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MANAGEMENT'S DISCUSSION AND ANALYSIS OF

Edgar Online, Inc.

FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The following is a discussion and analysis of the financial condition and
results of operations for the three and nine months ended September 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 ("American
                Agri-Business"), domiciled in Texas and managed by ARMtech
                Insurance Services, Inc. (together with American

Agri-Business,

Free Report: How to Earn $2k a Week

                "ARMtech").


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



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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.

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 September 30, 2012 and 2011


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



                                                Three Months Ended September 30,
                                                 2012                      2011               Change(1)
                                                  (U.S. dollars in thousands, except for ratios)
Revenues
Gross premiums written                     $        621,255          $        700,866              (11.4 )%
Ceded premiums written                             (107,175 )                (149,539 )            (28.3 )%

Net premiums written                                514,080                   551,327               (6.8 )%

Net premiums earned                                 551,872                   561,493               (1.7 )%
Net investment income                                45,882                    14,100             225.4  %
Net realized and unrealized investment
gains                                                10,097                     1,033             877.4  %
Net impairment losses recognized in
earnings (losses)                                      (131 )                    (240 )            (45.4 )%
Other underwriting loss                              (1,347 )                  (2,141 )            (37.1 )%

Total revenues                                      606,373                   574,245               5.6  %

Expenses
Net losses and loss expenses                        407,523                   456,691              (10.8 )%
Acquisition expenses                                 88,782                    72,249              22.9  %
General and administrative expenses                  52,715                    58,574              (10.0 )%
Amortization of intangibles                           2,434                     2,976              (18.2 )%
Net foreign exchange losses (gains)                   3,774                    (4,085 )               NM (2)
Interest expense                                      9,041                     9,055               (0.2 )%
Income tax expense (benefit)                          1,986                    (1,197 )               NM (2)

Net income (loss)                          $         40,118          $        (20,018 )               NM (2)

Net loss ratio                                        73.8  %                   81.3  %             (7.5 )
Acquisition expense ratio                             16.1  %                   12.9  %              3.2
General and administrative expense
ratio                                                  9.6  %                   10.4  %             (0.8 )

Combined ratio                                        99.5  %                  104.6  %             (5.1 )





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


(2)  Not meaningful.




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Premiums


Gross premiums written in the three months ended September 30, 2012 were $621.3
million, a decrease of $79.6 million, or 11.4%, compared to the same period in
2011. Net premiums written in the three months ended September 30, 2012 were
$514.1 million, a decrease of $37.2 million, or 6.8%. The change in net premiums
written was driven by the following factors:



• Within the agriculture line of the Insurance segment, premiums declined

            due to a lack of positive premium adjustments in the current period
            while in the third quarter of 2011 significant positive premium
            adjustments were recorded as a result of the commodity price increases
            and greater acreage planted;



• Growth in the property line of the Reinsurance segment resulting from

            increased renewal premiums and new business recorded across the
            Company's businesses; and



• Growth in the casualty line of the Reinsurance segment resulting from

            new business and a number of positive premium adjustments, 

offset by a

            modest amount of non-renewals.


The decline in ceded premiums written by the Company in the quarter ended
September 30, 2012 as compared to the same period in 2011 was primarily driven
by the decrease in gross premiums written in the agriculture insurance line that
drove a corresponding reduction in cessions to the Federal Crop Insurance
Corporation.

Net premiums earned for the three months ended September 30, 2012 were $551.9
million, a decrease of $9.6 million, or 1.7%, from the third quarter of 2011.
The decrease in net premiums earned resulted from the decline in net written
premiums recorded in the agriculture line in the current period, offset by
growth in premiums recorded across other lines in more recent periods.

Net Investment Income


The Company's net investment income of $45.9 million increased by 225.4% or
$31.8 million for the quarter ended September 30, 2012 as compared to the same
period in 2011. Net investment income during the third quarter of 2012 included
net mark to market gains of $15.1 million on Other Investments, comprised of
alternative funds and specialty funds, as compared to mark to market losses of
$22.5 million in the third quarter of 2011. Investment income generated from the
Company's fixed income investments, which consist of fixed maturity investments
and short-term investments, declined by $5.9 million for the three months ended
September 30, 2012 compared to the same period in 2011. This decline resulted
primarily from lower reinvestment rates over the past 12 months. Investment
expenses, including investment management fees, for the three months ended
September 30, 2012 were $3.4 million compared to $3.4 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 September 30, 2012 and 2011 and the market yield and portfolio duration as of September 30, 2012 and 2011 were as follows:



                                                        Three Months Ended September 30,
                                                    2012                               2011
Annualized net earned yield(1)                          2.97 %                             0.90 %
Total return on investment portfolio(2)                 1.75 %                             0.37 %
Market yield(3)                                         1.10 %                             1.91 %
Portfolio duration(4)                                   2.52  years                        2.48  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 third quarter of 2012, the yield on the benchmark three year U.S.
Treasury bond fluctuated within a 28 basis point range, with a high of 0.82% and
a low of 0.54%. Trading activity in the Company's portfolio during the third
quarter included reductions in agency residential mortgage-backed securities,
foreign government bonds and corporate securities, and increased allocations to
short-term investments, U.S. government and government agencies securities,
government guaranteed corporate securities, non-agency commercial
mortgage-backed securities, asset-backed securities and equity securities. The
duration of the fixed income investments increased to 2.52 years at
September 30, 2012 from 2.39 years at December 31, 2011.

