Standard & Poor's said yesterday that it raised financialstrength ratings on Endurance Specialty Holdings Ltd.'s operatingcompanies to "A."

The rating firm's action makes Endurance the third Bermudacompany formed in 2001 to break S&P's "A-minus" threshold.

S&P said the Endurance ratings outlook is stable.

"Class of 2001" Bermuda companies--formed after the Sept. 11,2001 terror attacks--besides Endurance, include Axis Capital andAspen Specialty, both of which have operating subsidiaries thatalready hold the coveted "A" ratings.

The upgrade on Endurance, coming five years after its founding,reflects its strong competitive position based on its global marketpresence, scale, and diversified insurance and reinsuranceplatforms, S&P said in its announcement, highlighting, inparticular, Endurance's increased scale within its U.S. excess andsurplus lines platform.

S&P said roughly 30 percent of Endurance's 2006 grosspremiums were from reinsurance and 70 percent from insurance.

In addition, the New York-based rating agency said thatEndurance maintains capital adequacy above expectations for therating, and that its combined ratio is 87 so far this year. Abottom-line loss of $220 million from 2005 has been replenishedwith net income of $299 million through nine months, S&Padded.

Although Endurance has also demonstrated strong financialflexibility, raising $600 million in debt and equity after thestorms in 2005, S&P had some negatives to report.

For example, S&P said management underestimated thevolatility and correlations inherent within its large nationalcommercial per-risk accounts (flood exposure) and property andoffshore marine exposure correlations in 2005. The company hasmoved to nonrenew or cancel these exposures, however, and based onEndurance's strong enterprise risk management; S&P said itexpects prospective volatility to be reduced.

The stable outlook, S&P said, is based on its expectationthat Endurance will maintain strong earnings in 2007--potentiallynet income near $400 million before significant catastrophe losseson a combined ratio of about 90.

In yesterday's announcement, S&P also said it raisedcounterparty credit and senior debt ratings on Endurance SpecialtyHoldings Ltd. to "triple-B-plus" from "triple-B," and raised itspreferred stock rating to "triple-B-minus" from"double-B-plus."