Prepared and filed by St Ives Burrups

S-1/A 1 b329725_s1a.htm PRE-EFFECTIVE AMENDMENTS Prepared and filed by St Ives Burrups

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As filed with the Securities and Exchange Commission on March 2, 2004

Registration No. 333-112258

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

AMENDMENT NO. 2
to

FORM S-1

REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933

Endurance Specialty Holdings Ltd.
(Exact Name of Registrant as Specified in Its Charter)

Bermuda		6331		98-0392908
(State or Other Jurisdiction of Incorporation or Organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification No.)

Wellesley House, 90 Pitts Bay Road Pembroke HM 08, Bermuda (441) 278-0400		CT Corporation System 111 Eighth Avenue, 13th Floor New York, New York 10011 (212) 590-9200
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)		(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)

Copies To:

Susan J. Sutherland, Esq.	John V. Del Col, Esq.	Michael Groll, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP	General Counsel and Secretary	Sheri E. Bloomberg, Esq.
Four Times Square	Wellesley House	LeBoeuf, Lamb, Greene & MacRae, L.L.P.
New York, New York 10036	90 Pitts Bay Road	125 West 55th Street
(212) 735-3000	Pembroke HM 08, Bermuda	New York, NY 10019
(212) 735-2000 (facsimile)	(441) 278-0400	(212) 424-8000; (212) 424-8500 (facsimile)

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement number for the same offering.

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.

If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box.

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

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Subject to Completion. Dated March 2, 2004.

PROSPECTUS

8,000,000 Shares

Endurance Specialty Holdings Ltd.

Ordinary Shares

The selling shareholders identified in this prospectus are offering up to 8,000,000 ordinary shares of Endurance Specialty Holdings Ltd. We will not receive any proceeds from the sale of ordinary shares by the selling shareholders.

Our ordinary shares are listed on the New York Stock Exchange (“NYSE”) under the trading symbol “ENH.” The last reported sale price of our ordinary shares on the NYSE on March 1, 2004 was $33.86 per share.

Investing in our ordinary shares involves risk. See “Risk Factors” beginning on page 8 to read about factors you should consider before buying ordinary shares.


	Per Share	Total

Public offering price	$	$
Underwriting discount	$	$
Proceeds, before expenses, to selling shareholders	$	$

To the extent that the underwriters sell more than 8,000,000 ordinary shares, the underwriters have the option to purchase up to an additional 1,200,000 ordinary shares from the selling shareholders at the initial offering price less the underwriting discount.

Neither the Securities and Exchange Commission, any state securities commission, the Registrar of Companies in Bermuda, the Bermuda Monetary Authority nor any other regulatory body has approved or disapproved of these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.

The shares will be ready for delivery on or about , 2004.


Goldman, Sachs & Co.		Merrill Lynch & Co.

Credit Suisse First Boston

Deutsche Bank Securities

JPMorgan

Wachovia Securities

The date of this prospectus is , 2004.

The information in this prospectus is not complete and may be changed. The selling shareholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

TABLE OF CONTENTS

	Page
Prospectus Summary		1
Risk Factors		8
Cautionary Statement Regarding Forward-Looking Statements		28
Use of Proceeds		29
Price Range of Our Ordinary Shares		29
Dividend Policy		30
Selected Consolidated Financial Information		31
Management’s Discussion and Analysis of Financial Condition and Results of Operations		33
Industry Background		54
Business		56
Regulatory Matters		71
Management		82
Principal and Selling Shareholders		96
Certain Relationships and Related Transactions		101
Description of Share Capital		103
Certain Indebtedness		114
Shares Eligible for Future Sale		116
Material Tax Considerations		118
Underwriting		127
Legal Matters		130
Experts		130
Where You Can Find More Information		130
Enforceability of Civil Liabilities under United States Federal Securities Laws and Other Matters		131
Index to Consolidated Financial Statements		F-1
Glossary of Selected Insurance and Other Terms		G-1

You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with information that is different from that contained in this prospectus. Neither we nor the selling shareholders are making, nor will make, an offer to sell the ordinary shares in any jurisdiction where the offer or sale is not permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of time of delivery of this prospectus or of any sale of our ordinary shares.

Ordinary shares may be offered or sold in Bermuda only in compliance with the provisions of the Investment Business Act of 2003 of Bermuda which regulates the sale of securities in Bermuda. In addition, the Bermuda Monetary Authority (the “BMA”) must approve all issuances and transfers of shares of a Bermuda exempted company. We have received from the BMA their permission for the issue and free transferability of the ordinary shares in the Company being offered pursuant to this prospectus, as long as the shares are listed on the NYSE, to and among persons who are non-residents of Bermuda for exchange control purposes. In addition, we will deliver to and file a copy of this prospectus with the Registrar of Companies in Bermuda in accordance with Bermuda law. The BMA and the Registrar of Companies accept no responsibility for the financial soundness of any proposal or for the correctness of any of the statements made or opinions expressed in this prospectus.

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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. While we have highlighted what we believe is the most important information about the Company and this offering in this summary, you should read the entire prospectus carefully, including the “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” sections and our consolidated financial statements and the notes to those financial statements before making an investment decision. As used in this prospectus, unless the context otherwise requires, references to “we,” “us,” “our” and “the Company” refer to the consolidated operations of Endurance Specialty Holdings Ltd., and its direct and indirect subsidiaries, including Endurance Specialty Insurance Ltd. (“Endurance Bermuda”), Endurance Worldwide Holdings Limited, Endurance Worldwide Insurance Limited (“Endurance U.K.”), Endurance U.S. Holdings Corp., Endurance Reinsurance Corporation of America (“Endurance U.S.”) and Endurance Services Ltd. (“Endurance Services”). “Endurance Holdings” refers solely to Endurance Specialty Holdings Ltd. In this prospectus, amounts are expressed in U.S. dollars and the financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), except as otherwise indicated. We have included a glossary of insurance and other terms, commencing on page G-1. Each term defined in the glossary is printed in boldface the first time it appears in this prospectus. On December 17, 2002, we effected a share premium issuance to our existing shareholders at that time. Except as otherwise indicated, all share data in this prospectus assumes the share premium issuance to such existing shareholders of four additional shares for each common share outstanding had occurred as of the date such data is presented. As used in this prospectus, “common shares” refers to our ordinary shares and class A shares collectively. Unless otherwise indicated, all data in this prospectus assumes no exercise of either the underwriters’ over-allotment option or of any outstanding warrants or options to purchase common shares of Endurance Holdings.

The Company

Overview

Endurance Holdings is a holding company domiciled in Bermuda. Through our operating subsidiaries based in Bermuda, the United Kingdom and the United States, we focus on writing specialty lines of personal and commercial property and casualty insurance and reinsurance on a global basis. We define specialty lines as those lines of insurance and reinsurance that require dedicated, specialized underwriting skills and resources in order to be profitably underwritten. Our portfolio of specialty lines of business is organized into the following segments: property per risk treaty reinsurance, property catastrophe reinsurance, casualty treaty reinsurance, property individual risk, casualty individual risk and aerospace and other specialty lines.

We seek to create a portfolio of specialty lines which are profitable and have limited correlation with one another. We believe that a well constructed portfolio of diversified risks will produce less volatile results than each of the individual lines of business independently, allow for greater capital efficiency, and provide a superior risk-adjusted return on capital. We identify and underwrite attractive insurance and reinsurance business through our experienced underwriting staff and apply a centralized, quantitative framework of risk analysis across all of our business segments. We produce our business through the leading worldwide insurance and reinsurance intermediaries.

Since our inception in December 2001, we have been able to achieve significant success in the development of our business. Our accomplishments include:

•

building our business from a startup in 2001 to $1.6 billion in gross premiums and $263.4 million in net income for the year ended December 31, 2003;


	•	generating an 18.4% return on average equity for the year ended December 31, 2003;


	•	successfully launching multiple specialty business segments;


	•	building a substantial client base around the world;


	•	recruiting a highly experienced management team and building a staff of approximately 250;


	•	licensing insurance subsidiaries in Bermuda, the United Kingdom and the United States;

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•

acquiring renewal rights to the property catastrophe business of LaSalle Re Limited (“LaSalle”);


	•	acquiring renewal rights to the majority of the reinsurance business of The Hartford Fire Insurance Company and HartRe Company, L.L.C. (collectively, “HartRe”);


	•	establishing a $192 million multi-year term loan facility and a $108 million one-year revolving credit facility that was expanded to a $500 million letter of credit and revolving credit facility, and;


	•	successfully completing our initial public offering in February 2003 and obtaining a NYSE listing.

Current conditions in the global insurance and reinsurance markets continue to present an attractive opportunity for us to deploy our capital. Many global property and casualty insurers and reinsurers are currently experiencing significantly reduced capital resulting from several years of excessively competitive pricing, expanding coverage terms, significant increases in losses from asbestos liability, under-reserving, and poor investment performance. In addition, Standard & Poor’s Rating Services (“Standard & Poor’s”) and A.M. Best Company Inc. (“A.M. Best”) have lowered the financial strength ratings of a significant number of reinsurers in 2002 and 2003, further reducing available reinsurance capacity with sufficient financial security.

Our Competitive Strengths

We believe certain characteristics distinguish us from our competitors, including:

•

Extensive Specialized Underwriting and Risk Management Capabilities. We have made significant investments in our technical capabilities, including hiring 103 experienced underwriters and an actuarial, risk analysis and modeling staff of 28.


	•	Underwriting and Risk Management Discipline. We remain highly selective in our underwriting approach. All of our underwriting activity is supported by detailed, upfront pricing analyses through which we seek to limit our exposure to any single contract and any single geographic or catastrophic peril. In 2003, despite significant expansion of our business, we provided insurance quotes on 36.7% of the 8,637 submissions we received. Our quotation rate in 2002 was similar to that in 2003.


	•	Experienced Management Team. Our senior management team averages over 20 years of experience in the insurance and reinsurance industry and participates in our stock-based compensation plan that ties compensation to the achievement of goals aligned with those of our shareholders.


	•	Strong Market Relationships. The underwriting expertise and extensive industry relationships previously developed by our senior management team and underwriters have allowed us to quickly establish our presence in the global insurance and reinsurance markets. We have strong relationships with major insurance and reinsurance brokers, including: Aon Corporation (“Aon”), Marsh & McLennan Companies, Inc. (“Marsh”), Willis Group Holdings, Ltd. (“Willis”), Benfield Group plc (“Benfield”) and Towers Perrin Reinsurance (“Towers Perrin”).


	•	Bermuda-Based Operations. Bermuda is our principal base of operations, which allows us to benefit from its well-developed network of insurance and reinsurance brokers, an experienced pool of employees with significant insurance expertise and a responsive regulatory environment that allows for rapid innovation in insurance and reinsurance products.


	•	Conservative Investment Policy. We have a conservative investment policy aimed at minimizing the volatility of our investment results. At December 31, 2003, 100% of our invested assets were held in cash and cash equivalents and fixed maturity securities, 87% of which were rated AAA and 100% were rated A or better.

•

Excellent Financial Strength. The Company’s operating subsidiaries are rated “A” (Excellent) by A.M. Best and “A-” (Strong) by Standard & Poor’s. We were one of a small

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number of companies to be upgraded by A.M. Best in 2003 when we received our upgrade to “A” (“Excellent”). These ratings reflect A.M. Best and Standard & Poor’s opinions of our financial strength and are not applicable to the ordinary shares offered by this prospectus and are not recommendations to buy, sell or hold such shares.


	•	Unencumbered Capital Base. At December 31, 2003, we had total shareholders’ equity of approximately $1.6 billion. As a recently formed company, we are unencumbered by any historical losses relating to asbestos liabilities, the World Trade Center tragedy and other pre-December 2001 liability exposures currently affecting many of our competitors. By choosing to form and license new subsidiaries rather than assuming unknown liabilities through the acquisition of existing licensed “shell” companies, we have no risk that loss reserve development relating to historical exposures prior to our formation will negatively impact our future financial results.

Business Strategy

Our goal is to generate a superior long-term return on capital by leveraging our competitive strengths and successfully executing our strategy. The key elements of our strategy are:

•

Maintain a Portfolio of Profitable Specialty Lines. We believe there are significant opportunities in a number of lines of business in the current market environment. We participate in those specific specialty lines that we believe have the potential to offer the highest risk-adjusted return on capital and in which we believe we can establish a competitive advantage through our specialized teams of expert underwriters. We intend to use our ability to participate in multiple lines of business to deploy capital and resources to the most attractive business lines at the most opportune times.


	•	Utilize Monoline Level of Expertise in Each Line of Business. We have formed teams of highly experienced professionals to manage each of our specific lines of business. Each team is led by a senior executive and is supported by highly experienced underwriting personnel who are specialists in their unique business line.


	•	Apply Extensive Technical Analysis to Our Underwriting. We manage our portfolio of risks through the utilization of catastrophe modeling and dynamic financial analysis techniques that provide a quantitative basis for the management of risk aggregation and correlation. We license a broad array of catastrophe modeling products. We have our own proprietary underwriting risk management system and have built a proprietary suite of individual contract, portfolio, capital allocation, and market risk management and price monitoring tools around this system.


	•	Maintain an Efficient Expense Structure. Several factors contribute to our low cost structure, including our utilization of variable cost brokerage distribution, our presence in the Bermuda market which targets large insurance and reinsurance programs for clients, our current emphasis on high severity, low frequency lines which can be underwritten by relatively small teams, and our centralized risk management structure which limits redundant expenses and systems.


	•	Proactively Manage Our Capital Base. We actively manage our capital by allocating resources to underwriting opportunities which we believe will offer the highest risk-adjusted return on capital. Over the long-term, we will seek to return excess capital to our shareholders rather than use it to underwrite business at unattractive pricing levels. We have already undertaken a number of capital management initiatives, including two acquisitions at prices which were accretive to our earnings, selective repurchases of our ordinary shares on favorable terms, and the payment of shareholder dividends.

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Risks Relating to Our Company

As part of your evaluation of the Company, you should take into account the risks we face in our business. These risks include:

•

Limited Operating History. We have a limited operating and financial history. As a result, there is limited historical financial and operating information to help you evaluate our past performance or to make a decision about an investment in our ordinary shares.


	•	Uncertainty of Establishing Loss Reserves. Establishing and maintaining an appropriate level of loss reserves is an inherently uncertain process, especially for recently formed insurers like us without an established loss history. Because of this uncertainty, it is possible that our loss reserves at any given time will prove inadequate. This could cause a material reduction in our profitability and capital.


	•	Vulnerability to Losses from Catastrophes. Our property and property catastrophe insurance and reinsurance operations expose us to claims arising from catastrophes. In the event that we experience catastrophe losses, there is a possibility that our unearned premium and loss reserves will be inadequate to cover these risks, which could have a material adverse effect on our financial condition and our results of operations.


	•	Failure of Our Loss Limitation Methods. Limitations or exclusions from coverage or choice of forum, or other loss limitation methods we employ may not be effective or may not be enforceable in the manner we intend, which could have a material adverse effect on our financial condition and our results of operations, possibly to the extent of eliminating our shareholders’ equity.


	•	Non-renewal of Existing Contracts. Our contracts are generally for a one-year term. In our financial forecasting process, we make assumptions about the renewal of our prior year’s contracts. If actual renewals do not meet expectations, our premiums written in future years and our future results of operations could be materially adversely affected. This risk is especially prevalent in the first quarter of each year when a large number of reinsurance contracts are subject to renewal.


	•	Constraints Related to Our Holding Company Structure. As a holding company, Endurance Holdings has no substantial operations of its own. Dividends and other permitted distributions from insurance subsidiaries are expected to be Endurance Holdings’ sole source of funds to meet ongoing cash requirements. These payments are limited by the regulations in the jurisdictions in which our subsidiaries operate. The inability of these subsidiaries to pay dividends in sufficient amounts for Endurance Holdings to meet its cash requirements could have a material adverse effect on its operations.