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 September 30, 2012 were $908.0 million compared to $566.0
million during the same period a year ago. Net realized investment gains
increased during the three months ended September 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
September 30, 2012 and 2011 were as follows:



                                                         Three Months Ended September 30,
                                                         2012                       2011
                                                           (U.S. dollars in thousands)
Gross realized gains on investment sales            $        11,976            $         6,904
Gross realized losses on investment sales                    (2,222 )                   (5,735 )
Change in fair value of derivative financial
instruments                                                     343                       (136 )

Net realized and unrealized investment gains $ 10,097

   $         1,033





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Net Impairment Losses Recognized in Earnings (Losses)


During the three months ended September 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 September 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 September 30, 2012 and 2011 were as follows:



                                                        Three Months Ended September 30,
                                                        2012                        2011
                                                          (U.S. dollars in thousands)
Total other-than-temporary impairment
losses                                             $         (126 )            $         (168 )
Portion of loss recognized in other
comprehensive income                                           (5 )                       (72 )

Net impairment losses recognized in
earnings (losses)                                  $         (131 )            $         (240 )



The $0.1 million and $0.2 million of other-than-temporary impairment ("OTTI")
losses recognized by the Company in the third 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.

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

Net Foreign Exchange Gains and Losses


For the three months ended September 30, 2012, the Company remeasured its
monetary assets and liabilities denominated in foreign currencies, which
resulted in a net foreign exchange loss of $3.8 million compared to a net
foreign exchange gain of $4.1 million for the same period of 2011. This loss
resulted from offsetting exposures across the Company as the U.S. dollar
weakened against the major currencies in the period. In the prior year, the net
foreign exchange gain resulted from the strengthening of the U.S. dollar against
other major currencies which reduced foreign denominated net liabilities.

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 September 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
$13.2 million related primarily to Hurricane Isaac and unfavorable development
on an earthquake in Italy which added 2.5 percentage points to the Company's net
loss ratio for the third quarter of 2012. For the three months ended
September 30, 2011, Hurricane Irene, Danish floods, brushfires in Texas and
multiple storms in the Midwest United States which, when accumulated, triggered
certain aggregate catastrophe contracts, adversely affected the Company's net
loss ratio in the Reinsurance and Insurance segments. The Company recorded
losses, net of reinsurance, reinstatement premiums and other loss sensitive
accruals, of $98.6 million in relation to these events, which added 17.7
percentage points to the Company's net loss ratio for the third quarter of 2011.
The reduction in net losses incurred was partially offset by increased losses
recorded in the agriculture line of the Insurance segment which was impacted by
extreme drought conditions in the Midwest United States.



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Favorable prior year loss reserve development was $55.6 million for the third
quarter of 2012 compared to $44.4 million during the same period in 2011. In the
third quarter of 2012, prior year loss reserves emerged favorably across the
short, long and other tail business of the Insurance segment and the short and
long tail business of the Reinsurance segment. Favorable reserve development in
the third quarter of 2012 was higher than the third quarter of 2011 principally
due to the short tail business of the Reinsurance segment where increased
favorable reserve development was experienced in the property and marine lines
of business partially offset by a decline in the catastrophe line.

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 September 30, 2012
increased by 3.2 percentage points compared to the acquisition expense ratio for
the same period in 2011. The change in the acquisition expense ratio was driven
by the following factors:


• Higher commissions and the accelerated expensing of deferred

             commissions in the agriculture line of the Insurance segment due to
             the increased level of losses incurred during the period;



• An increase in net earned premiums in the Company's contract binding

             authority business, which carries higher commission rates, and a
             decline in net earned premiums in the Company's excess

casualty

             business written in Bermuda, which attracts relatively lower
             acquisition expenses, in the Company's casualty line of

business in

             the Insurance segment; and




       •     The combination of new business, non-renewed contracts and the
             restructuring of certain business in the casualty line of the
             Reinsurance segment.

General and Administrative Expenses


The Company's general and administrative expense ratio for the third quarter of
2012 decreased compared to the same period in 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 arising from a
lower headcount, a lower concentration of more senior staff and changes to the
performance measures driving the annual incentive provision. Lower expenditure
was partially offset by increased consulting and facilities costs. At
September 30, 2012, the Company had a total of 849 employees compared to 864
employees at September 30, 2011.

Income Tax Expense (Benefit)


The Company recorded a tax expense for the quarter ended September 30, 2012 of
$2.0 million compared to a tax benefit of $1.2 million for the quarter ended
September 30, 2011. The current period tax expense resulted from income
generated in the current period by the Company in the U.K.

Net Income (Loss)


The Company generated net income of $40.1 million in the three months ended
September 30, 2012 compared to a net loss of $20.0 million in the same period of
2011 primarily as a result of a decrease in catastrophe losses and an
improvement in investment returns during the current period, partially offset by
agriculture insurance losses from the Midwestern drought.



