Best Affirms Endurance Ratings; Raises Outlook to Positive

December 12, 2006

A.M. Best Co. has affirmed the financial strength rating (FSR) of “A-” (Excellent) and the issuer credit ratings (ICR) of “a-” of Bermuda-based Endurance Specialty Insurance Ltd. and its operating affiliates. Best also affirmed the ICR of “bbb-” of Endurance Specialty Holdings, Ltd. and all related debt ratings, and revised its outlook on all of the ratings from stable to positive.

“These rating actions reflect Endurance’s excellent capitalization, strong broker distribution network and significant risk management enhancements made over the past year,” said Best. “The company maintains a geographically diversified book of business, which includes both short- and long-tail lines of business.

“Endurance’s positive outlook is based on several factors including the enhanced underwriting and risk management controls implemented following the 2005 catastrophe season. These controls enable the company to better analyze all property submissions for the effect on operating returns and zonal aggregations. Endurance has also bolstered its reinsurance program by purchasing additional coverage through both traditional and industry loss warranty markets.

“Furthermore, Endurance established catastrophe bond coverage through the formation of Shackleton Re Limited. This three tranche catastrophe bond provides protection from both first and second event U.S. earthquake and hurricane exposures.”

Best also noted that “Endurance continues to exhibit strong financial flexibility with access to both equity and debt markets,” while its “financial leverage measures remain commensurate with its rating levels.” Best said it “expects the company to maintain financial leverage as measured by debt and preferred-to-total capital at 25 percent or below, while fixed charge coverage is expected to remain in the upper single-digit range.

“These strengths are partially offset by increased competition, which is expected to flatten property rates and place additional pressure on casualty lines as companies seek to diversify their business profiles. This concern is somewhat mitigated by Endurance’s strategy of selective acquisitions with the latest being the establishment of admitted and non-admitted primary U.S. affiliates.”

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