	•	Cyclical Nature of the Insurance and Reinsurance Business. Historically, the property and casualty reinsurance business has been a cyclical industry characterized by periods of intense price competition. Although premium levels for many products have generally increased during the past two years, the supply of insurance and reinsurance capacity may increase, either by capital provided by new entrants or by the commitment of additional capital by existing insurers and reinsurers, which may cause prices to decrease.

For more information about these and other risks, see “Risk Factors” beginning on page 8. You should carefully consider these risk factors together with all the other information included in this prospectus before making an investment decision.

Our principal executive offices are located at Wellesley House, 90 Pitts Bay Road, Pembroke HM 08, Bermuda and our telephone number is (441) 278-0400.

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The Offering

Ordinary shares offered by the
selling shareholders

8,000,000 ordinary shares


Over-allotment option granted by the selling shareholders	1,200,000 ordinary shares


Common shares outstanding before and after this offering	63,915,000 ordinary shares


Use of proceeds	We will not receive any proceeds from the sale of ordinary shares by the selling shareholders.


Voting Rights	On all matters submitted to a vote of shareholders, holders of our ordinary shares are entitled to one vote per share, subject to the adjustments regarding voting set forth in “Description of Share Capital — Voting Adjustments.”

Dividend policy

We paid dividends of $0.08 per ordinary share on June 30, 2003, $0.12 per ordinary share on September 30, 2003 and $0.12 per ordinary share on December 31, 2003. On February 12, 2004, our board of directors declared a dividend of $0.18 per ordinary share to be paid on March 31, 2004 to holders of ordinary shares as of the close of business on March 17, 2004. Any future payment of dividends will be at the discretion of our board of directors and will be subject to significant restrictions which are described under “Dividend Policy,” “Regulatory Matters” and elsewhere in this prospectus.


Risk factors	See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our ordinary shares.


NYSE symbol	ENH

As of March 1, 2004, the selling shareholders beneficially held approximately 77% of our outstanding ordinary shares and warrants exercisable for an additional 10.5% of our outstanding common shares. After giving effect to this offering, assuming no exercise of the over-allotment option, the selling shareholders would have held approximately 63% of our outstanding ordinary shares and warrants exercisable for an additional 10.5% of our outstanding common shares, as of that date. See “Principal and Selling Shareholders.”

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Summary Consolidated Financial Information

The following table sets forth our summary consolidated financial information for the periods ended and as of the dates indicated. As described in Note 1 to our consolidated financial statements included elsewhere in this prospectus, our consolidated financial statements include the accounts of Endurance Holdings, Endurance Bermuda, Endurance U.K. and Endurance U.S. Endurance Bermuda was incorporated on November 30, 2001 and commenced operations on December 17, 2001. Endurance Holdings was incorporated on June 27, 2002 and effected an exchange offer in July 2002 with the shareholders of Endurance Bermuda. The exchange offer was accounted for as a business combination of companies under common control. On December 17, 2002, we effected a share premium issuance to our existing shareholders. Except as otherwise indicated, all share data in this prospectus assumes the share premium issuance to our existing shareholders of four additional shares for each common share outstanding had occurred as of the date such data is presented.

The summary consolidated financial information presented below is derived from our consolidated financial statements included elsewhere in this prospectus. These historical results are not necessarily indicative of results to be expected from any future period. You should read this summary consolidated financial information together with our consolidated financial statements and related notes and the section of this prospectus entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

	Year Ended December 31, 2003		Year Ended December 31, 2002		Period Ended December 31, 2001

	(in thousands, except earnings per share data)
Summary Income Statement Data:

Gross premiums written and acquired (a)	$	1,601,997	$	798,760	$	376

Net premiums written and acquired (b)		1,597,844		764,918		376

Net premiums earned (includes $0.3 million and $30.7 million from related parties in 2003 and 2002, respectively)		1,173,947		369,489		1

Net investment income		71,010		42,938		838

Net realized gains on sales of investments		5,718		6,730		—
Losses and loss expenses (includes $0.2 million and $17.5 million from related parties in 2003 and 2002, respectively)		663,696		204,455		—
Acquisition expenses (includes $0.0 million and $7.0 million from related parties in 2003 and 2002, respectively)		230,549		64,013		—
General and administrative expenses		100,657		49,999		527
Net income		263,437		102,066		312

Per Share Data:
Basic earnings per share	$	4.19	$	1.74	$	0.01
Diluted earnings per share	$	4.00	$	1.73	$	0.01
Weighted average number of common shares outstanding:
Basic		62,933		58,699		39,630
Diluted		65,900		58,858		39,630

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	As of December 31, 2003		As of December 31, 2002		As of December 31, 2001

	(in thousands, except book value per share data)
Summary Balance Sheet Data:

Cash and investments	$	2,674,232	$	1,663,249	$	1,162,498

Total assets		3,458,964		2,054,594		1,165,099

Reserve for losses and loss expenses		833,158		200,840		—

Reserve for unearned premiums		824,685		403,305		375

Bank debt		103,029		192,000		—

Total shareholders’ equity		1,644,815		1,217,500		1,162,312

Per Share Data:
Book value per share (c)	$	25.68	$	22.14	$	19.37
Diluted book value per share (d)	$	24.03	$	21.73	$	19.37

Selected Ratios (Based on U.S. GAAP income statement data):

	Year Ended December 31, 2003			Year Ended December 31, 2002

Loss ratio (e)		56.5	%		55.3	%
Acquisition expense ratio (f)		19.6	%		17.3	%
General and administrative expense ratio (g)		8.6	%		13.6	%

Combined ratio (h)		84.7	%		86.2	%

(a)

Gross premiums written and acquired for the year ended December 31, 2003 included $400.3 million of gross premiums acquired in the HartRe transaction. Gross premiums written and acquired for the year ended December 31, 2002 included $90.0 million of gross premiums acquired in the LaSalle transaction. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Years Ended December 31, 2003 and December 31, 2002 — Premiums.”

(b)

Net premiums written and acquired for the year ended December 31, 2003 included $400.3 million of gross premiums acquired in the HartRe transaction. Net premiums written and acquired for the year ended December 31, 2002 included $69.0 million of net premiums acquired in the LaSalle transaction. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Years Ended December 31, 2003 and December 31, 2002 — Premiums.”

(c)

Book value per share is based on total shareholders’ equity divided by basic common shares outstanding of 64,046,776 at December 31, 2003, 55,000,000 at December 31, 2002 and 60,000,000 at December 31, 2001. Common shares outstanding include 134,776 vested restricted share units for purposes of the December 31, 2003 book value per share calculation.

(d)

Diluted book value per share is a non-GAAP measure based on total shareholders’ equity divided by the number of common shares and common share equivalents outstanding at the end of the period, using the treasury stock method. Common share equivalents include options and warrants which are dilutive when the market price of the Company’s shares exceeds the exercise price of the options or warrants. Diluted shares outstanding were 68,444,576 at December 31, 2003, 56,016,679 at December 31, 2002 and 60,000,000 at December 31, 2001. Common shares outstanding include 134,776 vested restricted share units for purposes of the December 31, 2003 book value per share calculation. We believe that this is an effective measure of the per share value of the Company as it takes into account the effect of all outstanding dilutive securities.

(e)	The loss ratio is calculated by dividing losses and loss expenses by net premiums earned.

(f)	The acquisition expense ratio is calculated by dividing acquisition expenses by net premiums earned.

(g)	The general and administrative expense ratio is calculated by dividing general and administrative expenses by net premiums earned.

(h)	The combined ratio is the sum of the loss ratio, the acquisition expense ratio and the general and administrative expense ratio. As a recently formed company, our historical combined ratio may not be indicative of future underwriting performance.

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RISK FACTORS

Before investing in our ordinary shares you should carefully consider the following risk factors and all other information set forth in this prospectus. These risks could materially affect our business, results of operations or financial condition and cause the trading price of our ordinary shares to decline. You could lose all or part of your investment.

Risks Relating to Our Business

Since we have a limited operating history, it is difficult to predict our future performance.

Our Bermuda insurance subsidiary, Endurance Bermuda, was formed on November 30, 2001 and began operations on December 17, 2001. Endurance Holdings was formed on June 27, 2002. Endurance U.S. was formed on September 5, 2002 and received a license to write certain lines of reinsurance business in the State of New York from the New York State Department of Insurance (the “New York Department”) on December 18, 2002. Endurance U.K. was formed on April 10, 2002 and on December 4, 2002 was authorized by the United Kingdom’s Financial Services Authority (“FSA”) to begin writing certain lines of insurance and reinsurance in the United Kingdom and European Union. As a result, there is limited historical financial and operating information available to help you evaluate our past performance or to make a decision about an investment in our ordinary shares. Companies in their initial stages of development present substantial business and financial risks and may suffer significant losses. These new companies must successfully develop business relationships, establish operating procedures, hire staff, install management information and other systems, establish facilities and obtain licenses, as well as take other steps necessary to conduct their intended business activities. As a result of these risks, it is possible that we may not be successful in implementing our business strategy or in completing the development of the infrastructure necessary to run our business. In addition, because of our limited operating history, our historical financial results may not accurately predict our future performance. As a result of industry factors or factors specific to us, we may have to alter our anticipated methods of conducting our business, such as the nature, amount and types of risks we assume.

If actual claims exceed our reserve for losses and loss expenses, our financial condition and results of operations could be adversely affected.

Our success depends upon our ability to accurately assess the risks associated with the businesses that we insure or reinsure. We establish loss reserves to cover our estimated liability for the payment of all losses and loss expenses incurred with respect to premiums earned on the policies that we write. Loss reserves do not represent an exact calculation of liability. Rather, loss reserves are estimates of what we expect the ultimate settlement and administration of claims will cost. These estimates are based upon actuarial and statistical projections and on our assessment of currently available data, as well as estimates of future trends in claims severity and frequency, judicial theories of liability and other factors. Loss reserve estimates are refined continually in an ongoing process as experience develops and claims are reported and settled. Establishing an appropriate level of loss reserves is an inherently uncertain process. Moreover, these uncertainties are greater for insurers like us than for insurers with a longer operating history because we do not yet have an established loss history. Because of this uncertainty, it is possible that our reserves at any given time will prove inadequate.

To the extent we determine that actual losses and loss expenses exceed our expectations and reserves recorded in our financial statements, we will be required to immediately increase reserves. This could cause a material reduction in our profitability and capital. The number and size of reported claims that we have received to date have been moderate, resulting in $162.5 million in case reserves on our balance sheet at December 31, 2003. In the future, the number of claims could increase, and their cumulative size could exceed our loss reserves.

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As a property and property catastrophe insurer and reinsurer, we are particularly vulnerable to losses from catastrophes.

Our property and property catastrophe insurance and reinsurance operations expose us to claims arising out of catastrophes. Catastrophes can be caused by various unpredictable events, including earthquakes, hurricanes, hailstorms, severe winter weather, floods, fires, tornadoes, explosions and other natural or man-made disasters. We also face substantial exposure to losses resulting from acts of war, acts of terrorism and political instability. The global geographic distribution of our business subjects us to catastrophe exposure for natural events occurring in a number of areas throughout the world, including, but not limited to, windstorms in Europe, hurricanes in Florida, the Gulf Coast and the Atlantic coast regions of the United States, typhoons and earthquakes in Japan and earthquakes in California and the New Madrid region of the United States. The loss experience of property catastrophe insurers and reinsurers has generally been characterized as low frequency but high severity in nature. We expect that increases in the values and concentrations of insured property will increase the severity of such occurrences in the future. In the event that we experience catastrophe losses, there is a possibility that our unearned premium and loss reserves will be inadequate to cover these risks. In addition, because accounting regulations do not permit insurers and reinsurers to reserve for such catastrophic events until they occur, claims from catastrophic events could cause substantial volatility in our financial results for any fiscal quarter or year and could have a material adverse effect on our financial condition and results of operations. Our ability to write new business also could be adversely impacted. See “Business — Underwriting and Risk Management.”

As a property and casualty insurer and reinsurer, we could face losses from war, terrorism and political unrest.

We may have substantial exposure to losses resulting from acts of war, acts of terrorism and political instability. These risks are inherently unpredictable, although recent events may lead to increased frequency and severity. It is difficult to predict their occurrence with statistical certainty or to estimate the amount of loss an occurrence will generate. Accordingly, it is possible that our loss reserves will be inadequate to cover these risks. Although we generally exclude acts of terrorism from insurance policies and reinsurance treaties where practicable, we also provide coverage in circumstances where we believe we are adequately compensated for assuming such risk. Even in cases where we have deliberately sought to exclude coverage, we may not be able to eliminate completely our exposure to terrorist acts and thus it is possible that these acts will have a material adverse effect on us.

The risks associated with property and casualty reinsurance underwriting could adversely affect us.

Because we participate in property and casualty reinsurance markets, the success of our underwriting efforts depends, in part, upon the policies, procedures and expertise of the ceding companies making the original underwriting decisions. We face the risk that these ceding companies may fail to accurately assess the risks that they assume initially, which, in turn, may lead us to inaccurately assess the risks we assume. If we fail to establish and receive appropriate premium rates, we could face significant losses on these contracts.

If actual renewals of our existing contracts do not meet expectations, our premiums written in future years and our future results of operations could be materially adversely affected.

Our contracts are generally for a one-year term. In our financial forecasting process, we make assumptions about the renewal of our prior year’s contracts. If actual renewals do not meet expectations, our premiums written in future years and our future results of operations could be materially adversely affected. This risk is especially prevalent in the first quarter of each year when a large number of reinsurance contracts are subject to renewal.

The failure of any of the loss limitation methods we employ could have a material adverse effect on our financial condition or on our results of operations.

We seek to limit our loss exposure by writing many of our insurance and reinsurance contracts on an excess of loss basis, adhering to maximum limitations on policies written in defined geographical zones,

limiting program size for each client, establishing per risk and per occurrence limitations for each event and prudent underwriting guidelines for each program written. In the case of proportional treaties, we seek per occurrence limitations or loss ratio caps to limit the impact of losses from any one event. Most of our direct liability insurance policies include maximum aggregate limitations. We also seek to limit our loss exposure through geographic diversification. Geographic zone limitations involve significant underwriting judgments, including the determination of the area of the zones and whether a policy falls within particular zone limits. Disputes relating to coverage and choice of legal forum may also arise. As a result, various provisions of our policies, such as limitations or exclusions from coverage or choice of forum, may not be enforceable in the manner we intend and some or all of our other loss limitation methods may prove to be ineffective. Underwriting is a matter of judgment, involving important assumptions about matters that are inherently unpredictable and beyond our control, and for which historical experience and probability analysis may not provide sufficient guidance. One or more catastrophic or other events could result in claims that substantially exceed our expectations, which could have a material adverse effect on our financial condition and our results of operations, possibly to the extent of eliminating our shareholders’ equity.

Since we are dependent on key executives, the loss of any of these executives or our inability to retain other key personnel could adversely affect our business.

Our success substantially depends upon our ability to attract and retain qualified employees and upon the ability of our senior management and other key employees to implement our business strategy. We believe there are only a limited number of available qualified executives in the business lines in which we compete. Although we are not aware of any planned departures, we rely substantially upon the services of Kenneth J. LeStrange, our Chief Executive Officer, President and Chairman of the board of directors, Steven W. Carlsen, Chairman of Endurance U.S. and President of Endurance Services, and James R. Kroner, our Chief Financial Officer. Each of Messrs. LeStrange, Carlsen and Kroner have employment agreements with the Company. We believe we have been successful in attracting and retaining key personnel since our inception. The loss of any of their services or the services of other members of our management team or the inability to attract and retain other talented personnel could impede the further implementation of our business strategy, which could have a material adverse effect on our business. We do not currently maintain key man life insurance policies with respect to any of our employees.

Our business could be adversely affected by Bermuda employment restrictions.