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Consolidated Results of Operations - For the Nine Months Ended September 30, 2012 and 2011


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



                                               Nine Months Ended September 30,
                                                  2012                    2011             Change(1)
                                                 (U.S. dollars in thousands, except for ratios)
Revenues
Gross premiums written                     $        2,286,980         $  2,204,148               3.8  %
Ceded premiums written                               (445,431 )           (412,191 )             8.1  %

Net premiums written                                1,841,549            1,791,957               2.8  %

Net premiums earned                                 1,482,847            1,430,904               3.6  %
Net investment income                                 134,723              106,443              26.6  %
Net realized and unrealized investment
gains                                                  30,258               26,340              14.9  %
Net impairment losses recognized in
earnings (losses)                                        (757 )             (2,819 )            (73.1 )%
Other underwriting loss                                (1,663 )             (2,122 )            (21.6 )%

Total revenues                                      1,645,408            1,558,746               5.6  %

Expenses
Losses and loss expenses                            1,016,187            1,220,514              (16.7 )%
Acquisition expenses                                  229,399              205,754              11.5  %
General and administrative expenses                   181,365              190,421               (4.8 )%
Amortization of intangibles                             7,988                8,800               (9.2 )%
Net foreign exchange gains                            (14,699 )             (7,655 )            92.0  %
Interest expense                                       27,132               27,166               (0.1 )%
Income tax expense (benefit)                            2,893              (19,896 )               NM (2)

Net income (loss)                          $          195,143         $    (66,358 )               NM (2)

Net loss ratio                                          68.5  %              85.3  %            (16.8 )
Acquisition expense ratio                               15.5  %              14.4  %              1.1
General and administrative expense
ratio                                                   12.2  %              13.3  %             (1.1 )

Combined ratio                                          96.2  %             113.0  %            (16.8 )




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

    points.


(2)  Not meaningful.


Premiums

Gross premiums written in the nine months ended September 30, 2012 were $2,287.0
million, an increase of $82.8 million, or 3.8%, compared to the same period in
2011. Net premiums written in the nine months ended September 30, 2012 were
$1,841.5 million, an increase of $49.6 million, or 2.8%, compared to the same
period in 2011. The change 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
                from the Company's U.S., Zurich and Singapore offices;




            •   Increased catastrophe premiums in the Reinsurance segment as a
                result of improved pricing during renewals;




            •   Growth in casualty premiums in the Reinsurance segment due to new
                business, increased renewal premiums and an increase in positive
                premium adjustments;




            •   Decreased premiums in the agriculture line of the

Insurance segment

                where the impact of lower commodity prices was partially offset by
                growth in policy count; and




            •   A decline in premiums in the property line of the

Insurance segment

                as the Company curtailed the underwriting of several insurance
                products in order to reallocate capital to more profitable lines of
                business.




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Net premiums earned for the nine months ended September 30, 2012 were $1,482.8
million, an increase of $51.9 million, or 3.6%, from the nine months ended
September 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 $134.7 million increased by 26.6% or
$28.3 million for the nine months ended September 30, 2012 as compared to the
same period in 2011. Net investment income during the first nine months of 2012
included net mark to market gains of $38.1 million on Other Investments,
comprised of alternative and specialty funds, as compared to mark to market
losses of $7.6 million in the first nine months of 2011. Investment income
generated by the Company's fixed income investments declined by $18.3 million in
the first nine months of 2012 compared to the same period in 2011 primarily due
to lower reinvestment rates, partly offset by a higher average investment
portfolio balance. Investment expenses for the nine months ended September 30,
2012, including investment management fees, were $10.0 million compared to $10.5
million for the same period in 2011.

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



                                                       Nine Months Ended September 30,
                                                    2012                              2011
Annualized net earned yield(1)                         2.87 %                            2.31 %
Total return on investment portfolio(2)                4.08 %                            2.60 %
Market yield(3)                                        1.10 %                            1.91 %
Portfolio duration(4)                                  2.52  years                       2.48  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 nine months ended September 30, 2012, the yield on the benchmark
three year U.S. Treasury bond fluctuated within a 65 basis point range, with a
high of 1.20% and a low of 0.54%. Trading activity in the Company's portfolio
for the nine months ended September 30, 2012 included reductions in government
guaranteed corporate securities and non-agency residential mortgage-backed
securities, and increased allocations to government and agency guaranteed
corporate securities, foreign government bonds, corporate securities, non-agency
commercial mortgage-backed securities, asset-backed securities, equity
securities and Other Investments.



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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 nine months
ended September 30, 2012 were $2,460.9 million compared to $2,382.6 million
during the same period a year ago. Net realized investment gains increased
during the nine months ended September 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 nine months ended September 30, 2012
and 2011 were as follows:



                                                         Nine Months Ended September 30,
                                                          2012                     2011
                                                           (U.S. dollars in thousands)
Gross realized gains on investment sales             $       34,837          $         40,563
Gross realized losses on investment sales                    (5,391 )                 (13,928 )
Change in fair value of derivative financial
instruments                                                     812                      (295 )

Net realized and unrealized investment gains $ 30,258

$ 26,340

Net Impairment Losses Recognized in Earnings (Losses)


During the nine months ended September 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 September 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
nine months ended September 30, 2012 and 2011 were as follows:



                                                         Nine Months Ended September 30,
                                                       2012                        2011
                                                           (U.S. dollars in thousands)

Total other-than-temporary impairment losses $ (274 )

  $          (1,908 )
Portion of loss recognized in other
comprehensive income                                        (483 )                        (911 )

Net impairment losses recognized in earnings
(losses)                                           $        (757 )           $          (2,819 )



The $0.8 million of OTTI losses recognized by the Company in the nine months
ended September 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 nine months ended September 30, 2011, the Company recorded $2.8 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, $0.9 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 September 30, 2012 and determined it
did not need to recognize any OTTI losses in the nine months ended September 30,
2012 (2011-$35,000).

