UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



FORM 10-K

(Mark One)ý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934FOR THE TRANSITION PERIOD
FROM                                    to


COMMISSION FILE NUMBER 1-10545



TRANSATLANTIC HOLDINGS, INC.(Exact name of registrant as specified in its charter)



Delaware(State or other jurisdiction of
incorporation or organization)

13-3355897(I.R.S. Employer Identification No.)80 Pine Street, New York, New York(Address of principal executive offices)

10005(Zip Code)


(212) 365-2200
(Registrant's telephone number, including area code)



Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Name of Each Exchange on
Which RegisteredCommon Stock, Par Value $1.00 per Share

New York Stock Exchange


Securities registered pursuant to Section 12(g) of the Act:None



Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes ý    No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o    No ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes o    No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this
chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (check one):

Large accelerated filer ý

Accelerated filer o

Non-accelerated filer o (Do not check if a smaller
reporting company)

Smaller reporting company o


Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
o    No ý

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant computed by reference to
the price at which the common equity was last sold, as of June 30, 2009 (the last business day of the registrant's most recently completed second fiscal quarter) was approximately
$2,868,315,447.

As
of January 31, 2010, there were outstanding 66,416,333 shares of Common Stock, $1.00 par value, of the registrant.



Documents Incorporated by Reference

Portions of the registrant's definitive proxy statement filed or to be filed with the Securities and Exchange Commission
pursuant to Regulation 14A involving the election of directors at the annual meeting of the stockholders of the registrant scheduled to be held on May 20, 2010 are incorporated by
reference in Part III of this Form 10-K.



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TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS



PagePART IItem 1.

Business

1Item 1A.

Risk Factors

22Item 1B.

Unresolved Staff Comments

33Item 2.

Properties

33Item 3.

Legal Proceedings

33Item 4.

Submission of Matters to a Vote of Security Holders

33PART IIItem 5.

Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities

34Item 6.

Selected Financial Data

36Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

39Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

77Item 8.

Financial Statements and Supplementary Data

79Item 9.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

133Item 9A.

Controls and Procedures

133Item 9B.

Other Information

133PART IIIItem 10.

Directors, Executive Officers and Corporate Governance

134Item 11.

Executive Compensation

135Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

136Item 13.

Certain Relationships and Related Transactions, and Director Independence

136Item 14.

Principal Accounting Fees and Services

136PART IVItem 15.

Exhibits and Financial Statement Schedules

137


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Table of Contents

PART I

Throughout this Annual Report on Form 10-K, Transatlantic Holdings, Inc. (the
"Company", and collectively with its subsidiaries, "TRH") presents its operations in the way it believes will be most meaningful. In certain instances, TRH's unpaid losses and loss adjustment expenses
are presented net of related reinsurance recoverable in accordance with principles prescribed or permitted by insurance regulatory authorities as these are standard measures in the insurance and
reinsurance industries.

Item 1.Business

The Company and Its History

The Company is a holding company incorporated in the state of Delaware. Originally formed in 1986 under the name PREINCO
Holdings, Inc. as a holding company for Putnam Reinsurance Company ("Putnam"), the Company's name was changed to Transatlantic Holdings, Inc. on April 18, 1990 following the
acquisition on April 17, 1990 of all of the common stock of Transatlantic Reinsurance Company® ("TRC") in exchange for shares of common stock of the Company (the "Share Exchange").
Prior to the Share Exchange, American International Group, Inc. ("AIG", and collectively, with its subsidiaries, the "AIG Group") held a direct and indirect interest of approximately 25% in the
Company and an indirect interest of 49.99% in TRC. As a result of the Share Exchange, AIG became the beneficial owner of approximately 41% of the Company's outstanding common stock and TRC became a
wholly-owned subsidiary of the Company. In June 1990, certain stockholders of the Company (other than AIG) sold shares of the Company's common stock in a public offering. Prior to June 10, 2009
and as of December 31, 2008 and 2007, AIG beneficially owned approximately 59% of the Company's outstanding shares. On June 10, 2009, AIG and American Home Assurance Company ("AHAC"), a
wholly owned subsidiary of AIG, consummated a secondary public offering (the "Offering") of 29.9 million issued and outstanding shares of the Company owned by AIG and AHAC. TRH did not receive
any proceeds from the Offering. According to the Form 13F filed on February 18, 2010 by AIG, as of December 31, 2009, the AIG Group had sole voting authority over
9.2 million shares of the Company's common stock, representing approximately 13.8% of the Company's outstanding shares as of December 31, 2009. (SeeRelationship
with the AIG Groupfor a description of recent events relating to AIG.)

The
Company, through its wholly-owned subsidiaries, TRC, Trans Re Zurich ("TRZ"), acquired by TRC in 1996, and Putnam (contributed by the Company to TRC in 1995), offers reinsurance
capacity for a full range of property and casualty products, directly and through brokers, to insurance and reinsurance companies, in both the domestic and international markets on both a treaty and
facultative basis. One or both of TRC and Putnam is licensed, accredited, authorized or can serve as a reinsurer in 50 states and the District of Columbia in the United States and in Puerto Rico and
Guam. Through its international locations, TRH has operations worldwide, including Canada, six countries in Europe, three countries in Central and South America, one country in Africa, one country in
Asia (excluding Japan), Japan and Australia. TRC is licensed in Canada, Japan, the United Kingdom, the Dominican Republic, the Hong Kong Special Administrative Region, the People's Republic of China
and Australia. TRC is an Admitted Reinsurer in Brazil, where it maintains an office in Rio de Janeiro. In addition, TRC is registered and authorized as a foreign reinsurer in Argentina (where it
maintains a representative office in Buenos Aires, Transatlantic Re (Argentina) S.A.), the Republic of Panama (where it maintains a representative office, TRC
(PANAMÁ) S.A.), Bolivia, Chile, Colombia, Ecuador, El Salvador, France, Germany, Guatemala,
Honduras, Mexico, Nicaragua, Paraguay, Peru, Uruguay and Venezuela, and is authorized to maintain a representative office in Shanghai, the People's Republic of China. TRZ is licensed as a reinsurer in
Switzerland and registered in Paraguay, Ecuador, Argentina, Honduras, El Salvador, the Dominican Republic and Colombia. Transatlantic Polska Sp. z o.o., a subsidiary of TRC, maintains a registered
representative office in Warsaw, Poland.

1

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Table of Contents

The Reinsurance Business

Reinsurance is an arrangement whereby one or more companies, the reinsurer(s), agrees to indemnify another insurance or reinsurance
company, the ceding company, for all or part of the insurance risks underwritten by the ceding company. Reinsurance can provide certain basic benefits to the ceding company. It reduces net liability
on individual risks, thereby enabling the ceding company to underwrite more business than its own resources can support and it provides catastrophe protection to lessen the impact of large or multiple
losses.

TRH
offers two types of reinsurance based on the underlying insurance coverage:





TRH
writes reinsurance either through treaty or facultative reinsurance arrangements:



2

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Table of Contents



TRH
provides reinsurance for most major lines of insurance on both pro rata and excess-of-loss bases. A ceding company's reinsurance program may involve pro rata
and excess-of-loss reinsurance on both a treaty and facultative basis:



Operations

TRH's activities in the United States are conducted through its worldwide headquarters in New York, NY, its branch in Miami, FL and
offices in Chicago, IL, Overland Park, KS, San Francisco, CA, Columbus, OH and Stamford, CT. All domestic treaty and facultative business is underwritten by, or under the supervision of, senior
officers of TRH located in New York. TRH's headquarters in New York and offices in Miami, Rio de Janeiro, Toronto, London, Paris, Zurich, Hong Kong, Tokyo and Sydney offer treaty as well as
facultative reinsurance. In addition, TRH operates representative offices in Buenos Aires, Panama, Warsaw, Munich and Shanghai, and maintains exclusive representative arrangements with MS Upson
Associates c.c. in Johannesburg, South Africa and with NOBARE in Stockholm, Sweden. On January 2, 2009, TRH's arrangement with Momentum Underwriting Management, Ltd. ("Momentum
Underwriting") in London, England, in which Momentum Underwriting had the underwriting authority to bind TRH, pursuant to strict underwriting guidelines, lapsed and was not renewed by TRH. Momentum
Underwriting no longer has underwriting authority on behalf of TRH. The termination of this arrangement did not affect business previously bound by Momentum Underwriting on behalf of TRH before the
termination of this arrangement. TRH also operates Professional Risk Management Services, Inc. ("PRMS"), a wholly-owned subsidiary of the Company. Based in Arlington, VA, PRMS is an insurance
program manager specializing in professional liability insurance services, including underwriting, claims and risk management, for individual healthcare providers, group practices, facilities and
organizations.

TRH
reinsures risks from a broad spectrum of industries throughout the United States and foreign countries. Business underwritten by all branches located outside the United States and by
the Miami branch (which underwrites business in Latin America and the Caribbean) accounted for approximately 49%, 50% and 51% of worldwide net premiums written in 2009, 2008 and 2007, respectively.
(SeeManagement's Discussion and Analysis of Financial Condition and Results of Operations("MD&A") for a discussion of premium fluctuations between
years,Regulationfor a discussion of certain conditions associated with international business and Note 17 of Notes to Consolidated Financial
Statements for financial data by business segment.)

3

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Table of Contents

Gross
premiums written of approximately $263 million (6.3%), $310 million (7.0%) and $307 million (7.2%) in 2009, 2008 and 2007, respectively, were originated by the
AIG Group and ceded to TRH. These amounts exclude (a) premiums assumed that initially were insured by AIG subsidiaries as a result of TRH's marketing efforts and then ceded to TRH by
prearrangement; and (b) amounts assumed from an AIG subsidiary and ceded in an equal amount to other AIG subsidiaries. The amount of premiums assumed that initially were insured by AIG
subsidiaries as a result of TRH's marketing efforts and then ceded to TRH by prearrangement are not material. (See Note 16 of Notes
to Consolidated Financial Statements ("Note 16") for the amount of premiums assumed from an AIG subsidiary and ceded in an equal amount to other AIG subsidiaries.) (See Relationship with the AIG Group.)

In
addition, TRH holds a 40% interest in Kuwait Reinsurance Company (K.S.C.) ("Kuwait Re"), acquired in 2000, which has a balance sheet carrying value of $44.2 million and
$51.4 million at December 31, 2009 and 2008, respectively. Kuwait Re provides property, casualty and life reinsurance products to clients in Middle Eastern and North African markets.

TRC
and Putnam have a quota share reinsurance agreement where TRC cedes 5% of its assumed reinsurance, net of other retrocessions, to Putnam. Presently all of Putnam's business is
assumed from TRC pursuant to this quota share reinsurance agreement. This agreement was entered into for operational reasons and had no impact on TRH's consolidated financial position or results of
operations.

4

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Table of Contents

Property and Casualty Lines of Business

Casualty reinsurance constitutes the larger portion of TRH's business, accounting for 71% of net premiums written in 2009, 70% in 2008
and 71% in 2007. The following table presents certain underwriting information concerning TRH's casualty and property business for the periods indicated (see MD&A):

Years Ended December 31,Net Premiums Written

Net Premiums Earned

Net Losses and Loss
Adjustment Expenses Incurred

Loss and Loss
Adjustment Expense Ratio2009

2008

2007

2009

2008

2007

2009

2008

2007

2009

2008

2007(dollars in millions)Casualty:Other liability(1)(2)(3)(4)

$
1,077.5

$
1,037.2

$
1,040.4

$
1,037.6

$
1,061.3

$
1,043.9

$
865.7

$
842.3

$
941.7


83.4
%

79.4
%

90.2
%Accident and health


416.0


314.0


248.3


399.3


302.8


238.5


331.7


232.0


185.6


83.1


76.6


77.8Medical malpractice(3)(4)


339.3


372.4


388.8


359.0


372.5


379.8


255.6


295.8


304.2


71.2


79.4


80.1Ocean marine and aviation(3)


291.8


323.6


335.7


305.8


329.2


350.9


217.1


251.7


251.5


71.0


76.5


71.7Auto liability(3)


241.1


317.6


289.6


274.6


297.0


268.0


224.9


210.2


213.6


81.9


70.8


79.7Surety and credit(2)


239.2


224.6


177.6


222.9


214.7


173.8


136.3


140.3


84.7


61.1


65.3


48.7Other(4)


236.7


278.6


324.7


246.8


300.7


313.5


218.3


273.5


208.1


88.5


91.0


66.4Total casualty


2,841.6


2,868.0


2,805.1


2,846.0


2,878.2


2,768.4


2,249.6


2,245.8


2,189.4


79.0


78.0


79.1Property:Fire(2)(3)(4)


507.5


582.7


568.6


544.6


573.7


534.2


236.2


393.5


235.6


43.4


68.6


44.1Allied lines(2)(3)(4)


349.0


314.6


284.4


342.1


304.8


289.4


56.5


128.6


73.4


16.5


42.2


25.4Auto physical damage


122.3


170.5


111.4


131.0


136.9


101.4


107.2


93.7


78.1


81.9


68.4


77.1Homeowners multiple peril(3)(4)


70.5


72.8


64.5


77.5


72.4


83.4


16.1


13.5


(6.6
)

20.7


18.7


(7.9
)Other(4)


95.2


99.5


118.9


97.9


101.4


125.9


13.6


32.1


68.1


13.9


31.7


54.1Total property


1,144.5


1,240.1


1,147.8


1,193.1


1,189.2


1,134.3


429.6


661.4


448.6


36.0


55.6


39.6Total

$
3,986.1

$
4,108.1

$
3,952.9

$
4,039.1

$
4,067.4

$
3,902.7

$
2,679.2

$
2,907.2

$
2,638.0


66.3


71.5


67.6


(1)A
large majority of the amounts within the other liability line relates to complex risks such as E&O and D&O, to general casualty risks and, to a much
lesser extent, environmental impairment liability.(2)In
2009, development on reserves held at December 31, 2008 relating to losses that occurred in 2008 and prior years significantly decreased net
losses and loss adjustment expenses incurred in the fire, allied lines and surety and credit lines and significantly increased net losses and loss adjustment expenses incurred in the other liability
line. There were no significant catastrophe losses incurred for events occurring in 2009.(3)In
2008, development on reserves held at December 31, 2007 relating to losses that occurred in 2007 and prior years significantly decreased net
losses and loss adjustment expenses incurred in the allied lines, homeowners multiple peril, auto liability and fire lines and significantly increased net losses and loss adjustment expenses incurred
in the other liability and medical malpractice lines. In addition, pre-tax net catastrophe losses of $180 million significantly increased net losses and loss adjustment expenses
incurred in the allied lines, ocean marine and fire lines.(4)In
2007, development on reserves held at December 31, 2006 relating to losses that occurred in 2006 and prior years significantly increased net
losses and loss adjustment expenses incurred in the other liability, medical malpractice and other property lines and significantly decreased net losses and loss adjustment expenses incurred in the
homeowners multiple peril, fire, allied lines and other casualty lines. In addition, pre-tax net catastrophe losses of $65 million significantly increased net losses and loss
adjustment expenses incurred in the fire line.


Operating results in 2009, 2008 and 2007 included pre-tax net catastrophe costs of ($6) million, $170 million and
$55 million, respectively. (SeeMD&A.)

In
general, the overall operating results (including investment performance) and other changes to stockholders' equity of property and casualty insurance and reinsurance companies, and
TRH, in particular, are subject to significant fluctuations due to competition, natural and man-made catastrophic events, general economic and social conditions, financial, credit and
industry market conditions, foreign currency exchange rate fluctuations, interest rates, operating performance and prospects of investee companies and other factors, such as changes in tax laws, tort
laws and the regulatory environment.

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Table of Contents

Treaty and Facultative Reinsurance

Treaty reinsurance constitutes the great majority of TRH's business, accounting for 97%, 97% and 96% of net premiums written in 2009,
2008 and 2007, respectively. Facultative reinsurance comprises the balance of net premiums written.

The
following table presents certain information concerning TRH's treaty and facultative business for the periods indicated:

TreatyYears Ended December 31,2009(1)

2008(2)

2007(in millions)Gross premiums written

$
3,947.3

$
4,088.7

$
3,971.5Net premiums written


3,867.8


3,976.6


3,805.8Net premiums earned


3,918.9


3,938.0


3,748.4




FacultativeYears Ended December 31,2009(1)

2008(2)

2007(in millions)Gross premiums written

$
256.5

$
334.5

$
312.1Net premiums written


118.3


131.5


147.1Net premiums earned


120.2


129.4


154.3


(1)In
2009 compared to 2008, domestic treaty net premiums written increased significantly in the A&H and other liability lines, offset in part by a significant
decrease in the medical malpractice line. International treaty net premiums written decreased significantly in the property, auto liability, boiler and machinery and ocean marine lines, partially
offset by a significant increase in the A&H and other liability lines. Facultative gross premiums written decreased in 2009 compared to 2008 due largely to a decrease in premiums that, by
prearrangement with TRH, were assumed from an AIG subsidiary and then ceded in an equal amount to other AIG subsidiaries in the property and other liability lines. Facultative net premiums written in
2009 decreased compared to 2008 principally in the other liability line along with relatively smaller decreases spread across several lines.(2)In
2008 compared to 2007, domestic treaty net premiums written increased significantly in the property, A&H, auto liability and other liability lines,
offset in part by a significant decrease in the fidelity line. International treaty net premiums written increased significantly in the property, credit and A&H lines, partially offset by a
significant decrease in the other liability and ocean marine lines. Facultative gross premiums written increased in 2008 compared to 2007 due largely to an increase in premiums that, by prearrangement
with TRH, were assumed from an AIG subsidiary and then ceded in an equal amount to other AIG subsidiaries in the fire line. Facultative net premiums written in 2008 decreased compared to 2007
principally in the property and A&H lines.




Treaty reinsurance accounted for approximately $3.95 billion of gross premiums written and $3.87 billion of net premiums
written in 2009. Approximately 72% of treaty net premiums written resulted from casualty lines treaties, with the remainder from property lines treaties. Approximately 70% of total treaty gross
premiums written in 2009 represented treaty reinsurance written on a pro rata basis and the balance represented treaty reinsurance written on an excess-of-loss basis. Treaty
business written by TRH's international operations accounted for approximately 47% of TRH's total net premiums written for the year ended December 31, 2009.

TRH's
treaty business consists primarily of business within the other liability (including D&O and E&O), A&H, medical malpractice, ocean marine and aviation, auto liability (including
non-standard risks), surety and credit, fire, allied lines, auto physical damage and homeowners multiple peril lines. A

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Table of Contents

significant
portion of TRH's business within these lines (primarily other liability, medical malpractice and A&H) is derived from complex risks.

TRH's
treaty business accepts a portfolio of risks on either a risk attaching basis or loss occurring during ("LOD") basis. For risk attaching treaties, if an individual risk covered by
the treaty incepts during the treaty period, TRH's liability for that policy goes to that treaty year regardless of when the loss occurs. For LOD treaties, TRH covers losses occurring during the
treaty coverage period on all in-force policies, regardless of the date the policies were issued by the ceding company.

TRH's
treaty underwriting process emphasizes a team approach among TRH's underwriters, actuaries and claims staff, as appropriate. Treaties are reviewed for compliance with TRH's
underwriting guidelines and objectives and most treaties are evaluated in part based upon actuarial analyses conducted by TRH. TRH's actuarial models used in such analyses are tailored in each case to
the exposures and experience underlying the specific treaty and the loss experience for the risks covered. Property catastrophe exposed treaties are generally evaluated using industry standard models.
These models are used as a guide for risk assessment and are continually being updated. TRH also frequently conducts underwriting and claims audits at the offices of a prospective ceding company both
before and after entering into major treaties, because reinsurers, including TRH, do not separately evaluate each of the individual risks assumed under their treaties and, consequently, are largely
dependent on the original underwriting decisions made by the ceding company. Such dependence subjects TRH, and reinsurers in general, to the possibility that the ceding companies have not adequately
evaluated the risks to be reinsured and, therefore, that the premiums ceded in connection therewith may not adequately compensate the reinsurer for the risk assumed.

TRH
offers brokers full service with large capacity for both casualty and property risks. For non-AIG Group business, TRH often seeks to lead treaty arrangements. The lead
reinsurer on a treaty generally accepts one of the largest percentage shares of the treaty and takes the initiative in negotiating price, terms and conditions. TRH believes that this strategy has
enabled it to influence more effectively the terms and conditions of the treaties in which it has participated. Except where premiums assumed were insured by AIG subsidiaries as a result of TRH's
marketing efforts and then ceded to TRH by prearrangement, TRH has generally not set terms and conditions as lead underwriter with respect to treaty reinsurance purchased by the AIG Group, although it
may do so in the future. When TRH does not lead the treaty, it may still suggest changes to any aspect of the treaty. TRH may reject any treaty business offered to it based upon its assessment of all
relevant factors. Such factors include type and level of risk assumed, actuarial and underwriting judgment with respect to rate adequacy, various treaty terms, prior and anticipated loss experience
(including exposure to natural and man-made catastrophes) on the treaty, prior business experience with the ceding company, overall financial position, operating results, the A.M.
Best Company ("Best"), Standard & Poor's ("S&P") and Moody's Investors Service ("Moody's") ratings of the ceding company and social, legal, regulatory, environmental and general economic
conditions affecting the risks assumed or the ceding company.

TRH
currently has approximately 3,700 treaties in effect for the current underwriting year. In 2009, no single treaty exceeded 3% of treaty gross premiums written. Approximately 6% of
treaty gross premiums written in 2009 were originated by the AIG Group and ceded to TRH. These amounts exclude premiums assumed that initially were insured by AIG subsidiaries as a result of TRH's
marketing efforts and then ceded to TRH by prearrangement. The amount of premiums assumed that initially were insured by AIG subsidiaries as a result of TRH's marketing efforts and then ceded to TRH
by prearrangement are not material. (SeeRelationship with the AIG Group.) The majority of TRH's non-AIG Group treaty premiums were written
on a pro rata basis. Except for the AIG Group, no single ceding company accounted for more than 5% of total treaty gross premiums written in 2009. (SeeRelationship with the
AIG Group.)

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Table of Contents



During 2009, TRH wrote approximately $256.5 million of gross premiums written and $118.3 million of net premiums written
of facultative reinsurance. The vast majority of the difference between gross premiums written and net premiums written represents amounts assumed from an AIG subsidiary and ceded in an equal amount
to other AIG subsidiaries. Approximately 61% of facultative net premiums written represented casualty risks with the balance comprising property risks. TRH provides facultative reinsurance on
predominantly an excess-of-loss basis, although some business is written on a pro rata basis. Facultative business written by TRH's international operations accounted for
approximately 2% of TRH's total net premiums written for the year ended December 31, 2009.

TRH's
facultative contracts (also called certificates) provide prospective coverage on virtually the same basis as the original policy issued by the ceding insurer. In 2009, TRH's
facultative book of
business focused on the property, other liability, medical malpractice and A&H lines, although coverage is generally offered for most lines of business, and is written principally on a risk attaching
basis for each risk (i.e., TRH's liability starts with the underlying policy inception and ends when the underlying policy expires). With respect
to facultative contracts, TRH's clients come to TRH on a risk by risk basis when they wish to obtain a larger policy limit than provided by their existing outward treaty reinsurance or when their
existing treaty reinsurance excludes a class of business or type of coverage they provide to policyholders.

