June 30, 2012 reduced slightly compared to those in the same periods in 2011 due to modest growth in net premiums earned and lower annual incentive expense.

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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 June 30, 2012,
Endurance Bermuda could pay a dividend or return additional paid-in capital
totaling approximately $531.4 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 $200.0
million, which remains outstanding and is callable on demand.

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 June 30, 2012 without the prior
approval of the applicable insurance regulator. At June 30, 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 June 30, 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, cash and cash equivalents and pending securities transactions, as
of June 30, 2012 totaled $6.4 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 $200.5 million at June 30, 2012,
compared to $239.8 million at December 31, 2011. On July 13, 2012, Moody's
downgraded the sovereign rating of Italy from "A3" to "Baa2". If this downgrade
was in effect at June 30, 2012, the total fair value of securities having a
"BBB" rating would have declined by $2.5 million, while securities having a
"Below 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.



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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. At June 30, 2012, the fair value of
the Company's investment in the hedge fund was in excess of the invested amount.

Cash Flows



                                                            Six Months Ended June 30,
                                                             2012                 2011
                                                           (U.S. dollars in thousands)
Net cash provided by operating activities               $       70,295         $  288,252
Net cash used in investing activities                          (70,197 )          (35,154 )
Net cash used in financing activities                          (46,447 )         (120,788 )
Effect of exchange rate changes on cash and cash
equivalents                                                     (2,385 )    

8,682


Net (decrease) increase in cash and cash
equivalents                                                    (48,734 )    

140,992

Cash and cash equivalents, beginning of period                 890,914      

609,852


Cash and cash equivalents, end of period                $      842,180      

$ 750,844

In the six months to June 30, 2012, the Company's cash and cash equivalents decreased $48.7 million to $842.2 million. In the six months to June 30, 2011, cash and cash equivalents increased by $141.0 million to $750.8 million.


Cash flows provided by operating activities for the six months ended June 30,
2012 were $70.3 million compared to cash flows provided by operating activities
of $288.3 million for the six months ended June 30, 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 six months ended June 30, 2012, cash flows used in investing
activities were $70.2 million, compared to cash flows used in investing
activities of $35.2 million for the same period in 2011. The Company actively
manages it investment portfolio on a fair value basis to generate attractive
economic returns and income. 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 $44.0 million in net
purchases within our investment portfolio, while 2011 reflected net proceeds of
$0.6 million from the sale and maturity of investments.

Our cash flows used in financing activities for the six months ended June 30,
2012 were $46.4 million, compared to cash flows used in financing activities of
$120.8 million for the same period in 2011. The cash flows used in financing
activities in 2011 was higher than in 2012 principally due to the repurchases of
common shares in 2011, offset by the issuance of Series B, non-cumulative
preferred shares.

During the six months ended 2012, the Company repurchased $1.0 million of its
6.15% Senior Notes due October 15, 2015. During the six months ended June 30,
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 the Company. 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.



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As of June 30, 2012 and December 31, 2011, the Company had pledged cash and cash
equivalents and fixed maturity investments of $248.6 million and $171.4 million,
respectively, in favor of certain ceding companies to collateralize obligations.
As of June 30, 2012 and December 31, 2011, the Company had also pledged $340.5
million and $517.2 million of its cash and fixed maturity investments to meet
collateral obligations for $297.9 million and $447.3 million in letters of
credit outstanding under its credit facility, respectively. In addition, at
June 30, 2012 and December 31, 2011, cash and fixed maturity investments with
fair values of $373.5 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 ("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 as administrative agent. As of June 30, 2012,
there were no borrowings under the Credit Facility and letters of credit
outstanding under the Credit Facility were $297.9 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's 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 Standard & Poor's or (b) LIBOR plus a
margin ranging from 1.125% to 1.750%. In addition, the Credit Facility required
the Company to pay to the lenders a commitment fee.

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 loss 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.



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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.

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.

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 purposes of the PSLRA or otherwise.



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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;



• 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;




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• 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 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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