Net Foreign Exchange Gains

For the nine months ended September 30, 2012, the Company remeasured its
monetary assets and liabilities denominated in foreign currencies, which
resulted in a net foreign exchange gain of $14.7 million compared to a $7.7
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 in the first half of
the year. Other net gains were 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 timing of gains realized as the U.S. dollar fluctuated
over the nine month period.



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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 nine months ended September 30, 2012, the Company incurred catastrophe
losses arising from Hurricane Isaac, other 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 $49.6 million in
relation to these events which added 3.5 percentage points to the Company's net
loss ratio for the nine months ended September 30, 2012. For the nine months
ended September 30, 2011, multiple events adversely affected the Company's net
loss ratio in the Reinsurance segment. These included Hurricane Irene, Danish
floods, brushfires in Texas, 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 $354.7 million in relation to these events, which added
25.2 percentage points to the Company's net loss ratio for the nine months ended
September 30, 2011. In addition, the Company recorded lower reserves for
attritional losses in the Insurance segment's property and professional lines
and the Reinsurance segment's casualty line in the nine months ended
September 30, 2012 compared to the same period in 2011. The overall reduction in
current year net losses incurred was partially offset by increased crop related
losses experienced in the agriculture line of the Insurance segment which was
impacted by the extreme drought conditions in the U.S. Midwest in the third
quarter.

Favorable prior year loss reserve development was $92.1 million for the nine
months ended September 30, 2012 as compared to $137.9 million for the same
period in 2011. In the nine months ended September 30, 2012 and 2011, prior year
loss reserves emerged favorably across the short, long and other tail business
of the Insurance segment and in the short and long tail business of the
Reinsurance segment. Favorable reserve development in the first nine months of
2012 was less than the first nine months of 2011 principally due to the
agriculture line of the Insurance segment which experienced a later and stronger
harvest in the 2010 crop year compared to 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 nine months ended September 30, 2012
increased compared to the acquisition expense ratio for the same period in 2011.
The change in acquisition expense ratio resulted from the Reinsurance segment,
which generally incurs a higher acquisition expense rate, accounting for a
higher proportion of net premiums earned in 2012 and the following factors
within the Insurance segment:



            •   Higher commissions and the accelerated expensing of deferred
                commissions in the agriculture line of the Insurance

segment due to

                the increased level of losses incurred during the period; and




            •   An increase in net earned premiums in the Company's contract
                binding authority business, which carries higher commission rates,
                and a decline in net earned premiums in the Company's excess
                casualty business written in Bermuda, which attracts relatively
                lower acquisition expenses in the Company's casualty line of
                business in the Insurance segment.




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General and Administrative Expenses


The Company's general and administrative expense ratio for the nine months ended
September 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 the Company's 2011 annual incentive compensation was lower than previously
accrued. At September 30, 2012, the Company had a total of 849 employees
compared to 864 employees at September 30, 2011.

Income Tax Expense (Benefit)


The Company recorded a tax expense for the nine months ended September 30, 2012
of $2.9 million compared to a tax benefit of $19.9 million for the same period
in 2011 due to significant net losses experienced in its United States
operations in 2011.

Net Income (Loss)


The Company produced net income of $195.1 million for the nine months ended
September 30, 2012 compared to a net loss of $66.4 million in the same period of
2011 primarily due to the decrease in catastrophe losses, improved investment
portfolio performance and growth in net premiums earned, partially offset by
losses in the Company's agriculture insurance line of business due to the
Midwestern drought.

Subsequent Events


On October 29, 2012, Hurricane Sandy made landfall in the Northeastern United
States. Preliminary information indicates that this storm has the potential to
cause significant losses within the insurance industry generally. To date,
reported claims as a result of this storm have been limited. Accordingly, while
losses emanating from the storm cannot be accurately estimated at this time, the
Company may need to establish appropriate loss reserves related to Hurricane
Sandy in the fourth quarter of 2012, which may have a negative impact on its
results of operations.



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Reserve for Losses and Loss Expenses


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

Insurance Segment - Short Tail Lines



  •   Property




  •   Surety

Insurance Segment - Long Tail Lines



  •   Casualty




  •   Healthcare liability




  •   Professional lines




  •   Workers compensation (discontinued)

Insurance Segment - Other Tail Line



  •   Agriculture

Reinsurance Segment - Short Tail Lines



  •   Catastrophe




  •   Property




  •   Aerospace and marine




  •   Surety

Reinsurance Segment - Long Tail Lines



  •   Casualty




  •   Other specialty

Reinsurance Segment - Other Tail Line



  •   Agriculture


As of September 30, 2012, the Company had accrued losses and loss expense
reserves of $4.5 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 nine months ended
September 30, 2012 and 2011, the Company's net paid losses and loss expenses
were $745.7 million and $785.2 million, respectively.