Other
underwriting expenses associated with facultative business are generally higher in proportion to related premiums than those associated with treaty business, reflecting, among
other things, the more labor-intensive nature of underwriting and servicing facultative business. Approximately 8% of facultative gross premiums written in 2009 were originated by the AIG Group and
ceded to TRH. These amounts exclude (a) premiums assumed that initially were insured by AIG subsidiaries as a result of TRH's marketing efforts and then ceded to TRH by prearrangement; and
(b) amounts assumed from an AIG subsidiary and ceded in an equal amount to other AIG subsidiaries. The amount of premiums assumed that initially were insured by AIG subsidiaries as a result of
TRH's marketing efforts and then ceded to TRH by prearrangement are not material. (SeeRelationship with the AIG Group.) Except for the AIG Group, no
single ceding company accounted for more than 4% of total facultative gross premiums written in 2009.

Retrocession Arrangements

To a limited extent, TRH enters into retrocession arrangements, generally in order to reduce the effect of individual or aggregate
losses, to reduce volatility in specific lines, to improve risk adjusted portfolio returns and to increase gross premium writings and risk capacity without requiring additional capital.

Retrocession
arrangements do not relieve TRH from its obligations to the insurers and reinsurers from whom it assumes business. The failure of retrocessionnaires to honor their
obligations could result in losses to TRH. TRH holds substantial amounts of funds, trust agreements and letters of credit to collateralize reinsurance recoverables. Such funds, trust agreements and
letters of credit can be drawn on for amounts remaining unpaid beyond contract terms. In addition, an allowance has been established for estimated unrecoverable amounts.

As
of December 31, 2009, TRH had in place approximately 130 active retrocessional arrangements for current and prior underwriting years with approximately 300 retrocessionnaires,
and reinsurance recoverable on paid and unpaid losses and loss adjustment expenses totaled $747.1 million, including $266.5 million recoverable from the AIG Group. No unsecured
recoverables from a single retrocessionnaire are considered material to the financial position of TRH. (See Note 16.)

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Table of Contents

Risk Management

TRH employs an Enterprise Risk Management ("ERM") framework to identify, assess, quantify, mitigate and manage TRH's risks in order to
maximize its long-term value and achieve its corporate objectives. This framework is integrated into the day-to-day activities of TRH as well as its strategic
planning processes.

As
part of this framework, TRH determines its underwriting risk profile by giving underwriters written underwriting authorities which are linked to competence and delegated according to
class, risk limits, program limits and premium limits. The monitoring of underwriting and claims performance takes various forms including the qualitative review of underwriting files and rationales
by peers and internal audit reviews of underwriting authorities and data input into TRH's real-time management information system. Class results are reviewed quarterly at meetings between
the regional Chief Underwriting Officers, the risk management department, the heads of underwriting areas, line underwriters, actuaries and the claims department. In addition, the actuarial department
monitors rate adequacy, conducts profitability studies and assesses reserve adequacy.

Aggregating
exposures are managed centrally through the establishment of risk tolerances which are set annually and monitored through quarterly and half-yearly roll ups of
actual exposures. TRH has also developed a scenario-based assessment of potential loss events that focuses on cross-class aggregations and correlations. For natural catastrophe exposures,
roll-ups are conducted using proprietary rating models supplemented by internally generated assessments for un-modeled exposures. (SeeCatastrophe
ExposureinMD&Afor further information.)

The
risk management team is led by the Chief Risk Officer ("CRO") who reports directly to the Chief Executive Officer who chairs a Corporate Risk Management Committee composed of
executive officers including the CRO, Chief Financial Officer, Chief Information Officer, General Counsel, Chief Actuary, Senior Claims Executive in New York as well as the Chief Underwriting Officers
for the Domestic Operations, International Operations and the Caribbean and Latin American Operations, among other officers. In addition, the Risk Management Committee of the Company's Board of
Directors provides Board oversight of the risk management of TRH.

In
all major branches, local risk committees meet quarterly to review the major risks of TRH including regulatory, operational, credit and other financial risks. These committees include
senior representatives from the finance and accounting, claims, actuarial, systems, legal and underwriting departments and report to the risk management department in New York. TRH uses various tools
including an employee code of conduct, mandatory ethics training, internal audit reviews and business continuity planning to mitigate its operational risks.

TRH
utilizes investment strategies to manage asset type, sector, industry, issuer and issue concentrations within the investment portfolio and uses an approved reinsurers list to
communicate throughout TRH the acceptability of potential retrocessionaires.

TRH
is engaged in the continuous review and enhancement of its ERM framework, which includes the development of an economic capital model to assess the probability and potential severity
of risk events and to determine the optimum risk adjusted profile for TRH.

Marketing

TRH provides property and casualty reinsurance capacity through brokers as well as directly to insurance and reinsurance companies in
both the domestic and international markets. TRH believes its worldwide network of offices helps position TRH to take advantage of market opportunities.

Business
assumed from the AIG Group is generally obtained directly from the ceding company. Non-AIG Group treaty business is produced primarily through brokers, while
non-AIG Group facultative

9

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Table of Contents

business
is produced both directly and through brokers. Brokerage fees generally are paid by reinsurers. In 2009, approximately 82% of TRH's non-AIG Group gross premiums written was
written through brokers and the balance was written directly. In 2009, companies controlled by Aon Corporation ("Aon") and Marsh & McLennan Companies, Inc. ("Marsh"), were TRH's largest
brokerage sources of non-AIG Group business. Non-AIG Group business brokered by Aon, Marsh and the rest of TRH's ten largest brokerage sources of non-AIG business
as a percentage of TRH's consolidated revenues and total gross premiums written in 2009 are presented below:

Revenues

Gross
Premiums
WrittenAon


25
%

26
%Marsh


16


17Next eight largest brokerage sources of non-AIG business


17


18Ten largest brokerage sources of non-AIG business


58
%

61
%


The
business attributable to a broker includes all non-AIG gross premiums produced by that broker and its affiliates in the full year regardless of the date that any such affiliate was
acquired.

TRH
believes that its emphasis on generally seeking the lead position in reinsurance treaties in which it participates is beneficial in obtaining business. Brokers do not have the
authority to bind TRH with respect to reinsurance agreements, nor does TRH commit in advance to accept any portion of the business that brokers submit to it.

Claims

Claims are managed by TRH's professional claims staff whose responsibilities include the review of initial loss reports, creation of
claim files, determination of whether further investigation is required, establishment and adjustment of case reserves and payment of claims. In addition to claims assessment, processing and payment,
the claims staff conducts comprehensive claims audits of both specific claims and overall claims procedures at the offices of selected ceding companies, which TRH believes benefit all parties to the
reinsurance arrangement. Claims audits are conducted in the ordinary course of business. In certain instances, a claims audit may be performed prior to assuming reinsurance business.

Reserves for Unpaid Losses and Loss Adjustment Expenses ("Gross Loss Reserves")

Significant periods of time may elapse between the occurrence of an insured loss, the reporting of the loss to the ceding company and
the reinsurer, and the ceding company's payment of that loss and subsequent payments to the ceding company by the reinsurer. Insurers and reinsurers establish gross loss reserves, which represent
estimates of future amounts needed to pay claims and related expenses with respect to insured events which have occurred on or before the balance sheet date, including events which have not been
reported to the ceding company.

Upon
receipt of a notice of claim from the ceding company, TRH establishes its own case reserve for the estimated amount of the ultimate settlement, if any. Case reserves usually are
based upon the amount of reserves recommended by the ceding company and may be supplemented by additional amounts as deemed necessary. In certain instances, TRH establishes case reserves even when the
ceding company has not reported any liability to TRH.

TRH
also establishes reserves to provide for the estimated expenses of settling claims, including legal and other fees, the general expenses of administering the claims adjustment
process (i.e., loss adjustment expenses ("LAE")), and for losses and LAE incurred but not reported ("IBNR"). TRH calculates LAE and IBNR reserves by
using generally accepted actuarial reserving techniques to estimate the ultimate liability for losses and LAE. Such reserves are periodically reassessed by TRH to

10

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Table of Contents

adjust
for changes in the expected loss emergence pattern over time. TRH has an in-house actuarial staff which periodically reviews TRH's unpaid losses and LAE both gross and net of
related reinsurance recoverables.

Gross
loss reserves represent the accumulation of case reserves and IBNR reserves. Provisions for inflation and social inflation (e.g.,
awards by judges and juries which progressively increase in size at a rate exceeding that of general inflation) are implicitly considered in the overall reserve setting process as an element of the
numerous judgments which are made as to expected trends in average claim severity. Legislative changes may also affect TRH's liabilities, and evaluation of the impact of such changes is made in the
reserve setting process.

The
methods of determining estimates for unreported losses and establishing resulting reserves and related reinsurance recoverable are continually reviewed and updated, and any resulting
adjustments are reflected in income currently. The process relies upon the basic assumption that past experience, adjusted for the effect of current developments and likely trends, is an appropriate
basis for predicting future events. However, estimation of loss reserves is a difficult process, especially in view of changing legal and economic environments which impact the development of loss
reserves, and therefore quantitative techniques frequently have to be supplemented by subjective considerations and managerial judgment. In addition, trends that have affected development of
liabilities in the past may not necessarily occur or affect liability development to the same degree in the future.

While
the reserving process is difficult and subjective for the ceding companies, the inherent uncertainties of estimating such reserves are even greater for the reinsurer, due primarily
to the longer term nature of much reinsurance business, the diversity of development patterns among different types of reinsurance treaties or facultative contracts, the necessary reliance on the
ceding companies for information regarding reported claims and differing reserving practices among ceding companies, which are subject to change without notice. TRH writes a significant amount of
non-proportional assumed casualty reinsurance as well as proportional assumed reinsurance of excess casualty business for classes such as medical malpractice and D&O, which can exhibit
greater volatility over time than most other classes due to their low frequency, high severity nature and loss cost trends that are more difficult to predict.

During
the loss settlement period, which can be many years in duration, additional facts regarding individual claims and trends usually become known. As these become apparent, it usually
becomes
necessary to refine and adjust the reserves upward or downward. Even then, the ultimate net liability may be materially different from the revised estimates which are reflected in TRH's consolidated
financial statements, and such differences may have, and in certain years have had, a material effect on net income. (SeeMD&A, including the discussion
ofCritical Accounting Estimates, and Note 2(j) of Notes to Consolidated Financial Statements for further discussion.)

Net
losses and LAE incurred consist of the estimated ultimate cost of settling claims incurred within the reporting period (net of related reinsurance recoverable), including IBNR
claims, plus changes in estimates of liabilities for prior period losses.

The
"Analysis of Consolidated Net Loss Reserves Development" which follows presents the development of net loss reserves for calendar years 1999 through 2009. The upper half of the table
shows the cumulative amounts paid during successive years relating to the opening reserve. For example, with respect to the net loss reserve of $6.90 billion as of December 31, 2007, by
the end of 2009 (two years later) $2.81 billion had actually been paid in settlement of those net loss reserves. In addition, as reflected in the lower section of the table, the original net
loss reserve of $6.90 billion was re-estimated to be $6.96 billion at December 31, 2009. This change from the original estimate would normally result from a combination of a
number of factors, including losses being settled for different amounts than originally estimated. The original estimates will also be increased or decreased as more information becomes known about
the individual claims, overall claim frequency and severity patterns. The net

11

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Table of Contents

(deficiency)
redundancy depicted in the table, for any particular calendar year, shows the aggregate change in estimates over the period of years subsequent to the calendar year reflected at the top
of the respective columns. For example, the net deficiency of $59.2 million at December 31, 2009 relating to December 31, 2007 net loss reserves of $6.90 billion represents
the cumulative amount by which net loss reserves as of year-end 2007 have developed adversely from that date through the end of 2009.

Each
amount other than the original reserves in the following table includes the effects of all changes in amounts for prior periods. For example, if a loss settled in 2006 for $150,000
was first reserved in 2003 at $100,000 and remained unchanged until settlement, the $50,000 deficiency (actual loss minus original estimate) would be included in the cumulative net (deficiency)
redundancy in each of the years in the period 2003 through 2005 shown in the following table. Conditions and trends that have affected development of liability in the past may not necessarily occur in
the future. Accordingly, it may not be appropriate to extrapolate future development based on this table.

The
"Analysis of Net Unpaid Losses and Loss Adjustment Expenses and Net Reestimated Liability" presents additional information regarding the development of gross loss reserves.

ANALYSIS OF CONSOLIDATED NET LOSS RESERVES DEVELOPMENT(1)

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009(in thousands)Net loss reserves, as of December 31:(2)

$
2,762,162

$
2,614,917

$
2,908,887

$
3,257,906

$
3,956,420

$
4,980,609

$
5,690,443

$
6,207,220

$
6,899,716

$
7,349,078

$
7,871,825Cumulative paid as of:One year later


953,708


892,752


1,033,574


1,057,314


1,090,058


1,492,464


1,447,284


1,464,916


1,841,768


1,559,712Two years later


1,570,329


1,573,227


1,759,047


1,806,388


2,035,299


2,416,036


2,526,261


2,761,250


2,813,396Three years later


2,050,795


2,071,480


2,332,901


2,535,149


2,792,484


3,263,061


3,549,463


3,485,127Four years later


2,408,700


2,499,596


2,932,043


3,198,831


3,485,611


4,028,731


4,127,882Five years later


2,722,971


2,940,058


3,479,594


3,792,955


4,112,690


4,453,364Six years later


3,039,306


3,333,401


3,953,515


4,297,909


4,470,656Seven years later


3,306,557


3,649,883


4,365,880


4,609,558Eight years later


3,525,322


3,952,850


4,620,686Nine years later


3,765,082


4,137,488Ten years later


3,876,772Net reestimated liability as of:(2)End of year


2,762,162


2,614,917


2,908,887


3,257,906


3,956,420


4,980,609


5,690,443


6,207,220


6,899,716


7,349,078


7,871,825One year later


2,776,519


2,650,589


3,248,013


3,580,493


4,273,802


5,249,445


5,871,571


6,295,600


6,899,232


7,310,130Two years later


2,802,612


3,088,303


3,561,876


4,112,290


4,781,344


5,557,243


6,133,365


6,385,124


6,958,926Three years later


3,158,790


3,392,021


4,176,419


4,637,194


5,110,862


5,878,870


6,282,334


6,441,824Four years later


3,379,226


3,872,054


4,641,988


4,976,922


5,485,195


6,066,219


6,401,324Five years later


3,725,975


4,217,748


4,904,646


5,345,798


5,701,065


6,209,964Six years later


3,944,728


4,396,225


5,184,316


5,555,013


5,881,308Seven years later


4,064,479


4,584,446


5,390,160


5,742,547Eight years later


4,193,632


4,747,977


5,570,367Nine years later


4,321,030


4,898,056Ten years later


4,439,343Net (deficiency) redundancy as of December 31, 2009

$
(1,677,181
)
$
(2,283,139
)
$
(2,661,480
)
$
(2,484,641
)
$
(1,924,888
)
$
(1,229,355
)
$
(710,881
)
$
(234,604
)
$
(59,210
)
$
38,948


---

12

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Table of Contents

ANALYSIS OF NET UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES  AND NET REESTIMATED LIABILITY(1)

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009(in thousands)End of year:Gross liability

$
3,304,931

$
3,077,162

$
3,747,583

$
4,032,584

$
4,805,498

$
5,941,464

$
7,113,294

$
7,467,949

$
7,926,261

$
8,124,482

$
8,609,105Related reinsurance recoverable


542,769


462,245


838,696


774,678


849,078


960,855


1,422,851


1,260,729


1,026,545


775,404


737,280Net liability

$
2,762,162

$
2,614,917

$
2,908,887

$
3,257,906

$
3,956,420

$
4,980,609

$
5,690,443

$
6,207,220

$
6,899,716

$
7,349,078

$
7,871,825One year later:Gross reestimated liability

$
3,369,520

$
3,126,518

$
4,136,126

$
4,465,908

$
5,117,490

$
6,344,019

$
7,306,595

$
7,633,138

$
7,918,300

$
8,070,824Reestimated related reinsurance recoverable


593,001


475,929


888,113


885,415


843,688


1,094,574


1,435,024


1,337,538


1,019,068


760,694Net reestimated liability

$
2,776,519

$
2,650,589

$
3,248,013

$
3,580,493

$
4,273,802

$
5,249,445

$
5,871,571

$
6,295,600

$
6,899,232

$
7,310,130Two years later:Gross reestimated liability

$
3,426,471

$
3,565,853

$
4,556,676

$
5,003,598

$
5,761,231

$
6,633,579

$
7,618,979

$
7,722,795

$
7,988,632Reestimated related reinsurance recoverable


623,859


477,550


994,800


891,308


979,887


1,076,336


1,485,614


1,337,671


1,029,706Net reestimated liability

$
2,802,612

$
3,088,303

$
3,561,876

$
4,112,290

$
4,781,344

$
5,557,243

$
6,133,365

$
6,385,124

$
6,958,926Three years later:Gross reestimated liability

$
3,788,866

$
3,970,012

$
5,188,506

$
5,678,239

$
6,096,568

$
7,017,192

$
7,769,983

$
7,770,305Reestimated related reinsurance recoverable


630,076


577,991


1,012,087


1,041,045


985,706


1,138,322


1,487,649


1,328,481Net reestimated liability

$
3,158,790

$
3,392,021

$
4,176,419

$
4,637,194

$
5,110,862

$
5,878,870

$
6,282,334

$
6,441,824Four years later:Gross reestimated liability

$
4,098,524

$
4,492,711

$
5,814,220

$
6,034,785

$
6,536,334

$
7,219,505

$
7,886,168Reestimated related reinsurance recoverable


719,298


620,657


1,172,232


1,057,863


1,051,139


1,153,286


1,484,844Net reestimated liability

$
3,379,226

$
3,872,054

$
4,641,988

$
4,976,922

$
5,485,195

$
6,066,219

$
6,401,324Five years later:Gross reestimated liability

$
4,479,946

$
4,868,258

$
6,099,084

$
6,467,893

$
6,766,081

$
7,364,727Reestimated related reinsurance recoverable


753,971


650,510


1,194,438


1,122,095


1,065,016


1,154,763Net reestimated liability

$
3,725,975

$
4,217,748

$
4,904,646

$
5,345,798

$
5,701,065

$
6,209,964Six years later:Gross reestimated liability

$
4,728,479

$
5,058,733

$
6,441,624

$
6,692,327

$
6,952,158Reestimated related reinsurance recoverable


783,751


662,508


1,257,308


1,137,314


1,070,850Net reestimated liability

$
3,944,728

$
4,396,225

$
5,184,316

$
5,555,013

$
5,881,308Seven years later:Gross reestimated liability

$
4,860,380

$
5,262,921

$
6,660,562

$
6,887,469Reestimated related reinsurance recoverable


795,901


678,475


1,270,402


1,144,922Net reestimated liability

$
4,064,479

$
4,584,446

$
5,390,160

$
5,742,547Eight years later:Gross reestimated liability

$
5,007,580

$
5,439,253

$
6,849,486Reestimated related reinsurance recoverable


813,948


691,276


1,279,119Net reestimated liability

$
4,193,632

$
4,747,977

$
5,570,367Nine years later:Gross reestimated liability

$
5,145,660

$
5,591,138Reestimated related reinsurance recoverable


824,630


693,082Net reestimated liability

$
4,321,030

$
4,898,056Ten years later:Gross reestimated liability

$
5,265,220Reestimated related reinsurance recoverable


825,877Net reestimated liability

$
4,439,343Gross (deficiency) redundancy as of December 31, 2009

$
(1,960,289
)
$
(2,513,976
)
$
(3,101,903
)
$
(2,854,885
)
$
(2,146,660
)
$
(1,423,263
)
$
(772,874
)
$
(302,356
)
$
(62,371
)
$
53,658


(1)This
table is on a calendar year basis and does not represent accident or underwriting year data.


13

---





Table of Contents

The trend depicted in the latest development year in the net reestimated liability portion of the "Analysis of Consolidated Net Loss Reserves Development" table
and in the "Analysis of Net Unpaid Losses and Loss Adjustment Expenses and Net Reestimated Liability" table reflects net favorable development. Net favorable development of $38.9 million was
recorded in 2009 on losses occurring in all prior years. (SeeMD&A.) This net favorable development was comprised of net favorable development of
$219.1 million for losses occurring in 2002 to 2008, partially offset by net adverse development of $180.2 million for losses occurring in 2001 and prior.

In
general, the deficiencies shown in the tables for the years 1999 through 2006 resulted largely from losses occurring in 2001 and prior in certain casualty lines. Such adverse
development has involved an unexpected increase in the frequency and severity of large claims, as was common in the industry, relating to non-proportional assumed casualty reinsurance as
well as proportional assumed reinsurance of excess casualty business for such volatile classes as medical malpractice, D&O, E&O and other general casualty. (See MD&A.)

For
TRH's domestic subsidiaries (TRC and Putnam), there is no difference in reserves for losses and LAE, net of related reinsurance recoverable, whether determined in accordance with
generally accepted accounting principles in the U.S. ("GAAP") or statutory accounting principles. (See Note 6 of Notes to Consolidated Financial Statements for a reconciliation of beginning and
ending gross and net loss reserves.)

Investment Operations

TRH's investments must comply with the insurance laws of the State of New York, the state of domicile of TRC and Putnam, and of the
other states and jurisdictions in which the Company and its subsidiaries are regulated. These laws prescribe the kind, quality and concentration of investments which may be made by insurance
companies. In general, these laws permit investments, within specified limits and subject to certain qualifications, in federal, state and municipal obligations, corporate fixed maturities, preferred
and common stocks, real estate mortgages and real estate. The Finance and Investment Committee of the Company's Board of Directors and senior management oversee investments, establish TRH's investment
strategy and implement investment decisions. Through June 30, 2009, the AIG Group acted as financial advisors and managers of TRH's investment portfolio and, in connection therewith, made the
selection of particular investments. Effective July 1, 2009, TRH employs a third party not affiliated with AIG to provide these services.

TRH's
current investment strategy seeks to optimize after-tax income through a high quality diversified taxable fixed maturity and tax-exempt municipal fixed
maturity portfolio, while maintaining an adequate level of liquidity. TRH adjusts its mix of taxable and tax-exempt investments, as appropriate, generally as a result of strategic
investment and tax planning considerations. Tax-exempt fixed maturities carry lower pre-tax yields than taxable fixed maturities that are comparable in risk and term to
maturity due to their tax-advantaged status. (SeeMD&A.) The equity portfolio is structured to achieve capital appreciation primarily
through a selection of large capitalization U.S. stocks. Other invested assets principally include alternative investments and TRH's 40% interest in Kuwait Re.

Through
2008, TRH participated in a securities lending program (the "Securities Lending Program") managed by a subsidiary of AIG, whereby certain securities (principally fixed maturities
available for sale) from its portfolio were loaned to third parties. (See Note 4(h) of Notes to Consolidated Financial Statements.) Under such program, TRH loaned securities to counterparties
and received collateral, generally cash, which was invested to earn a spread. The collateral received was invested in separate portfolios containing floating rate bonds
(i.e.,fixed maturities), including asset-backed securities, and interest-bearing cash equivalents. These portfolios were maintained in
segregated accounts for TRH by the program manager. The collateral was returned to the counterparties when the loaned securities were returned to TRH at a future date. In the fourth quarter of 2008,
TRH terminated its participation in the Securities Lending Program.

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Table of Contents

The
following table reflects investment results for TRH for each of the five years in the period ended December 31, 2009.