We will need to continue to hire employees to work in Bermuda. Under Bermuda law, non-Bermudians (other than spouses of Bermudians) may not engage in any gainful occupation in Bermuda without an appropriate governmental work permit. Work permits may be granted or extended by the Bermuda government upon showing that, after proper public advertisement in most cases, no Bermudian (or spouse of a Bermudian) is available who meets the minimum standard requirements for the advertised position. The Bermuda government recently announced a new policy limiting the duration of work permits to six years, with certain exemptions for key employees. All of our 48 Bermuda-based professional employees who require work permits, including Messrs. LeStrange and Kroner, have been granted permits by the Bermuda government. The terms of these permits range from three to five years depending on the individual. None of our current Bermuda employees for whom we have applied for a work permit have been denied. It is possible that we could lose the services of one or more of our key employees if we are unable to obtain or renew their work permits, which could have a material adverse effect on our business.

A decline in the financial strength ratings of Endurance Bermuda, Endurance U.K. or Endurance U.S. could affect our standing among brokers and customers and cause our premiums and earnings to decrease.

Ratings have become an increasingly important factor in establishing the competitive position of insurance and reinsurance companies. A.M. Best assigned to Endurance Bermuda, Endurance U.K. and Endurance U.S. a financial strength rating of “A” (Excellent) and Standard & Poor’s assigned a financial strength rating to Endurance Bermuda, Endurance U.K. and Endurance U.S. of “A-” (Strong). The objective of A.M. Best’s and Standard & Poor’s rating systems is to provide an opinion of an insurer’s or reinsurer’s financial strength and ability to meet ongoing obligations to its policyholders. These ratings reflect A.M.

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Best’s and Standard & Poor’s opinions of Endurance Bermuda’s, Endurance U.K.’s and Endurance U.S.’s initial capitalization, performance, management and sponsorship, and are not applicable to the ordinary shares offered by this prospectus and are not a recommendation to buy, sell or hold such shares. A.M. Best maintains a letter scale rating system ranging from “A++” (Superior) to “F” (In Liquidation), and includes 16 separate ratings categories. Within these categories, “A++” (Superior) and “A+” (Superior) are the highest, followed by “A” (Excellent) and “A-” (Excellent). Publications of A.M. Best indicate that the “A” and “A-” ratings are assigned to those companies that, in A.M. Best’s opinion, have demonstrated an excellent ability to meet their ongoing obligations to policyholders. These ratings are subject to periodic review by, and may be revised downward or revoked at the sole discretion of, A.M. Best. The rating “A” (Excellent) by A.M. Best is the third highest of 15 rating levels (the rating of “S” (Suspended) is considered a rating category but not a rating level). Standard & Poor’s maintains a letter rating system ranging from “AAA” (Extremely Strong) to “R” (Under Regulatory Supervision). Within these categories, “AAA” (Extremely Strong) is the highest, followed by “AA+,” “AA” and “AA-” (Very Strong) and “A+,” “A” and “A-” (Strong). Publications of Standard & Poor’s indicate that the “A+,” “A” and “A-” ratings are assigned to those companies that, in Standard & Poor’s opinion, have demonstrated strong financial security characteristics, but are somewhat more likely to be affected by adverse business conditions than are insurers with higher ratings. These ratings may be changed, suspended, or withdrawn at the discretion of Standard & Poor’s. The rating “A-” (Strong) by Standard & Poor’s is the seventh highest of twenty-one rating levels.

If Endurance Bermuda’s, Endurance U.K.’s or Endurance U.S.’s rating is reduced from its current level by A.M. Best or Standard & Poor’s, our competitive position in the insurance and reinsurance industry would suffer, and it would be more difficult for us to market our products. A downgrade could result in a significant reduction in the number of insurance and reinsurance contracts we write and in a substantial loss of business as client companies, and brokers that place such business, move to other competitors with higher ratings.

Our holding company structure and certain regulatory and other constraints affect our ability to pay dividends and make other payments.

Endurance Holdings is a holding company and, as such, has no substantial operations of its own. Dividends and other permitted distributions from insurance subsidiaries are expected to be Endurance Holdings’ primary source of funds to meet ongoing cash requirements, including debt service payments and other expenses, and to pay dividends, if any, to shareholders. Bermuda law and regulations, including, but not limited to, Bermuda insurance regulations, restrict the declaration and payment of dividends and the making of distributions by Endurance Bermuda unless certain regulatory requirements are met. The inability of Endurance Bermuda to pay dividends in an amount sufficient to enable Endurance Holdings to meet its cash requirements at the holding company level could have a material adverse effect on its operations. In addition, Endurance U.K. and Endurance U.S. are subject to significant regulatory restrictions limiting their ability to declare and pay dividends. We therefore do not expect to receive dividends from either of those subsidiaries for the foreseeable future.

Endurance Holdings is subject to Bermuda regulatory constraints that will affect its ability to pay dividends on its ordinary shares and make other payments. Under the Bermuda Companies Act 1981, as amended (the “Companies Act”), Endurance Holdings may declare or pay a dividend or make a distribution out of retained earnings or contributed surplus only if it has reasonable grounds for believing that it is, or would after the payment be, able to pay its liabilities as they become due and if the realizable value of its assets would thereby not be less than the aggregate of its liabilities and issued share capital and share premium accounts. In addition, our credit facilities prohibit Endurance Holdings from declaring or paying any dividends if a default or event of default has occurred and is continuing at the time of such declaration or payment or would result from such declaration or payment. For a discussion of the legal limitations on our subsidiaries’ ability to pay dividends to Endurance Holdings and of Endurance Holdings to pay dividends to its shareholders, see “Dividend Policy,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources,” “Certain Indebtedness” and “Regulatory Matters.”

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The cost of reinsurance security arrangements may materially impact our margins.

As a Bermuda reinsurer, Endurance Bermuda is required to post collateral security with respect to reinsurance liabilities it assumes from ceding insurers domiciled in the U.S. The posting of collateral security is generally required in order for U.S. ceding companies to obtain credit on their U.S. statutory financial statements with respect to reinsurance liabilities ceded to unlicensed or unaccredited reinsurers. Under applicable statutory provisions, the security arrangements may be in the form of letters of credit, reinsurance trusts maintained by third-party trustees or funds-withheld arrangements whereby the trusted assets are held by the ceding company. Endurance Bermuda has the ability to issue up to $470 million in letters of credit under the Company’s letter of credit and revolving credit facility that expires on August 6, 2004. If this facility is not sufficient or if the Company is unable to renew this facility or is unable to arrange for other types of security on commercially acceptable terms, the ability of Endurance Bermuda to provide reinsurance to U.S.-based clients may be severely limited.

Security arrangements may subject our assets to security interests and/or require that a portion of our assets be pledged to, or otherwise held by, third parties. Although the investment income derived from our assets while held in trust typically accrues to our benefit, the investment of these assets is governed by the investment regulations of the state of domicile of the ceding insurer, which may be more restrictive than the investment regulations applicable to us under Bermuda law. The restrictions may result in lower investment yields on these assets, which could have a material adverse effect on our profitability.

The right of certain significant investors to designate a majority of our directors may prevent or frustrate attempts by shareholders to replace or remove the current management of the Company.

As of the date of this prospectus, our founding shareholders beneficially own ordinary shares aggregating approximately 82% of the equity interest in our ordinary shares on a fully diluted basis assuming the full exercise of all vested share options, restricted share units and warrants exercisable for ordinary shares or class A shares. Certain of our significant investors have contractual rights to nominate designees as candidates for election to our board of directors and select from our directors members of committees of our board of directors, and have so designated seven of our existing eleven directors. See “Description of Share Capital — Amended and Restated Shareholders Agreement — Composition of Board and Board Committees.”

As a result of their ownership position and contractual rights, our significant investors and their board representatives, independently and voting together with our other existing shareholders, will have the ability to significantly influence matters requiring shareholder approval, including, without limitation, the election of directors and amalgamations, consolidations and sales of all or substantially all of our assets.

The commercial and investment activities of our significant investors may lead to conflicts of interest.

Certain of our significant investors engage in commercial activities and enter into transactions or agreements with us or in competition with us, which may give rise to conflicts of interest. We derive a significant portion of our business through reinsurance relationships and other arrangements in which Aon, one of the selling shareholders, has acted as a broker or insurance or reinsurance intermediary. Due to Aon’s investment in us and their involvement in our formation, it is possible that certain brokers and intermediaries that compete with Aon will perceive a conflict of interest in our relationships with Aon and may, therefore, be hesitant to present insurance and reinsurance proposals and opportunities to us. As of the date of this prospectus, Aon held approximately 21.9% of our outstanding ordinary shares on a fully diluted basis. After giving effect to this offering, assuming no exercise of the over-allotment option, Aon would have held approximately 19.4% of our outstanding ordinary shares on a fully diluted basis as of that date. See “Principal and Selling Shareholders.”

Some of our significant investors or their affiliates have sponsored, and may in the future sponsor, other entities engaged in or intending to engage in insurance and reinsurance underwriting, some of which, together with our significant investors, may compete with us. Certain of our significant investors and their affiliates have also entered into agreements with and made investments in numerous companies that may compete with us.

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Profitability may be adversely impacted by inflation.

The effects of inflation could cause the cost of claims from catastrophes or other events to rise in the future. Our reserve for losses and loss expenses includes 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, we will be required to increase our loss reserves with a corresponding reduction in our net income in the period in which the deficiency is identified.

Our investment performance may affect our financial assets and ability to conduct business.

We derive a significant portion of our income from our invested assets. As a result, our operating results depend in part on the performance of our investment portfolio, which currently consists of fixed maturity securities. Our income derived from our invested assets was $76.7 million or 29.1% of our net income for the year ended December 31, 2003. Our operating results are subject to a variety of investment risks, including risks relating to general economic conditions, market volatility, interest rate fluctuations, liquidity risk and credit and default risk. Additionally, with respect to certain investments, we are subject to pre-payment or reinvestment risk.

With respect to our longer-term liabilities, we strive to structure our investments in a manner that recognizes our liquidity needs for our future liabilities. In that regard, we attempt to correlate the maturity and duration of our investment portfolio to our general and specific liability profile. However, if our liquidity needs or general and specific liability profile unexpectedly change, we may not be successful in continuing to structure our investment portfolio in that manner. The market value of our fixed maturity investments will be subject to fluctuation depending on changes in various factors, including prevailing interest rates. To the extent that we are unsuccessful in correlating our investment portfolio with our liabilities, we may be forced to liquidate our investments at times and prices that are not optimal, which could have a material adverse effect on the performance of our investment portfolio.

Interest rates are highly sensitive to many factors, including governmental monetary policies, domestic and international economic and political conditions and other factors beyond our control. Although we attempt to take measures to manage the risks of investing in a changing interest rate environment, we may not be able to mitigate interest rate sensitivity effectively. Our mitigation efforts include maintaining a high quality portfolio with a relatively short duration to reduce the effect of interest rate changes on book value. A significant portion of the investment portfolio matures each year, allowing for reinvestment at current market rates. The portfolio is actively managed and trades are made to balance our exposure to interest rates. However, a significant increase in interest rates could have a material adverse effect on our book value.

We may be adversely affected by foreign currency fluctuations.

We have made a significant investment in the capitalization of Endurance U.K., which is denominated in British Sterling. In addition, we enter into reinsurance and insurance contracts where we are obligated to pay losses in currencies other than U.S. dollars. For the year ended December 31, 2003, approximately 9% of our gross premiums were written in currencies other than the U.S. dollar. A portion of our cash and cash equivalents, investments and loss reserves are also denominated in non-U.S. currencies. The majority of our operating foreign currency assets and liabilities are denominated in Euros, British Sterling, Canadian Dollars, Japanese Yen and Australian Dollars (“Major Currencies”). We may, from time to time, experience losses from fluctuations in the values of these and other non-U.S. currencies, which could have a material adverse affect on our results of operations.

We periodically buy and sell Major Currencies or investment securities denominated in Major Currencies in an attempt to match our non-U.S. dollar assets to our related non-U.S. dollar liabilities. We have no currency hedges in place; however, as part of our matching strategy, we consider the use of hedges when we become aware of probable significant losses that will be paid in non-U.S. currencies. However, it is possible that we will not successfully match our exposures or structure the hedges so as to effectively manage these risks.

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We may require additional capital in the future which may not be available or only available on unfavorable terms.

Our future capital requirements depend on many factors, including our ability to write new business successfully and to establish premium rates and reserves at levels sufficient to cover losses. We may need to raise additional funds through financings or curtail our growth and reduce our assets. Any equity or debt financing, if available at all, may be on terms that are not favorable to us. In the case of equity financings, dilution to our shareholders could result, and in any case such securities may have rights, preferences and privileges that are senior to those of the ordinary shares offered hereby. If we cannot obtain adequate capital, our business, results of operations and financial condition could be adversely affected.

Since we depend on a few brokers for a large portion of our revenues, loss of business provided by any one of them could adversely affect us.

We market our insurance and reinsurance worldwide primarily through insurance and reinsurance brokers. In the year ended December 31, 2003, our top five brokers represented approximately 86% of our gross premiums written, excluding gross premiums acquired in the HartRe transaction. See “Business — Distribution.” One of those brokers, Aon, is currently one of our investors and is a selling shareholder in the offering being made pursuant to this prospectus. Affiliates of two of these brokers, Marsh and Benfield, have also co- sponsored the formation of other Bermuda reinsurers that may compete with us, and these brokers may decide to favor the reinsurers they sponsored over other companies. Loss of all or a substantial portion of the business provided by one or more of these brokers could have a material adverse effect on our business.

Our reliance on brokers subjects us to their credit risk.

In accordance with industry practice, we frequently pay amounts owed on claims under our insurance or reinsurance contracts to brokers, and these brokers, in turn, pay these amounts over to the clients that have purchased insurance or reinsurance from us. If a broker fails to make such a payment, in a significant majority of business that the Company writes, it is highly likely that the Company will be liable to the client for the deficiency because of local laws or contractual obligations. Likewise, when the client pays premiums for these policies to brokers for payment over to us, these premiums are considered to have been paid and, in most cases, the client will no longer be liable to us for those amounts, whether or not we have actually received the premiums. Consequently, we assume a degree of credit risk associated with brokers around the world with respect to most of our insurance and reinsurance business. To date we have not experienced any losses related to such credit risks.

The effects of emerging claim and coverage issues on our business are uncertain.

As industry practices and legal, judicial, social and other environmental conditions change, unexpected and unintended issues related to claims and coverage may emerge. These issues may adversely affect our business by either extending coverage beyond our underwriting intent or by increasing the number or size of claims. In some instances, these changes may not become apparent until some time after we have issued insurance or reinsurance contracts that are affected by the changes. As a result, the full extent of liability under our insurance or reinsurance contracts may not be known for many years after a contract is issued.

Recent examples of emerging claims and coverage issues include:

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larger settlements and jury awards for professionals and corporate directors and officers covered by professional liability and directors’ and officers’ liability insurance; and


	•	a growing trend of plaintiffs targeting property and casualty insurers in purported class action litigations relating to claims-handling, insurance sales practices and other practices related to the conduct of our business.

The effects of these and other unforeseen emerging claim and coverage issues are extremely hard to predict and could harm our business.

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We operate in a highly competitive environment which could adversely impact our operating margins.

The insurance and reinsurance industries are highly competitive. We compete with major U.S. and non-U.S. insurers and reinsurers, including other Bermuda-based insurers and reinsurers. For information regarding competition in each of our business segments, see “Business — Business Segments.” Many of our competitors have greater financial, marketing and management resources. A number of newly-organized, Bermuda-based insurance and reinsurance entities compete in the same market segments in which we operate. In addition, we may not be aware of other companies that may be planning to enter the segments of the insurance and reinsurance market in which we operate or of existing companies that may be planning to raise additional capital. Increasing competition could result in fewer submissions, lower premium rates and less favorable policy terms and conditions, which could have a material adverse impact on our growth and profitability.