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



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

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



                                  Incurred related to:
       Three Months Ended                                          Total incurred
       September 30, 2012    Current year       Prior years            losses
                                         (U.S. dollars in thousands)
       Insurance:
       Short tail           $        4,271     $      (4,655 )    $           (384 )
       Long tail                    64,896           (10,083 )              54,813
       Other                       237,022            (2,701 )             234,321

       Total Insurance             306,189           (17,439 )             288,750

       Reinsurance:
       Short tail                   90,198           (30,022 )              60,176
       Long tail                    53,845            (9,876 )              43,969
       Other                        12,933             1,695                14,628

       Total Reinsurance           156,976           (38,203 )             118,773

       Totals               $      463,165     $     (55,642 )    $        407,523





                                  Incurred related to:
       Nine Months Ended                                           Total incurred
       September 30, 2012    Current year       Prior years            losses
                                         (U.S. dollars in thousands)
       Insurance:
       Short tail           $       21,809     $     (11,720 )    $         10,089
       Long tail                   196,928           (18,663 )             178,265
       Other                       431,138            (8,536 )             422,602

       Total Insurance             649,875           (38,919 )             610,956

       Reinsurance:
       Short tail                  269,520           (43,267 )             226,253
       Long tail                   165,062           (18,145 )             146,917
       Other                        23,825             8,236                32,061

       Total Reinsurance           458,407           (53,176 )             405,231

       Totals               $    1,108,282     $     (92,095 )    $      1,016,187



Losses and loss expenses for the three and nine months ended September 30, 2012
included $55.6 million and $92.1 million in favorable development of reserves
relating to prior accident years, respectively. The favorable loss reserve
development experienced during the three and nine months ended September 30,
2012 benefited the Company's reported loss ratio by approximately 10.1 and 6.2
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 nine months ended September 30, 2012 across all
reserving groups included within the Insurance segment and the short tail and
long tail reserving groups in the Reinsurance segment.



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For the three months ended September 30, 2012, the Company did not materially
alter any 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. During the nine months ended September 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 or 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.

Insurance

Short Tail Insurance. For the three and nine months ended September 30, 2012,
the favorable loss emergence within the short tail insurance reserve category
was primarily due to lower than expected reported claim emergence related to the
property line of business.

Long Tail Insurance. For the three and nine months ended September 30, 2012, the
Company recorded favorable loss emergence within this reserve category primarily
due to lower than expected claims activity within the healthcare liability and
professional lines of business. Favorable loss emergence was partially offset by
adverse development within the casualty line of business and the workers'
compensation line of business that the Company exited in 2009.

Other Insurance. The Company recorded favorable prior period loss emergence
within this reserve category for the three and nine months ended September 30,
2012 primarily due to lower than anticipated agriculture claims settlements for
the 2011 crop year.

Reinsurance

Short Tail Reinsurance. For the three and nine months ended September 30, 2012,
the Company recorded favorable loss emergence within this reserve category
primarily due to lower than expected claims activity within the catastrophe,
aerospace and marine, and surety and other specialty lines of business. This
favorable development was partially offset by adverse development within the
property line of business for the nine months ended September 30, 2012.

Long Tail Reinsurance. For the three and nine months ended September 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 line of business.


Other Reinsurance. For the three and nine months ended September 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 nine months ended September 30, 2011
are summarized as follows:



                                  Incurred related to:
       Three Months Ended                                          Total incurred
       September 30, 2011    Current year       Prior years            losses
                                         (U.S. dollars in thousands)
       Insurance:
       Short tail           $       10,648     $      (4,182 )    $          6,466
       Long tail                    64,522            (8,501 )              56,021
       Other                       197,447               272               197,719

       Total Insurance             272,617           (12,411 )             260,206

       Reinsurance:
       Short tail                  176,214           (19,342 )             156,872
       Long tail                    50,720           (11,234 )              39,486
       Other                         1,553            (1,426 )                 127

       Total Reinsurance           228,487           (32,002 )             196,485

       Totals               $      501,104     $     (44,413 )    $        456,691





                                  Incurred related to:
       Nine Months Ended                                           Total incurred
       September 30, 2011    Current year       Prior years            losses
                                         (U.S. dollars in thousands)
       Insurance:
       Short tail           $       37,705     $     (18,606 )    $         19,099
       Long tail                   199,149           (16,551 )             182,598
       Other                       383,797           (35,056 )             348,741

       Total Insurance             620,651           (70,213 )             550,438

       Reinsurance:
       Short tail                  563,209           (52,750 )             510,459
       Long tail                   164,599           (10,624 )             153,975
       Other                         9,954            (4,312 )               5,642

       Total Reinsurance           737,762           (67,686 )             670,076

       Totals               $    1,358,413     $    (137,899 )    $      1,220,514



Losses and loss expenses for the three and nine months ended September 30, 2011
included $44.4 million and $137.9 million in favorable development of reserves
relating to prior accident years, respectively. The favorable loss reserve
development experienced during the three and nine months ended September 30,
2011 benefited the Company's reported loss ratio by approximately 7.9 and 9.6
percentage points, respectively. This net reduction in estimated losses for
prior accident years resulted primarily from lower than expected claims
emergence across the short tail and long tail reserving groups for the current
quarter and all reserving groups for the nine months ended September 30, 2011
included within the Insurance segment and all reserving groups in the
Reinsurance segment for both the three and nine months ended September 30, 2011.

For the three and nine months ended September 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 nine months ended September 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 nine months ended September 30, 2011, 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 modest unfavorable loss emergence within
this reserve category for the third quarter of 2011 and favorable loss reserve
development for the nine months ended September 30, 2011, primarily due to lower
than anticipated agriculture claims settlements for the 2010 crop year.

Reinsurance

Short Tail Reinsurance. For the nine months ended September 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 nine months ended September 30, 2011, the Company recorded favorable loss emergence within this reserve category primarily due to lower than expected claims reported within the Company's casualty line of business.