INVESTMENT RESULTS(1)

Consolidated

Excluding Securities Lending Program(2)Years Ended
December 31,

Average
Investments
and
Interest-Bearing
Cash(3)

Pre-Tax Net
Investment
Income

Pre-Tax
Effective
Yield(4)

Average
Investments
and
Interest-Bearing
Cash(5)

Pre-Tax Net
Investment
Income(6)

Pre-Tax
Effective
Yield(7)(dollars in thousands)2009

$
11,470,262

$
467,402


4.1
%
$
11,470,262

$
467,402


4.1
%2008


11,595,522


440,451


3.8


10,589,507


437,883


4.12007


12,024,944


469,772


3.9


10,171,508


467,293


4.62006


10,270,004


434,540


4.2


9,119,143


432,343


4.72005


8,748,640


343,247


3.9


8,007,658


341,631


4.3


(1)See
discussion of the impact of the Securities Lending Program on investment yields in 2008 and 2007 inResults of
OperationsinMD&A.(2)Represents
consolidated information excluding the Securities Lending Program which better reflects the return on the current investment portfolio as the
Securities Lending Program was terminated in the fourth quarter of 2008.(3)Average
of beginning and ending carrying values of investments and interest-bearing cash and cash equivalents for the year.(4)Pre-tax
net investment income divided by average investments and interest-bearing cash and cash equivalents.(5)Average
of beginning and ending carrying values of investments and interest-bearing cash and cash equivalents excluding securities lending invested
collateral.(6)Pre-tax
net investment income excluding net investment income from securities lending invested collateral.(7)Pre-tax
net investment income excluding net investment income from securities lending invested collateral divided by average investments and
interest-bearing cash and cash equivalents excluding securities lending invested collateral.


The carrying values of available for sale securities are subject to significant volatility from changes in their fair values. (See MD&A.)

As
of December 31, 2009, the fair value of the total investment portfolio was $12.37 billion.

In
addition, TRH's investments are exposed to market and other significant risks which could result in the loss of fair value. Market risk results from the potential for adverse
fluctuations in interest rates, equity prices and foreign currency exchange rates. TRH has performed Value at Risk ("VaR") analyses to estimate the maximum potential loss of fair value that could
occur as a result of market risk over a period of one month at a confidence level of 95%. TRH's market risk analyses do not provide weight to risks relating to market issues such as liquidity and the
credit-worthiness of investments. (SeeItem 7A.Quantitative and Qualitative Disclosures About Market Risk.)

Competition

The reinsurance business is a mature, highly competitive industry in virtually all lines of business. (See MD&Afor a discussion of
market conditions and trends in competition intensity in recent years.)

Competition
in the types of reinsurance in which TRH engages is based on many factors, including the perceived overall financial strength of the reinsurer, Best, S&P and Moody's ratings,
states or other jurisdictions where the reinsurer is licensed, accredited, authorized or can serve as a reinsurer, capacity and coverages offered, premiums charged, specific terms and conditions of
the reinsurance offered, value-added services offered, speed of claims payment and reputation and experience in the lines of business underwritten. These factors also operate in the aggregate across
the reinsurance industry, generally in combination with prevailing economic conditions. Reinsurance purchases are also sensitive to cyclical movements in reinsurance rates, terms and conditions and,
ultimately, the reinsurance industry's overall financial results.

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TRH
competes in the United States and international reinsurance markets with numerous international and domestic reinsurance companies, some of which have greater resources than TRH or
operate in different regulatory jurisdictions and tax environments. TRH's competitors include independent reinsurance companies, subsidiaries or affiliates of established worldwide insurance
companies, reinsurance departments of certain primary insurance companies, domestic and European underwriting syndicates and, in some instances, government owned or subsidized facilities. Although
most reinsurance companies operate in the broker market, TRH's largest competitors also work directly with ceding companies, competing with brokers.

Traditional
reinsurers as well as capital market participants from time to time produce alternative products (such as reinsurance securitizations, catastrophe bonds and various
derivatives such as swaps) that may compete with certain types of reinsurance, such as property catastrophe. Over time, these numerous initiatives could significantly affect supply, pricing and
competition in the reinsurance industry.

Employees

At December 31, 2009, TRH had approximately 620 employees. Approximately 270 employees were located in the New York
headquarters; 110 employees were located in other locations in the United States and 240 employees were located in offices outside of the United States.

Regulation

TRH's operations are subject to regulation in the U.S. and abroad. Changes to the regulatory environment can have a significant effect
on TRH and its businesses. TRC, TRZ and Putnam, in common with other reinsurers, are subject to regulation and supervision by the states and by other jurisdictions in which they do business. Within
the United States, the method of such regulation varies but generally has its source in statutes that delegate regulatory and supervisory powers to an elected or appointed state insurance official.
This regulation and supervision focuses primarily on the level of solvency that must be maintained, including risk-based capital measurements, limitations on the form of investments and
other forms of risk. In addition, such regulation covers the licensing of underwriters of insurance and reinsurance, restrictions on the size of risks which may be insured under a single contract,
specifications for deposits of securities for the benefit of ceding companies, methods of accounting, periodic examinations of the affairs and financial reports of insurance companies, the form and
content of reports of financial condition required to be filed, and reserves for unearned premiums, losses and other purposes. As required by the State of New York, TRC and Putnam use the Codification
of Statutory Accounting Principles as primary guidance on statutory accounting. In general, such regulation is for the protection of the ceding companies and, ultimately, their policyholders rather
than security holders.

The
rates and contract terms of reinsurance agreements with non-affiliates are generally not subject to regulation by any governmental authority. This contrasts with primary
insurance agreements where the rates and policy terms are generally closely regulated by governmental authorities. As a practical matter, however, the rates charged by primary insurers and the policy
terms of primary insurance agreements may affect the rates charged and the policy terms under associated reinsurance agreements.

The
Company, under the relevant insurance laws, is deemed an insurance holding company and TRH and its insurance company affiliates are subject to the insurance holding company statutes
of various states and jurisdictions. The insurance holding company laws and regulations vary from jurisdiction to jurisdiction, but generally require domestic insurance holding companies and insurers
and reinsurers that are subsidiaries of insurance holding companies to register with the applicable state regulatory authority and to file with that authority certain reports which provide information
concerning their capital structure, ownership, financial condition, affiliated company transactions and general business operations.

Such
insurance holding company laws generally also require prior regulatory agency approval of changes in direct or indirect control of an insurer or reinsurer and of certain material
intercorporate

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transfers
of assets within the holding company structure. The New York Insurance Law provides that no corporation or other person, except an authorized insurer, may acquire direct control of TRC or
Putnam, or acquire control of the Company and thus indirect control of TRC and Putnam, unless such corporation or person has obtained the prior approval of the New York State Insurance Department (the
"NYS ID") for such acquisition. For the purposes of the New York Insurance Law, any investor acquiring ten percent or more of the Company's common shares would be presumed to be a "controlling person"
of the Company and its subsidiaries, unless the NYS ID determines upon application that such investor would not control the Company. An investor who could be deemed a "controlling person" of the
Company would be required to obtain the approval of the NYS ID prior to such acquisition. In addition, such investor would become subject to various ongoing reporting requirements in New York and in
certain other states.

Risk
Based Capital ("RBC") is designed to measure the adequacy of an insurer's statutory surplus in relation to the risks inherent in its business. Thus, in theory, inadequately
capitalized insurance companies can be identified. The RBC formula develops a risk adjusted target level of statutory surplus by applying certain factors to various asset, premium and reserve items.
Higher factors are applied to items deemed to have more risk by the National Association of Insurance Commissioners ("NAIC") and lower factors are applied to items that are deemed to have less risk.
Thus, the target level of statutory surplus varies not only as a result of the insurer's size, but also on the risk profile of the insurer's operations.

The
RBC Model Law provides for four incremental levels of regulatory attention for insurers whose surplus is below the calculated RBC target. These levels of attention range in severity
from requiring the insurer to submit a plan for corrective action to placing the insurer under regulatory control.

At
December 31, 2009, the statutory surpluses of TRC and Putnam each exceeded the level of surplus required under RBC requirements for regulatory attention.

Through
the "credit for reinsurance" mechanism, TRC and Putnam are indirectly subject to the effects of regulatory requirements imposed by the states in which TRC's and Putnam's ceding
companies are licensed. In general, an insurer which obtains reinsurance from a reinsurer that is licensed, accredited or authorized by the state in which the insurer files statutory financial
statements is permitted to take a credit on its statutory financial statements in an aggregate amount equal to the reinsurance recoverable on paid losses and the liabilities for unearned premiums and
loss and LAE reserves ceded to the reinsurer, subject to certain limitations where amounts of reinsurance recoverable on paid losses are more than 90 days overdue. Certain states impose
additional requirements that make it difficult to become so authorized, and certain states do not allow credit for
reinsurance ceded to reinsurers that are not licensed or accredited in that state without additional provision for security.

At
the December 2008 Winter National Meeting, the NAIC formally adopted the new NAIC Reinsurance Regulatory Modernization Framework proposal (the "Framework"). The Framework contemplates
the creation of the NAIC Reinsurance Supervision Review Department (the "RSRD"). The purpose of the RSRD will be to review and evaluate systems of reinsurance regulation in U.S. jurisdictions and
non-U.S. jurisdictions to determine whether those regulatory systems are equivalent in terms of effectiveness to the systems of reinsurance regulation in typical U.S. jurisdictions.
International reinsurers domiciled in an RSRD approved jurisdiction are eligible to participate in the Framework. The same is true for U.S. reinsurers domiciled in a U.S. state that has been approved
by the RSRD.

Under
the Framework, the issue of whether credit for reinsurance in financial statements would be allowed will be determined primarily by the single state that is the primary U.S.
regulator of the reinsurer, rather than by the domestic regulators of the ceding insurers as is done currently.

Participating
reinsurers would be assigned one of five security ratings by their U.S. regulatorranging from 1 (secure) to 5 (vulnerable). The ratings would be based upon a
number of factors, including but not limited to the reinsurers' ratings from rating agencies. The level of collateral required for reinsurance placed with reinsurers would vary from zero for
reinsurers with the highest security rating to 100% of gross assumed liabilities for reinsurers with the lowest security ratings. It should be noted that the

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NAIC's
approval of the Framework is not, in and of itself, sufficient to implement the Framework. The Framework requires enabling legislation from the U.S. Congress. The Framework needs to be adopted
separately by each state legislature and the NAIC Reinsurance Task Force must develop an operating plan for the RSRD. Finally, the Framework would be applied only on a prospective basis.

In
addition to the NAIC actions, several federal proposals were introduced in Congress which would allow industry participants to voluntarily choose a federal charter over the current
state system. With the current debate in Congress over financial services regulatory reform, TRH believes that any insurance industry reform will most likely be addressed within the broader financial
services industry proposals. Several states including New York and Florida have also drafted separate collateral requirement proposals. While it is unclear what proposal will ultimately be adopted by
the states, any revision of the collateral requirements will likely recognize that reinsurers domiciled in certain countries outside of the U.S. are subject to financial scrutiny comparable to their
U.S. domiciled counterparts. Consequently, collateral requirements under credit for reinsurance rules may be based in part on domicile and in part on each reinsurer's financial strength rating as
assigned by the NAIC or its designated rating organization(s). TRH does not presently expect this proposal to have a material effect on its operations. However, such proposal is expected to reduce the
amount of
collateral that many non-U.S. domiciled companies will need to post to secure their obligations to U.S. domiciled insurers and reinsurers.

TRH's
international operations are regulated in various jurisdictions with respect to licensing requirements, currency, amount and type of security deposits, amount and type of reserves
and amount and type of local investment. International operations and assets held abroad may be adversely affected by political and other developments in foreign countries, including possible tax
changes, nationalization and changes in regulatory policy, as well as by consequences of hostilities and unrest. The risks of such occurrences and their overall effect upon TRH vary from country to
country and cannot easily be predicted. Regulations governing technical reserves and remittance of balances in some countries may hinder remittance of profits and repatriation of assets.

The
Terrorism Risk Insurance Act of 2002 ("TRIA") was signed into law in November 2002 and extended for two years in December 2005. TRIA provided coverage to the insurance industry for
acts of terrorism, as defined by TRIA. The Terrorism Risk Insurance Extension Act of 2005 ("TRIEA") greatly increased the portion of the loss the insurance industry would pay in the event of a
terrorist attack and reduced the number of lines covered. This coverage does not apply to reinsurers. The Terrorism Risk Insurance Program Reauthorization Act of 2007 ("TRIPRA") extended the TRIEA
program through 2014. TRIPRA removes the distinction between foreign and domestic acts of terrorism and hardens the cap on insurers' aggregate liability at $100 billion. Additionally, TRIPRA
mandates that Federal fund outlays be recouped by mandatory policyholder surcharges. In general, TRH does not provide terrorism cover under international property treaties nor does it provide cover
for certified acts of terrorism, as defined by TRIEA, under domestic property treaties. TRH offers terrorism-specific treaty coverages to ceding companies on a limited basis. With respect to other
lines of business, TRH assumes terrorism risk in marine, aviation and other casualty treaties after careful underwriting consideration and, in many cases, with limitations.

Within
the European Union (the "EU"), the EU Reinsurance Directive of November 2005 (the "Directive") was adopted and may be fully implemented by all member countries by 2010. The
Directive requires member countries to lift barriers to trade within the EU for companies that are domiciled in an EU country. TRH operates within the EU through a series of foreign branches and
continues to evaluate the potential impact of the implementation of the Directive which could vary from country to country. TRH has contacted insurance regulators throughout the EU to ascertain their
regulatory intent and to discuss each country's rule applicable to TRH. Currently, TRH continues to conduct business within the EU through its foreign branches with no significant impact on its
operations. As each country within the EU adopts rules implementing the Directive, TRH could be materially adversely affected by the adopted rules. TRH may be required to post additional collateral in
EU countries or may need to consider restructuring its business in order to comply with the rules adopted in EU countries implementing the Directive.

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In
addition to the Directive, the EU is phasing in a new regulatory regime for regulation of financial services known as "Solvency II." Solvency II is a principles-based regulatory
regime that seeks to enhance transparency, promote uniformity, and encourage a proactive approach to company solvency. It is built on a risk-based approach to setting capital requirements
of insurers and reinsurers. It is anticipated that Solvency II will not be implemented before 2012. TRH could be materially impacted by the implementation of Solvency II depending on the costs
associated with implementation by each EU country, any increased capitalization requirements and any costs associated with adjustment to TRH's corporate operating structure.

Traditionally,
regulatory and legislative changes affecting the insurance and reinsurance industries, as well as the financial services industry as a whole, are conducted in an organized
and structured manner encompassing the issuance of draft legislation or regulations and a significant period for review, evaluation and comment by the industry and markets. As a result of the recent
displacement in the financial markets and its impact on the insurance and reinsurance industry, legislators and/or regulators may feel compelled to pass new rules in an expedited manner without the
normal review periods. The passage of new regulatory rules on an expedited basis may have a material adverse impact on TRH if those rules increase the cost of doing business or restrict TRH's ability
to underwrite certain lines of business and/or make certain investments without providing TRH with the normal amount of time to review the new rules, assess their impact on TRH and allow TRH to alter
its business strategies or restructure in the most efficient manner.

Relationship with the AIG Group



AIG, a Delaware corporation, is a holding company which, through its subsidiaries, is engaged in a broad range of insurance and
insurance-related activities in the United States and abroad. AIG's primary activities include general insurance, life insurance and retirement services operations. Other significant activities
include financial services and asset management. AIG subsidiaries, collectively, are among the largest purchasers of reinsurance in the insurance industry based on premiums ceded.

Prior
to June 10, 2009 and as of December 31, 2008 and 2007, AIG beneficially owned approximately 59% of the Company's outstanding shares. On June 10, 2009, AIG and
AHAC, a wholly owned subsidiary of AIG, consummated the Offering of 29.9 million issued and outstanding shares of the
common stock of the Company owned by AIG and AHAC. TRH did not receive any proceeds from the Offering. According to the Form 13F filed on February 18, 2010 by AIG, as of
December 31, 2009, the AIG Group had sole voting authority over 9.2 million shares of the Company's common stock, representing approximately 13.8% of the Company's outstanding shares as
of December 31, 2009.

As
a result of the Offering, the Company is no longer considered a "controlled company" pursuant to the corporate governance listing standards of the New York Stock Exchange ("NYSE") and
is no longer able to avail itself of the exemptions from certain of the NYSE's corporate governance listing standards applicable to controlled companies (subject to the rules of the NYSE permitting a
phase in period for compliance with such corporate governance listing standards).

In
connection with the Offering, TRH entered into a Master Separation Agreement (the "MSA") with AIG and AHAC on May 28, 2009. The MSA sets forth TRH's agreements with AIG and
AHAC regarding the orderly separation of TRH from AIG, AHAC and their subsidiaries (the "Separation") and governs certain aspects of TRH's relationship with AIG, AHAC and their subsidiaries on a going
forward basis, including their waiver of certain rights they may have under intercompany agreements and insurance agreements.

In
connection with the Offering, TRH also entered into (a) a transition services agreement (the "TSA") with AIG; (b) a stockholders agreement (the "Stockholders Agreement")
with AIG and AHAC; and (c) a registration rights agreement (the "Registration Rights Agreement") with AIG and AHAC. The TSA sets forth TRH's agreements with AIG regarding the provision by AIG,
AHAC and their subsidiaries of

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limited
services to TRH for a specified period of time following the Separation. As of December 31, 2009, all service agreements under the TSA have expired. The Stockholders Agreement provides
AIG and AHAC with certain information and consent rights and will subject AIG, AHAC and their respective subsidiaries, affiliates, officers and directors to certain standstill provisions.
Additionally, pursuant to the Stockholders Agreement, AIG, AHAC and their subsidiaries are subject to voting and transfer restrictions covering their shares of the Company's common stock. The
Registration Rights Agreement provides AIG and AHAC with registration rights relating to any shares of the Company's common stock held by them. AIG and AHAC may require TRH to register under the
Securities Act of 1933 all or a portion of these shares. The registration rights are subject to certain limitations, including TRH's right to temporarily suspend the registration of shares.

TRH
is a party to numerous contracts, agreements, licenses, permits, authorizations and other arrangements (the "Applicable Arrangements and Authorizations") that contain provisions
giving counterparties certain rights (including, in some cases, termination rights) in the event of a change in control of the Company or its subsidiaries. If a change in control occurs, cedants may
be permitted to cancel contracts on a cut-off or run-off basis, and TRH may be required to provide collateral to secure premium and reserve balances or may be required to
cancel and commute the contract, subject to an agreement between the parties that may be settled in
arbitration. If a contract is cancelled on a cut-off basis, TRH may be required to return unearned premiums, net of commissions.

The
Offering may be deemed to have constituted a change in control of TRH under a portion of TRH's non-AIG Group reinsurance agreements. Whether a ceding company would have cancellation
rights in connection with the Offering depends upon the language of its agreement with TRH. Whether a ceding company exercises any cancellation rights it has would depend on, among other factors, such
ceding company's views with respect to the prevailing market conditions, the pricing and availability of replacement reinsurance coverage and TRH's ratings. As of December 31, 2009, no cedants
have notified TRH of their intention to exercise any cancellation rights they may have as a result of the Offering.

As
of December 31, 2009, one of the Company's seven directors, Thomas R. Tizzio, was a retired executive officer of AIG. Mr. Tizzio is a Retired Senior Vice Chairman and
Honorary Director of AIG.

As
of December 31, 2008, one of the Company's eight directors, Mr. Tizzio, was a retired executive officer of AIG. Mr. Tizzio is a Retired Senior Vice Chairman and
Honorary Director of AIG.

Between
July 1, 2008 and October 24, 2008, two of the Company's nine directors, Steven J. Bensinger and Mr. Tizzio, were active, former or retired executive officers
of AIG. Mr. Bensinger resigned as Vice ChairmanFinancial Services and acting Chief Financial Officer of AIG on October 9, 2008.

Between
January 1, 2008 and June 30, 2008, three of the Company's ten directors, Mr. Bensinger, Martin J. Sullivan and Mr. Tizzio, were active, former or
retired executive officers of AIG. Mr. Sullivan was a Director, President and Chief Executive Officer of AIG until June 15, 2008.

As
of December 31, 2007, three of the Company's ten current directors were active or retired executive officers of AIG and held a number of executive positions with AIG, including
the following: Mr. Bensinger was an Executive Vice President and Chief Financial Officer; Mr. Sullivan was a Director, President and Chief Executive Officer; and Mr. Tizzio was a
Retired Senior Vice Chairman and Honorary Director.



In the normal course of business, TRH sells reinsurance to subsidiaries of the AIG Group. Based upon TRH's assessment of risk
selection, pricing, terms and conditions and other relevant factors, TRH either accepts or rejects potential AIG Group business. Except where premiums assumed were insured by AIG subsidiaries as a
result of TRH's marketing efforts and then ceded to TRH by prearrangement, TRH has generally not set terms and conditions as lead underwriter with respect to the treaty reinsurance purchased by the
AIG Group; however, TRH may in the future set terms and conditions with respect to

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such
business as lead underwriter and intends that the terms and conditions of any such reinsurance will be negotiated on an arm's length basis.

Gross
premiums written of approximately $263 million (6.3%), $310 million (7.0%) and $307 million (7.2%) in 2009, 2008 and 2007, respectively, were originated by the
AIG Group and ceded to TRH. These amounts exclude (a) premiums assumed that initially were insured by AIG subsidiaries as a result of TRH's marketing efforts and then ceded to TRH by
prearrangement; and (b) amounts assumed from an AIG subsidiary and ceded in an equal amount to other AIG subsidiaries. The amount of premiums assumed that initially were insured by AIG
subsidiaries as a result of TRH's marketing efforts and then ceded to TRH by prearrangement are not material. (See Note 16 for the amount of premiums assumed from an AIG subsidiary and ceded in
an equal amount to other AIG subsidiaries.)

As
of December 31, 2009 and 2008, $266.5 million and $250.5 million, respectively, of reinsurance recoverables on paid and unpaid losses and LAE were recoverable
from the AIG Group.

2015 Notes Purchased by AIG Subsidiaries

In
December 2005, certain subsidiaries of AIG purchased $450 million aggregate principal amount of the Company's 5.75% senior notes due in 2015. (See Note 7 of Notes to
Consolidated Financial Statements.)

Available Information

The Company files annual, quarterly and current reports, proxy statements and other documents with the Securities and Exchange
Commission (the "SEC"). The public may read and copy any materials filed with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, DC 20549. The public may obtain
information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains an Internet Web site that contains reports,
proxy and information statements, and other information regarding issuers, including the Company, that file electronically with the SEC. The public can obtain any documents that the Company files
electronically with the SEC athttp://www.sec.govor through the New York Stock Exchange, 20 Broad Street, New York, New York 10005, on which the
Company's common stock is listed.

TRH's
website, which can be found on the Internet athttp://www.transre.com, contains frequently updated information about the Company and
its operations. Copies of the Company's recent Forms 10-K, Forms 10-Q and Forms 8-K, and all amendments to those reports, can be accessed free
of charge as soon as reasonably practicable after the reports and amendments are electronically filed with or furnished to the Securities and Exchange Commission by selecting "SEC Filings" on the
drop-down menu under "Investor Information." TRH also makes available on its corporate website copies of the charters for the Company's Audit, Nominating and Corporate Governance and
Compensation Committees, as well as its Corporate Governance Guidelines, Director Independence Standards, Director, Executive Officer and Senior Financial Officer Code of Business Conduct &
Ethics, Employee Code of Conduct and Related-Party Transaction Approval Policy.

In
addition, copies of any of the Company's reports on Form 10-K, Form 10-Q and Form 8-K, and all amendments to those reports, as
well as any Quarterly Earnings Press Release may be obtained by contacting the Company's Investor Relations department at:



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Item 1A.Risk Factors

The risks described below could materially affect TRH's business, results of operations, cash flows or financial condition.