Further, insurance/risk-linked securities and derivative and other non-traditional risk transfer mechanisms and vehicles are being developed and offered by other parties, including non-insurance company entities, which could impact the demand for traditional insurance or reinsurance. A number of new, proposed or potential industry or legislative developments could further increase competition in our industry. These developments include:

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several new insurance and reinsurance companies have been formed and capitalized in excess of $500 million since September 2001 and a number of these companies compete with us in the same markets;


	•	legislative mandates for insurers to provide certain types of coverage in areas where we or our ceding clients do business, such as the mandated terrorism coverage in the Terrorism Risk Insurance Act of 2002, could eliminate the opportunities for us to write those coverages; and


	•	programs in which state-sponsored entities provide property insurance in catastrophe prone areas or other “alternative markets” types of coverage could eliminate the opportunities for us to write those coverages.

In addition, insurance companies that merge may be able to enhance their negotiating position when buying reinsurance and may be able to spread their risks across a consolidated, larger capital base so that they require less reinsurance.

New competition from these developments could cause the demand for insurance or reinsurance to fall or the expense of customer acquisition and retention to increase, either of which could have a material adverse affect on our growth and profitability.

Efforts to comply with the Sarbanes-Oxley Act will entail significant expenditure; non-compliance with the Sarbanes-Oxley Act may adversely affect us.

The Sarbanes-Oxley Act of 2002 that became law in July 2002, as well as new rules subsequently implemented by the Securities and Exchange Commission (“Commission”) and the NYSE, have required, and will require, changes to some of our accounting and corporate governance practices, including the requirement that we issue a report on our internal controls as required by Section 404 of the Sarbanes-Oxley Act. We expect these new rules and regulations to continue to increase our accounting, legal and other costs, and to make some activities more difficult, time consuming and/or costly. Compliance with Section 404 of the Sarbanes-Oxley Act is required by December 31, 2004. In the event that we are unable to achieve compliance with the Sarbanes-Oxley Act and related rules, it may have a material adverse effect on us.

The historical cyclicality of the property and casualty reinsurance industry may cause fluctuations in our results.

Historically, property and casualty reinsurers have experienced significant fluctuations in operating results due to competition, frequency of occurrence or severity of catastrophic events, levels of capacity, general economic conditions and other factors. Demand for reinsurance is influenced significantly by underwriting results of primary property and casualty insurers and prevailing general economic conditions.

The supply of reinsurance is related to prevailing prices, the levels of insured losses and the levels of industry surplus which, in turn, may fluctuate in response to changes in rates of return on investments being earned in the reinsurance industry. As a result, the reinsurance business historically has been a cyclical industry characterized by periods of intense price competition due to excessive underwriting capacity as well as periods when shortages of capacity permitted favorable premium levels. Although rates for many products have generally increased since our formation, and remain above our benchmark rates, the supply of reinsurance may increase, either by capital provided by new entrants or by the commitment of additional capital by existing reinsurers, which may cause prices to decrease. We are beginning to see more competition across many of the lines of business in which we participate. Any of these factors could lead to a significant reduction in premium rates, less favorable policy terms and conditions and fewer submissions for our underwriting services. In addition to these considerations, changes in the frequency and severity of losses suffered by insurers may affect the cycles of the reinsurance business significantly, and we expect to experience the effects of such cyclicality. For a description of recent trends in the property and casualty insurance and reinsurance industries, see “Industry Background.”

Acquisitions or strategic investments that we made or may make could turn out to be unsuccessful.

As part of our strategy, we have pursued and may continue to pursue growth through acquisitions and/or strategic investments in new businesses. The negotiation of potential acquisitions or strategic investments as well as the integration of an acquired business or new personnel could result in a substantial diversion of management resources. Acquisitions could involve numerous additional risks such as potential losses from unanticipated litigation or levels of claims and inability to generate sufficient revenue to offset acquisition costs.

Our ability to manage our growth through acquisitions or strategic investments will depend, in part, on our success in addressing these risks. Any failure by us to effectively implement our acquisitions or strategic investment strategies could have a material adverse effect on our business, financial condition or results of operations.

The regulatory system under which we operate, and potential changes thereto, could have a material adverse effect on our business.

General. Our insurance subsidiaries may not be able to obtain or maintain necessary licenses, permits, authorizations or accreditations, or may be able to do so only at great cost. In addition, we may not be able to comply fully with, or obtain appropriate exemptions from, the wide variety of laws and regulations applicable to insurance or reinsurance companies or holding companies. Failure to comply with or to obtain appropriate exemptions under any applicable laws could result in restrictions on our ability to do business in one or more of the jurisdictions in which we operate and fines and other sanctions, which could have a material adverse effect on our business. See “Regulatory Matters.”

Endurance Bermuda. Endurance Bermuda is a registered Class 4 Bermuda insurance and reinsurance company. Among other matters, Bermuda statutes, regulations and policies of the BMA require Endurance Bermuda to maintain minimum levels of statutory capital, statutory capital and surplus, and liquidity, to meet solvency standards, to obtain prior approval of ownership and transfer of shares and to submit to certain periodic examinations of its financial condition. These statutes and regulations may, in effect, restrict Endurance Bermuda’s ability to write insurance and reinsurance policies, to make certain investments and to distribute funds.

Endurance Bermuda does not maintain a principal office, and its personnel do not solicit, advertise, settle claims or conduct other activities that may constitute the transaction of the business of insurance or reinsurance, in any jurisdiction in which it is not licensed or otherwise not authorized to engage in such activities. Although Endurance Bermuda does not believe it is or will be in violation of insurance laws or regulations of any jurisdiction outside Bermuda, inquiries or challenges to Endurance Bermuda’s insurance or reinsurance activities may still be raised in the future.

The offshore insurance and reinsurance regulatory environment has become subject to increased scrutiny in many jurisdictions, including the United States and various states within the United States.

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Compliance with any new laws regulating offshore insurers or reinsurers could have a material adverse effect on our business.

Endurance U.K. On December 4, 2002, Endurance U.K. received authorization from the FSA to begin writing certain lines of insurance and reinsurance in the United Kingdom. As an authorized insurer in the United Kingdom, Endurance U.K. is able to operate throughout the European Union, subject to compliance with certain notification requirements of the FSA and in some cases, certain local regulatory requirements. As an FSA authorized insurer, the insurance and reinsurance businesses of Endurance U.K. are subject to close supervision by the FSA. During 2004, the FSA will strengthen its requirements for senior management arrangements, systems and controls of insurance and reinsurance companies under its jurisdiction and will place an increased emphasis on risk identification and management in relation to the prudential regulation of insurance and reinsurance business in the United Kingdom. Though, in many respects, the 2004 changes in the FSA’s requirements amplify existing FSA principles and rules and codify good business practice, certain of these changes, and any new guidance given by the FSA, may have an adverse impact on the business of Endurance U.K.

In addition, given that the framework for supervision of insurance and reinsurance companies in the United Kingdom is largely formed by E.U. directives (which are implemented by member states through national legislation), changes at the E.U. level may affect the regulatory scheme under which Endurance U.K. operates. A general review of E.U. insurance solvency directives is currently in progress and may lead to changes, such as increased minimum capital requirements. Before this, however, the FSA has proposed to introduce new enhanced capital requirements (“ECR”) for insurers and reinsurers which will include capital charges based on assets, claims and premiums. The level of ECR seems likely to be at least twice the existing required minimum solvency margin for most companies, although the FSA has already adopted an informal approach of encouraging companies to hold at least twice the current EU minimum. In addition, the FSA is proposing to give guidance regularly to insurers under “individual capital assessments,” which may result in guidance that a company should hold in excess of the ECR. These changes may increase the required regulatory capital of Endurance U.K.

Endurance U.S. Endurance U.S. is organized in and licensed to write certain lines of reinsurance business in the State of New York and, as a result, is subject to New York law and regulation under the supervision of the Superintendent of Insurance of the State of New York. The New York Superintendent also has regulatory authority over a number of affiliate transactions between Endurance U.S. and other members of our holding company system. The purpose of the state insurance regulatory statutes is to protect U.S. insureds and U.S. ceding insurance companies, not our shareholders. Among other matters, state insurance regulations require Endurance U.S. to maintain minimum levels of capital, surplus and liquidity, require Endurance U.S. to comply with applicable risk-based capital requirements and impose restrictions on the payment of dividends and distributions. These statutes and regulations may, in effect, restrict the ability of Endurance U.S. to write new business or distribute assets to Endurance Holdings.

In recent years, the U.S. insurance regulatory framework has come under increased federal scrutiny, and some state legislators have considered or enacted laws that may alter or increase state regulation of insurance and reinsurance companies and holding companies. Moreover, the National Association of Insurance Commissioners (“NAIC”), which is an association of the insurance commissioners of all 50 states and the District of Columbia, and state insurance regulators regularly reexamine existing laws and regulations. Changes in these laws and regulations or the interpretation of these laws and regulations could have a material adverse effect on our business.

For example, in response to the tightening of supply in certain insurance and reinsurance markets resulting from, among other things, the World Trade Center tragedy, the Terrorism Risk Insurance Act of 2002 was enacted to ensure the availability of insurance coverage for terrorist acts in the United States. This law establishes a federal assistance program through the end of 2005 to help the commercial property and casualty insurance industry cover claims related to future terrorism related losses and regulates the terms of insurance relating to terrorism coverage. This has increased underwriting capacity for certain of our competitors as a result of the Act’s requirement that coverage for terrorist acts be offered by insurers. To date, this law has resulted in an increase of certain terrorism coverages which we are required to offer. We

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have taken steps to provide that our insurance operations are able to receive the benefit of this law. We are currently unable to predict the extent to which the foregoing new initiative may affect the demand for our products or the risks which may be available for us to consider underwriting.

Risks Related to Ownership of Our Ordinary Shares

Future sales of ordinary shares may affect their market price.

We cannot predict what effect, if any, future sales of our ordinary shares, or the availability of ordinary shares for future sale, will have on the market price of our ordinary shares. Sales of substantial amounts of our ordinary shares in the public market following this offering, or the perception that such sales could occur, could adversely affect the market price of our ordinary shares and may make it more difficult for you to sell your ordinary shares at a time and price which you deem appropriate. See “Description of Share Capital — Registration Rights Agreement” and “Shares Eligible for Future Sale” for further information regarding circumstances under which additional ordinary shares may be sold. As of March 1, 2004, 63,915,000 ordinary shares were outstanding and an additional 9,418,077 common shares were issuable upon the full exercise or conversion of outstanding vested options, warrants and restricted share units.

We, our directors and officers, all of our warrant holders and the selling shareholders have agreed, with limited exceptions, for a period of 90 days after the date of this prospectus, that we and they will not, without the prior written consent of Goldman, Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated on behalf of the underwriters, directly or indirectly, offer to sell, sell or otherwise dispose of or hedge any of our ordinary shares. One of our founding shareholders has agreed to the foregoing for a period of 30 days.

In connection with an exchange offer in July of 2002 with all of our existing shareholders at the time, we granted rights to such shareholders to require us to register their ordinary shares under the Securities Act of 1933, as amended (“Securities Act”) for sale into the public markets pursuant to a registration rights agreement, dated as of July 22, 2002. A copy of the registration rights agreement has been filed as an exhibit to the registration statement of which this prospectus forms a part. We have filed this registration statement pursuant to the exercise of demand registration rights under such agreement by Aon, Capital Z Financial Services, Perry Corp., Texas Pacific Group and various Thomas H. Lee related entities. See “Principal and Selling Shareholders.”

Pursuant to the registration rights agreement, we gave notice to our other founding shareholders that we have received notice of the exercise of demand registration rights under the registration rights agreement and gave such other shareholders the opportunity to include their shares in the registration statement and this prospectus. The other founding shareholders had up to 21 days after receipt of the notice, or February 23, 2004, to elect to include their shares in the offering to be made pursuant to this prospectus. It is possible that shareholders may decide to withdraw their shares from registration, as they have no obligation to sell any shares even though they may have exercised demand or other registration rights under our registration rights agreement. The actual number of shares to be sold by the selling shareholders pursuant to this offering (including pursuant to the over-allotment option) will be reflected in the final prospectus. Upon effectiveness of the registration statement, all shares included in such registration statement will be freely transferable.

Upon consummation of this offering, the shareholders under the registration rights agreement and their transferees will continue to have the right to require us to register their ordinary shares for sale under the Securities Act, subject to the 90-day lock-up agreements described above and certain other exceptions. See “Description of Share Capital — Registration Rights Agreement.”

There are provisions in our charter documents that may reduce or increase the voting rights of our ordinary shares.

As used in this prospectus, all references to “bye-laws” refer to the amended and restated bye-laws of Endurance Holdings. The bye-laws generally provide that any shareholder owning, directly, indirectly or, in the case of any U.S. Person, by attribution, more than 9.5% of our ordinary shares will have the voting rights

attached to such ordinary shares reduced so that it may not exercise more than 9.5% of the total voting rights. The reduction in votes is generally to be applied proportionately among all shareholders who are members of the first shareholder’s “control group.” A “control group” means, with respect to any person, all shares directly owned by such person and all shares directly owned by each other shareholder any of whose shares are included in the “controlled shares” of such person. “Controlled shares” means all ordinary shares that a person is deemed to own directly, indirectly (within the meaning of Section 958(a) of the Internal Revenue Code of 1986, as amended (the “Code”)) or, in the case of a U.S. Person, constructively (within the meaning of Section 958(b) of the Code). A similar limitation is to be applied to shares held directly by members of a “related group.” A “related group” means a group of shareholders that are investment vehicles and are under common control and management. Any reduction in votes will generally be allocated proportionately among members of the shareholder’s “control group” or “related group,” as the case may be. The amount of any reduction of votes that occurs by operation of the above limitations will generally be reallocated proportionately among all other shareholders of Endurance Holdings who were not members of these groups so long as such reallocation does not cause any person to become a 9.5% shareholder.

Under these provisions, certain shareholders may have their voting rights limited to less than one vote per share, while other shareholders may have voting rights in excess of one vote per share. Moreover, these provisions could have the effect of reducing the votes of certain shareholders who would not otherwise be subject to the 9.5% limitation by virtue of their direct share ownership. The bye-laws of Endurance Holdings provide that shareholders will be notified of their voting interests prior to any vote to be taken by the shareholders. See “Description of Share Capital — Voting Adjustments.”

As a result of any reallocation of votes, your voting rights might increase above 5% of the aggregate voting power of the outstanding ordinary shares, thereby possibly resulting in your becoming a reporting person subject to Schedule 13D or 13G filing requirements under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition, the reallocation of your votes could result in your becoming subject to filing requirements under Section 16 of the Exchange Act.

The Company also has the authority to request information from any shareholder for the purpose of determining whether a shareholder’s voting rights are to be reallocated pursuant to the bye-laws. If a shareholder fails to respond to a request for information from the Company or submits incomplete or inaccurate information (after a reasonable cure period) in response to a request, the Company, in its reasonable discretion, may reduce or eliminate the shareholder’s voting rights.

Provisions of Endurance Holdings’ bye-laws may restrict the ability to transfer shares of Endurance Holdings.

Pursuant to its bye-laws, Endurance Holdings’ board of directors may decline to register a transfer of any ordinary shares if the relevant instrument of transfer (if any) is in favor of five persons or more jointly or is not properly executed, the transferred shares are not fully paid shares or if the transferor fails to comply with all applicable laws and regulations governing the transfer.

A shareholder may be required to sell its shares of Endurance Holdings.