Other Reinsurance. For the three and nine months ended September 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 September 30, 2012:



                                                                  Reserve for losses
                          Case Reserves       IBNR Reserves       and loss expenses
                                         (U.S. dollars in thousands)
     Insurance:
     Short tail          $        24,670     $        27,019     $             51,689
     Long tail                   401,257           1,313,644                1,714,901
     Other                       730,852             137,644                  868,496

     Total Insurance           1,156,779           1,478,307                2,635,086

     Reinsurance:
     Short tail                  514,053             323,933                  837,986
     Long tail                   305,309             705,218                1,010,527
     Other                         8,159              17,684                   25,843

     Total Reinsurance           827,521           1,046,835                1,874,356

     Totals              $     1,984,300     $     2,525,142     $          4,509,442





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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 nine months ended September 30, 2012 and 2011.



                                           Three Months Ended September 30,                Nine Months Ended September 30,
                                            2012                      2011                    2012                   2011
                                                          (U.S. dollars in thousands, except for ratios)
Revenues
Gross premiums written                $        324,808          $        

450,451 $ 1,252,814 $ 1,302,032 Ceded premiums written

                        (103,543 )                (147,241 )              (417,109 )           (393,020 )

Net premiums written                           221,265                   303,210                 835,705              909,012

Net premiums earned                            283,273                   318,602                 710,988              730,491
Other underwriting loss                         (1,384 )                  (2,875 )                (2,684 )             (2,875 )

                                               281,889                   315,727                 708,304              727,616

Expenses
Losses and loss expenses                       288,750                   260,206                 610,956              550,438
Acquisition expenses                            24,506                    18,738                  58,265               50,907
General and administrative
expenses                                        29,409                    29,328                  96,663              102,361

                                               342,665                   308,272                 765,884              703,706

Underwriting (loss) income            $        (60,776 )        $          

7,455 $ (57,580 ) $ 23,910


Net loss ratio                                   101.9 %                    81.7 %                  85.9 %               75.3 %
Acquisition expense ratio                          8.7 %                     5.9 %                   8.2 %                7.0 %
General and administrative
expense ratio                                     10.4 %                     9.2 %                  13.6 %               14.0 %

Combined ratio                                   121.0 %                    96.8 %                 107.7 %               96.3 %



Premiums. Gross premiums written for the three and nine months ended
September 30, 2012 in the Insurance segment decreased by 27.9% and 3.8% 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 September 30,
                                             2012                        2011
                                      Gross          Net          Gross          Net
                                    Premiums      Premiums      Premiums      Premiums
                                     Written       Written       Written       Written
                                                (U.S. dollars in thousands)
       Agriculture                  $ 171,826     $ 106,180     $ 289,656     $ 185,017
       Professional lines              43,209        34,804        39,559        30,812
       Casualty                        54,704        32,397        57,520        37,664
       Property                        18,900        13,595        30,049        17,681
       Healthcare liability            34,076        32,196        33,652        32,021
       Surety and other specialty       2,093         2,093            15            15

       Total                        $ 324,808     $ 221,265     $ 450,451     $ 303,210





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                                             Nine Months Ended September 30,
                                           2012                           2011
                                    Gross           Net           Gross            Net
                                  Premiums       Premiums       Premiums        Premiums
                                   Written        Written        Written         Written
                                               (U.S. dollars in thousands)
    Agriculture                  $   838,932     $ 528,349     $   855,486      $ 577,538
    Professional lines               130,573       107,841         124,209         99,560
    Casualty                         160,619       102,409         159,580        107,234
    Property                          46,926        26,418          90,643         56,262
    Healthcare liability              70,651        65,575          72,243         68,542
    Surety and other specialty         5,113         5,113            (129 )         (124 )

    Total                        $ 1,252,814     $ 835,705     $ 1,302,032      $ 909,012



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



        •    Decreased premiums in the agriculture line of the Insurance segment
             where the impact of lower commodity prices was partially offset by
             growth in policy count; and



• A decline in premiums in the property line as the Company curtailed in

             the underwriting of several insurance products in order to reallocate
             capital to more profitable lines of business.


Net premiums earned by the Company in the Insurance segment decreased in both
the three and nine months ended September 30, 2012 compared to the same periods
in 2011. The decreases were primarily due to the decrease in net premiums
written in the agriculture and property lines in 2012 compared to 2011.

Losses and Loss Expenses. The increases in the net loss ratios in the Company's
Insurance segment for the three and nine months ended September 30, 2012
compared to the same periods in 2011 was primarily driven by increased crop
related losses experienced in the agriculture line which was impacted by the
extreme drought conditions in the Midwest in the third quarter. The increases in
the net loss ratios in the Company's Insurance segment were partially offset by
lower losses incurred in the property and professional lines, which experienced
a lower incidence of attritional losses than in 2011. In addition, for the nine
month period ended September 30, 2012, the increase in the net loss ratios
reflected lower levels of favorable prior year reserve releases than in 2011.

During the first nine months of 2012, the Company's previously estimated loss
and loss expense reserves for the Insurance segment for prior accident years
were reduced by $38.9 million, which decreased the net loss ratio by 5.5
percentage points, as compared to a reduction of $70.2 million, which decreased
the net loss ratio by 9.6 percentage points, for the nine months ended
September 30, 2011. The higher level of favorable loss development in the first
nine months of 2011 compared to 2012 was primarily driven by the agriculture
line of business. The higher development in the first nine months of 2011
resulted from the combination of strong performance in the agriculture line for
the 2010 crop year and 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 lower level of net
favorable development experienced in 2012 was less adverse loss reserve
development related to the discontinued workers' compensation business in the
surety and other line compared to 2011.