The occurrence of severe catastrophic events could have a material adverse effect on TRH's financial condition, results of operations and operating cash flows.

Because TRH underwrites property and casualty reinsurance and has large aggregate exposures to natural and man-made
disasters, TRH expects that its loss experience will from time to time include events of great severity. The frequency and severity of catastrophe losses are inherently unpredictable, particularly in
light of the acceleration of climate change. Consequently, the occurrence of losses from a severe catastrophe or series of catastrophes could have a material adverse effect on TRH's financial
condition, results of operations and cash flows. Increases in the values and geographic concentrations of insured property and the effects of inflation have historically resulted in increased severity
of industry losses in recent years, and TRH expects that those factors will increase the severity of catastrophe losses in the future.

If TRH is required to increase its liabilities for loss reserves, TRH's financial condition, results of operations and ultimately its cash flows may be materially adversely
affected.

Significant periods of time may elapse between the occurrence of an insured loss, the reporting of the loss to the ceding company and
the reinsurer, and the ceding company's payment of that loss and subsequent payments to the ceding company by the reinsurer. TRH is required by applicable insurance laws and regulations and GAAP to
establish liabilities on its consolidated balance sheet for payment of losses and LAE that will arise in the future from its reinsurance products for losses that have occurred as of the balance sheet
date. Under GAAP, TRH is not permitted to establish liabilities until an event occurs that may give rise to a loss. Once such an event occurs, liabilities are established in TRH's financial statements
for its losses, based upon estimates of losses incurred by the ceding companies. As a result, only liabilities applicable to losses incurred up to the reporting date may be established, with no
allowance for the provision of a contingency reserve to account for expected or unexpected future losses. Losses arising from future events will be estimated and recognized at the time the losses
occur. Although TRH annually reviews the adequacy of its established reserves for losses and LAE, there can be no assurance that TRH's loss reserves will not develop adversely and have a material
effect on TRH's results of operations. To the extent these liabilities may be insufficient to cover actual losses or LAE, TRH will have to add to these liabilities and incur a charge to its earnings,
which could have a material adverse effect on TRH's financial condition, results of operations and ultimately its cash flows. SeeMD&Afor a further
discussion of the risks and uncertainties relating to loss reserves.

A downgrade in the ratings assigned to TRH could adversely affect TRH's ability to write new business and/or TRH's cost and availability of any future unsecured financing,
and may adversely impact TRH's existing agreements.

S&P, Best and Moody's are generally considered to be significant rating agencies with respect to the evaluation of insurance and
reinsurance companies. Financial strength and credit ratings by these rating agencies are important factors in establishing a competitive position for insurance and reinsurance companies. Financial
strength ratings measure a company's ability to meet its insurance and reinsurance obligations to contract holders. Credit ratings measure a company's ability to repay its debt obligations and
directly affect the cost and availability of unsecured financing. Ratings are subject to periodic review at the discretion of each respective rating agency and may be revised downward or revoked at
their sole discretion. Rating agencies also may increase their scrutiny of rated companies, revise their rating standards or take other action. In addition, a ceding company's own rating may be
adversely affected by a downgrade in the rating of its reinsurer or an affiliated company. Therefore, a downgrade of a rating of the

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Company
or its operating subsidiaries may dissuade a ceding company from reinsuring with TRH in the future and may influence a ceding company to reinsure with one of TRH's competitors that has a
higher financial strength rating. In general, if the insurer financial strength ratings and/or financial strength ratings of TRC, TRZ or Putnam from these rating agencies fall below "A-,"
certain rating agency triggers in TRH's contracts would allow customers to elect to take a number of actions such as terminating the contracts on a run-off or cut-off basis,
requiring TRH to post collateral for all or a portion of the obligations or requiring commutation under the contract as described below. A downgrade of TRH's debt ratings may also increase future
borrowing costs.

S&P
maintains a counterparty credit rating and insurer financial strength rating of "A+" (Strong) on each of TRC, TRZ and Putnam. The Company's counterparty credit rating is "BBB+". The
outlooks for these ratings are stable. The Company's senior unsecured debt rating is "BBB+". The counterparty credit rating and insurer financial strength rating "A+" represents the fifth out of 21
rating levels. The counterparty credit rating "BBB+" represents the eighth out of 21 rating levels.

Best
maintains financial strength ratings on TRC, TRZ and Putnam of "A (Excellent)" and issuer credit ratings of "a". Best maintains an issuer credit rating of "bbb" on the Company. The
outlooks for these ratings are stable. The financial strength rating "A (Excellent)" represents the third out of 15 rating levels. The issuer credit rating "a" represents the sixth out of 21 rating
levels and the issuer credit rating "bbb" represents the ninth out of 21 rating levels.

Moody's
maintains an insurance financial strength rating of "A1" on TRC and a senior unsecured debt rating of "Baa1" on the Company. Both of these ratings have stable outlooks. The
insurance
financial strength rating "A1" is the fifth out of 21 rating levels and the senior unsecured debt rating "Baa1" is the eighth out of 21 rating levels.

All
of these ratings are current opinions of S&P, Best and Moody's, respectively. As such, they may be changed, suspended or withdrawn at any time by the respective rating agencies as a
result of changes in, or unavailability of, information or based on other circumstances. Ratings may also be withdrawn at the request of TRH's management. Ratings are not a recommendation to buy, sell
or hold securities or TRH's reinsurance products and each rating should be evaluated independently of any other rating.

A
significant portion of TRH's in-force treaty contracts as of December 31, 2009 permit the ceding company to cancel the contract on a cut-off or
run-off basis if TRH's operating subsidiaries' financial strength rating is downgraded below a certain rating level, generally "A-". TRC's and TRZ's financial strength ratings
are at least two levels above the most common trigger point. In addition, contracts may also permit the ceding company to cancel the contract if there is a significant decline in the statutory surplus
of TRC, generally of at least 20%.

Contracts
may contain one or both of the aforementioned contractual provisions, certain other cancellation triggers or other stipulations, such as a requirement to post collateral for
all or a portion of TRH's obligations or require commutation under the contract if a triggering event occurs. Whether a ceding company would exercise any of these cancellation rights would depend on,
among other factors, the reason and extent of such downgrade or surplus reduction, the prevailing market conditions and the pricing and availability of replacement reinsurance coverage.

When
a contract is cancelled on a "cut-off" basis, as opposed to a "run-off" basis, the liability of the reinsurer under policies which became effective under the
treaty prior to the cancellation date of such treaty ceases with respect to losses resulting from events taking place on and after said cancellation date. Accordingly, unearned premiums on that
business as of the cut-off date are returned to the ceding company, net of a proportionate share of the original ceding commission. In the accounting period of the cancellation effective
date, the amount of unearned premiums returned would be recorded as a reduction of gross premiums written with a like reduction in gross unearned premiums with no effect on gross

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premiums
earned. Thus, the canceling of a contract generally has liquidity and future implications to TRH's business but rarely affects premiums already earned.

TRH
cannot predict in advance the extent to which these cancellation rights would be exercised, if at all, or what effect such cancellations would have on TRH's financial condition or
future operations, but such effect potentially could be materially adverse.

TRH
may secure its obligations under its various reinsurance contracts using trusts and letters of credit. TRH may enter into agreements with ceding companies that require TRH to provide
collateral for its obligations under certain reinsurance contracts with these ceding companies under various circumstances, including where TRH's obligations to these ceding companies exceed
negotiated thresholds. These thresholds may vary depending on TRH's ratings, and a downgrade of TRH's ratings or a failure to achieve a certain rating may increase the amount of collateral TRH is
required to provide. TRH may provide the collateral by delivering letters of credit to the ceding company, depositing assets into a trust for the benefit of the ceding company or permitting the ceding
company to withhold funds that would otherwise be delivered to TRH under the reinsurance contract. The amount of collateral TRH is required to provide typically represents all or a portion of the
obligations TRH may owe the ceding company, often including estimates made by the ceding company of IBNR claims. Since TRH may be required to provide collateral based on the ceding company's estimate,
TRH may be obligated to provide collateral that exceeds TRH's estimates of the ultimate liability to the ceding company. An increase in the amount of collateral TRH is obligated to provide to secure
its obligations may have an adverse impact on, among other things, TRH's ability to write additional reinsurance.

If TRH's risk management methods and pricing models are not effective, TRH's financial condition, results of operations and cash flows could be materially adversely
affected.

TRH's property and casualty reinsurance contracts cover unpredictable events such as hurricanes, windstorms, hailstorms, earthquakes,
volcanic eruptions, fires, industrial explosions, freezes, riots, floods and other natural or man-made disasters, including those that may result from terrorist activity. TRH is also
exposed to multiple insured losses arising out of a single occurrence that have the potential to accumulate to material amounts and affect multiple risks/programs and classes of business. TRH uses
modeling techniques to manage certain of such risks to acceptable limits, although current techniques used to estimate the exposure may not accurately predict the probability of such an event or the
extent of resulting losses. In addition, TRH may purchase retrocession protection designed to limit the amount of losses that it may incur. Retrocession arrangements do not relieve TRH from its
obligations to the insurers and reinsurers from whom TRH assumes business. The failure of retrocessionnaires to honor their obligations could result in losses to TRH. Moreover, from time to time,
market conditions may limit and in some cases prevent reinsurers from obtaining the types and amounts of reinsurance that they consider adequate for their risk management. If TRH is unable to obtain
retrocessional coverage in the amounts it desires or on acceptable terms, TRH's capacity and appetite for risk could change, and TRH's financial condition, results of operations and cash flows may be
materially adversely affected.

Further,
various provisions of TRH's contracts, such as limitations to or exclusions from coverage or choice of legal forum, may not be enforceable in the manner TRH intends, due to,
among other things, disputes relating to coverage and choice of legal forum. Additionally, underwriting is a matter of judgment, involving important assumptions about matters that are inherently
difficult to predict and are beyond TRH's control, and for which historical experience and probability analysis may not provide sufficient guidance. Also, TRH's risk management methods, models,
databases and experience may not adequately address the emergence of various matters, such as the impact of climate change, that could significantly affect TRH's business in future periods. One or
more catastrophic or other events and emerging risks could result in claims or have an impact that substantially exceeds TRH's expectations, which could have a material adverse effect on TRH's
financial condition, results of operations and cash flows.

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The property and casualty reinsurance business is historically cyclical, and TRH expects to experience periods with excess underwriting capacity and unfavorable pricing.

Historically, property and casualty reinsurers have experienced significant fluctuations in operating results. Demand for reinsurance
is influenced significantly by underwriting and investment results of primary insurers and prevailing general economic and market conditions, all of which affect ceding companies' decisions as to the
amount or portion of risk that they retain for their own accounts and consequently how much they decide to cede to reinsurance companies. The supply of reinsurance is related to prevailing prices, the
levels of insured losses and the levels of industry surplus, among other factors, that, in turn, may fluctuate in response to changes in rates of return on investments being earned in the reinsurance
industry. In addition, the supply of reinsurance is affected by a reinsurer's confidence in its ability to accurately assess the probability of expected underwriting outcomes, particularly with
respect to catastrophe losses. As a result, the property and casualty 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 pricing.

The
cyclical trends in the industry and the industry's profitability can also be affected significantly by volatile and unpredictable developments, including what TRH believes to be a
trend of courts to grant increasingly larger awards for certain damages, changes in the political, social or economic environment, natural disasters (such as catastrophic hurricanes, windstorms,
tornadoes, earthquakes and floods), man-made disasters (such as those arising from terrorist activities), fluctuations in interest rates, changes in the investment environment that affect
market prices of and returns on investments and inflationary pressures that may affect the size of losses experienced by primary insurers. TRH cannot predict whether market conditions will improve,
remain constant or deteriorate. Unfavorable market conditions may affect TRH's ability to write reinsurance at rates that TRH considers appropriate relative to the risk assumed. If TRH cannot write
property and casualty reinsurance at appropriate rates, TRH's ability to transact reinsurance business would be significantly and adversely affected.

Increased competition could adversely affect TRH's profitability.

The property and casualty reinsurance industry is highly competitive in virtually all lines. TRH could face increased competition from
new market entrants, existing market participants devoting additional capital to the types of business written by TRH, alternatives to reinsurance available to cedants, such as capital market
alternatives, and government-sponsored reinsurance entities.

Competition
in the types of reinsurance in which TRH is engaged is based on many factors, including the perceived overall financial strength of the reinsurer, ratings of S&P, Best and
Moody's, states or other jurisdictions where the reinsurer is licensed, accredited, authorized or can serve as a reinsurer, capacity and coverages offered, premiums charged, specific terms and
conditions of the reinsurance offered, services offered, speed of claims payment and reputation and experience in the lines of business underwritten.

TRH
competes in the U.S. and international reinsurance markets with numerous international and domestic reinsurance companies, some of which have greater resources than TRH or operate in
different regulatory jurisdictions and tax environments. TRH's competitors include independent reinsurance companies, subsidiaries or affiliates of established worldwide insurance companies,
reinsurance departments of certain primary insurance companies, domestic and European underwriting syndicates and, in some instances, government-owned or subsidized facilities. Certain of these
competitors have been operating substantially longer than TRH and have established long-term and continuing business relationships throughout the industry, which can be a significant
competitive advantage.

Traditional
reinsurers as well as capital market participants from time to time produce alternative products or reinsurance vehicles (such as reinsurance securitizations, catastrophe
bonds and various derivatives, such as swaps, and sidecars) that may compete with certain types of reinsurance, such as

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property
catastrophe. Hedge funds may provide reinsurance and retrocessional protections through captive companies or other alternative transactions on a fully collateralized basis for property and
energy catastrophe business. Over time, these numerous initiatives could significantly affect supply, pricing and competition in the reinsurance industry.

Additionally,
government involvement in the reinsurance markets continues to evolve. For example, although the Florida legislature has recently begun to decrease the amount of
reinsurance offered by
the state-run reinsurer, the Florida Hurricane Catastrophe Fund ("FHCF"), in 2007, Florida enacted legislation that, among other things, increased the aggregate reinsurance capacity of the
FHCF. In addition, the legislation authorized Citizens Property Insurance Corporation, the state-sponsored insurer of last resort, to increase its underwriting capacity and charge lower rates. This
legislation initially reduced and may, as initiatives in the Florida market evolve, continue to change the role of the private reinsurance markets in Florida. Further, if similar measures are taken in
other regions that reduce the demand for private reinsurance within such markets, this may compel current market participants to seek greater participation in different regions and thus increase
competition in other regions such as Latin America, the Caribbean and the coastal Mid-Atlantic and New England states.

A limited number of brokers account for a large portion of TRH's premiums; the loss of all or a substantial portion of the business provided by them may have an adverse
effect on TRH.

The great majority of TRH's premiums are written through brokers. In 2009, non-AIG Group business brokered by companies
controlled by Aon and Marsh accounted for 26% and 17%, respectively, of total gross premiums written. In addition, non-AIG Group business brokered by TRH's 10 largest brokerage sources of
non-AIG Group business accounted for 61% of total gross premiums written in 2009. These brokers also have, or may in the future acquire, ownership interests in insurance and reinsurance
companies that may compete with TRH. The loss of all or a substantial portion of the business provided by TRH's brokers could have a material adverse effect on TRH.

Concentration of TRH's investment portfolios in any particular segment of the economy may have adverse effects.

Concentration of TRH's investment portfolios in any particular industry, group of related industries, asset class or geographic region
could have an adverse effect on TRH's investment portfolios and consequently on TRH's consolidated results of operations or financial condition. While TRH seeks to mitigate this risk by having a
broadly diversified portfolio, events or developments that have a negative effect on any particular industry, group of related industries, asset class or geographic region may have a greater adverse
effect on investment portfolios to the extent that the portfolios are concentrated rather than diversified. Further, TRH's ability to sell assets relating to such particular groups of related assets
may be limited if other market participants are seeking to sell at the same time.

The valuation of TRH's investments includes methodologies, estimations and assumptions which are subject to differing interpretations; a change in interpretations could
result in changes to investment valuations that may adversely affect TRH's results of operations or financial condition.

The vast majority of TRH's investments are measured at fair value using methodologies, estimations and assumptions which are subject to
differing interpretations. Financial instruments with quoted prices in active markets generally have more pricing observability and less judgment is used in measuring fair value. Conversely, financial
instruments traded in other-than-active markets or that do not have quoted prices have less observability and are measured at fair value using valuation models or other pricing
techniques that require more judgment. Investments recorded at fair value in the consolidated balance sheet are classified in a hierarchy for disclosure purposes consisting of three "levels" based on
the

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observability
of inputs available in the marketplace used to measure the fair values. (See Note 3 of Notes to Consolidated Financial Statements for the types of assets included in each of the
three levels.)

Securities
that are less liquid are more difficult to value and trade. During periods of market disruption, including periods of significantly rising or high interest rates, rapidly
widening credit spreads or illiquidity, it may be difficult to value certain of the securities in TRH's investment portfolio if trading becomes less frequent or market data becomes less observable.
There may be certain asset classes that were in active markets with significant observable data that become illiquid due to changes in the financial environment. In such cases, more securities may
fall to Level 3 and thus require more subjectivity and judgment of TRH's management. In addition, prices provided by independent pricing services and independent broker quotes can vary widely
even for the same security.

As
such, valuations may include inputs and assumptions that are less observable or require greater estimation as well as valuation methods which are more sophisticated, thereby resulting
in values which may be greater or less than the value at which the investments may be ultimately sold. Further, rapidly changing or strained credit and equity market conditions could materially impact
the valuation of securities as reported within TRH's consolidated financial statements and the period-to-period changes in value could vary significantly. Decreases in value
may have a material adverse effect on TRH's results of operations or financial condition. (SeeMD&Afor a further discussion of the risks and
uncertainties relating to critical accounting estimates.)

The determination of the amount of other-than-temporary impairment ("OTTI") taken on TRH's investments is subjective and could materially impact
TRH's results of operations or financial condition.

The determination that a security has incurred an other-than-temporary decline in value requires the judgment
of TRH's management and consideration of the fundamental condition of the issuer, its near-term prospects and all relevant facts and circumstances. (See Note 4(g) of Notes to
Consolidated Financial Statements for the methodology TRH uses to determine OTTI.)

There
can, however, be no assurance that TRH has accurately assessed the level of impairments reflected in its financial statements. Furthermore, additional impairments may need to be
taken in the future. Historical trends may not be indicative of future impairments.

An
investment is impaired if its fair value falls below its cost or amortized cost. The determination of whether an impairment is other-than-temporary is
subjective and involves considerable judgment and the consideration of various factors and circumstances. The significant factors include:



If
TRH's determination of OTTI is materially incorrect, it could have a material adverse effect on TRH's financial condition, results of operations and cash flows.

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TRH's liquidity could be materially impaired by future events within or outside of TRH's control, including conditions in the financial and credit markets.

The Company depends on dividends, distributions and other payments from its subsidiaries to fund dividend payments and to fund payments
on its obligations, including debt obligations. Regulatory and other legal restrictions may limit TRH's ability to transfer funds freely, either to or from its subsidiaries. In particular, certain of
TRH's branches or subsidiaries are subject to laws and regulations, including those in foreign jurisdictions, that authorize regulatory bodies to block or reduce transfers of funds to the home office
in the U.S. or TRH's affiliates. These laws and regulations may hinder TRH's ability to access funds that it may need to make payments on its obligations.

Certain
of TRH's investments may become illiquid. TRH's investments include fixed maturities (including asset-backed securities), equity investments and other invested assets (including
alternative investments and direct equity investments). Disruptions in the credit and financial markets may materially affect the liquidity of TRH's investments. If TRH requires significant amounts of
cash on short notice in excess of normal cash requirements in a period of market illiquidity, then TRH may have difficulty selling investments in a timely manner or may be forced to dispose of them
for less than what TRH might otherwise have been able to under other conditions.

Furthermore,
TRH does not currently have a credit facility to help it respond to any liquidity problems it may encounter and from time to time it may be difficult for TRH to obtain a
credit facility. In addition, conditions in the credit and financial markets, changes in the Company's stock price and other factors could make it difficult for TRH to raise cash in the capital
markets.

The impact on TRH of governmental actions made in response to the recent economic crisis is difficult to determine at this time.

In response to the recent financial crises affecting the credit and financial markets and concern about certain financial institutions'
ongoing viability, numerous regulatory and governmental actions have been taken or proposed. Within the U.S., the Federal Reserve has taken action through reduced federal funds rates and the expansion
of acceptable collateral for its loans to provide additional liquidity. Numerous financial institutions have received and may continue to receive capital both in the form of emergency loans and direct
U.S. Government equity investments. Within the United Kingdom and Europe, similar actions, including interest rate cuts and capital injections into financial institutions, have been undertaken. It is
possible that some of TRH's competitors may participate in some of these programs. There can be no assurance as to the effect that any such governmental actions will have on the financial markets
generally or on TRH's financial condition, results of operations and cash flows in particular.

Difficult and volatile conditions in the global capital and credit markets and in the overall economy could materially and adversely affect TRH's operating results,
investment portfolio and financial condition.

Disruption and volatility in the global capital and credit markets and in the overall economy affects TRH's business in a number of
ways, including the following:



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It
is difficult to predict when and how long these conditions will exist and how TRH's markets, business and investments will be adversely affected. Accordingly, these conditions could
have a material adverse effect on TRH's consolidated financial condition or results of operations in future periods.

TRH may be adversely affected by the impact of market volatility and interest rate and foreign currency exchange rate fluctuations.

TRH's principal invested assets are fixed maturity investments and other interest rate sensitive securities, which are subject to the
market risk of potential losses from adverse changes in interest rates, credit spreads or trading liquidity and may also be adversely affected by foreign currency exchange rate fluctuations. Depending
on TRH's classification of the investment, changes in the fair value of TRH's securities are reflected in its consolidated balance sheet, statement of operations and/or statement of comprehensive
income. TRH's investment portfolio is also subject to credit risk resulting from adverse changes in the issuers' ability to repay the debt or the ability of bond insurers to meet their obligations to
pay principal and/or interest if an
issuer is unable to repay its debt. Moreover, issuers may face liquidity pressures as a result of economic conditions and, in turn, may be subject to downgrades by the credit rating agencies. These
risks could materially adversely affect TRH's results of operations and financial condition.

A
principal exposure to foreign currency risk is TRH's obligation to settle claims in foreign currencies. The possibility exists that TRH may incur foreign currency exchange gains or
losses as TRH ultimately settles claims required to be paid in foreign currencies. To mitigate this risk, TRH also maintains investments denominated in certain foreign currencies in which the claims
payments will be made. To the extent TRH does not seek to hedge its foreign currency risk or hedges prove ineffective, the resulting impact of a movement in foreign currency exchange rates could
materially adversely affect TRH's results of operations or financial condition.

TRH's businesses are heavily regulated, and changes in regulation may reduce TRH's profitability and limit its growth.

TRH's reinsurance subsidiaries are subject to extensive regulation and supervision in the jurisdictions in which they conduct business.
This regulation is generally designed to protect the interests of policyholders, as opposed to reinsurers and their stockholders and other investors, and relates to authorization to transact certain
lines of business, capital and surplus requirements, investment limitations, underwriting limitations, transactions with affiliates, dividend limitations, changes in control and a variety of other
financial and non-financial components of an insurance company's business.

In
recent years, the state insurance regulatory framework in the U.S. has come under increased federal scrutiny, and some state legislatures have considered or enacted laws that may
alter or increase state authority to regulate insurance and reinsurance companies and insurance holding companies. Further, the NAIC and state insurance regulators are re-examining
existing laws and regulations, specifically focusing on modifications to holding company regulations, interpretations of existing laws and the development of new laws. Any proposed or future
legislation or NAIC initiatives may be more restrictive than current regulatory requirements or may result in higher costs.