Endurance Holdings’ bye-laws provide that we have the option, but not the obligation, to require a shareholder to sell its ordinary shares for their fair market value to us, to other shareholders or to third parties if we determine, based on the written advice of legal counsel, that failure to exercise our option would result in adverse tax consequences to us or certain U.S. Persons as to which the shares held by such shareholder constitute controlled shares. In the latter case, our right to require a shareholder to sell its ordinary shares to us will be limited to the purchase of a number of ordinary shares that will permit avoidance of those adverse tax consequences. See “Description of Share Capital — Bye-laws — Acquisition of Ordinary Shares by Endurance Holdings.”

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A shareholder may be required to indemnify us for any tax liability that results from the acts of that shareholder.

Our bye-laws provide certain protections against adverse tax consequences to us resulting from laws that apply to our shareholders. If a shareholder’s death or non-payment of any tax or duty payable by the shareholder, or any other act or thing involving the shareholder, causes any adverse tax consequences to us, (i) the shareholder (or his executor or administrator) is required to indemnify us against any tax liability that we incur as a result, (ii) we will have a lien on any dividends or any other distributions payable to the shareholder by us to the extent of the tax liability, and (iii) if any amounts not covered by our lien on dividends and distributions are owed to us by the shareholder as a result of our tax liability, we have the right to refuse to register any transfer of the shareholder’s shares.

There are regulatory limitations on the ownership and transfer of our ordinary shares.

Ordinary shares may be offered or sold in Bermuda only in compliance with the provisions of the Investment Business Act of 2003 of Bermuda which regulates the sale of securities in Bermuda. In addition, the BMA must approve all issuances and transfers of shares of a Bermuda exempted company. We have received from the BMA their permission for the issue and free transferability of the ordinary shares in the Company being offered pursuant to this prospectus, as long as the shares are listed on the NYSE, to and among persons who are non-residents of Bermuda for exchange control purposes. In addition, we will deliver to and file a copy of this prospectus with the Registrar of Companies in Bermuda in accordance with Bermuda law. The BMA and the Registrar of Companies accept no responsibility for the financial soundness of any proposal or for the correctness of any of the statements made or opinions expressed in this prospectus.

The Financial Services and Markets Act 2000 (“FSMA”) regulates the acquisition of “control” of any U.K. insurance company authorized under FSMA. Any company or individual that (together with its or his associates) directly or indirectly acquires 10% or more of the shares of a U.K. authorized insurance company or its parent company, or is entitled to exercise or control the exercise of 10% or more of the voting power in such authorized insurance company or its parent company, would be considered to have acquired “control” for the purposes of FSMA, as would a person who had significant influence over the management of such authorized insurance company or its parent company by virtue of his shareholding or voting power in either. A purchaser of more than 10% of our ordinary shares would therefore be considered to have acquired “control” of Endurance U.K. Under the FSMA, any person proposing to acquire “control” over a U.K. authorized insurance company must notify the FSA of his intention to do so and obtain the FSA’s prior approval. The FSA would then have three months to consider that person’s application to acquire “control.” In considering whether to approve such application, the FSA must be satisfied both that the acquirer is a fit and proper person to have such “control” and that the interests of consumers would not be threatened by such acquisition of “control.” Failure to make the relevant prior application would constitute a criminal offense.

State laws in the United States also require prior notices or regulatory agency approval of changes in control of an insurer or its holding company. The insurance laws of the State of New York, where Endurance U.S. is domiciled, provide that no corporation or other person except an authorized insurer may acquire control of a domestic insurance or reinsurance company unless it has given notice to such company and obtained prior written approval of the New York Superintendent. Any purchaser of 10% or more of our ordinary shares could become subject to such regulations and could be required to file certain notices and reports with the New York Superintendent prior to such acquisition.

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U.S. persons who own our ordinary shares may have more difficulty in protecting their interests than U.S. persons who are shareholders of a U.S. corporation.

The Companies Act, which applies to Endurance Holdings and Endurance Bermuda, differs in certain material respects from laws generally applicable to U.S. corporations and their shareholders. In order to highlight those differences, set forth below is a summary of certain significant provisions of the Companies Act, including, where relevant, information on Endurance Holdings’ bye-laws, which differ in certain respects from provisions of Delaware corporate law. Because the following statements are summaries, they do not discuss all aspects of Bermuda law that may be relevant to Endurance Holdings and our shareholders.

Interested Directors. Under Bermuda law and Endurance Holdings’ bye-laws, we cannot void any transaction we enter into in which a director has an interest, nor can such director be accountable to us for any benefit realized pursuant to such transaction, provided the nature of the interest is disclosed at the first opportunity at a meeting of directors, or in writing, to the directors. In addition, Endurance Holdings’ bye-laws allow a director to be taken into account in determining whether a quorum is present and to vote on a transaction in which he has an interest, but the resolution with respect to such transactions will fail unless it is approved by a majority of the disinterested directors voting on such a transaction. Under Delaware law such transaction would not be voidable if:

•

the material facts as to such interested director’s relationship or interests were disclosed or were known to the board of directors and the board had in good faith authorized the transaction by the affirmative vote of a majority of the disinterested directors;


	•	such material facts were disclosed or were known to the shareholders entitled to vote on such transaction and the transaction were specifically approved in good faith by vote of the majority of shares entitled to vote thereon; or


	•	the transaction was fair as to the corporation as of the time it was authorized, approved or ratified.

Under Delaware law, the interested director could be held liable for a transaction in which the director derived an improper personal benefit.

Business Combinations with Large Shareholders or Affiliates. As a Bermuda company, Endurance Holdings may enter into business combinations with its large shareholders or one or more wholly-owned subsidiaries, including asset sales and other transactions in which a large shareholder or a wholly-owned subsidiary receives, or could receive, a financial benefit that is greater than that received, or to be received, by other shareholders or other wholly-owned subsidiaries, without obtaining prior approval from our shareholders and without special approval from our board of directors. Under Bermuda law, amalgamations require the approval of the board of directors, and in some instances, shareholder approval. However, when the affairs of a Bermuda company are being conducted in a manner which is oppressive or prejudicial to the interests of some shareholders, one or more shareholders may apply to a Bermuda court, which may make such order as it sees fit, including an order regulating the conduct of the company’s affairs in the future or ordering the purchase of the shares of any shareholders by other shareholders or the company. If we were a Delaware company, we would need prior approval from our board of directors or a supermajority of our shareholders to enter into a business combination with an interested shareholder for a period of three years from the time the person became an interested shareholder, unless we opted out of the relevant Delaware statute. Bermuda law or Endurance Holdings’ bye-laws would require board approval and in some instances, shareholder approval, of such transactions.

Shareholders’ Suits. The rights of shareholders under Bermuda law are not as extensive as the rights of shareholders in many United States jurisdictions. Class actions and derivative actions are generally not available to shareholders under Bermuda law. However, the Bermuda courts ordinarily would be expected to follow English case law precedent, which would permit a shareholder to commence a derivative action in the name of a company where the act complained of is alleged to be beyond the corporate power of the company, is illegal or would result in the violation of Endurance Holdings’ memorandum of association or bye-laws. Furthermore, consideration would be given by the court to acts that are alleged to constitute a fraud against the minority shareholders or where an act requires the approval of a greater percentage of our

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shareholders than actually approved it. The successful party in such an action generally would be able to recover a portion of attorneys’ fees incurred in connection with such action. Endurance Holdings’ bye-laws provide that shareholders waive all claims or rights of action that they might have, individually or in the right of Endurance Holdings, against any director or officer for any action or failure to act in the performance of such director’s or officer’s duties, except such waiver shall not extend to any claims or rights of action that would render the waiver void pursuant to the Companies Act, that arise out of fraud or dishonesty on the part of such director or officer or with respect to the recovery of any gain, personal profit or advantage to which the officer or director is not legally entitled.

Class actions and derivative actions generally are available to shareholders under Delaware law for, among other things, breach of fiduciary duty, corporate waste and actions not taken in accordance with applicable law. In such actions, the court has discretion to permit the winning party to recover attorneys’ fees incurred in connection with such action.

Indemnification of Directors and Officers. Under Bermuda law and Endurance Holdings’ bye-laws, Endurance Holdings will indemnify its directors or officers or any person appointed to any committee by the board of directors and any resident representative (and their respective heirs, executors or administrators) against all actions, costs, charges, liabilities, loss, damage or expense, to the full extent permitted by law, incurred or suffered by such officer, director or other person by reason of any act done, conceived in or omitted in the conduct of the company’s business or in the discharge of his/her duties; provided that such indemnification shall not extend to any matter involving any fraud or dishonesty on the part of such director, officer or other person. Under Delaware law, a corporation may indemnify a director or officer of the corporation against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in defense of an action, suit or proceeding by reason of such position if such director or officer acted in good faith and in a manner he or she reasonably believed to be in or not be opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, such director or officer had no reasonable cause to believe his or her conduct was unlawful.

For more information on the differences between Bermuda and Delaware corporate laws, see “Description of Share Capital — Differences in Corporate Law.”

Anti-takeover provisions in our bye-laws could impede an attempt to replace or remove our directors, which could diminish the value of our ordinary shares.

Endurance Holdings’ bye-laws contain provisions that may entrench directors and make it more difficult for shareholders to replace directors even if the shareholders consider it beneficial to do so. In addition, these provisions could delay or prevent a change of control that a shareholder might consider favorable. For example, these provisions may prevent a shareholder from receiving the benefit from any premium over the market price of our ordinary shares offered by a bidder in a potential takeover. Even in the absence of an attempt to effect a change in management or a takeover attempt, these provisions may adversely affect the prevailing market price of our ordinary shares if they are viewed as discouraging changes in management and takeover attempts in the future.

Examples of provisions in our bye-laws that could have such an effect include:

•

election of our directors is staggered, meaning that the members of only one of three classes of our directors are elected each year;


	•	the total voting power of any shareholder owning more than 9.5% of our ordinary shares will be reduced to 9.5% of the total voting power of our ordinary shares;


	•	our directors may, in their discretion, decline to record the transfer of any ordinary shares on our share register, unless the instrument of transfer is in favor of less than five persons jointly or if they are not satisfied that all required regulatory approvals for such transfer have been obtained; and

•

we have the option, but not the obligation, to require a shareholder to sell its ordinary shares to us, to our other shareholders or to third parties at fair market value if we determine, based on

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the advice of legal counsel, that failure to exercise our option would result in adverse tax consequences to us or certain U.S. Persons as to which the shares held by such shareholder constitute controlled shares.

It may be difficult to enforce service of process and enforcement of judgments against us and our officers and directors.

Endurance Holdings is a Bermuda company and certain of its officers and directors are residents of various jurisdictions outside the United States. A substantial portion of its assets and its officers and directors, at any one time, are or may be located in jurisdictions outside the United States. Although Endurance Holdings has irrevocably appointed CT Corporation System as an agent in New York, New York to receive service of process with respect to actions against Endurance Holdings arising out of violations of the U.S. federal securities laws in any federal or state court in the United States relating to the transactions covered by this prospectus, it may be difficult for investors to effect service of process within the United States on our directors and officers who reside outside the United States or to enforce against us or our directors and officers judgments of U.S. courts predicated upon civil liability provisions of the U.S. federal securities laws.

We have been advised by Appleby Spurling & Kempe, our Bermuda counsel, that there is no treaty in force between the United States and Bermuda providing for the reciprocal recognition and enforcement of judgments in civil and commercial matters. As a result, whether a United States judgment would be enforceable in Bermuda against us or our directors and officers depends on whether the U.S. court that entered the judgment is recognized by the Bermuda court as having jurisdiction over us or our directors and officers, as determined by reference to Bermuda conflict of law rules. A judgment debt from a U.S. court that is final and for a sum certain based on U.S. federal securities laws will not be enforceable in Bermuda unless the judgment debtor had submitted to the jurisdiction of the U.S. court, and the issue of submission and jurisdiction is a matter of Bermuda (not United States) law.

In addition to and irrespective of jurisdictional issues, the Bermuda courts will not enforce a United States federal securities law that is either penal or contrary to public policy. It is the advice of Appleby Spurling & Kempe that an action brought pursuant to a public or penal law, the purpose of which is the enforcement of a sanction, power or right at the instance of the state in its sovereign capacity, will not be entertained by a Bermuda Court. Certain remedies available under the laws of U.S. jurisdictions, including certain remedies under U.S. federal securities laws, would not be available under Bermuda law or enforceable in a Bermuda court, as they would be contrary to Bermuda public policy. Further, no claim may be brought in Bermuda against us or our directors and officers in the first instance for violation of U.S. federal securities laws because these laws have no extraterritorial jurisdiction under Bermuda law and do not have force of law in Bermuda. A Bermuda court may, however, impose civil liability on us or our directors and officers if the facts alleged in a complaint constitute or give rise to a cause of action under Bermuda law.

Risks Related to Taxation

We may become subject to taxes in Bermuda after March 28, 2016, which may have a material adverse effect on our financial condition.

The Bermuda Minister of Finance, under the Exempted Undertakings Tax Protection Act 1966, as amended, of Bermuda, has given Endurance Holdings and Endurance Bermuda an assurance that if any legislation is enacted in Bermuda that would “impose tax computed on profits or income or computed on any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance tax, then the imposition” of any such tax will not be applicable to Endurance Holdings, Endurance Bermuda or any of their respective operations, shares, debentures or other obligations until March 28, 2016. See “Material Tax Considerations — Certain Bermuda Tax Considerations.” Given the limited duration of the Minister of Finance’s assurance, however, it is possible that after March 28, 2016 we may be subject to Bermuda taxes.

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We and our subsidiaries may be subject to U.S. tax which may have a material adverse effect on our financial condition and results of operations.

Endurance Holdings and Endurance Bermuda are Bermuda companies and Endurance U.K. is an English company. Endurance Holdings, Endurance Bermuda and Endurance U.K. each intends to operate in such a manner that none of these companies will be deemed to be engaged in the conduct of a trade or business within the United States. Nevertheless, because definitive identification of activities which constitute being engaged in a trade or business in the United States is not provided by the Code, or regulations or court decisions, the Internal Revenue Service (“IRS”), might contend that any of Endurance Holdings, Endurance Bermuda and/or Endurance U.K. are/is engaged in a trade or business in the United States. If Endurance Holdings, Endurance Bermuda and/or Endurance U.K. were engaged in a trade or business in the United States, and if Endurance U.K. or Endurance Bermuda were to qualify for benefits under the applicable income tax treaty with the United States, but such trade or business were attributable to a “permanent establishment” in the United States (or in the case of Endurance Bermuda, with respect to investment income, arguably even if such income were not attributable to a “permanent establishment”), Endurance Holdings, Endurance U.K. and/or Endurance Bermuda would be subject to U.S. federal income tax at regular corporate rates on the income that is effectively connected with the U.S. trade or business, plus an additional 30% “branch profits” tax in certain circumstances, in which case our financial condition and results of operations and your investment could be materially adversely affected. See “Material Tax Considerations — Certain United States Federal Income Tax Considerations — United States Taxation of Endurance Holdings, Endurance Bermuda, Endurance U.K. and Endurance U.S.”

Endurance Holdings and/or any of its subsidiaries could be subject to U.S. tax on a portion of its income that is earned from U.S. sources (and certain types of foreign source income which are effectively connected with the conduct of a U.S. trade or business) if any of them are considered to be a personal holding company, or a PHC, for U.S. federal income tax purposes. This status will depend on whether more than 50% of our shares could be deemed to be owned by five or fewer individuals and the percentage of our income, or that of our subsidiaries, that consists of “personal holding company income,” as determined for U.S. federal income tax purposes. We believe, based upon information made available to us regarding our existing shareholder base, that neither we nor any of our subsidiaries will be considered a PHC, but due to the lack of complete information regarding our ultimate share ownership, we cannot be certain that this will be the case, or that the amount of U.S. tax that would be imposed if it were not the case would be immaterial. See “Material Tax Considerations — Certain United States Federal Income Tax Considerations — United States Taxation of Endurance Holdings, Endurance Bermuda, Endurance U.K. and Endurance U.S. — Personal Holding Companies.”