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Acquisition Expenses. The Company's acquisition expense ratios in the Insurance
segment in the third quarter and first nine months of 2012 increased compared to
the same periods in 2011. The change in the acquisition expense ratio over both
periods was driven by the following factors:



• Higher commissions and the accelerated expensing of deferred

             commissions in the agriculture line of the Insurance segment due to
             the increased level of losses incurred during the period; and




        •    An increase in net earned premiums in the Company's contract binding
             authority business, which carries higher commission rates, and a
             decline in net earned premiums in the Company's excess casualty
             business written in Bermuda, which attracts relatively lower
             acquisition expenses, in the Company's casualty line of

business in

             the Insurance segment.


General and Administrative Expenses. The decrease in general and administrative
expenses and expense ratios in the Insurance segment in the third quarter and
first nine months of 2012 compared to the same periods in 2011 was a result of
lower annual incentive expense as the actual payout of the Company's 2011 annual
incentive compensation was lower than previously accrued 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 nine months
ended September 30, 2012 and 2011.



                                               Three Months Ended September 30,               Nine Months Ended September 30,
                                                 2012                    2011                   2012                   2011
                                                               (U.S. dollars in thousands, except for ratios)
Revenues
Gross premiums written                      $       296,447         $       

250,415 $ 1,034,166 $ 902,116 Ceded premiums written

                               (3,632 )                (2,298 )              (28,322 )              (19,171 )

Net premiums written                                292,815                 248,117              1,005,844                882,945

Net premiums earned                                 268,599                 242,891                771,859                700,413
Other underwriting income                                37                     734                  1,021                    753

                                                    268,636                 243,625                772,880                701,166

Expenses
Losses and loss expenses                            118,773                 196,485                405,231                670,076
Acquisition expenses                                 64,276                  53,511                171,134                154,847
General and administrative expenses                  23,306                  29,246                 84,702                 88,060

                                                    206,355                 279,242                661,067                912,983

Underwriting income (loss)                  $        62,281         $       

(35,617 ) $ 111,813 $ (211,817 )


Net loss ratio                                         44.2 %                  81.0 %                 52.4 %                 95.6 %
Acquisition expense ratio                              23.9 %                  22.0 %                 22.2 %                 22.1 %
General and administrative expense ratio                8.7 %                  12.0 %                 11.0 %                 12.6 %

Combined ratio                                         76.8 %                 115.0 %                 85.6 %                130.3 %





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Premiums. In the third quarter of 2012, net premiums written in the Reinsurance
segment increased by 18.0% over the same period of 2011. In the nine months
ended September 30, 2012, net premiums written in the Reinsurance segment
increased by 13.9% over the same period in 2011. Gross and net premiums written
for each line of business in the Reinsurance segment for the three and nine
months ended September 30, 2012 and 2011 were as follows:



                                             Three Months Ended September 30,
                                             2012                        2011
                                      Gross          Net          Gross          Net
                                    Premiums      Premiums      Premiums      Premiums
                                     Written       Written       Written       Written
                                                (U.S. dollars in thousands)
       Catastrophe                  $  38,871     $  36,484     $  46,275     $  43,868
       Casualty                        77,781        77,781        56,293        56,292
       Property                       157,742       157,742       129,203       129,203
       Aerospace and marine             9,914         9,914         5,891         6,002
       Surety and other specialty      12,139        10,894        12,753        12,752

       Total                        $ 296,447     $ 292,815     $ 250,415     $ 248,117





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                                              Nine Months Ended September 30,
                                             2012                          2011
                                     Gross            Net           Gross          Net
                                   Premiums        Premiums       Premiums      Premiums
                                    Written         Written        Written       Written
                                                (U.S. dollars in thousands)
     Catastrophe                  $   354,275     $   329,067     $ 330,771     $ 314,328
     Casualty                         258,352         257,113       218,264       217,463
     Property                         318,514         318,521       251,475       251,475
     Aerospace and marine              53,831          53,794        53,472        51,567
     Surety and other specialty        49,194          47,349        48,134        48,112

     Total                        $ 1,034,166     $ 1,005,844     $ 902,116     $ 882,945



The movements in net premiums written in the Reinsurance segment for the third
quarter and nine months ended September 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 U.S., Zurich and Singapore
            offices; and



• Growth in casualty premiums due to new business, renewal premiums and

            an increase in positive premium adjustments.


Net premiums earned by the Company in the Reinsurance segment for the three and
nine months ended September 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 nine months ended September 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 $13.2 million and $49.6 million
in the quarter and nine months ended September 30, 2012 in relation to Hurricane
Isaac, various U.S. tornado and storm losses and an Italian earthquake. The net
losses from these events added 5.6 and 6.9 percentage points to the Reinsurance
segment's net loss ratio for the third quarter and nine months ended
September 30, 2012, respectively. During the third quarter and nine months ended
September 30, 2011, the Company incurred losses of $91.1 million and $347.2
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
38.4 and 50.8 percentage points to the Reinsurance segment's net loss ratio for
the third quarter and nine months ended September 30, 2011, respectively.