Within
the EU, the Directive was adopted and may be fully implemented by all member countries by 2010. The Directive requires member countries to lift barriers to trade within the EU for
companies that are domiciled in an EU country. TRH operates within the EU through a series of foreign branches and continues to evaluate the potential impact of the implementation of the Directive
which could vary from country to country. TRH has contacted insurance regulators throughout the EU to ascertain their regulatory intent and to discuss each country's rule applicable to TRH. Currently,
TRH continues to conduct business within the EU through its foreign branches with no significant impact on its operations. As each country within the EU adopts rules implementing the Directive, TRH
could be materially

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adversely
affected by the adopted rules. TRH may be required to post additional collateral in EU countries or may need to consider restructuring its business in order to comply with the rules adopted
in EU countries implementing the Directive.

In
addition to the Directive, the EU is phasing in a new regulatory regime for regulation of financial services known as "Solvency II." Solvency II is a principles-based regulatory
regime that seeks to enhance transparency, promote uniformity, and encourage a proactive approach to company solvency. It is built on a risk-based approach to setting capital requirements
of insurers and reinsurers. It is anticipated that Solvency II will not be implemented before 2012. TRH could be materially impacted by the implementation of Solvency II depending on the costs
associated with implementation by each EU country, any increased capitalization requirements and any costs associated with adjustment to TRH's corporate operating structure.

Traditionally,
regulatory and legislative changes affecting the insurance and reinsurance industries, as well as the financial services industry as a whole, are conducted in an organized
and structured manner encompassing the issuance of draft legislation or regulations and a significant period for review, evaluation and comment by the industry and markets. As a result of the
displacement in the financial markets and its impact on the insurance and reinsurance industry, legislators and/or regulators may feel compelled to pass new rules in an expedited manner without the
normal review periods. The passage of new regulatory rules on an expedited basis may have a material adverse impact on TRH if those rules increase the cost of doing business or restrict TRH's ability
to underwrite certain lines of business and/or make certain investments without providing TRH with the normal amount of time to review the new rules, assess their impact on TRH and allow TRH to alter
its business strategies or restructure in the most efficient manner.

TRH's offices that operate in jurisdictions outside the U.S. are subject to certain limitations and risks that are unique to foreign operations.

TRH's international operations are also regulated in various jurisdictions with respect to licensing requirements, currency, amount and
type of security deposits, amount and type of reserves, amount and type of local investments and other matters. International operations
and assets held abroad may be adversely affected by political and other developments in foreign countries, including possibilities of tax changes, nationalization and changes in regulatory policy, as
well as by consequences of hostilities and unrest. The risks of such occurrences and their overall effect upon TRH vary from country to country and cannot easily be predicted. In addition, TRH's
results of operations and net unrealized currency translation gain or loss (a component of accumulated other comprehensive income) are subject to volatility as the value of the foreign currencies
fluctuate relative to the U.S. dollar. Regulations governing technical reserves and remittance balances in some countries may hinder remittance of profits and repatriation of assets.

The loss of key personnel could adversely affect TRH's results of operations, financial condition and cash flows.

TRH relies upon the knowledge and talent of its employees to successfully conduct business. A loss of key personnel could have a
material effect on TRH's results of operations, financial condition and cash flows in future periods.

The Company is a holding company and depends on the ability of its subsidiaries to distribute funds to it in order to meet its financial and other obligations.

The payment of dividends, interest and other obligations by the Company is dependent on the ability of its subsidiaries to pay
dividends. The payment of dividends by TRC and its wholly owned subsidiaries, TRZ and Putnam, is restricted by insurance regulations. Under New York insurance law, TRC and

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Putnam
may pay dividends only out of their statutory earned surplus. Such dividends are limited by statutory formula unless otherwise approved by the NYS ID. At December 31, 2009, TRC had
statutory earned surplus of $2.50 billion, and, in 2009, in accordance with the statutory formula, for the twelve months ended December 31, 2009, TRC could have paid dividends of
approximately $401.6 million without regulatory approval.

TRH's counterparties may acquire certain rights upon a change in control of TRH, which could negatively affect TRH.

TRH is a party to the Applicable Arrangements and Authorizations that contain provisions giving counterparties certain rights
(including, in some cases, termination rights) in
the event of a change in control of the Company or its subsidiaries. If a change in control occurs, cedants may be permitted to cancel contracts on a cut-off or run-off basis,
and TRH may be required to provide collateral to secure premium and reserve balances or may be required to cancel and commute the contract, subject to an agreement between the parties that may be
settled in arbitration. If a contract is cancelled on a cut-off basis, TRH may be required to return unearned premiums, net of commissions. In certain instances, contracts contain dual
triggers, such as a change in control and a ratings downgrade, both of which must be satisfied for the contractual right to be exercisable.

Whether
a ceding company would have cancellation rights in connection with a change in control of TRH depends upon the language of its agreement with TRH. Whether a ceding company
exercises any cancellation rights it has would depend on, among other factors, such ceding company's views with respect to the prevailing market conditions, the pricing and availability of replacement
reinsurance coverage and TRH's ratings.

In
addition, contracts may provide a ceding company with multiple options, such as collateralization or commutation, that would be triggered by a change in control. Collateral
requirements may take the form of trust agreements or be funded by securities held or letters of credit. Upon commutation, the amount to be paid to settle the liability for gross loss reserves would
typically consider a discount to the financial statement loss reserve value, reflecting the time value of money resident in the ultimate settlement of such loss reserves. TRH cannot presently predict
the effects, if any, a change in control will have on the Applicable Arrangements and Authorizations, including the extent to which cancellation rights would be exercised, if at all, or on TRH's
financial condition, results of operations, or cash flows, but such effect could be material.

Future sales of the Company's common stock, or the perception in the public markets that these sales may occur, could depress the price of the Company's common stock.

Sales of substantial amounts of the Company's common stock in the public market, or the perception that these sales could occur, could
adversely affect the price of the Company's common stock and could impair TRH's ability to raise capital through the sale of additional shares. In connection with the Offering, TRH entered into a
registration rights agreement with the AIG Group. The registration rights agreement provides the AIG Group with registration rights relating to the remaining shares of the Company's common stock held
by the AIG Group. The AIG Group may require TRH to register under the federal securities law all or a portion of these shares. The registration rights are subject to certain limitations, including
TRH's right to temporarily suspend the registration of the shares. If the AIG Group exercises its registration rights and sells a large number of shares of the Company's common stock, the price of the
Company's common stock could decline.

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Provisions in the Company's certificate of incorporation and by-laws and the insurance laws of the jurisdictions in which TRH operates could discourage another
company from acquiring TRH and may prevent attempts by the Company's stockholders to replace or remove TRH's current management.

Some provisions of the Company's certificate of incorporation and by-laws may have the effect of delaying, discouraging or
preventing a merger, acquisition or other change in control that the Company's stockholders may consider favorable, including transactions in which stockholders may receive a premium for their shares.
In addition, these provisions may frustrate or prevent any attempts by the Company's stockholders to replace or remove TRH's current management by making it more difficult for stockholders to replace
or remove the Company's board of directors. These provisions include:



In
addition, at any time and without stockholder approval, the Company's board of directors may amend the Company's by-laws in a manner that has the effect of delaying,
discouraging or preventing a merger, acquisition or other change in control that the Company's stockholders may consider favorable, including transactions in which stockholders may receive a premium
for their shares.

TRH
is also subject to the laws governing insurance holding companies of various states and countries where TRH's reinsurance subsidiaries are domiciled. Under these laws, a person
generally must obtain the applicable insurance regulator's approval to acquire, directly or indirectly, ten percent (or sometimes five percent) or more of the outstanding voting securities of TRH's
reinsurance subsidiaries. These laws may prevent, delay or defer a change in control of the Company or TRH's reinsurance company subsidiaries.

The market price of the Company's common stock has been volatile and may continue to be volatile, which may make it difficult or impossible for stockholders to obtain a
favorable selling price for their shares.

The Company's common stock price has been volatile. Volatility in the market price of the Company's common stock may prevent
stockholders from being able to sell their shares at or above the price they paid for their shares. TRH currently expects that the Company's common stock price may continue to be volatile due to
factors such as:



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The
stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies like TRH.
These broad market and industry factors may materially reduce the market price of the Company's common stock, regardless of TRH's operating performance.

Item 1B.Unresolved Staff Comments

None.

Item 2.Properties

As of December 31, 2009, the office space of TRH's New York headquarters and its Chicago and Toronto offices are rented from the
AIG Group, which leases it from others. The lease for the office space occupied by TRH's New York headquarters expires in 2021. All other offices are rented from unrelated third parties.

Item 3.Legal Proceedings

TRH, in common with the reinsurance industry in general, is subject to litigation in the normal course of its business. TRH does not
believe that any pending litigation will have a material adverse effect on its consolidated results of operations, financial position or cash flows.

On
September 30, 2009, TRC initiated arbitration proceedings against United Guaranty Residential Insurance Company, United Guaranty Mortgage Indemnity Company, United Guaranty
Credit Insurance Company and United Guaranty Residential Insurance Company of North Carolina (collectively, "UGC"), each a subsidiary of the AIG Group. The arbitration proceedings involve certain
contracts related to subprime mortgages and credit default insurance pursuant to which UGC purchased reinsurance from TRC (the "Disputed Contracts"). TRC seeks in the proceedings, among other things,
to rescind the Disputed Contracts. While the final outcome cannot be predicted with certainty, TRH believes these arbitration proceedings, when resolved, will not have a material adverse effect on
TRH's consolidated results of operations, financial position or cash flows.

In
addition, from time to time, regulators commence investigations into insurance and reinsurance-industry practices. TRH has cooperated, and will continue to cooperate, in producing
documents and other information in response to subpoenas and other requests. While TRH does not believe that any of these inquiries will have a material impact on TRH's business or financial results,
it is not possible to predict with any certainty at this time what impact, if any, these inquiries may have on TRH's business or financial results.

Item 4.Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of security holders during the fourth quarter of 2009.

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PART II

Item 5.Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer  Purchases of Equity
Securities

The following table sets forth the high and low sales prices and the dividends declared per share of Transatlantic
Holdings, Inc. (the "Company") Common Stock ("TRH
shares") on the New York Stock Exchange Composite Tape for each of the four quarters of 2009 and 2008:

2009

2008High

Low

Dividends
Declared

High

Low

Dividends
DeclaredFirst Quarter

$
40.52

$
26.16

$
0.19

$
73.76

$
62.06

$
0.16Second Quarter


46.83


34.92


0.20


69.62


56.47


0.19Third Quarter


51.36


41.48


0.20


66.95


51.90


0.19Fourth Quarter


56.42


49.01


0.20


57.25


30.17


0.19


The
Company paid each dividend in the quarter following the quarter of declaration.

The
declaration and payment of future dividends, if any, by the Company will be at the discretion of the Board of Directors and will depend upon many factors, including the Company's
consolidated earnings, financial condition and business needs, capital and surplus requirements of the Company's operating subsidiaries, regulatory considerations and other factors. See Note 15
of Notes to Consolidated Financial Statements for restrictions on the Company's operating subsidiaries' ability to pay dividends.

As
of January 31, 2010, the approximate number of holders of TRH shares, including those whose TRH shares are held in nominee name, was 38,000.

In
November 2000, the Board of Directors authorized the purchase of up to 200,000 TRH shares (375,000 shares after adjustment for subsequent stock splits) from time to time in the open
market or through negotiated transactions (the "November 2000 Authorization"). In December 2009, the Board of Directors authorized the purchase of up to $200 million of TRH shares from time to
time in the open market or via negotiated transactions through December 31, 2011 (the "December 2009 Authorization"). The December 2009 Authorization superseded the 170,050 shares then still
available for repurchase under the November 2000 Authorization. In the fourth quarter of 2009, the Company repurchased 59,600 shares of its common stock as detailed below:

Total Number of
Shares
Purchased(1)

Average Price
Paid Per Share

Total Number of
Shares
Purchased as
Part of the
December 2009
Authorization

Dollar Amount
Still Available
Under the
December 2009
Authorization at
End of Month
(in thousands)October 2009




$





$
November 2009











December 2009


59,600


51.51


59,600


196,930Total


59,600


51.51


59,600

$
196,930


(1)Does
not include 50,978 shares relating to options exercised in the fourth quarter of 2009 that were attested to in satisfaction of the exercise price by
holders of the Company's employee or director stock options.


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Performance Graph

The following Performance Graph compares the cumulative total return to stockholders on TRH shares for a five-year period
(December 31, 2004 to December 31, 2009) with the cumulative total return of the S&P 500 stock index (the "S&P 500 Index"), a new peer group of companies (the "New Peer
Group") and the peer group of companies used in the 2008 Annual Report on Form 10-K (the "Old Peer Group"). Dividend reinvestment has been assumed and returns have been weighted to
reflect relative stock market capitalization.

The
Old Peer Group consists of fifteen reinsurance companies to which TRH compared its business and operations: Arch Capital Group Ltd., Axis Capital Holdings Ltd.,
Endurance Specialty Holdings Ltd., Everest Re Group Ltd., IPC Holdings, Ltd. (through September 4, 2009, when it was acquired by Validus Holdings, Ltd.), Max Capital
Group Ltd., Montpelier Re Holdings Ltd., Odyssey Re Holdings Corp. (through October 28, 2009, when it was acquired by Fairfax Financial Holdings Limited), Partner Re Ltd.,
Platinum Underwriters Holdings, Ltd., PXRE Group Ltd. (through August 6, 2007, when it was acquired by Argo Group International Holdings, Ltd.), RenaissanceRe
Holdings Ltd., SCOR, SCOR Holding (Switzerland) (formerly known as Converium Holding AG, through June 27, 2008 when it was delisted) and Swiss Reinsurance Co. The performance of
IPC Holdings, Ltd., Odyssey Re Holdings Corp., PXRE Group Ltd. and SCOR Holding (Switzerland) are included for a shorter period since they were not public companies for the entire
five-year performance period. The New Peer Group consists of the Old Peer Group with the addition of Validus Holdings, Ltd. starting on September 8, 2009, the first trading
day following its acquisition of IPC Holdings, Ltd.

Cumulative Total Return to Stockholders  Value of $100 Invested in December 2004

Comparison of Cumulative Five Year Total Return

GRAPHIC

Company / Index

Dec. 2004

Dec. 2005

Dec. 2006

Dec. 2007

Dec. 2008

Dec. 2009Transatlantic Holdings, Inc.

$
100.00

$
109.46

$
102.01

$
120.38

$
67.26

$
89.12S&P 500 Index


100.00


104.91


121.48


128.16


80.74


102.11New Peer Group


100.00


103.05


118.72


116.54


97.40


105.44Old Peer Group


100.00


103.05


118.72


116.54


97.40


105.31


35

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Table of Contents

Item 6.Selected Financial Data

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES

The Selected Financial Data should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results
of Operations and the consolidated financial statements and accompanying notes included elsewhere herein.

Years Ended December 31,2009

2008

2007

2006

2005(in thousands, except per share data and ratios)Statement of Operations Data:Net premiums written

$
3,986,101

$
4,108,092

$
3,952,899

$
3,633,440

$
3,466,353Net premiums earned

$
4,039,082

$
4,067,389

$
3,902,669

$
3,604,094

$
3,384,994Net losses and loss adjustment expenses incurred


(2,679,171
)

(2,907,227
)

(2,638,033
)

(2,462,666
)

(2,877,042
)Net commissions


(927,918
)

(980,626
)

(980,121
)

(903,666
)

(857,450
)(Decrease) increase in deferred acquisition costs


(12,406
)

6,956


16,901


13,471


14,648Other underwriting expenses


(158,181
)

(131,555
)

(115,760
)

(102,339
)

(79,526
)Underwriting profit (loss)(1)


261,406


54,937


185,656


148,894


(414,376
)Net investment income


467,402


440,451


469,772


434,540


343,247Realized net capital (losses) gains(2)


(70,641
)

(435,541
)

9,389


10,862


39,884Gain on early extinguishment of debt


9,869


10,250








Interest on senior notes


(43,454
)

(43,359
)

(43,421
)

(43,405
)

(2,050
)Other expenses, net


(28,549
)

(23,515
)

(25,644
)

(10,983
)

(12,803
)Income (loss) before income taxes


596,033


3,223


595,752


539,908


(46,098
)Income (taxes) benefits


(118,371
)

99,031


(108,611
)

(111,756
)

84,008Net income

$
477,662

$
102,254

$
487,141

$
428,152

$
37,910Per Common Share:Net income:Basic

$
7.20

$
1.54

$
7.37

$
6.49

$
0.58Diluted


7.15


1.53


7.31


6.46


0.57Cash dividends declared


0.79


0.73


0.62


0.53


0.46Share Data:Weighted average common shares outstanding:Basic


66,381


66,270


66,124


65,955


65,836Diluted


66,802


66,722


66,654


66,266


66,169Ratios:(3)Loss ratio


66.3
%

71.5
%

67.6
%

68.3
%

85.0
%Commission ratio


23.3


23.9


24.7


24.7


24.9Other underwriting expense ratio


3.9


3.2


2.9


2.9


2.3Underwriting expense ratio


27.2


27.1


27.6


27.6


27.2Combined ratio


93.5
%

98.6
%

95.2
%

95.9
%

112.2
%


36

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Table of Contents



As of December 31,2009

2008

2007

2006

2005(in thousands, except per share data)Balance Sheet Data:Total Investments

$
12,315,395

$
10,229,557

$
12,500,540

$
11,130,832

$
9,043,717Cash and cash equivalents


195,723


288,920


255,432


205,264


198,120Total assets


14,943,659


13,376,938


15,484,327


14,268,464


12,364,676Unpaid losses and loss adjustment expenses


8,609,105


8,124,482


7,926,261


7,467,949


7,113,294Unearned premiums


1,187,526


1,220,133


1,226,647


1,144,022


1,082,282Senior notes


1,033,087


722,243


746,930


746,633


746,353Total stockholders' equity


4,034,380


3,198,220


3,349,042


2,958,270


2,543,951Book value per common share(4)

$
60.77

$
48.19

$
50.56

$
44.80

$
38.60


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Table of Contents

Cautionary Statement Regarding Forward-Looking Information

This Annual Report on Form 10-K and other publicly available documents may include, and Transatlantic
Holdings, Inc. and its subsidiaries (collectively, "TRH"), through their officers and representatives, may from time to time make, statements which may constitute "forward-looking statements"
within the meaning of the U.S. federal securities laws. These forward-looking statements are identified, including without limitation, by their use of such terms and phrases as:

"intend"

"plans""intends"

"anticipates""intended"

"anticipated""goal"

"should""estimate"

"think""estimates"

"thinks""expect"

"designed to""expects"

"foreseeable future""expected"

"believe""project"

"believes""projects"

"scheduled""projected"

and similar expressions"projections"


These
statements are not historical facts but instead represent only TRH's belief regarding future events and financial performance, many of which, by their nature, are inherently
uncertain and outside of TRH's control. These statements may address, among other things, TRH's strategy and expectations for growth, product development, government and industry regulatory actions,
legal matters, financial, credit and industry market conditions, financial results and reserves, as well as the
expected impact on TRH of natural and man-made (e.g., terrorist attacks) catastrophic events and political, economic, legal and social
conditions.

It
is possible that TRH's actual results, financial condition and expected outcomes may differ, possibly materially, from those anticipated in these forward-looking statements. Important
factors that could cause TRH's actual results to differ, possibly materially, from those discussed in the specific forward-looking statements may include, but are not limited to, uncertainties
relating to economic conditions, financial and credit market conditions, cyclical industry conditions, credit quality, government, regulatory and accounting policies, volatile and unpredictable
developments (including natural and man-made catastrophes), the legal environment, legal and regulatory proceedings, failures of pricing models to accurately assess risks, the reserving
process, the competitive environment in which TRH operates, interest rate and foreign currency exchange rate fluctuations and the uncertainties inherent in international operations.

These
factors are further discussed throughoutManagement's Discussion and Analysis of Financial Condition and Results of Operationsand
inPart I,Item 1A.Risk Factorsof this
Form 10-K. TRH is not under any obligation to (and expressly disclaims any such obligation to) update or alter any forward-looking statement, whether written or oral, that may be
made from time to time, whether as a result of new information, future events or otherwise.

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Table of Contents

Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations  ("MD&A")

Throughout this Annual Report on Form 10-K, Transatlantic Holdings, Inc. (the "Company", and collectively
with its subsidiaries, "TRH") presents its operations in the way it believes will be most meaningful. In certain instances, TRH's unpaid losses and loss adjustment expenses ("LAE") are presented net
of related reinsurance recoverable ("net loss reserves") in accordance with principles prescribed or permitted by insurance regulatory authorities, as these are standard measures in the insurance and
reinsurance industries.

Financial Statements

The following discussion refers to the consolidated financial statements of TRH as of December 31, 2009 and 2008 and for each of
the three years in the period ended December 31, 2009, which are presented elsewhere herein. Financial data discussed below have been affected by certain transactions between TRH and related
parties. (See Notes 7, 12, 14 and 16 of Notes to Consolidated Financial Statements.)

Executive Overview

The operations of the Company are conducted principally by its three major operating subsidiariesTransatlantic Reinsurance
Company® ("TRC"), Trans Re Zurich ("TRZ") and Putnam Reinsurance Company ("Putnam")and are managed based on its geographic segments. Through its operations on six continents,
TRH offers reinsurance capacity on both a treaty and facultative basisstructuring programs for a full range of property and casualty products, with an emphasis on specialty lines, which
may exhibit greater volatility of results over time than most other lines. Such capacity is offered through reinsurance brokers and, to a lesser extent, directly to domestic and foreign insurance and
reinsurance entities.

TRH
conducts its business and assesses performance through segments organized along geographic lines. The Domestic segment principally includes financial data from branches in the United
States except Miami, as well as revenues and expenses of the Company (including interest expense on the Company's senior notes and stock-based compensation expense). Data from the London and Paris
branches and from TRZ are reported in the aggregate as International-Europe and considered as one segment due to operational and regional similarities. Data from the Miami (which serves Latin America
and the Caribbean), Toronto, Hong Kong and Tokyo branches are grouped as International-Other and represents the aggregation of segments that are generally not material.

TRH's
operating strategy emphasizes product and geographic diversification as key elements in managing its level of risk concentration. TRH seeks to focus on more complex risks within
the casualty and property lines and adjusts its mix of business to take advantage of market opportunities. Over time, TRH has most often capitalized on market opportunities when they arise by
strategically expanding operations in an existing location or opening a branch or representative office in new locations. TRH's operations serving international markets leverage TRH's product
knowledge, worldwide resources and financial strength, typically utilizing indigenous management and staff with a thorough knowledge of local markets and product characteristics.

In
2009, casualty lines comprised 71% of TRH's net premiums written, while property lines totaled 29%. In addition, treaty reinsurance totaled 97% of net premiums written, with the
balance representing facultative accounts. Business written by international operations represented 49% of net premiums written in 2009.

TRH's
major sources of revenues are net premiums earned for reinsurance risks undertaken and income from investments. The great majority of TRH's investments are in fixed maturity
securities held to

39

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Table of Contents

maturity
and available for sale. In general, premiums are received significantly in advance of related claims payments.