We and our subsidiaries may be subject to U.K. tax which may have a material adverse effect on our financial condition and results of operations.

Endurance Holdings and Endurance Bermuda are organized in Bermuda and Endurance U.S. is a company incorporated in the United States. Accordingly, because they are not incorporated in the United Kingdom, none of Endurance Holdings, Endurance Bermuda or Endurance U.S. will be treated as being resident in the United Kingdom unless their central management and control is exercised in the United Kingdom. The concept of central management and control is indicative of the highest level of control of a company, which is wholly a question of fact. The directors of Endurance Holdings, Endurance Bermuda and Endurance U.S. intend to manage their affairs so that none of them are resident in the United Kingdom for tax purposes.

A company not resident in the United Kingdom for corporation tax purposes can nevertheless be subject to U.K. corporation tax if it carries on a trade through a branch or agency in the United Kingdom but the charge to U.K. corporation tax is limited to profits (including revenue profits and capital gains) connected with such branch or agency. The directors of Endurance Holdings, Endurance Bermuda and Endurance U.S. intend that each will operate in such a manner that none of these companies carry on a trade through a branch or agency in the United Kingdom. Nevertheless, because neither case law nor U.K. statute definitively defines the activities that constitute trading in the United Kingdom through a branch or agency, the U.K. Inland Revenue might contend that any of Endurance Holdings, Endurance Bermuda and/or Endurance U.S.

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are/is trading in the United Kingdom through a branch or agency in the United Kingdom. If Endurance U.S. were trading in the U.K. through a branch or agency and Endurance U.S. were to qualify for benefits under the applicable income tax treaty between the United Kingdom and the United States, only those profits which were attributable to a permanent establishment in the United Kingdom would be subject to U.K. corporation tax. The United Kingdom has no income tax treaty with Bermuda.

If Endurance Holdings, Endurance Bermuda or Endurance U.S. were treated as being resident in the United Kingdom for U.K. corporation tax purposes, or as carrying on a trade in the United Kingdom through a branch or agency, our financial condition and results of operations and your investment could be materially adversely affected.

If you acquire 10% or more of Endurance Holdings’ ordinary shares, you may be subject to taxation under the “controlled foreign corporation” (“CFC”) rules.

Each “10% U.S. Shareholder” of a foreign corporation that is a CFC for an uninterrupted period of 30 days or more during a taxable year, and who owns shares in the CFC directly or indirectly through foreign entities on the last day of the CFC’s taxable year, must include in its gross income for U.S. federal income tax purposes its pro rata share of the CFC’s “subpart F income,” even if the subpart F income is not distributed. A foreign corporation is considered a CFC if “10% U.S. Shareholders” own more than 50% of the total combined voting power of all classes of voting stock of such foreign corporation, or the total value of all stock of such corporation. A 10% U.S. Shareholder is a U.S. Person who owns at least 10% of the total combined voting power of all classes of stock entitled to vote of the foreign corporation. For purposes of taking into account insurance income, a CFC also includes a foreign corporation in which more than 25% of the total combined voting power of all classes of stock (or more than 25% of the total value of the stock) is owned by 10% U.S. Shareholders, on any day during the taxable year of such corporation, if the gross amount of premiums or other consideration for the reinsurance or the issuing of insurance or annuity contracts exceeds 75% of the gross amount of all premiums or other consideration in respect of all risks. For purposes of determining whether a corporation is a CFC, and therefore whether the 50% (or 25%, in the case of insurance income) and 10% ownership tests have been satisfied, “own” means owned directly, indirectly through foreign entities or is considered as owned by application of certain constructive ownership rules. Due to the anticipated dispersion of Endurance Holdings’ share ownership among holders, its bye-law provisions that impose limitations on the concentration of voting power of its ordinary shares and authorize the board of directors to purchase such shares under certain circumstances, and other factors, no U.S. Person that owns shares in Endurance Holdings directly or indirectly through foreign entities should be subject to treatment as a 10% U.S. Shareholder of a CFC. It is possible, however, that the IRS could challenge the effectiveness of these provisions and that a court could sustain such a challenge. See “Material Tax Considerations — Certain United States Federal Income Tax Considerations — United States Taxation of Holders of Ordinary Shares — Shareholders Who Are U.S. Persons.”

U.S. Persons who hold ordinary shares may be subject to U.S. income taxation on their pro rata share of our “related party insurance income” (“RPII”).

If Endurance U.K.’s or Endurance Bermuda’s RPII were to equal or exceed 20% of Endurance U.K.’s or Endurance Bermuda’s gross insurance income in any taxable year and direct or indirect insureds (and persons related to such insureds) own (or are treated as owning directly or indirectly) 20% or more of the voting power or value of the shares of Endurance U.K. or Endurance Bermuda, a U.S. Person who owns ordinary shares of Endurance Holdings directly or indirectly through foreign entities on the last day of the taxable year would be required to include in its income for U.S. federal income tax purposes the shareholder’s pro rata share of Endurance U.K.’s or Endurance Bermuda’s RPII for the entire taxable year, determined as if such RPII were distributed proportionately to such U.S. shareholders at that date regardless of whether such income is distributed. In addition, any RPII that is includible in the income of a U.S. tax-exempt organization would be treated as unrelated business taxable income. The amount of RPII earned by Endurance U.K. or Endurance Bermuda (generally, premium and related investment income from the direct or indirect insurance or reinsurance of any direct or indirect U.S. shareholder of Endurance U.K. or Endurance Bermuda or any person related to such shareholder) depends on a number of factors, including the

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geographic distribution of Endurance U.K.’s or Endurance Bermuda’s business and the identity of persons directly or indirectly insured or reinsured by Endurance U.K. or Endurance Bermuda. Although we believe that our RPII has not in the recent past equaled or exceeded 20% of our gross insurance income, and do not expect it to do so in the foreseeable future, some of the factors, which determine the extent of RPII in any period, may be beyond Endurance U.K.’s or Endurance Bermuda’s control. Consequently, Endurance U.K.’s or Endurance Bermuda’s RPII could equal or exceed 20% of its gross insurance income in any taxable year and ownership of its shares by direct or indirect insureds and related persons could equal or exceed the 20% threshold described above.

The RPII rules provide that if a shareholder who is a U.S. Person disposes of shares in a foreign insurance corporation that has RPII (even if the amount of RPII is less than 20% of the corporation’s gross insurance income or the ownership of its shares by direct or indirect insureds and related persons is less than the 20% threshold) and in which U.S. Persons own 25% or more of the shares, any gain from the disposition will generally be treated as ordinary income to the extent of the shareholder’s share of the corporation’s undistributed earnings and profits that were accumulated during the period that the shareholder owned the shares (whether or not such earnings and profits are attributable to RPII). In addition, such a shareholder will be required to comply with certain reporting requirements, regardless of the amount of shares owned by the shareholder. These rules should not apply to dispositions of ordinary shares because Endurance Holdings will not itself be directly engaged in the insurance business. The RPII provisions, however, have not been interpreted by the courts or the U.S. Treasury Department, and regulations interpreting the RPII provisions of the Code exist only in proposed form. Accordingly, the IRS might interpret the proposed regulations in a different manner and the applicable proposed regulations may be promulgated in final form in a manner that would cause these rules to apply to dispositions of our ordinary shares. See “Material Tax Considerations — Certain United States Federal Income Tax Considerations — United States Taxation of Holders of Ordinary Shares — Shareholders Who Are U.S. Persons.”

U.S. Persons who hold ordinary shares will be subject to adverse tax consequences if we are considered a “passive foreign investment company” (a “PFIC”) for U.S. federal income tax purposes.

We believe that we should not be considered a PFIC for U.S. federal income purposes for the year ended December 31, 2003. Moreover, we do not expect to conduct our activities in a manner that would cause us to become a PFIC in the future. However, it is possible that we could be deemed a PFIC by the IRS for 2003 or any future year. If we were considered a PFIC it could have material adverse tax consequences for an investor that is subject to U.S. federal income taxation, including subjecting the investor to a greater tax liability than might otherwise apply or subjecting the investor to tax on amounts in advance of when tax would otherwise be imposed. There are currently no regulations regarding the application of the PFIC provisions to an insurance company. New regulations or pronouncements interpreting or clarifying these rules may be forthcoming. We cannot predict what impact, if any, such guidance would have on a shareholder that is subject to U.S. federal income taxation. See “Material Tax Considerations — Certain United States Federal Income Tax Considerations — United States Taxation of Holders of Ordinary Shares — Shareholders Who Are U.S. Persons — Passive Foreign Investment Companies.”

U.S. Persons who hold ordinary shares will be subject to adverse tax consequences if we or any of our subsidiaries are considered a “foreign personal holding company” (“FPHC”) for U.S. federal income tax purposes.

Endurance Holdings and/or any of its non-U.S. subsidiaries could be considered to be a FPHC for U.S. federal income tax purposes. This status will depend on whether more than 50% of our shares could be deemed to be owned by five or fewer individuals who are citizens or residents of the United States, and the percentage of our income, or that of our subsidiaries, that consists of “foreign personal holding company income,” as determined for U.S. federal income tax purposes. We believe, based upon information made available to us regarding our existing shareholder base, that neither we nor any of our subsidiaries are, and we currently do not expect any of them or us to become, a FPHC for U.S. federal income tax purposes. Due to the lack of complete information regarding our ultimate share ownership, however, we cannot be certain that we will not be considered a FPHC. If we were considered a FPHC it could have material adverse tax

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consequences for an investor that is subject to U.S. federal income taxation including subjecting the investor to a greater tax liability than might otherwise apply and subjecting the investor to tax on amounts in advance of when tax would otherwise be imposed. See “Material Tax Considerations — Certain United States Federal Income Tax Considerations — United States Taxation of Holders of Ordinary Shares — Shareholders Who Are U.S. Persons — Foreign Personal Holding Companies.”

Changes in U.S. federal income tax law could materially adversely affect shareholders’ investment.

Legislation has been introduced in the U.S. Congress intended to eliminate certain perceived tax advantages of companies (including insurance companies) that have legal domiciles outside the United States but have certain U.S. connections. While there is no currently pending legislative proposal which, if enacted, would have a material adverse effect on us, our subsidiaries or our shareholders, it is possible that broader-based legislative proposals could emerge in the future that could have an adverse impact on us, our subsidiaries or our shareholders.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements under “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and elsewhere in this prospectus may include forward-looking statements which reflect our current views with respect to future events and financial performance. Such statements include forward-looking statements both with respect to us in general and the insurance and reinsurance sectors specifically, both as to underwriting and investment matters. 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 federal securities laws or otherwise.

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

•

the effects of competitors’ pricing policies, and of changes in laws and regulations on competition, including industry consolidation and development of competing financial products;


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


	•	the effects of terrorist-related insurance legislation and laws;


	•	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;


	•	decreased level of demand for property and casualty insurance or reinsurance or increased competition due to an increase in capacity of property and casualty insurers and reinsurers;


	•	the inability to obtain or maintain financial strength or claims-paying ratings by one or more of our subsidiaries;


	•	uncertainties in our reserving process;


	•	Endurance Holdings or Endurance Bermuda becomes subject to income taxes in the United States or the United Kingdom;


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


	•	acceptance of our products and services, including new products and services;


	•	the inability to renew business previously underwritten or acquired;


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


	•	loss of key personnel;


	•	political stability of Bermuda;


	•	changes in accounting policies or practices; 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 this prospectus. 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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USE OF PROCEEDS

All the ordinary shares to be sold in the offering are being sold by the selling shareholders. Consequently, we will not receive any proceeds from the sale of ordinary shares by the selling shareholders. We will pay certain expenses related to this offering, including certain expenses incurred by the selling shareholders estimated at approximately $1.0 million.

PRICE RANGE OF OUR ORDINARY SHARES

Our ordinary shares began publicly trading on February 28, 2003 on the NYSE under the symbol “ENH.” Prior to that time, there was no trading market for our ordinary shares. The following table sets forth, for the fiscal quarters and periods indicated, the high and low sales prices per ordinary share as reported on the NYSE since our initial public offering on February 28, 2003:

	High		Low

*2003*
From February 28, 2003 through March 31, 2003	$	25.40	$	22.40
Second quarter		31.65		23.95
Third quarter		32.17		27.05
Fourth quarter		34.00		28.46

*2004*
First Quarter (through March 1, 2004)	$	36.10	$	32.00

On March 1, 2004, the closing price of our ordinary shares as reported on the NYSE was $33.86 per share. The approximate number of record holders of our ordinary shares as of February 27, 2004 was 56, not including beneficial owners of shares registered in nominee or street name.

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DIVIDEND POLICY

We paid dividends of $0.08 per ordinary share on June 30, 2003, $0.12 per ordinary share on September 30, 2003 and $0.12 per ordinary share on December 31, 2003. On February 12, 2004, our board of directors declared a dividend of $0.18 per share to be paid on March 31, 2004 to holders of ordinary shares as of the close of business on March 17, 2004. Any determination to pay future dividends will be at the discretion of our board of directors and will be dependent upon our results of operations and cash flows, our financial position and capital requirements, general business conditions, legal, tax, regulatory and any contractual restrictions on the payment of dividends and any other factors our board of directors deems relevant.

Endurance Holdings is a holding company and has no direct operations. The ability of Endurance Holdings to pay dividends or distributions depends almost exclusively on the ability of its subsidiaries to pay dividends to Endurance Holdings. 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 other distributions. Endurance U.K. is subject to significant regulatory restrictions limiting its ability to pay dividends. In addition, Endurance U.S. has agreed with the New York Department to not pay a dividend until December 2004 without prior regulatory approval. For a further description of the restrictions on the ability of our subsidiaries to pay dividends, see “Regulatory Matters — Bermuda — Minimum Solvency Margin and Restrictions on Dividends and Distributions,” “Regulatory Matters — U.K. Regulation — Restrictions on Dividend Payments” and “Regulatory Matters — U.S. Regulation — New York State Dividend Limitations.” In addition, our credit facilities prohibit Endurance Holdings from declaring or paying any dividends if a default or event of default has occurred and is continuing at the time of such declaration or payment or would result from such declaration or payment. See “Certain Indebtedness.”

As of December 31, 2003, the maximum amount of distributions that Endurance Bermuda could pay to Endurance Holdings under applicable insurance and Companies Act regulations without prior regulatory approval was approximately $230 million. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

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SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following table sets forth our selected consolidated financial information for the periods ended and as of the dates indicated. As described in Note 1 to our consolidated financial statements included elsewhere in this prospectus, our consolidated financial statements include the accounts of Endurance Holdings, Endurance Bermuda, Endurance U.K. and Endurance U.S. Endurance Bermuda was incorporated on November 30, 2001 and commenced operations on December 17, 2001. Endurance Holdings was incorporated on June 27, 2002 and effected an exchange offer in July 2002 with the shareholders of Endurance Bermuda. The exchange offer was accounted for as a business combination of companies under common control. On December 17, 2002, we effected a share premium issuance to our existing shareholders. Except as otherwise indicated, all share data in this prospectus assumes the share premium issuance to our existing shareholders of four additional shares for each common share outstanding had occurred as of the date such data is presented.

We derived the following selected consolidated financial and additional data for the period from November 30, 2001 (inception) through December 31, 2001 and for the years ended December 31, 2002 and December 31, 2003 from our audited consolidated financial statements and related notes. These historical results are not necessarily indicative of results to be expected from any future period.

You should read the following selected consolidated financial information along with the information contained in this prospectus, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes included elsewhere in this prospectus.