The Company recorded $38.2 million and $53.2 million of favorable prior year
loss reserve development in the three and nine months ended September 30, 2012
compared to $32.0 million and $67.7 million in the three and nine months ended
September 30, 2011. During the three and nine months ended September 30, 2012,
the majority of the favorable loss reserve development emanated from the short
tail lines of business, as claims emergence in these lines was less than
originally estimated by the Company.

Acquisition Expenses. The Company's acquisition expense ratio in the Reinsurance
segment for the three months ended September 30, 2012 was higher than in the
same period in 2011. The change in acquisition ratio for the three month period
resulted primarily from the combination of new business, non-renewed contracts
and the restructuring of certain business in the casualty line which produced a
higher overall acquisition expense ratio. In the nine month period ended
September 30, 2012, the acquisition ratio was comparable to the same period in
2011.



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General and Administrative Expenses. The general and administrative expense
ratios in the Reinsurance segment for the three and nine months ended
September 30, 2012 reduced compared to those in the same periods in 2011 due to
modest growth in net premiums earned and lower annual incentive expense as the
actual payout of the Company's 2011 annual incentive compensation was lower than
previously accrued.

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 September 30,
2012, Endurance Bermuda could pay a dividend or return additional paid-in
capital totaling approximately $501.8 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 American Agri-Business 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 September 30, 2012 without
the prior approval of the applicable insurance regulator. At September 30, 2012,
American Agri-Business (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 September 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 September 30, 2012 totaled $6.5 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 $222.2 million at September 30, 2012,
compared to $239.8 million at December 31, 2011. On October 10, 2012, S&P
downgraded the sovereign rating of Spain from "BBB+" to "BBB-". The Company does
not have any exposure to Spain and therefore this downgrade did not impact the
Company's exposure. The Company does not have any direct exposure to sovereign
debt issued by 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 September 30, 2012, the fair value
of the Company's investment in the hedge fund was in excess of the invested
amount.

Cash Flows



                                                         Nine Months Ended September 30,
                                                          2012                    2011
                                                           (U.S. dollars in thousands)
Net cash provided by operating activities            $       211,449         $       337,499
Net cash used in investing activities                       (146,600 )               (93,981 )
Net cash used in financing activities                        (67,828 )              (225,764 )
Effect of exchange rate changes on cash and cash
equivalents                                                    7,841        

(3,662 )


Net increase in cash and cash equivalents                      4,862        

14,092

Cash and cash equivalents, beginning of period               890,914        

609,852


Cash and cash equivalents, end of period             $       895,776        

$ 623,944

In the nine months to September 30, 2012, the Company's cash and cash equivalents increased $4.9 million to $895.8 million. In the nine months to September 30, 2011, cash and cash equivalents increased by $14.1 million to $623.9 million.


Cash flows provided by operating activities for the nine months ended
September 30, 2012 were $211.4 million compared to cash flows provided by
operating activities of $337.5 million for the nine months ended September 30,
2011. The decrease in cash flows provided by operating activities during 2012
was primarily due to decreased premium collections, offset by an increase in net
income.

During the nine months ended September 30, 2012, cash flows used in investing
activities were $146.6 million, compared to cash flows used in investing
activities of $94.0 million for the same period in 2011. The Company actively
manages its 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 increase in cash
flows used in investing activities in 2012 principally reflected increased
purchases of Other Investments and an absence of positive cash flows from
securities lending collateral received, partially offset by lower net purchases
of available for sale investments compared to 2011.

Cash flows used in financing activities for the nine months ended September 30,
2012 were $67.8 million, compared to cash flows used in financing activities of
$225.8 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 nine months ended September 30, 2012, the Company repurchased $1.0
million of its 6.15% Senior Notes due October 15, 2015. During the nine months
ended September 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 September 30, 2012 and December 31, 2011, the Company had pledged cash and
cash equivalents and fixed maturity investments of $236.1 million and $171.4
million, respectively, in favor of certain ceding companies to collateralize
obligations. As of September 30, 2012 and December 31, 2011, the Company had
also pledged $341.0 million and $517.2 million of its cash and fixed maturity
investments to meet collateral obligations for $300.0 million and $447.3 million
in letters of credit outstanding under its credit facility, respectively. In
addition, at September 30, 2012 and December 31, 2011, cash and fixed maturity
investments with fair values of $350.5 million and $370.4 million were on
deposit with U.S. state regulators, respectively, and cash and fixed maturity
investments with fair values of nil 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 September 30,
2012, there were no borrowings under the Credit Facility and letters of credit
outstanding under the Credit Facility were $300.0 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.



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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.

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;




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

which we operate, including the establishment of the Federal Insurance

        Office and other regulatory changes mandated by the Dodd-Frank Wall Street
        Reform and Consumer Protection Act of 2010 in the United States and the
        implementation of Solvency II by the European Commission;




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




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

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

        our brokers;




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



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




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




  • the effects of terrorist related insurance legislation and laws;




  • loss of key personnel;




  • political stability of Bermuda;



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

        operate or underwrite business;




  • changes in accounting regulation, policies or practices;




  • our investment performance;



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

        of those assets, if any;




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



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

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

        foreign government and other securities in our investment portfolio as
        well as the uncertainty in the market generally;



• the need for additional capital in the future which may not be available

        or only available on unfavorable terms;



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

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

        event; and




    •   changes in general economic conditions, including inflation, foreign

currency exchange rates, interest rates, and other factors.



The foregoing review of important factors should not be construed as exhaustive
and should be read in conjunction with the other cautionary statements that are
included in our 2011 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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Wordcount: 13851



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