Prior to June 10, 2009 and as of December 31, 2008 and 2007, AIG beneficially owned approximately 59% of the Company's
outstanding shares. On June 10, 2009, AIG and American Home Assurance Company ("AHAC"), a wholly owned subsidiary of AIG, consummated the secondary public offering (the "Offering") of
29.9 million issued and outstanding shares of the common stock of the Company owned by AIG and AHAC. TRH did not receive any proceeds from the Offering. According to the Form 13F filed
on February 18, 2010 by AIG, as of December 31, 2009, the AIG Group had sole voting authority over 9.2 million shares of the Company's common stock, representing approximately
13.8% of the Company's outstanding shares as of December 31, 2009.

As
a result of the Offering, the Company is no longer considered a "controlled company" pursuant to the corporate governance listing standards of the New York Stock Exchange ("NYSE") and
is no longer able to avail itself of the exemptions from certain of the NYSE's corporate governance listing standards applicable to controlled companies (subject to the rules of the NYSE permitting a
phase in period for compliance with such corporate governance listing standards).

In
connection with the Offering, TRH entered into a Master Separation Agreement (the "MSA") with AIG and AHAC on May 28, 2009. The MSA sets forth TRH's agreements with AIG and
AHAC regarding the orderly separation of TRH from AIG, AHAC and their subsidiaries (the "Separation") and governs certain aspects of TRH's relationship with AIG, AHAC and their subsidiaries on a going
forward basis, including their waiver of certain rights they may have under intercompany agreements and insurance agreements.

In
connection with the Offering, TRH also entered into (a) a transition services agreement (the "TSA") with AIG; (b) a stockholders agreement (the "Stockholders Agreement")
with AIG and AHAC; and (c) a registration rights agreement (the "Registration Rights Agreement") with AIG and AHAC. The TSA sets forth TRH's agreements with AIG regarding the provision by AIG,
AHAC and their subsidiaries of limited services to TRH for a specified period of time following the Separation. As of December 31, 2009, all service agreements under the TSA have expired. The
Stockholders Agreement provides AIG and AHAC with certain information and consent rights and will subject AIG, AHAC, and their respective subsidiaries, affiliates, officers and directors to certain
standstill provisions. Additionally, pursuant to the Stockholders Agreement, AIG, AHAC and their subsidiaries are subject to voting and transfer restrictions covering their shares of the Company's
common stock. The Registration Rights Agreement provides AIG and AHAC with registration rights relating to any shares of the Company's common stock held by them. AIG and AHAC may require TRH to
register under the Securities Act of 1933 all or a portion of these shares. The registration rights are subject to certain limitations, including TRH's right to temporarily suspend the registration of
shares.

TRH
is a party to numerous contracts, agreements, licenses, permits, authorizations and other arrangements (the "Applicable Arrangements and Authorizations") that contain provisions
giving counterparties certain rights (including, in some cases, termination rights) in the event of a change in control of the Company or its subsidiaries. If a change in control occurs, cedants may
be permitted to cancel contracts on a cut-off or run-off basis, and TRH may be required to provide collateral to secure premium and reserve balances or may be required to
cancel and commute the contract, subject to an agreement between the parties that may be settled in arbitration. If a contract is cancelled on a cut-off basis, TRH may be required to
return unearned premiums, net of commissions.

The
Offering may be deemed to have constituted a change in control of TRH under a portion of TRH's non-AIG Group reinsurance agreements. Whether a ceding company would have cancellation

40

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Table of Contents

rights
in connection with the Offering depends upon the language of its agreement with TRH. Whether a ceding company exercises any cancellation rights it has would depend on, among other factors, such
ceding company's views with respect to the prevailing market conditions, the pricing and availability of replacement reinsurance coverage and TRH's ratings. As of December 31, 2009, no cedants
have notified TRH of their intention to exercise any cancellation rights they may have as a result of the Offering.

SeeItem 1A.Risk Factorsfor a description of the possible impact of a change in control on TRH.



The following table summarizes TRH's revenues, income before income taxes and net income for the periods indicated:

Years Ended December 31,2009

2008

2007Amount

Change
From
Prior Year

Amount

Change
From
Prior Year

Amount(dollars in millions)Revenues

$
4,445.7


8.9
%
$
4,082.5


(6.8
)%
$
4,381.8Income before income taxes


596.0





3.2


(99.5
)

595.8Net income


477.7


367.1


102.3


(79.0
)

487.1


Revenues
increased in 2009 compared to 2008 due primarily to a decrease in realized net capital losses. The decrease in realized net capital losses was due principally to a decrease in
other-than-temporary impairments ("OTTI") and an increase in realized net capital gains (losses) on sales and redemptions of securities in 2009 as financial and credit markets
stabilized and partially recovered from the turmoil at the end of 2008. See Note 4(e) of Notes to Consolidated Financial Statements ("Note 4(e)") for a breakdown of realized net capital
losses.

Revenues
decreased in 2008 compared to 2007 due primarily to significant realized net capital losses and a decrease in net investment income, partially offset by an increase in net
premiums earned. The significant realized net capital losses of $435.5 million, including $317.8 million of OTTI, in 2008 generally resulted from declines in market values due to the
downturn in the U.S. economy, turmoil in the financial markets, financial market illiquidity and issuer-specific credit events. The decrease in net investment income was due largely to a decrease in
investment results from other invested assets, principally related to alternative investments, partially offset by an increase in fixed maturity income. The increase in net premiums earned emanated
primarily from Domestic operations and the Miami and London branches. The most significant increases in net premiums earned occurred in the accident and health ("A&H"), property, credit and auto
liability lines, partially offset by significant decreases in the fidelity and ocean marine lines. In general, changes in net premiums earned between periods were influenced by prevailing market
conditions and strategic decisions by TRH's management in recent periods.

While
there were no significant catastrophe losses for events occurring in 2009, the year 2009 included a reduction of pre-tax net catastrophe costs incurred of ($6) million
relating to events occurring in prior years. Results for 2008 included pre-tax net catastrophe costs of $170 million principally arising from Hurricane Ike. Results for 2007
included pre-tax net catastrophe costs of $55 million principally arising from European Windstorm Kyrill and floods in the U.K. Catastrophe costs include losses incurred and related
reinstatement premiums, the details of which can be found in Note 10 of Notes to Consolidated Financial Statements ("Note 10"). Reinstatement premiums may arise on both assumed and ceded
business as a result of contractual provisions found in certain catastrophe excess-of-loss reinsurance contracts that require additional premium to be paid in the event of a
loss to reinstate coverage for the remaining portion of the contract period. Net assumed (ceded) reinstatement premiums serve to increase (decrease) net premiums written and earned.

41

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Income
before income taxes and net income increased in 2009 compared to 2008 primarily as a result of a decrease in realized net capital losses and increased underwriting profit. The
increase in underwriting profit was primarily due to decreased catastrophe costs and an increase in favorable net loss reserve development in 2009. The increase in net income between periods was
reduced by the significant tax expense in 2009 caused by the improved results in 2009. Decreased catastrophe
costs and increased favorable net loss reserve development had the net impact of increasing pre-tax underwriting profit in 2009 by $216.2 million compared to 2008.

Income
before income taxes and net income decreased in 2008 as compared to 2007 principally due to significant realized net capital losses, including significant amounts of OTTI, and
decreases in underwriting profit (loss) and net investment income. The decrease in net income between periods was mitigated by significant deferred tax benefits in 2008. The decrease in underwriting
profit (loss) was largely due to decreased current accident year underwriting profit (loss) excluding catastrophe costs in 2008 compared to 2007 and a significant increase in net catastrophe costs
partly offset by a decrease in net loss reserve development. Higher catastrophe costs and lower net loss reserve development in 2008 had the net impact of decreasing pre-tax underwriting profit (loss)
in 2008 by $47.3 million compared to 2007. (See Note 17 of Notes to Consolidated Financial Statements for underwriting profit (loss) by segment.)

Underwriting
profit (loss) is defined as net premiums earned less net losses and LAE incurred, net of commissions and other underwriting expenses, plus (minus) any increase (decrease) in
deferred acquisition costs. (SeeOperational Reviewfor further discussion.)



The market conditions in which TRH operates have historically been cyclical, experiencing periods of price erosion followed by rate
strengthening as a result of catastrophes or other significant losses or events that affect the overall capacity of the industry to provide coverage. For the years under discussion, the reinsurance
market has been characterized by significant competition worldwide in most lines of business. Additionally, TRH is exposed to the operating cycles of primary insurers as the rates charged by, and the
policy terms associated with, primary insurance agreements may affect the rates charged by, and the policy terms associated with, reinsurance agreements, particularly for pro rata reinsurance
business.

Following
improvements in the U.S. property marketplace after significant catastrophe losses in 2004 and 2005, additional capacity entered the reinsurance market in the form of new
companies in Bermuda as well as the entrance of capacity from the capital markets via sidecars, catastrophe bonds and other derivative products. The entrance of the new capacity slowly eroded property
insurance and reinsurance rates through the first half of 2008, although the marketplace remained generally favorable.

During
the second half of 2008, however, the global credit and financial crisis began to significantly impact the insurance and reinsurance markets. First, many alternative reinsurance
solutions (such as sidecars) were terminated or not renewed. Second, the impairment of insurance company balance sheets meant historical risk levels in many cases now represented a higher than desired
percentage
of surplus. Third, Hurricane Ike produced one of the highest insured losses from a natural peril event despite being only a category 2 storm. These changes produced an increase in demand for
traditional reinsurance from insurance companies as they could not raise capital by issuing debt, did not want to issue equity at depressed stock prices and lost the ability to access the capital
markets for alternative reinsurance solutions. In addition, many reinsurers, affected by similar issues, could not maintain the levels of capacity that they had in recent years to take on risk.

Trends
in reinsurance rates at the beginning of 2009 were inconsistent, with rates increasing, staying level or deteriorating depending on the line of business or region. However, as
2009 progressed, improvements in general economic conditions, the strengthening of insurers' and reinsurers' balance

42

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sheets
and the low level of catastrophe losses in 2009 put downward pressure on reinsurance rates. Insurers had greater capacity to retain risk and increased access to capital market alternatives to
reinsurance compared to late 2008, while the strengthening of reinsurer balance sheets increased the amount of capacity available in the reinsurance market. Despite weakness in primary rates in
several casualty lines and an increase in capacity, reinsurers generally remained disciplined during the January 1, 2010 renewal period. The January 1, 2010 renewals generally saw higher
net retentions by cedants and reinsurance rates remaining within acceptable levels while exhibiting greater stability than primary rates.

More
specifically, rates on casualty lines were uneven in 2009. Certain lines, like directors' and officers' liability ("D&O") of financial institutions have shown rate increases, while
others have been flat or shown decreases. Results in many casualty lines have benefited from favorable accident year loss severity and frequency trends in 2009, but these trends may not be
sustainable. During the January 1, 2010 renewal period, casualty insurance rates generally remained under pressure, with some modest improvements in certain lines. Rates will likely remain
under pressure in the near future as excess capacity, good results in recent accident years and strong cedant balance sheets hinder improvements. However, the current low investment yield environment
combined with the potential of increased inflation in the future and deterioration from current favorable loss severity and frequency trends may lead to a hardening of casualty reinsurance rates in
the future.

In
property lines, some catastrophe-exposed regions, particularly peak zones, saw significant rate increases in the first half of 2009, which leveled off in the second half of 2009.
Overall this business remained acceptable through the January 1, 2010 renewal period, with rates in the U.S. down slightly and rates outside of the U.S. generally flat. The strengthening of
insurers' balance sheets also led to higher net retentions by cedants during the January 1, 2010 renewal period. The lack of significant catastrophe losses in 2009 and the strengthening of
cedants' balance sheets may lead to more downward pressure on property reinsurance rates going forward.

The
existence of favorable or improving market conditions in certain regions and lines of business does not necessarily translate into ultimate pricing adequacy for business written
under such
conditions. In addition, there can be no assurance that these favorable or improving conditions will occur or remain in effect in the future.

Starting
in mid-2007 and continuing through 2009, the U.S. residential mortgage market and the global credit and financial markets experienced serious disruptions, although
some improvement was evident by the end of 2009. TRH's operating results and financial condition have been adversely affected and may continue to be adversely affected by this disruption. (See Disruption in Global Credit and
Financial Markets.) However, the current global credit and financial markets may present attractive opportunities for
strategic acquisitions and investments, particularly given TRH's strong capital position, financial resources and reputation, which TRH may, from time to time, evaluate and pursue.

Further
information relating to items discussed in thisExecutive Overviewmay be found throughout MD&A.

Critical Accounting Estimates

This discussion and analysis of financial condition and results of operations is based on TRH's consolidated financial statements which
have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP"). The preparation of these financial statements requires the use of estimates and judgments
that affect the reported amounts and related disclosures. TRH relies on historical experience and on various other assumptions that it believes to be reasonable, under the circumstances, to make
judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates.

43

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TRH
believes its most critical accounting estimates are those with respect to loss reserves, fair value measurements of certain financial assets, OTTI of investments, premium revenues
and deferred acquisition costs, as they require management's most significant exercise of judgment on both a quantitative and qualitative basis in the preparation of TRH's consolidated financial
statements and footnotes. The accounting estimates that result require the use of assumptions about certain matters that are highly uncertain at the time of estimation. To the extent actual experience
differs from the assumptions used, TRH's results of operations and financial condition would be affected, possibly materially. A discussion of these most critical accounting estimates follows:



Estimates of loss reserves take into account TRH's assumptions with respect to many factors that will affect ultimate loss costs but
are not yet known. The ultimate process by which actual carried reserves are determined considers not only actuarial estimates but a myriad of other factors. Such factors, both internal and external,
which contribute to the variability and unpredictability of loss costs, include trends relating to jury awards, social inflation, medical inflation, worldwide economic conditions, tort reforms, court
interpretations of coverages, the regulatory environment, underlying policy pricing, terms and conditions and claims handling, among others. In addition, information gathered through underwriting and
claims audits is also considered. To the extent that these assumptions underlying the loss reserve estimates are significantly incorrect, ultimate losses may be materially different from the estimates
included in the financial statements and may materially and adversely affect results of operations and financial condition. The impact of those differences is reflected in the period they become
known.

The
reserving process is inherently difficult and subjective, especially in view of changing legal and economic environments which impact the development of loss reserves, and therefore
quantitative techniques frequently have to be supplemented by subjective considerations and managerial judgment. In addition, trends that have affected development of liabilities in the past may not
necessarily occur or affect development to the same degree in the future.

While
this process is difficult and subjective for ceding companies, the inherent uncertainties of estimating loss reserves are even greater for reinsurers, due primarily to the
longer-term nature of much reinsurance business, the diversity of development patterns among different types of reinsurance treaties or facultative contracts, the necessary reliance on the
ceding companies for information regarding reported claims and differing reserving practices among ceding companies, which are subject to change without notice. Nevertheless, data received from
cedants is subjected to audits periodically by TRH claims and underwriting personnel, to help ensure that reported data is supported by proper documentation and conforms to contract terms, and is
analyzed, as appropriate, by TRH underwriting and actuarial personnel. Such analysis often includes a detailed review of reported data to assess the underwriting results of reinsurance assumed and to
explain any significant departures from expected performance. Over time, reported loss information is ultimately corroborated when such information eventually attains paid status.

Standard
actuarial methodologies employed to estimate ultimate losses incorporate the inherent "lag" from the time claims are reported to the cedant to when the cedant reports the claims
to the reinsurer. Certain actuarial methodologies may be more appropriate than others in instances where this "lag" may not be consistent from period to period. Consequently, additional actuarial
judgment is employed in the selection of methodologies to best incorporate the potential impact of this situation.

Generally,
for each line of business, significant actuarial judgments are made with respect to the following factors used in the loss reserve setting process:



44

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During
the loss settlement period, which can be many years in duration, additional facts regarding individual claims and trends usually become known. As these facts and trends emerge, it
usually becomes necessary to refine and adjust the loss reserves upward or downward and even then the ultimate net liability may be materially different from the revised estimates. There is potential
for significant variation in the development of loss reserves when actual costs differ from those costs implied by the use of the assumptions employed in the reserve setting process. This is
particularly true for assumed reinsurance of long-tail casualty classes. Among the most critical assumptions are those made for ELRs and loss development factors.

The
methodologies that TRH employed to assess the reasonableness of loss reserve estimates included the paid loss development, incurred loss development, paid Bornhuetter-Ferguson
("B-F") and incurred B-F methods. The actuarial methods that TRH
employs to determine the appropriate loss reserves for short tail lines of business are the same as those employed for longer-tail lines. However, the judgments that are made with regard
to factors such as loss trends, ELRs and loss development factors for shorter-tail lines generally have much less of an effect on the determination of the loss reserve amount than when
those same judgments are made regarding longer-tailed lines of business. In contrast to the longer-tailed lines of business, reported losses for the shorter-tailed classes, such as the property lines
of business (e.g.,fire and homeowners multiple peril) and certain marine and energy classes, generally reach the ultimate level of incurred
losses in a relatively short period of time. Rather than having to rely on assumptions regarding ELRs and loss development factors for many accident years for a given line, these assumptions are
generally only relevant for the most recent accident year or two. Therefore, these assumptions tend to be less critical and the reserves calculated pursuant to these assumptions are subject to less
variability for the shorter-tailed lines of business.

The
characteristics of each line of business are considered in the reserving process. TRH's major lines of business and reserve methodologies are discussed
below:



45

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A
comprehensive annual loss reserve review is conducted in the fourth quarter of each year. The review is conducted in full detail for each class or line of business for each
underwriting office and consists of more than one hundred individual analyses. In completing these detailed actuarial reserve analyses significant actuarial judgment is often employed. TRH is required
to make numerous assumptions, including the selection of loss development factors and ELRs. Additionally, TRH needs to select the most appropriate actuarial method(s) to employ for each class of
business.

Triangles
of written premium, paid losses and incurred losses are organized by underwriting year evaluated at six month intervals. The data triangles are split by branch, contract type
(i.e., treaty versus facultative), line of business and often between excess-of-loss and pro rata business. The line of business
groupings vary by branch and are reviewed annually to ensure a proper balance between homogeneity and credibility of data. In the loss development methods, paid and incurred losses by underwriting
year are projected to an ultimate basis by applying appropriate age to ultimate development factors to the inception to date paid and incurred losses. The development factors are selected based on
curves fitted to the historical average which best represent the data. In the B-F methods, estimates of unpaid and unreported losses are arrived at by multiplying underwriting year earned
premium by an ELR and an estimated percentage of unpaid or unreported losses. These percentages of unpaid or unreported losses are derived from the loss development factors described above. These
methods yield an indication of the ultimate losses for each underwriting year. The indicated incurred but not reported ("IBNR")

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reserve
need is then determined (by year, by line of business) by subtracting the reported losses (which are equal to the sum of inception to date paid losses and the case reserves as of the balance
sheet date) from the indicated ultimate losses.

In
the course of these detailed loss reserve reviews, which are performed by year and by line of business, a point estimate of the loss reserve need is determined. Differences between
the indications arising from the various methods are analyzed to understand the drivers of these differences, so that TRH can make a selection based on the methods that are believed to be most
appropriate for that line of business. Frequently, the selection is based on an average of the various indications, giving the most weight to the indications deemed most appropriate. Generally
speaking, TRH is often able to give more weight to loss development indications for more mature years where credible reported losses exist, as opposed to the more current years, where the
B-F method is often highly relied upon due to the lack of credible and mature reported experience. When the actuarial point estimate is compared to the carried reserve, it is recognized
that there is an implicit range around the indicated point estimate whereby a carried reserve within that range may be considered reasonable. TRH reviews the appropriateness of the held reserves
relative to the indicated point estimate considering many factors. These factors may include, but are not limited to, the amount and direction of any difference between the point estimate and the held
reserve, any operational issues which may be difficult to actuarially quantify, various actuarial assumptions on which management may want additional input or any observations regarding optimism or
conservatism which management may believe need to be considered. Thus, the carried reserves, as determined by management, may be more or less than the actuarially determined point estimate. As of
December 31, 2009 and 2008, TRH's carried loss and LAE reserves, net of related reinsurance recoverable, were $7.87 billion and $7.35 billion, respectively, and were equal to the
actuarial point estimate.

There
is potential for significant variation in the development of loss reserves when actual costs differ from those costs implied by the assumptions used to test the loss reserves. This
is particularly true for assumed reinsurance of long-tail casualty classes. Among the most critical assumptions are those made for ELRs and loss development factors.

TRH's
annual loss reserve review for 2009 did not include the calculation of a range of loss reserve estimates. Because management does not believe it can currently assign credible
probabilistic values to a range, a better understanding of the volatility of loss reserve estimates can be gained via an analysis of the sensitivity of these estimates to changes in the critical
assumptions used in the loss reserve review process as opposed to creating a range during the loss reserve review process.

An
analysis of the sensitivity of the loss reserve indications to these key assumptions can be performed by measuring the effect of various changes to the assumptions utilized in the
reviews. The assumptions made regarding factors considered in the sensitivity analysis, such as loss trends, ELRs and loss development factors, are generally consistent with TRH's historical
experience. Loss development factors, for example, which are used to project reported paid and incurred losses to an ultimate incurred loss, are selected based on the curves fitted to the historical
averages which best represent the data. ELRs are based on the ultimate loss ratios for the more mature years adjusted for changes in the rate levels and other quantifiable factors to enable the ELRs
to remain consistent with historical experience. In general, it is believed that the vast majority of potential volatility in the loss reserves results from the longer tailed lines of business. For
the purpose of these sensitivity analyses, only IBNR loss reserves from these longer tailed lines, which represent approximately 85% of total IBNR loss reserves at December 31, 2009, were
included in the calculations. Additionally, only those underwriting years where it is believed reasonable for deviations from the original assumptions to occur were utilized. Generally, the last 14
years were included in the analysis. The results derived from the sensitivity analyses are roughly the same whether utilizing unpaid losses and loss adjustment expenses ("gross loss reserves") or net
loss reserves.

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While noting that there exists the potential for greater variations, TRH believes utilizing 5% and 10% changes to the assumptions made for both loss development
factors and ELRs provide reasonable benchmarks for a sensitivity analysis of the loss reserve estimates at December 31, 2009. For example, changing the ELRs by 5 percentage points has an
impact of about $200 million (either positively or negatively) on the loss reserve estimate. While less likely for many classes of business, TRH notes that changing the ELRs by
10 percentage points has an effect of about $410 million. As previously described, another key assumption is the selection of loss development patterns. The effect of increasing the tail
on the selected loss development patterns by 5% is about $390 million. Similarly, a 10% deviation would impact the reserve estimate by about $770 million. Because a downward adjustment
to the loss development patterns can result in implied negative future development on reported losses for certain years, this scenario is not believed to be as likely as that of an upward deviation of
this amount.

Due
to the assumptions and methodologies utilized by TRH in its reviews of longer tailed classes of business, changes to the ELRs generally have a much greater impact on the assessment
of loss reserves for the most recent few underwriting years while deviations from the loss development factors utilized in the reviews generally are more critical to the loss reserve indications for
older underwriting years (i.e., 2002 and prior). Management believes that it is reasonable to
simultaneously vary both of the assumptions previously discussed by 5% and 10%. The effect of varying these assumptions together by 5% is about $610 million. Increasing these assumptions by 10%
simultaneously adds approximately $1.20 billion to the reserve estimates, although management considers this scenario to be significantly less likely than the 5% scenario previously discussed.
TRH also notes that the classes of business for which these assumptions are most critical are medical malpractice, D&O, E&O and excess casualty.