	Year Ended December 31, 2003		Year Ended December 31, 2002		Period Ended December 31, 2001


	(in thousands, except earnings per share data)
Selected Income Statement Data:

Gross premiums written and acquired (a)	$	1,601,997	$	798,760	$	376

Net premiums written and acquired (b)		1,597,844		764,918		376

Net premiums earned (includes $0.3 million and $30.7 million from related parties in 2003 and 2002, respectively)		1,173,947		369,489		1

Net investment income		71,010		42,938		838

Net realized gains on sales of investments		5,718		6,730		—

Losses and loss expenses (includes $0.2 million and $17.5 million from related parties in 2003 and 2002, respectively)		663,696		204,455		—

Acquisition expenses (includes $0.0 million and $7.0 million from related parties in 2003 and 2002, respectively)		230,549		64,013		—

General and administrative expenses		100,657		49,999		527

Net income		263,437		102,066		312

Per Share Data:

Basic earnings per share	$	4.19	$	1.74	$	0.01

Diluted earnings per share	$	4.00	$	1.73	$	0.01

Weighted average number of common shares outstanding:
Basic		62,933		58,699		39,630

Diluted		65,900		58,858		39,630

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	As of December 31, 2003		As of December 31, 2002		As of December 31, 2001


	(in thousands, except book value per share data)
Selected Balance Sheet Data:

Cash and investments	$	2,674,232	$	1,663,249	$	1,162,498

Total assets		3,458,964		2,054,594		1,165,099

Reserve for losses and loss expenses		833,158		200,840		—

Reserve for unearned premiums		824,685		403,305		375

Bank debt		103,029		192,000		—

Total shareholders’ equity		1,644,815		1,217,500		1,162,312


Per Share Data:

Book value per share (c)	$	25.68	$	22.14	$	19.37

Diluted book value per share (d)	$	24.03	$	21.73	$	19.37

Selected Ratios (based on U.S. GAAP income statement data):

	Year Ended December 31, 2003			Year Ended December 31, 2002


Loss ratio (e)		56.5	%		55.3	%

Acquisition expense ratio (f)		19.6	%		17.3	%

General and administrative expense ratio (g)		8.6	%		13.6	%


Combined ratio (h)		84.7	%		86.2	%

(a)

(b)

(c)

(d)

(e)	The loss ratio is calculated by dividing losses and loss expenses by net premiums earned.

(f)	The acquisition expense ratio is calculated by dividing acquisition expenses by net premiums earned.

(g)	The general and administrative expense ratio is calculated by dividing general and administrative expenses by net premiums earned.

(h)	The combined ratio is the sum of the loss ratio, the acquisition expense ratio and the general and administrative expense ratio. As a recently formed company, our historical combined ratio may not be indicative of future underwriting performance.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the Company’s consolidated financial statements and related notes included elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, 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 “Cautionary Statement Regarding Forward-Looking Statements” for more information. You should review the “Risk Factors” set forth elsewhere in this prospectus 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. Endurance Holdings has three wholly-owned operating subsidiaries: Endurance Bermuda, based in Pembroke, Bermuda; Endurance U.K., based in London, England; and Endurance U.S., based in White Plains, New York. Endurance Holdings and its wholly-owned subsidiaries are collectively referred to in this discussion and analysis as the “Company.”

The Company writes specialty lines of personal and commercial property and casualty insurance and reinsurance on a global basis, and seeks to create a portfolio of specialty lines which are profitable and have limited correlation with one another. The Company’s portfolio of specialty lines of business is organized into the following segments: property per risk treaty reinsurance, property catastrophe reinsurance, casualty treaty reinsurance, property individual risk, casualty individual risk, and aerospace and other specialty lines.

The insurance lines that the Company writes are included in the property individual risk, casualty individual risk, and aerospace and other specialty lines segments. The reinsurance lines that the Company writes are included in the property per risk treaty reinsurance, property catastrophe reinsurance, casualty treaty reinsurance, and aerospace and other specialty lines segments.

Property insurance and reinsurance provides coverage of an insurable interest in tangible property for property loss, damage or loss of use. The Company writes property lines through its property per risk treaty reinsurance, property catastrophe reinsurance, property individual risk, and aerospace and other specialty lines segments.

Casualty insurance and reinsurance is 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 therefrom. It includes, but is not limited to, employers’ liability, workers’ compensation, automobile liability, personal liability and aviation liability insurance. The Company writes casualty lines through its casualty treaty reinsurance, casualty individual risk, and aerospace and other specialty lines segments.

The Company’s results of operations are affected by the following business and accounting factors and critical accounting policies:

Revenues

The Company derives its revenues primarily from premiums from its insurance policies and reinsurance contracts. The premiums the Company charges for the risks assumed are priced based on many assumptions and are a function of the amount and type of policies and contracts the Company writes as well as prevailing market prices. The Company prices these risks before its ultimate costs are known, which may extend many years into the future. In addition, the Company’s revenues include income generated from its investment portfolio. The Company’s investment portfolio is comprised primarily of fixed maturity investments that are held as available for sale. Under U.S. GAAP, these investments are carried at fair market value and unrealized gains and losses on the Company’s investments are excluded from earnings. These

unrealized gains and losses are included on the Company’s balance sheet in accumulated other comprehensive income as a separate component of shareholders’ equity.

Expenses

The Company’s expenses consist primarily of losses and loss expenses, acquisition expenses and general and administrative expenses. Losses and loss expenses are estimated by management and reflect its best estimate of ultimate losses and costs arising during the reporting period and revisions of prior period estimates. The Company records losses and loss expenses based on an actuarial analysis of the estimated losses the Company expects to be reported on policies and contracts written. The ultimate losses and loss expenses will depend on the actual costs to settle claims. Acquisition expenses consist principally of commissions and brokerage expenses that are typically a percentage of the premiums on insurance policies or reinsurance contracts written. General and administrative expenses consist primarily of personnel expenses and general operating expenses. Interest expense and amortization of intangible assets are disclosed separately from general and administrative expenses.

Marketplace Conditions and Trends

In general, the Company believes operating conditions in the insurance and reinsurance marketplace continued to be favorable during 2003. This improvement reflects the industry response to losses arising from the events of September 11, 2001, as well as recognition that intense competition in the late 1990s led to inadequate pricing and overly broad terms, conditions and coverages. Such industry developments resulted in impaired financial results of market participants and erosion of the industry’s capital base. Additionally, many established insurers and reinsurers have exited key markets. These developments have provided recently formed insurers and reinsurers, such as ourselves, with an opportunity to provide needed underwriting capacity at what the Company believes to be attractive rates in conjunction with improved terms and conditions. Although the Company is beginning to see increased competition across a number of its business segments, the Company believes premium levels are still attractive in the lines of business in which the Company participates.

Critical Accounting Policies and Estimates

The Company’s consolidated financial statements contain certain amounts that are inherently subjective in nature and require management to make assumptions and best estimates to determine the reported values. If factors such as those described in the “Risk Factors” section of this prospectus cause actual events or results to differ materially from management’s underlying assumptions or estimates, there could be a material adverse effect on the Company’s results of operations and financial condition and liquidity.

The Company believes that the following critical accounting policies affect significant estimates used in the preparation of its consolidated financial statements.

Premiums. Premiums written, acquired and ceded are earned over the terms of the risk period. Contracts and policies written on a losses occurring basis cover losses which occur during the term of the contract or policy, typically 12 months. Accordingly, the premium is earned evenly over the term. Contracts written on a policies attaching basis cover losses which attach to the underlying insurance policies written during the terms of the contracts. Premiums earned on a policies attaching basis usually extend beyond the original term of the reinsurance contract, typically resulting in recognition of premiums earned over a 24 month period rather than the traditional 12 month period. Policies attaching contracts accounted for 51% and 34% of the Company’s gross premiums written and acquired during the years ended December 31, 2003 and 2002, respectively.

Premiums written and ceded include estimates based on information received from brokers, ceding companies and insureds, and any subsequent differences arising on such estimates are recorded in the periods in which they are determined. Premiums on the Company’s excess of loss and proportional reinsurance contracts are estimated by management when the business is underwritten. For excess of loss contracts, the minimum and deposit premium, as defined in the contract, is generally considered to be the best estimate of

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the contract’s written premium at inception. Accordingly, this is the amount the Company generally records as written premium in the period the underlying risks incept. Estimates of premiums assumed under proportional contracts, primarily written on a policies attaching basis, are recorded in the period in which the underlying risks are expected to incept and are based on information provided by brokers and ceding companies and estimates of the underlying economic conditions at the time the risk is underwritten. As actual premiums are reported by the ceding companies, management evaluates the appropriateness of the premium estimate and any adjustment to this estimate is recorded in the period in which it becomes known. Adjustments to original premium estimates could be material and such adjustments may directly and significantly impact earnings in the period they are determined because the subject premium may be fully or substantially earned.

Reserve for Losses and Loss Expenses. The reserve for losses and loss expenses includes reserves for unpaid reported losses and losses incurred but not reported (“IBNR”). The reserve for unpaid reported losses and loss expenses is established by management based on reports from brokers, ceding companies and insureds and consultations with independent legal counsel, and represents the estimated ultimate cost of events or conditions that have been reported to or specifically identified by the Company. The reserve for IBNR losses and loss expenses is established by management based on estimates of ultimate losses and loss expenses. Inherent in the estimates of ultimate losses and loss expenses are expected trends in claim severity and frequency and other factors which may vary significantly as claims are settled. Accordingly, ultimate losses and loss expenses may differ materially from the amounts recorded in the consolidated financial statements. These estimates are reviewed regularly and, as experience develops and new information becomes known, the reserves are adjusted as necessary. Such adjustments, if any, are recorded in earnings in the period in which they become known.

Losses and loss expense reserves are initially estimated by the Company using information either developed by the Company from internal or independent external sources, or by using pricing information provided to the Company by ceding companies, insureds and brokers at the time individual contracts and policies are bound. This information is used to develop individual point estimates of carried reserves for each business segment. These individual point estimates are then aggregated along with actual losses reported to reach the total reserve carried in the Company’s consolidated financial statements. All of the Company’s loss reserving is currently performed on a point estimate basis. Neither the Company nor its actuarial advisors utilize any form of range estimation in the loss reserving process. The reserving method currently used is an expected loss method that is commonly applied when limited loss development experience exists. The methodology, known as the Modified Bornheuter-Ferguson method, establishes an initial loss estimate for each underwriting quarter by segment and type of contract. The portion of the initial loss estimate that is the IBNR reserve is then reduced each subsequent quarter by an amount equal to the amount of losses expected to be reported for that business segment during that quarter. Over time, the IBNR reserve will be reduced to zero and be replaced with the actual losses reported to the Company. The time period over which all losses are expected to be reported to the Company varies significantly by line of business. This period can range from a few quarters for some lines, such as property catastrophe, to many years for some casualty lines. To the extent that actual reported losses for specific lines of business and segments exceed expected reported losses, the carried estimate of ultimate loss will be correspondingly increased, and to the extent that actual reported losses are less than expected reported losses, the carried estimate of ultimate losses will be reduced.

The most significant assumptions used on December 31, 2003 to estimate losses and loss expense reserves are as follows:

the information developed from internal and independent external sources can be used to develop meaningful estimates of the likely future performance of business bound by the Company;


	2.	the loss and exposure information provided by ceding companies, insureds and brokers in support of their submissions can be used to derive meaningful estimates of the likely future performance of business bound with respect to each contract and policy;


	3.	historic loss development and trend experience is assumed to be indicative of future loss development and trends; and

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no significant emergence of losses or types of losses that are not represented in the information supplied to the Company by its brokers, ceding companies and insureds will occur.

While there can be no guarantee that any of the above assumptions will prove to be correct, management believes that these assumptions represent a realistic and appropriate basis for estimating loss and loss expense reserves.

At the time each insurance policy or reinsurance contract is written, an underwriter, generally working in conjunction with an actuary or a risk analyst, estimates an initial expected loss ratio for the contract. The estimate may be based on the prior experience of the insured or ceding company, current exposure profiles, analogous exposures under similar contracts with other insureds or ceding companies, modeled long-term expected losses and/or some combination of these factors. These initial expected loss ratios are utilized along with other factors, including industry experience and the judgment of the Company’s actuaries, in establishing loss ratios by line of business.

Reserves for losses and loss expenses are based in part upon the estimation of losses resulting from catastrophic events. Estimation of the losses and loss expenses resulting from catastrophic events based upon the Company’s historical claims experience is inherently difficult because of the Company’s short operating history and the possible severity of catastrophe claims. Therefore, the Company utilizes both proprietary and commercially available models, as well as historical reinsurance industry catastrophe claims experience, for purposes of evaluating future trends and providing an estimate of ultimate claims costs.

Several aspects of the Company’s casualty insurance and reinsurance operations complicate the actuarial reserving techniques for loss reserves as compared to other insurance and reinsurance operations. Among these aspects are the differences in the Company’s policy forms from more traditional forms, the lack of complete historical data for losses of the same type intended to be covered by the policies and contracts written by the Company, and the expectation that a portion of losses in excess of the Company’s attachment levels in many of its contracts will be low in frequency and high in severity, limiting the utility of claims experience of other insurers and reinsurers for similar claims.

The Company uses statistical and actuarial methods to estimate ultimate expected losses and loss expenses. The period of time from the occurrence of a loss, the reporting of a loss to the Company and the settlement of the Company’s liability may be several years. During this period, additional facts and trends may be revealed. As these factors become apparent, case reserves will be adjusted, sometimes requiring an increase in the overall reserves of the Company, and at other times requiring a reallocation of IBNR reserves to specific case reserves. These estimates are reviewed regularly, and such adjustments, if any, are reflected in earnings in the period in which they become known. The establishment of new reserves or the adjustment of previously recorded reserves could result in significant upward or downward changes to the Company’s financial condition for any particular period. While management believes that it has made a reasonable estimate of ultimate losses, the ultimate claims experience may not be as reliably predicted as may be the case with other insurance and reinsurance operations, and it is possible that losses and loss expenses will exceed the total reserves.

Accordingly, 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. Such adjustments, if any, are recorded in earnings in the period in which they are determined. A 1% change in the December 31, 2003 reserve for losses and loss expenses would result in a 3.2% change in net income for the year ended December 31, 2003.

Under U.S. GAAP, the Company is not permitted to establish loss reserves until the occurrence of an actual loss event. Once such an event occurs, the Company establishes reserves based upon estimates of total losses incurred by the ceding companies or insureds as a result of the event, its estimate of the potential losses incurred, and its estimate of the portion of such loss the Company has insured or reinsured. As a result, only loss reserves applicable to losses incurred up to the reporting date may be recorded, with no allowance for the provision of a contingency reserve to account for expected future losses. Losses arising from future events will be estimated and recognized at the time the loss is incurred and could be substantial. See “— Reserve for Losses and Loss Expenses” below for further discussion.

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Results for the year ended December 31, 2003 included $35.9 million of positive development of reserves as established at December 31, 2002. This positive prior period development benefited the Company’s loss ratio by approximately 3.1% in 2003. This positive development related to reductions in estimated ultimate incurred losses for the accident year 2002 resulted from reported loss emergence in 2003 which was less than expected in 2003. This absence of reported losses versus expectations occurred primarily in the Property Catastrophe Reinsurance and Property Individual Risk segment. See “—Reserve for Losses and Loss Expenses” below for further discussion.

Investments. The Company currently classifies all of its fixed maturity investments and short-term investments as “available for sale” and, accordingly, they are carried at estimated fair value. The fair value of fixed maturity securities is estimated using quoted market prices or dealer quotes.

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” the Company periodically reviews its investments to determine whether a decline in the fair value below the amortized cost basis is other than temporary. If such a decline in the fair value is judged to be other than temporary, the Company would write down the investment to fair value establishing a new cost basis. The amount of the write-down is charged to income as a realized loss. The new cost basis is not changed for subsequent recoveries in fair value.

Stock-based Employee Compensation Plans. Effective January 1, 2002, the Company adopted the fair value recognition provisions of SFAS No. 123 “Accounting for Stock-Based Compensation” (“SFAS No. 123”) prospectively to all employee awards granted, modified or settled after January 1, 2002. Under the fair value recognition provisions of SFAS No. 123, the estimated grant date fair value of employee stock options and other stock-based compensation is recognized as part of general and administrative expenses over the vesting period.