Net
loss reserves include amounts for risks relating to environmental impairment and asbestos-related illnesses. The majority of TRH's environmental and asbestos-related net loss
reserves arose from contracts entered into after 1985 that were underwritten specifically as environmental or asbestos-related coverages rather than as standard general liability coverages, where the
environmental or asbestos-related liabilities were neither clearly defined nor specifically excluded. The reserves carried for these claims, including losses and LAE IBNR, are based upon known facts
and current law. However, significant uncertainty exists in determining the amount of ultimate liability for environmental impairment and asbestos-related losses, particularly for those occurring in
1985 and prior. This uncertainty is due to inconsistent court resolutions and judicial interpretations with respect to underlying policy intent and coverage and uncertainties as to the allocation of
responsibility for resultant damages, among other things.

See
discussion of net development on losses occurring in prior years (which includes a discussion of the causative factors of such net development) underResults
of Operationsand further information about gross loss reserves underFinancial Condition and Liquidity.



TRH measures at fair value on a recurring basis financial instruments included principally in its available for sale securities
portfolios and certain short-term investments. The fair value of a financial instrument is the amount that would be received to sell an asset in an orderly transaction between willing, able and
knowledgeable market participants at the measurement date.

The
degree of judgment used in measuring the fair value of financial instruments generally correlates with the level of pricing observability. Financial instruments with quoted prices in
active markets generally have more pricing observability and less judgment is used in measuring fair value. Conversely, financial instruments traded in other-than-active
markets or that do not have quoted prices have less observability and are measured at fair value using valuation models or other pricing techniques that require more judgment. An active market is one
in which transactions for the asset being valued occurs with sufficient frequency and volume to provide pricing information on an ongoing basis. An other-than-active market is

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one
in which there are few transactions, the prices are not current, price quotations vary substantially either over time or among market makers, or in which little information is released publicly
for the asset being valued. Pricing observability is affected by a number of factors, including the type of financial instrument, whether the financial instrument is new to the market and not yet
established, the characteristics specific to the transaction and general market conditions.

TRH
management is responsible for the determination of the value of the financial assets carried at fair value and the supporting methodologies and assumptions. With respect to
securities, TRH employs independent third party valuation service providers to gather, analyze and interpret market information and derive fair values based upon relevant methodologies and assumptions
for individual instruments. When TRH's valuation service providers are unable to obtain sufficient market observable information upon which to estimate the fair value for a particular security, fair
value is determined either by requesting brokers who are knowledgeable about these securities to provide a quote, which is generally non-binding, or by employing widely accepted internal
valuation models.

Valuation
service providers typically obtain data about market transactions and other key valuation model inputs from multiple sources and, through the use of widely accepted internal
valuation models, provide a single fair value measurement for individual securities for which a fair value has been requested under the terms of service agreements. The inputs used by the valuation
service providers include, but are not limited to, market prices from recently completed transactions and transactions of comparable securities, interest rate yield curves, credit spreads, currency
rates, and other market observable information, as applicable. The valuation models take into account, among other things, market observable information as of the measurement date as well as the
specific attributes of the security being valued including its term, interest rate, credit rating, industry sector, and when applicable, collateral quality and other issue or issuer specific
information. When market transactions or other market observable data is limited, the extent to which judgment is applied in determining fair value is greatly increased.

TRH
employs specific control processes to determine the reasonableness of the fair values of TRH's financial assets. TRH's processes are designed to ensure that the values received or
internally estimated are accurately recorded and that the data inputs and the valuation techniques utilized are appropriate, consistently applied, and that the assumptions are reasonable and
consistent with the objective of determining fair value. TRH assesses the reasonableness of individual security values received from valuation service providers through various analytical techniques.
In addition, TRH
may validate the reasonableness of fair values by comparing information obtained from TRH's valuation service providers to other third party valuation sources for selected securities. TRH also
validates prices for selected securities obtained from brokers through reviews by those who have relevant expertise and who are independent of those charged with executing investing transactions.

As
of December 31, 2009, of TRH's $10.0 billion of available for sale fixed maturity and equity securities and other invested assets measured at fair value on a recurring
basis, $9.9 billion was based on prices received from independent pricing services and $0.1 billion was based on non-binding broker quotes or internal valuation sources. Fair
values from all external sources are reviewed by management, but none were adjusted.

Through
June 30, 2009, the AIG Group managed the investments and performed investment recordkeeping and the above valuation services for TRH. Effective July 1, 2009, TRH
employs third parties not affiliated with AIG to provide these services.

See
Note 3 of Notes to Consolidated Financial Statements ("Note 3") for discussion of how TRH determines the fair value of its fixed maturities available for sale, equities
available for sale and certain short-term investments.

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See Note 4(g) of Notes to Consolidated Financial Statements ("Note 4(g)") for the criteria TRH uses to evaluate if an
investment is a candidate for OTTI.

The
determination that a security has incurred OTTI in value requires the judgment of management and consideration of the fundamental condition of the issuer, its near-term
prospects and all the relevant facts and circumstances.

There
can, however, be no assurance that TRH has accurately assessed the level of impairments reflected in its financial statements. Furthermore, additional impairments may need to be
taken in the future. Historical trends may not be indicative of future impairments.

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At
December 31, 2009, TRH had gross unrealized losses on all fixed maturities (including fixed maturities classified as held to maturity) and equities totaling $173 million
which did not meet the criteria for OTTI. If TRH's determination of OTTI is materially incorrect, it could have a material adverse effect on TRH's financial condition, results of operations and cash
flows.



Management must make certain judgments in the determination of premiums written and earned by TRH. For pro rata treaty contracts,
premiums written and earned are based on reports received from ceding companies. For excess-of-loss treaty contracts, premiums are generally recorded as written based on
contract terms and are earned ratably over the terms of the related coverages provided. In recent years, treaty contracts have generated approximately 97% of TRH's premium revenues. Unearned premiums
and prepaid reinsurance premiums represent the portion of gross premiums written and ceded premiums written, respectively, relating to the unexpired terms of such coverages. The relationship between
net premiums written and net premiums earned will, therefore, vary depending generally on the volume
and inception dates of the business assumed and ceded and the mix of such business between pro rata and excess-of-loss reinsurance.

Premiums
written and earned, along with related costs, for which data has not been reported by the ceding companies, are estimated based on historical patterns and other relevant
information. Such estimates of premiums earned are considered when establishing the reserve for loss and LAE IBNR. The differences between these estimates and the actual data subsequently reported,
which may be material as a result of the diversity of cedants and reporting practices and the inherent difficulty in estimating premium inflows, among other factors, are recorded in the period when
the actual data become available and may materially affect results of operations. In the Consolidated Statements of Operations, premiums written and earned and the change in unearned premiums are
presented net of reinsurance ceded.

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TRH's
financial statements reflected estimates of gross premiums written, commissions and premium balances receivable, for which data had as yet to be reported by cedants as of
December 31, 2009 and 2008, as follows:

2009

Major Class

Gross
Premiums
Written

Commissions

Premiums
Balances
Receivable(in thousands)Casualty:Other liability

$
85,380

$
24,152

$
61,228Accident and health


14,975


3,908


11,067Medical malpractice


37,130


9,668


27,462Ocean marine and aviation


46,920


8,687


38,233Auto liability


7,794


1,888


5,906Surety and credit


36,198


12,107


24,091Other


14,292


3,483


10,809Total casualty


242,689


63,893


178,796Property:Fire


56,255


15,600


40,655Allied lines


13,301


2,734


10,567Auto physical damage


1,251


893


358Homeowners multiple peril


3,742


1,324


2,418Other


9,311


1,882


7,429Total property


83,860


22,433


61,427Total

$
326,549

$
86,326

$
240,223


2008

Major Class

Gross
Premiums
Written

Commissions

Premiums
Balances
Receivable(in thousands)Casualty:Other liability

$
111,165

$
30,237

$
80,928Accident and health


11,628


3,486


8,142Medical malpractice


37,748


10,271


27,477Ocean marine and aviation


42,942


4,485


38,457Auto liability


14,228


3,871


10,357Surety and credit


25,973


9,999


15,974Other


26,337


7,463


18,874Total casualty


270,021


69,812


200,209Property:Fire


56,105


13,228


42,877Allied lines


27,624


4,248


23,376Auto physical damage


19,749


5,256


14,493Homeowners multiple peril


3,586


1,279


2,307Other


1,877


445


1,432Total property


108,941


24,456


84,485Total

$
378,962

$
94,268

$
284,694


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TRH has provided no allowance for bad debts relating to the premium estimates based on its historical experience, the general profile of its cedants and the
ability TRH has in most cases to significantly offset these premium receivables with losses and LAE or other amounts payable to the same parties.



Acquisition costs, consisting primarily of net commissions incurred on business conducted through reinsurance contracts or
certificates, are deferred and then amortized over the period in which the related premiums are earned, generally one year. The evaluation of recoverability of acquisition costs to be deferred
considers the expected profitability of the underlying treaties and facultative certificates, which may vary materially from actual results. If the actual profitability varies from the expected
profitability, the impact of such differences is recorded, as
appropriate, when actual results become known and may have a material effect on results of operations.

Operational Review



TRH derives its revenue from two principal sources: premiums from reinsurance assumed net of reinsurance ceded
(i.e., net premiums earned) and income from investments. The following table shows net premiums written, net premiums earned, net investment income,
realized net capital (losses) gains, gain on early extinguishment of debt and total revenue of TRH for the periods indicated:

Years Ended December 31,2009

2008

2007Amount

Change
From
Prior Year

Amount

Change
From
Prior Year

Amount(dollars in millions)Net premiums written

$
3,986.1


(3.0
)%
$
4,108.1


3.9
%
$
3,952.9Net premiums earned


4,039.1


(0.7
)

4,067.4


4.2


3,902.7Net investment income


467.4


6.1


440.5


(6.2
)

469.8Realized net capital (losses) gains


(70.6
)

83.8


(435.5
)




9.4Gain on early extinguishment of debt


9.9


(3.7
)

10.3





Total revenues


4,445.7


8.9


4,082.5


(6.8
)

4,381.8


Net
premiums written decreased in 2009 compared to 2008 due in large part to changes in foreign currency exchange rates, but also reflected competitive market conditions which led TRH
not to renew certain business that did not meet TRH's underwriting standards.

Net
premiums written increased in 2008 compared to 2007 due to increases in Domestic and International operations. Overall premium growth in 2008 was mitigated by increased ceding
company retentions in certain lines and price erosion in many classes and regions in 2007 and the first half of 2008.

In
2009 and 2008, as compared to the respective immediately prior year, the changes in net premiums written were primarily from treaty business. In general, premium fluctuations reflect
prevailing market conditions and strategic decisions by TRH's management in recent periods as discussed earlier inMD&A.

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A
breakdown of total net premiums written in 2009, 2008 and 2007 is as follows:

Years Ended December 31,2009

2008

2007Casualty


71.3
%

69.8
%

71.0
%Property


28.7


30.2


29.0Total


100.0
%

100.0
%

100.0
%Treaty


97.0
%

96.8
%

96.3
%Facultative


3.0


3.2


3.7Total


100.0
%

100.0
%

100.0
%Domestic


51.5
%

49.6
%

49.3
%International


48.5


50.4


50.7Total


100.0
%

100.0
%

100.0
%


The
following table summarizes the net effect of changes in foreign currency exchange rates compared to the U.S. dollar on the percentage change in net premiums written in 2009 and 2008
compared to the respective immediately prior year.

2009

2008Change excluding foreign exchange


(0.5
)%

3.9
%Foreign exchange effect


(2.5
)

Change as reported in U.S. dollars


(3.0
)

3.9


Domestic
net premiums written increased in 2009 by $15.4 million, or 0.8%, from 2008 to $2.05 billion. Significant increases in Domestic net premiums written were recorded
in the A&H ($38.1 million) and other liability ($21.5 million) lines. These increases were largely offset by significant decreases in the medical malpractice ($31.9 million) and
auto liability ($17.5 million) lines.

International
net premiums written decreased in 2009 by $137.4 million, or 6.6%, from 2008 to $1.94 billion. The significant decreases in net premiums written occurred in
the London ($103.1 million), Paris ($100.0 million) and Hong Kong ($27.3 million) branches, partially offset by significant increases in TRZ ($46.2 million) and the Toronto
branch ($26.9 million). Significant decreases in International net premiums written were recorded in the property ($101.2 million), auto liability ($59.0 million), boiler and
machinery ($22.0 million) and ocean marine ($20.7 million) lines. These decreases were partially offset by significant increases in the A&H ($63.9 million) and other liability
($18.8 million) lines. Of the $137.4 million decrease in international net premiums written, $98.5 million was due to changes in foreign exchange rates.

Domestic
net premiums written increased in 2008 by $87.6 million, or 4.5%, from the prior year to $2.04 billion. Significant increases in Domestic net premiums written were
recorded in the property ($56.8 million), A&H ($48.5 million), auto liability ($20.8 million) and other liability ($18.9 million) lines. These increases were partially
offset by significant decreases in the fidelity ($41.9 million) and medical malpractice ($27.9 million) lines.

International
net premiums written increased in 2008 by $67.6 million, or 3.4%, from the prior year to $2.07 billion. The most significant increases in net premiums written
occurred in the Miami ($37.2 million), London ($15.9 million) and Hong Kong ($11.9 million) branches and in TRZ ($18.7 million), partially offset by a significant decrease
in the Toronto ($27.5 million) branch. International net premiums written increased significantly in the property ($35.4 million), credit ($25.1 million) and A&H
($17.2 million) lines

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and
were partially offset by significant decreases in the other liability ($22.0 million) and ocean marine ($12.7 million) lines.

Generally,
reasons for changes in gross premiums written between years are similar to those for net premiums written, except for changes in ceded premiums, including premiums assumed
from a subsidiary of AIG that, by prearrangement, were ceded in an equal amount to other subsidiaries of AIG (see Note 16 of Notes to Consolidated Financial Statements ("Note 16")). The
majority of the decrease in premiums ceded in 2009 compared to 2008 is due to a decrease in premiums assumed from a subsidiary of AIG that, by prearrangement with TRH, were then ceded in an equal
amount to other subsidiaries of AIG. The increase in premiums ceded to related parties in 2008 compared to 2007 is due principally to an increase in premiums assumed from a subsidiary of AIG that, by
prearrangement with TRH, were then ceded in an equal amount to other subsidiaries of AIG. The decrease in premiums ceded to non-related parties in 2008 compared to 2007 is due in part to
the purchase of less retrocession coverage. As further discussed in Notes 14 and 16 of Notes to Consolidated Financial Statements, TRH transacts business assumed and ceded with the AIG Group
and either accepts or rejects the proposed transactions with such companies based on its assessment of risk selection, pricing, terms and conditions, among other factors.

As
premiums written are primarily earned ratably over the terms of the related coverage, the reasons for changes in net premiums earned are generally similar to the reasons for changes
in net premiums written over time.

Net
investment income in 2009 increased compared to 2008 due to an increase in investment results from other invested assets of $40 million, principally related to alternative
investments. Net investment income in 2008 decreased compared to 2007 due to a decrease in investment results from other invested assets of $57 million, principally related to alternative
investments, partially offset by an increase in investment income from fixed maturities. The decrease in investment income from alternative investments was due in part to the recent turmoil in the
financial markets. The increase in investment income from fixed maturities is due in part to investment returns from continued positive operating cash flows. (See Note 4(d) of Notes to
Consolidated Financial Statements for a breakdown of the components of net investment income and the cash flow discussion underFinancial Condition and
Liquidity.)

For
2009, 2008 and 2007, the pre-tax effective yields on investments were 4.1%, 3.8% and 3.9%, respectively. The pre-tax effective yield on investments represents
net
investment income divided by the average balance sheet carrying value of investments and interest-bearing cash. The increase in the pre-tax effective yield on investments for 2009 compared
to 2008 is due largely to increased investment income from other invested assets and the impact of securities lending invested collateral on the yield in 2008, partially offset by the decrease in
pre-tax effective yield on fixed maturities for 2009 compared to 2008. Investment returns from securities lending invested collateral served to negatively impact the yields in 2008 and 2007 by 0.3%
and 0.7%, respectively, as the net return from the invested collateral is very small in relation to the balance sheet carrying amount because investment income earned from invested collateral is
reduced by interest payable to the collateral provider.

In
2008 compared to 2007, the decline in investment results from other invested assets reduced the yield by 0.5%. (SeeInvestment ResultsinItem 1.Business.)

Realized
net capital (losses) gains totaled ($70.6) million, ($435.5) million and $9.4 million in 2009, 2008 and 2007, respectively. Realized net capital (losses) gains generally
result from (a) investment dispositions, which reflect TRH's investment and tax planning strategies to optimize after-tax income; (b) OTTI of investments; and
(c) foreign currency transaction gains (losses). See Note 4(e) for a breakdown of realized net capital (losses) gains.

Realized
net capital losses in 2009 included ($83.1) million of OTTI write-downs charged to earnings, due in large part to the continued depressed fair values of certain securities and
issuer specific credit

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events.
OTTI decreased in 2009 compared to 2008 as financial and credit markets stabilized and partially recovered from the turmoil at the end of 2008. Realized net capital losses in 2008 included
($99.9) million of net losses on sales and redemptions of securities and ($317.8) million of OTTI write-downs. The significant realized net capital losses from sales and redemptions of securities and
OTTI write-downs in 2008 generally resulted from declines in the fair values of securities and issuer-specific credit events due to the downturn in the U.S. economy, turmoil in the financial markets
and financial market illiquidity in 2008.

Upon
the ultimate disposition of securities for which write-downs have been recorded, a portion of the write-downs may be recoverable depending on market conditions at the time of
disposition. (See Note 4(g) for the criteria used in the determination of such write-downs.)

OTTI
write-downs by balance sheet category at the time of impairment and type of impairment recorded for the years indicated are presented in the table below:

Severity
and/or
Duration

Lack of
Intent to
Hold to
Recovery

Issuer-
Specific
Credit
Events

Total(in millions)Year Ended December 31, 2009:Fixed maturities

$
(14.7
)
$
(6.0
)
$
(19.1
)
$
(39.8
)Equities


(35.4
)

(4.4
)

(3.5
)

(43.3
)Total included in the statement of operations


(50.1
)

(10.4
)

(22.6
)

(83.1
)Fixed maturitiesincluded in the statement of comprehensive income (loss)








(13.4
)

(13.4
)Total

$
(50.1
)
$
(10.4
)
$
(36.0
)
$
(96.5
)Year Ended December 31, 2008:Fixed maturities

$
(115.4
)
$
(2.4
)
$
(7.3
)
$
(125.1
)Equities


(69.2
)

(3.3
)

(22.5
)

(95.0
)Securities lending invested collateral


(79.7
)

(3.9
)

(14.1
)

(97.7
)Total included in the statement of operations

$
(264.3
)
$
(9.6
)
$
(43.9
)
$
(317.8
)Year Ended December 31, 2007:Fixed maturities

$


$
(2.1
)
$
(2.5
)
$
(4.6
)Equities


(21.1
)

(0.7
)

(0.7
)

(22.5
)Securities lending invested collateral











Total included in the statement of operations

$
(21.1
)
$
(2.8
)
$
(3.2
)
$
(27.1
)


Through 2008, TRH participated in a securities lending program (the "Securities Lending Program") managed by a subsidiary of AIG, whereby certain
securities (principally fixed maturities available for sale) from its portfolio were loaned to third parties. Under such program, TRH loaned securities to counterparties and received collateral,
generally cash, which was invested to earn a spread. The collateral was returned to the counterparties when the loaned securities were returned to TRH at a future date. In the fourth quarter of 2008,
TRH terminated its participation in the Securities Lending Program.

Prior
to the fourth quarter of 2008, the transfers of securities in exchange for collateral under the Securities Lending Program were accounted for as secured borrowings. Securities
lending invested collateral was shown on the balance sheet at fair value. A liability was recorded in an amount equal to the collateral received, reflecting TRH's obligation to return the collateral
when the loaned securities were returned. Income earned on invested collateral, net of interest payable to the collateral provider, was

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included
in net investment income. As a result of conditions affecting the financial and credit markets, in the fourth quarter of 2008, counterparties were successful in negotiating significantly
reduced collateral levels (i.e., collateral received as a percentage of the fair value of the security loaned). Due to the lower collateral levels,
during the fourth quarter of 2008, many of such loaned securities were accounted for as sales at the time of transfer and as purchases when the securities were subsequently returned.

The
financial impact on the Statement of Operations of the Securities Lending Program was as follows: With respect to securities lending invested collateral: Net investment income from
the Securities Lending Program (i.e., income earned on invested collateral, net of interest payable to the collateral provider) totaled
$2.6 million and $2.5 million in 2008 and 2007, respectively; Net realized losses on sales of securities lending invested collateral totaled ($8.0) million and
($1.8) million in 2008 and 2007, respectively; OTTI write-downs (included in realized net capital losses) totaled ($97.7) million in 2008 and nil in 2007. With respect to the securities
loaned, realized losses in the fourth quarter of 2008 on "deemed" sales of securities loaned totaled ($16) million.

In
2008, TRH repaid certain securities lending payables using cash from sources other than the sale of securities lending invested collateral. In that regard, certain fixed maturities,
including CMBS,
RMBS and other asset-backed securities were transferred from securities lending invested collateral to fixed maturities available for sale.

In
2009 and 2008, TRH repurchased portions of its 5.75% senior notes due in 2015 (the "2015 Notes") from non-related parties as detailed below:

2009

2008

2007(in millions)Principal amount repurchased

$
30

$
25

$
Repurchase price


20


15


Gain on early extinguishment of debt


10


10





The
property and casualty insurance and reinsurance industries use the combined ratio as a measure of underwriting profitability. The combined ratio reflects only underwriting results
and does not include income from investments. Generally, a combined ratio under 100% indicates an underwriting profit and a combined ratio exceeding 100% indicates an underwriting loss. Underwriting
profitability is subject to significant fluctuations due to competition, natural and man-made catastrophic events, economic and social conditions, foreign currency exchange rate
fluctuations, interest rates and other factors. TRH's combined ratio and its components, for all periods in this Form 10-K, are presented in accordance with the methodology commonly
used by insurance industry analysts and TRH's peers. The combined ratio represents the sum of the loss ratio and the underwriting expense ratio. The loss ratio represents net losses and LAE incurred
expressed as a percentage of net premiums earned. The underwriting expense ratio represents the sum of the commission ratio and the other underwriting expense ratio. The commission ratio represents
the sum of net commissions and the decrease (increase) in deferred acquisition costs expressed as a percentage of net premiums earned. The other underwriting expense ratio represents other
underwriting expenses expressed as a percentage of net premiums earned.

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The
following table presents loss ratios, underwriting expense ratios and combined ratios for consolidated TRH and each of TRH's reporting segments, for the years indicated:

Years Ended December 31,2009

2008

2007Consolidated:Loss ratio


66.3
%

71.5
%

67.6
%Commission ratio


23.3


23.9


24.7Other underwriting expense ratio


3.9


3.2


2.9Underwriting expense ratio


27.2


27.1


27.6Combined ratio


93.5
%

98.6
%

95.2
%Domestic:Loss ratio


66.0
%

78.7
%

74.2
%Commission ratio


23.2


23.1


23.1Other underwriting expense ratio


4.2


3.2


2.9Underwriting expense ratio


27.4


26.3


26.0Combined ratio


93.4
%

105.0
%

100.2
%InternationalEurope:Loss ratio


73.9
%

68.9
%

63.5
%Commission ratio


21.9


23.2


25.2Other underwriting expense ratio


3.4


3.0


2.8Underwriting expense ratio


25.3


26.2


28.0Combined ratio


99.2
%

95.1
%

91.5
%InternationalOther:Loss ratio


46.7
%

49.8
%

53.5
%Commission ratio


27.6


29.6


29.8Other underwriting expense ratio


4.1


4.0


3.5Underwriting expense ratio


31.7


33.6


33.3Combined ratio


78.4
%

83.4
%

86.8
%


The lower loss ratio for consolidated TRH in 2009 compared to 2008 is due principally to lower catastrophe costs and increased favorable loss
reserve development. The increase in the loss ratio for consolidated TRH in 2008 compared to 2007 reflects an increased current accident year loss ratio excluding catastrophe losses and increased net
catastrophe costs, partially offset by lower net loss reserve development. In the aggregate, catastrophe costs and net loss reserve development (decreased) added (0.9)%, 4.4% and 3.4% (from) to the
consolidated TRH combined ratio in 2009, 2008 and 2007, respectively.