Results of Operations

Period Ended December 31, 2001

During the period from November 30, 2001 to December 31, 2001, the Company wrote a small volume of business, with gross premiums written of $0.4 million and an immaterial amount of earned premiums. The Company did not incur any losses during this period. Net investment income resulting from the investment of the proceeds from the Company’s private placement contributed $0.8 million to its earnings. General and administrative expenses for the period were $0.5 million and net income was $0.3 million.

Years Ended December 31, 2003 and December 31, 2002

The following is a discussion and analysis of the Company’s consolidated results of operations for the years ended December 31, 2003 and December 31, 2002.

Results of operations for the years ended December 31, 2003 and 2002 were as follows:

	December 31,			December 31,
	2003			2002			Change

	(in thousands)
Revenues
Gross premiums written and acquired	$	1,601,997		$	798,760			100.6	%

Net premiums written and acquired		1,597,844			764,918			108.9	%

Net premiums earned		1,173,947			369,489			217.7	%

Expenses
Losses and loss expenses		663,696			204,455			224.6	%
Acquisition expenses		230,549			64,013			260.2	%
General and administrative expenses		100,657			49,999			101.3	%

		994,902			318,467			212.4	%

Underwriting income		179,045			51,022			250.9	%

Net investment income		71,010			42,938			65.4	%
Net foreign exchange gains		9,883			2,312			327.5	%
Net realized gains on sales of investments		5,718			6,730			(15.0	)%
Amortization of intangibles		(3,237	)		(809	)		300.1	%
Interest expense		(4,238	)		(984	)		330.7	%
Income tax benefit		5,256			857			513.3	%

Net income	$	263,437		$	102,066			158.1	%

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Premiums. Gross premiums written and acquired increased during 2003 due to growth from Endurance U.S., Endurance U.K. and Endurance Bermuda, and the acquisition of the majority of the in-force reinsurance business of HartRe. The acquisition of HartRe contributed $400.3 million in premiums acquired across a number of business segments including property per risk treaty reinsurance, property catastrophe reinsurance, casualty treaty reinsurance and aerospace and other specialty lines. For more information on the HartRe transaction, see “—Significant Transaction” below. There was additional contribution to premium growth of over $425.5 million as a result of growth at Endurance U.S. and Endurance U.K. which have observed favorable underwriting opportunities across the property per risk treaty reinsurance, casualty treaty reinsurance and property individual risk segments. Significant premium growth has also occurred in Endurance Bermuda, especially within the aerospace and other specialty lines segment which has seen an increase in excess of $46.4 million for the year in aerospace premiums written and the casualty individual risk segment which has experienced favorable underwriting conditions in both healthcare and excess general liability lines to produce an increase of $107.5 million in premiums written for the year.

There were negligible premiums ceded in the year ended December 31, 2003 compared to $33.8 million for the year ended December 31, 2002. The premiums ceded in 2002 resulted from retrocessional contracts acquired from LaSalle in May 2002. The Company currently does not purchase significant amounts of reinsurance protection as part of its overall risk management strategy.

Net premiums earned increased in 2003 as a result of the higher level of premiums written in the year ended December 31, 2003 compared to 2002, in addition to the earning of premiums that were written in 2002.

The following table provides the geographic distribution of gross premiums written and acquired by location of the related risks for the years ended December 31, 2003 and 2002:

	2003		2002

	(in thousands)
United States	$	1,065,893	$	561,000
Worldwide		383,670		160,897
Europe		80,001		32,939
Japan		27,062		13,081
Canada		14,790		7,487
Other		30,581		23,356

Total gross premiums written and acquired	$	1,601,997	$	798,760

The Company attributes gross premiums written and acquired to the geographic region in which the risks originate.

Net Investment Income.Net investment income was derived from interest earned on fixed maturity investments partially offset by investment management fees. The increase in net investment income was principally due to a 61% increase in invested assets, partially offset by declining average yields as a result of a lower interest rate environment in 2003. The increase in invested assets resulted from positive net operating cash flows of $943.2 million. Investment expenses for the year ended December 31, 2003 were $2.6 million, compared to $1.4 million for the year ended December 31, 2002.

The annualized period book yield (which is the average yield of the invested portfolio after adjusting for accretion and amortization from the purchase price) and total return of the investment portfolio (which includes realized and unrealized gains and losses) for the year ended December 31, 2003 were 3.79% and 4.07%, respectively. For the year ended December 31, 2002, the annualized period book yield and total return were 3.75% and 8.13%, respectively. The interest rate environment in the year ended December 31, 2003 was volatile. The yield on the benchmark five year U.S. Treasury bond moved 142 basis points from a high of 3.28% to a low of 1.86% during the year. The yield on the five year U.S. Treasury bond moved from 4.84% to 2.40% in the year ended December 31, 2002. During 2003, the Company redeployed cash into higher yielding securities thus reducing the overall portfolio cash position to 4.4% of total assets and extending the

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portfolio duration to 3.08 years at December 31, 2003, from 12.5% and 2.22 years, respectively, at December 31, 2002.

Losses and Loss Expenses. The reported loss ratio is characterized by various factors. During 2003 there had been a shift in the mix of business towards casualty business. The impact of the HartRe transaction and the other areas of premium growth resulted in a lower mix of property catastrophe reinsurance which produced a low incidence of loss activity over the last year due to the absence of significant catastrophes. While this shift in business mix has resulted in a slightly higher weighted average loss ratio for the current year, some business lines, particularly property individual risk and property catastrophe reinsurance experienced lower levels of reported losses than previously anticipated thereby resulting in favorable adjustments to reserves.

During 2003, the loss reserves held by the Company for the 2002 accident year proved to be moderately redundant. As of December 31, 2003, the Company’s original estimated ultimate losses of $204.5 million for accident year 2002 had been reduced by $35.9 million. This reduction in the Company’s initial estimated losses for accident year 2002 was experienced most significantly in the Property Catastrophe segment, the Property Individual Risk segment, and the Casualty Individual Risk segment.

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. Such 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 “—Critical Accounting Policies and Estimates — Reserve for Losses and Loss Expenses” for further discussion.

Acquisition Expenses. The acquisition expense ratio for the year ended December 31, 2003 was 19.6% compared to an acquisition expense ratio of 17.3% for the year ended December 31, 2002. The increase in acquisition expense ratio is due to the growth of the Company’s underwriting activities, most notably at Endurance U.S. which wrote a number of large treaty contracts.

General and Administrative Expenses. Growth in general and administrative expenses reflected the establishment and development of Endurance U.S. and Endurance U.K., as well as additional staff at Endurance Bermuda. At December 31, 2003 the Company had 245 employees compared to 120 employees at December 31, 2002.

The general and administrative expense ratio for the year ended December 31, 2003 was 8.6% compared to a general and administrative expense ratio of 13.6% for the year ended December 31, 2002. The ratio has declined as a result of growth in premiums earned.

Net Income. The increase in net income for the year ended December 31, 2003 compared to the year ended December 31, 2002 was due to the growth of the Company’s premiums, consistent underwriting margin and an increase in invested assets. Net income in 2003, was positively impacted by the results of all of the Company’s business segments, most notably its Property Catastrophe Reinsurance and Property Individual Risk segments.

Underwriting Results by Operating Segments

The determination of the Company’s business segments was based on how the Company monitors the performance of its underwriting operations. Management measures segment 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. Our historic combined ratios may not be indicative of future underwriting performance. The Company does not manage its assets by segment; accordingly, investment income and total assets are not allocated to the individual segments. General and administrative expenses incurred by segments are allocated directly. Remaining corporate overhead is allocated based on each segment’s proportional share of gross premiums written and acquired.

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The following table summarizes the underwriting results and associated ratios for the Company’s six business segments for the year ended December 31, 2003.

	Property Per Risk Treaty Reinsurance			Property Catastrophe Reinsurance			Casualty Treaty Reinsurance

	(in thousands)
Revenues
Gross premiums written and acquired	$	469,290		$	183,594		$	390,265

Net premiums written and acquired		469,290			184,303			387,497

Net premiums earned		296,551			174,158			284,843

Expenses
Losses and loss expenses		179,031			33,393			178,725
Acquisition expenses		74,454			19,807			76,643
General and administrative expenses		25,021			13,738			22,537

		278,506			66,938			277,905

Underwriting income	$	18,045		$	107,220		$	6,938

Ratios
Loss ratio		60.4	%		19.2	%		62.7	%
Acquisition expense ratio		25.1	%		11.4	%		26.9	%
General and administrative expense ratio		8.4	%		7.9	%		7.9	%

Combined ratio		93.9	%		38.5	%		97.5	%

	Property Individual Risk			Casualty Individual Risk			Aerospace and Other Specialty Lines			Total

	(in thousands)
Revenues
Gross premiums written and acquired	$	85,863		$	214,392		$	258,593		$	1,601,997

Net premiums written and acquired		83,929			214,232			258,593			1,597,844

Net premiums earned		65,408			173,266			179,721			1,173,947

Expenses
Losses and loss expenses		23,317			118,515			130,715			663,696
Acquisition expenses		7,058			19,069			33,518			230,549
General and administrative expenses		7,955			16,882			14,524			100,657

		38,330			154,466			178,757			994,902

Underwriting income	$	27,078		$	18,800		$	964		$	179,045

Ratios
Loss ratio		35.6	%		68.4	%		72.7	%		56.5	%
Acquisition expense ratio		10.8	%		11.0	%		18.7	%		19.6	%
General and administrative expense ratio		12.2	%		9.7	%		8.1	%		8.6	%

Combined ratio		58.6	%		89.1	%		99.5	%		84.7	%

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The following table summarizes the underwriting results and associated ratios for the Company’s six business segments for the year ended December 31, 2002.

	Property Per Risk Treaty Reinsurance			Property Catastrophe Reinsurance			Casualty Treaty Reinsurance

	(in thousands)
Revenues
Gross premiums written and acquired	$	168,054		$	178,120		$	203,566

Net premiums written and acquired		168,054			145,453			203,566

Net premiums earned		59,453			114,823			84,355

Expenses
Losses and loss expenses		35,577			42,804			56,070
Acquisition expenses		14,607			16,885			20,597
General and administrative expenses		10,520			11,150			12,743

		60,704			70,839			89,410

Underwriting income (loss)	$	(1,251	)	$	43,984		$	(5,055	)

Ratios
Loss ratio		59.8	%		37.3	%		66.5	%
Acquisition expense ratio		24.6	%		14.7	%		24.4	%
General and administrative expense ratio		17.7	%		9.7	%		15.1	%

Combined ratio		102.1	%		61.7	%		106.0	%


	Property Individual Risk			Casualty Individual Risk			Aerospace and Other Specialty Lines			Total

	(in thousands)
Revenues
Gross premiums written and acquired	$	62,934		$	106,903		$	79,183		$	798,760

Net premiums written and acquired		61,759			106,903			79,183			764,918

Net premiums earned		33,907			44,292			32,659			369,489

Expenses
Losses and loss expenses		13,283			33,958			22,763			204,455
Acquisition expenses		3,406			3,978			4,540			64,013
General and administrative expenses		3,939			6,692			4,955			49,999

		20,628			44,628			32,258			318,467

Underwriting income (loss)	$	13,279		$	(336	)	$	401		$	51,022

Ratios
Loss ratio		39.2	%		76.7	%		69.7	%		55.3	%
Acquisition expense ratio		10.0	%		9.0	%		13.9	%		17.3	%
General and administrative expense ratio		11.6	%		15.1	%		15.2	%		13.6	%

Combined ratio		60.8	%		100.8	%		98.8	%		86.2	%

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Property Per Risk Treaty Reinsurance

The Company’s Property Per Risk Treaty Reinsurance business segment reinsures individual property risks of ceding companies on a treaty basis. The Company’s Property Per Risk Treaty Reinsurance contracts cover claims from individual insurance policies written by its ceding company clients and include both personal lines and commercial lines exposures. The following table summarizes the underwriting results, associated ratios and the reserve for losses and loss expenses for the Property Per Risk Treaty Reinsurance business segment for the years ended December 31, 2003 and 2002, respectively.

	Year Ended

	December 31, 2003			December 31, 2002			Change(1)

	(in thousands)
Revenues
Gross premiums written and acquired	$	469,290		$	168,054			179.2	%

Net premiums written and acquired		469,290			168,054			179.2	%

Net premiums earned		296,551			59,453			398.8	%

Expenses
Losses and loss expenses		179,031			35,577			403.2	%
Acquisition expenses		74,454			14,607			409.7	%
General and administrative expenses		25,021			10,520			137.8	%

		278,506			60,704			358.8	%

Underwriting income (loss)	$	18,045		$	(1,251	)		NM(2	)

Ratios
Loss ratio		60.4	%		59.8	%		0.6
Acquisition expense ratio		25.1	%		24.6	%		0.5
General and administrative expense ratio		8.4	%		17.7	%		(9.3	)

Combined ratio		93.9	%		102.1	%		(8.2	)

Reserve for losses and loss expenses	$	188,757		$	34,843			441.8	%

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

(2)	Not meaningful.

Premiums. The increase in gross premiums written and acquired was in large part due to the acquisition of the HartRe business which contributed $139.8 million in premiums acquired for the year ended December 31, 2003. In addition, part of the increase in premiums written and acquired is a result of the inception of business of Endurance U.S. and Endurance U.K. which combined have contributed $148.0 million in premium growth for 2003. The growth in premiums earned in 2003 benefited significantly from the earning of premiums written in 2002. During 2003, 67% of premiums in this segment were written on a policies attaching basis which are earned over a 24 month period. In 2002, 59% of premiums in this segment were written on a policies attaching basis.

Losses and Loss Expenses. The low loss ratios in 2003 and 2002 reflected the strong pricing environment experienced by this business segment as well as the generally low level of loss emergence, both catastrophic losses and attritional losses, during both years.

Acquisition Expenses. The acquisition expense ratio for 2003 was largely consistent with 2002; the slight increase was due to a moderate shift in the mix of business.

General and Administrative Expenses. The increase in general and administrative expenses reflected the growth in the underwriting staff across all three operating subsidiaries during 2003. General and administrative expenses as a percentage of net premiums earned have decreased as premium earnings have increased significantly.

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Property Catastrophe Reinsurance

The Company’s Property Catastrophe Reinsurance business segment reinsures catastrophic perils for ceding companies on a treaty basis. The Company’s property catastrophe reinsurance contracts provide protection for most catastrophic losses that are covered in the underlying insurance policies written by its ceding company clients. Protection under property catastrophe treaties is provided on an occurrence basis, allowing the Company’s ceding company clients to combine losses that have been incurred in any single event from multiple underlying policies. The following table summarizes the underwriting results, associated ratios and the reserve for losses and loss expenses for the Property Catastrophe Reinsurance business segment for the years ended December 31, 2003 and 2002, respectively.

	Year Ended

	December 31,			December 31,
	2003			2002			Change(1)

	(in thousands)
Revenues
Gross premiums written and acquired	$	183,594		$	178,120			3.1	%

Net premiums written and acquired		184,303			145,453			26.7	%

Net premiums earned		174,158			114,823			51.7	%

Expenses
Losses and loss expenses		33,393			42,804			(22.0	)%
Acquisition expenses		19,807			16,885			17.3	%
General and administrative expenses		13,738			11,150			23.2	%

		66,938			70,839			(5.5	)%

Underwriting income	$	107,220		$	43,984			143.8	%

Ratios
Loss ratio		19.2	%		37.3	%		(18.1	)
Acquisition expense ratio		11.4	%		14.7	%		(3.3	)
General and administrative expense ratio		7.9	%		9.7	%		(1.8	)

Combined ratio		38.5	%		61.7	%		(23.2	)

Reserve for losses and loss expenses	$	62,725		$	40,122			56.3	%

(1)

With