While
there were no significant net catastrophe costs for events occurring during 2009, 2009 includes estimated reductions of net catastrophe costs incurred of ($5.6) million
relating to events occurring in prior years. Net catastrophe costs in the aggregate (decreased) added (0.1)%, 0.0%, (0.4)% and (0.1)% to the 2009 combined ratios for consolidated, Domestic,
International-Europe and International-Other, respectively. (See Note 10 for the amounts of net catastrophe costs by segment and the amounts of consolidated gross and ceded catastrophe losses
incurred and reinstatement premiums. See discussion inCatastrophe Exposureof the magnitude of TRH's catastrophe exposures.)

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While
TRH believes that it has taken appropriate steps to manage its exposure to possible future catastrophe losses, the occurrence of one or more natural or man-made
catastrophic events of unanticipated frequency or severity, such as a terrorist attack, earthquake or hurricane, that causes insured losses could have a material adverse effect on TRH's results of
operations, liquidity or financial condition. Current techniques and models may not accurately predict the probability of catastrophic events in the future and the extent of the resulting losses.
Moreover, one or more catastrophe losses could weaken TRH's retrocessionnaires and result in an inability of TRH to collect reinsurance recoverables.

In
addition, in 2009, TRH decreased its estimates of the ultimate amounts of net losses occurring in 2008 and prior years by $38.9 million. This net favorable development was
comprised of net favorable development of $219.1 million for losses occurring in 2002 to 2008, partially offset by net adverse development of $180.2 million relating to losses occurring
in 2001 and prior. The detail of the $38.9 million net favorable development by line of business relating to all prior years is presented in the table below:

Line of Business

Net Loss Reserve at
December 31, 2008

Year-end 2008 Net
Reestimated Liability
at Year-end 2009

Amount of
Reestimation
(Deficiency)
Redundancy(1)(in thousands)Other liability

$
3,220,712

$
3,341,142

$
(120,430
)Fire


546,050


441,940


104,110Allied lines


157,194


114,785


42,409Fidelity


255,808


285,829


(30,021
)Surety and credit


242,205


216,909


25,296Other, net


2,927,109


2,909,525


17,584Total

$
7,349,078

$
7,310,130

$
38,948


---

Significant net favorable development was recorded for losses occurring in the fire and allied lines, arising principally from losses occurring in
2007 to 2008, and the surety and credit line, arising principally from losses occurring in 2004 to 2008. The line of business with the most significant net adverse development recorded in 2009 was the
other liability line, arising principally from losses occurring in 2001 and prior, partially offset by favorable development from losses occurring between 2004 and 2006. The other liability line
includes certain specialty casualty classes, such as D&O and E&O, and general casualty classes. In addition, significant net adverse development was recorded in 2009 for losses occurring in the
fidelity line, arising principally from losses occurring in 2007 to 2008, related to the global credit crisis. (See Note 10 for amounts included in net favorable development that relate to
catastrophe losses.)

The
favorable development in 2004 through 2008 results generally from favorable loss trends. The net adverse development arising from losses occurring in 2001 and prior generally relates
to various excess casualty lines such as general liability and excess umbrella liability which were impacted by late reported high layer excess claims. Ceding companies and their reinsurers continue
to experience increased loss costs relative to expectations as loss emergence patterns continue to lengthen as regards the soft market years of 1997 through 2001.

TRH
writes a significant amount of non-proportional assumed casualty reinsurance as well as proportional assumed reinsurance of excess liability business for such volatile
classes as medical malpractice, D&O, E&O and general casualty. At the primary level, there are significant risk factors which contribute to the variability and unpredictability of the loss trend
factor for this business such as jury awards, social inflation, medical inflation, tort reforms and court interpretations of coverage. In addition, as a reinsurer, TRH is also highly dependent upon
the claims reserving and reporting practices of its cedants, which vary greatly by size, specialization and country of origin and whose practices are subject to change without notice.

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Based on information presently available, TRH's current loss reserves represent management's best estimate of ultimate losses, but there can be no assurance that
TRH's loss reserves will not develop adversely due to, for example, the inherent volatility in loss trend factors and variability of reporting practices for those classes, among other factors, and
materially exceed the carried loss reserves as of December 31, 2009 and thus, have a material adverse effect on future net income, financial condition and cash flows.

For
2009 compared to 2008, the changes in gross and ceded losses and LAE incurred each include the effect of a $22 million decrease in losses and LAE incurred relating to business
assumed from an AIG subsidiary which, by prearrangement with TRH, was then ceded in an equal amount to other AIG subsidiaries. (See Note 16.) In addition, the change in gross and ceded losses
and LAE incurred includes the changes in gross and ceded catastrophe losses as discussed in Note 10.

2008
includes net catastrophe costs of $169.7 million, principally relating to Hurricane Ike. Net catastrophe costs in the aggregate added 4.2%, 7.2%, 1.4% and 0.0% to the 2008
combined ratios for consolidated, Domestic, International-Europe and International-Other, respectively.

In
addition, in 2008, TRH decreased its estimates of the ultimate amounts of net losses occurring in 2007 and prior years by $0.5 million. This net favorable development was
comprised of net favorable development of $209.7 million for losses occurring in 2003 to 2007, offset by net adverse development of $209.2 million relating to losses occurring in 2002
and prior. The detail of the $0.5 million net favorable development by line of business relating to all prior years is presented in the table below:

Line of Business

Net Loss Reserve at
December 31, 2007

Year-end 2007 Net
Reestimated Liability
at Year-end 2008

Amount of
Reestimation
(Deficiency)
Redundancy(1)(in thousands)Other liability

$
2,966,824

$
3,046,459

$
(79,635
)Allied lines


128,184


84,543


43,641Medical malpractice


1,048,066


1,083,515


(35,449
)Homeowners multiple peril


26,951


9,963


16,988Auto liability


550,869


537,664


13,205Fire


492,853


481,281


11,572Other, net


1,685,969


1,655,807


30,162Total

$
6,899,716

$
6,899,232

$
484


(1)Amount
of reestimation represents the (increase) decrease in net losses and LAE incurred in 2008 relating to losses occurring in 2007 and prior years.


Significant net favorable development was recorded for losses occurring in the allied lines and fire lines, each arising principally from losses
occurring in 2007, and in the homeowners multiple peril and auto liability lines, each arising principally from losses occurring in 2005 to 2007. The line of business with the most significant net
adverse development recorded in 2008 was the other liability line, arising principally from losses occurring between 1997 and 2002, partially offset by favorable development from losses occurring in
2004 to 2006. The other liability line includes certain specialty casualty classes, such as D&O and E&O, and general casualty classes. In addition, significant net adverse development was recorded in
2008 for losses occurring in the medical malpractice line, arising principally from losses occurring in 1995 to 2001 and in 2006. (See Note 10 for amounts included in net adverse development
that relate to catastrophe losses.)

The
favorable development in 2004 through 2007 results generally from favorable loss trends. The net adverse development arising from losses occurring in years 1998 through 2001, which
represent the great majority of the 2002 and prior development, generally relates to the fact that for many classes within

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these
years, ceding companies continue to experience increased loss costs relative to expectations, coupled with an unexpected lengthening of the loss emergence patterns. Generally, loss activity was
greater than expected from losses occurring in the D&O and E&O classes, although to a lesser extent than in previous calendar year periods. Also, classes such as medical malpractice and excess
umbrella were impacted by late reported high layer excess claims to a greater extent than expected. Contributing to this increase, is the fact that many policies during this period covered underlying
contracts that extended over multiple years, which contributed to recent reported loss activity exceeding previous expectations. This has led to an increase in both the frequency and severity of
claims entering the reinsured excess-of-loss coverage layers at later points in time than had previously been experienced.

For
2008 compared to 2007, the changes in gross and ceded losses and LAE incurred each include the effect of a $12 million decrease in losses and LAE incurred relating to business
assumed from an AIG subsidiary which, by prearrangement with TRH, was then ceded in an equal amount to other AIG subsidiaries. (See Note 16.) In addition, the change in gross and ceded losses
and LAE incurred includes the changes in gross and ceded catastrophe losses as discussed in Note 10.

2007
includes net catastrophe costs of $55.2 million, principally relating to European Windstorm Kyrill and floods in the U.K. Net catastrophe costs in the aggregate added
(decreased) 1.4%, 0.4%, 3.2% and (0.1)% to (from) the 2007 combined ratios for consolidated, Domestic, International-Europe and International-Other, respectively.

In
addition, in 2007, TRH determined that its estimates of the ultimate amounts of net losses occurring in 2006 and prior years needed to be increased as a result of greater than
expected loss activity in 2007. As a result of that determination, TRH increased net losses and LAE incurred by $88.4 million, representing significant net adverse development in 2007 of losses
occurring in all prior years. This net adverse development was comprised of $368.9 million relating to losses occurring in 2002 and prior, partially offset by net favorable development of
$280.5 million, principally relating to losses occurring in 2006 and, to a lesser extent, 2005 and 2004. The detail of the $88.4 million net adverse development by line of business
relating to all prior years is presented in the table below:

Line of Business

Net Loss Reserve at
December 31, 2006

Year-end 2006 Net
Reestimated
Liability
at Year-end 2007

Amount of
Reestimation
(Deficiency)
Redundancy(1)(in thousands)Other liability

$
2,558,979

$
2,780,364

$
(221,385
)Medical malpractice


926,906


964,977


(38,071
)Fire


461,105


377,473


83,632Allied lines


113,335


69,990


43,345Homeowners multiple peril


50,838


16,662


34,176Other, net


2,096,057


2,086,134


9,923Total

$
6,207,220

$
6,295,600

$
(88,380
)


(1)Amount
of reestimation represents the (increase) decrease in net losses and LAE incurred in 2007 relating to losses occurring in 2006 and prior years.


As presented in the table above, the line of business with the most significant net adverse development recorded in 2007 was the other liability
line, arising principally from losses occurring between 1998 and 2002 for reasons similar to those discussed earlier for the other liability line development in 2008. The other liability line includes
certain specialty casualty classes, such as D&O and E&O, and general casualty classes. In addition, significant net adverse development was recorded in 2007 in the medical malpractice line, arising
principally from losses occurring between 1998 and 2002. These increases to incurred losses were offset in part by net favorable development occurring most significantly in the fire line, arising
principally from losses occurring in 2006, and in the allied lines and

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homeowners
multiple peril lines, each arising principally from losses occurring between 2004 and 2006. (See Note 10 for amounts included in net adverse development that relate to catastrophe
losses.)

The
underwriting expense ratio for consolidated TRH in 2009 remained level with 2008 as an increase of 0.7% in the other underwriting expense ratio was offset by a decrease of 0.6% in
the commission ratio. The increase in the other underwriting expense ratio in 2009 compared to 2008 is related largely to additional compensation costs associated with improved results in 2009
compared to 2008 and expenses incurred related to an employee retention plan (the "Retention Plan") covering a significant number of its employees, including its senior-most management.
The decrease in the commission ratio occurred in the International-Europe and International-Other segments. The underwriting expense ratio for consolidated TRH decreased in 2008 compared to 2007 due
to a decrease of 0.8% in the commission ratio, partially offset by an increase of 0.3% in the other underwriting expense ratio. The decrease in the commission ratio is due in part to a
change in the mix of business. The increase in the other underwriting expense ratio in 2008 compared to 2007 is due in part to expenses incurred related to the Retention Plan.

On
October 3, 2008, TRH adopted the Retention Plan covering a significant number of its employees, including its senior-most management. Salary expense incurred
related to the Retention Plan totaled $20 million in 2009 and $8 million in 2008. (See Note 19.)

Deferred
acquisition costs vary as the components of net unearned premiums change and the deferral rate changes. Acquisition costs, consisting primarily of commissions incurred, are
charged to earnings over the period in which the related premiums are earned.

In
November 2009, the Company issued $350 million principal amount of its 8% senior notes due in 2039 (the "2039 Notes" and together with the 2015 Notes, the "Senior Notes"), all
of which remains outstanding as of December 31, 2009. In 2009 and 2008, TRH repurchased $30 million and $25 million, respectively, principal amount of the 2015 Notes from
non-related parties. $695 million and $725 million principal amount of the 2015 Notes were outstanding at December 31, 2009 and 2008, respectively. Interest expense incurred and
interest paid in connection with the Senior Notes is shown below:

Years Ended December 31,2009

2008

2007(in thousands)Interest expense incurred

$
43,454

$
43,359

$
43,421Interest paid


40,394


43,113


43,125


General
corporate expenses, certain stock-based compensation costs and expenses relating to Professional Risk Management Services, Inc. ("PRMS") are the primary components of
"other, net" expenses on the Consolidated Statement of Operations. PRMS is an insurance program manager specializing in professional liability insurance services.

Income
before income taxes was $596.0 million in 2009, $3.2 million in 2008 and $595.8 million in 2007. The increase in income before income taxes in 2009 compared
to 2008 resulted from a decrease in realized net capital losses and an increase in underwriting profit. The increase in underwriting profit is due to a decrease in catastrophe costs and an increase in
favorable net loss reserve development in 2009. Decreased catastrophe costs and increased favorable net loss reserve development had the net impact of increasing pre-tax underwriting profit in 2009 by
$216.2 million compared to 2008.

The
decrease in income before income taxes in 2008 compared to 2007 resulted from significant realized net capital losses, including significant amounts of OTTI, decreased underwriting
profit and lower net investment income in 2008. The decreased net underwriting profit in 2008 is due in part to decreased current accident year underwriting profit (loss) excluding catastrophe costs
in 2008 compared to 2007 and increased net catastrophe costs partially offset by lower net loss reserve development. Increased net catastrophe costs and lower net loss reserve development had the net
impact of decreasing pre-tax

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underwriting
profit by $47.3 million. The decrease in net investment income is largely due to a decrease in investment results from other invested assets, principally related to alternative
investments, partially offset by increased net investment income from fixed maturities.

Federal
and foreign income tax (benefit) expense of $118.4 million, ($99.0) million and $108.6 million were recorded in 2009, 2008 and 2007, respectively. The 2008 tax
benefit, which exceeds the income before income taxes in 2008, resulted from the tax benefit generated by the significant amount of realized net capital losses occurring during the year, including the
tax benefit on $100.3 million of tax capital loss carrybacks to prior years, in addition to the customary tax benefits associated with tax-exempt interest and the dividends received
deduction.

Income
tax expense in 2009 includes $56.7 million of deferred tax benefits from minimum tax credit carryforwards. In 2008, TRH reversed $15.0 million of previously recorded
deferred tax benefits from minimum tax credit carryforwards. In 2007, TRH generated $32.9 million of deferred tax benefits from minimum tax credit carryforwards.

The
effective tax rates, which represent the sum of current and deferred income taxes (benefits) divided by income before income taxes, were 19.9% in 2009, (3,073.0%) in 2008 and 18.2%
in 2007. The difference in effective tax rates in 2009 compared to 2008 was due to tax exempt income representing a smaller percentage of pretax income in 2009 compared to 2008. Net catastrophe costs
and realized net capital losses significantly reduced pretax income in 2008.

The
actual tax benefit in 2008 derived from tax-exempt interest was slightly higher than 2007; however, the percentage impact in the effective tax rate calculation from such
item increased significantly. The greater impact is caused by the fact that income before taxes (i.e., the denominator in the effective tax rate
calculation) is lower in 2008 compared to 2007, due to the significant realized net capital losses and net catastrophe costs in 2008 compared to 2007. (See Note 5 of Notes to Consolidated
Financial Statements.)

TRH
recognized income tax expenses (benefits) of $2.0 million, ($59.4) million and ($19.3) million relating to catastrophe costs occurring in 2009, 2008 and 2007, respectively.

Net
income and net income per common share on a diluted basis, respectively, were as follows: 2009$477.7 million, $7.15; 2008$102.3 million,
$1.53; 2007$487.1 million, $7.31. Reasons for the changes between years are as discussed earlier. (See Note 9 of Notes to Consolidated Financial Statements for the
calculation of net income per common share.)



The performance of TRH is commonly assessed by analysts and others based on performance measures which are not defined under GAAP.
Those measures include net operating income ("NOI"), NOI per Common Share (diluted) and operating return on equity ("Operating ROE"). NOI is defined as GAAP net income (loss) excluding realized net
capital gains (losses) and gain on early extinguishment of debt, net of taxes. NOI Per Common Share (diluted) represents NOI divided by average common shares outstanding on a diluted basis. Operating
ROE is defined as NOI divided by the average of beginning and ending stockholders' equity. In addition, GAAP return on equity ("GAAP ROE") is defined as GAAP net income divided by the average of
beginning and ending stockholders' equity. TRH uses these measures in analyzing its performance as these measures focus on the core fundamentals of TRH's operations. While TRH considers realized
capital gains (losses) and the gain on early extinguishment of debt as integral parts of its business and results, such items are not indicative of the core fundamentals of TRH's operations. TRH
believes these measures are of interest to the investment community because they provide additional meaningful methods of evaluating certain aspects of TRH's operating performance from period to
period on bases that are not otherwise apparent under GAAP. These non-GAAP measures, namely, NOI, NOI Per Common Share (diluted) and Operating ROE should not be viewed as

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substitutes
for GAAP net income, GAAP net income per common share on a diluted basis and GAAP ROE, respectively. Reconciliations of NOI, NOI Per Common Share (diluted) and Operating ROE to GAAP net
income, GAAP net income per common share on a diluted basis and GAAP ROE, respectively, the most directly comparable GAAP measures, are included below:

Years Ended December 31,2009

2008

2007Amount

Per Common
Share
(Diluted)

Amount

Per Common
Share
(Diluted)

Amount

Per Common
Share
(Diluted)(in millions, except per share amounts)Net income

$
477.7

$
7.15

$
102.3

$
1.53

$
487.1

$
7.31Realized net capital losses (gains), net of tax(1)


45.9


0.69


283.1


4.25


(6.1
)

(0.09
)Gain on early extinguishment of debt, net of tax(1)


(6.4
)

(0.10
)

(6.7
)

(0.10
)




Net operating income

$
517.2

$
7.74

$
378.7

$
5.68

$
481.0

$
7.22




Years Ended December 31,2009

2008

2007GAAP return on equity


13.2
%

3.1
%

15.4
%Realized net capital losses (gains), net of tax(1)


1.3


8.7


(0.1
)Gain on early extinguishment of debt, net of tax(1)


(0.2
)

(0.2
)

Operating return on equity


14.3
%

11.6
%

15.3
%


(1)Assumes
a 35% tax rate.


The increases in NOI, NOI per Common Share (diluted) and Operating ROE in 2009 compared to 2008 is due largely to a decrease in catastrophe costs
in 2009. The decreases in NOI, NOI per Common Share (diluted) and Operating ROE in 2008 compared to 2007 is due largely to an increase in catastrophe costs in 2008.



2009 compared to 2008Revenues increased in 2009 due principally to a decrease in realized net capital losses, including OTTI write-downs, and, to
lesser extents, increases in net investment income and net premiums earned. The reduction in realized net capital losses resulted in part from a decrease in OTTI write-downs as financial and credit
markets stabilized and partially recovered from the turmoil at the end of 2008. The increase in net investment income in 2009 is largely due to an increase in results from other invested assets,
principally related to alternative investments. The increase in net premiums earned in 2009 occurred primarily in the property and A&H lines offset in part by significant decreases in the medical
malpractice and other liability lines. Income (loss) before income taxes for 2009 increased due primarily to a decrease in realized net capital losses and an increase in underwriting profit (loss).
The increase in underwriting profit (loss) is largely due to a decrease in net catastrophe costs.

Net
catastrophe costs in 2009 were insignificant. 2008 includes net catastrophe costs of $147.4 million principally relating to Hurricane Ike.

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Assets increased by $943 million in 2009 due largely to an increase in investments of $1.35 billion, partially offset by decreases in the net
deferred income tax asset and premium balances receivable, net. The increase in investments is due largely to increases of $852 million in fixed maturities available for sale and
$487 million in short-term investments. The increase in investments generally reflects the investment of net operating cash inflows, changes in the fair value of investments and the
investment of the proceeds from the issuance of the 2039 Notes.

2008 compared to 2007Revenues decreased in 2008 due principally to significant realized net capital losses, including OTTI, and a decrease in net
investment income, offset in part by an increase in net premiums earned and a gain on the early extinguishment of debt. The significant realized net capital losses generally resulted from declines in
market values due to the downturn in the U.S. economy, turmoil in the financial markets, financial market illiquidity and issuer-specific credit events. The decrease in net investment income in 2008
is largely due to a decrease in results from other invested assets, principally related to alternative investments. The increase in net premiums earned in 2008 occurred primarily in the A&H, property,
other liability and auto liability lines offset in part by a significant decrease in the fidelity line. Income (loss) before
income taxes for 2008 decreased due primarily to increases in realized net capital losses and in underwriting loss and a decrease in net investment income. The increase in underwriting loss is
principally due to increased net catastrophe costs, principally related to Hurricane Ike.

2008
includes net catastrophe costs of $147.4 million principally relating to Hurricane Ike. 2007 includes net catastrophe costs of $8.0 million relating to catastrophe
events occurring in 2005.

Assets
decreased by $109 million in 2008 due largely to a decrease in investments and cash of $351 million partially offset by an increase in net deferred income tax asset.
The decrease in investments and cash is due largely to decreases of $255 million in securities lending invested collateral and of $269 million in equities available for sale, partially
offset by a $218 million increase in fixed maturities available for sale. The increase in net deferred income taxes is due in part to the deferred tax benefit related to OTTI and an increase in
net unrealized depreciation of investments in 2008.



2009 compared to 2008Revenues decreased due to decreases in net premiums written, net of the change in unearned premiums, and, to a lesser extent,
net investment income partially offset by a decrease in realized net capital losses. Changes in foreign currency exchange rates between the U.S. dollar and the currencies in which premiums are written
in 2009 as compared to 2008 decreased net premiums written by $78.7 million. Revenues decreased in the London and Paris branches, partially offset by an increase in TRZ. Net premiums earned
decreased principally in the property, auto liability and fidelity lines offset in part by a significant increase in the A&H line. Net investment income decreased in both the London and Paris branches
and in TRZ and was due in part to changes in foreign currency exchange rates and lower yields on investments. Income before income taxes for 2009 decreased due primarily to decreases in underwriting
profit and net investment income partially offset by a decrease in realized net capital losses. The decrease in underwriting profit reflects a higher loss ratio, excluding net catastrophe costs,
partially offset by lower net catastrophe costs and a lower commission ratio.

Net
catastrophe costs in 2009 were insignificant. 2008 includes net catastrophe costs of $22.1 million principally relating to Hurricane Ike, offset in part by favorable
development on catastrophe events occurring in 2007 and 2005.

Assets
increased by $408 million in 2009 due principally to a $526 million increase in investments. The increase in investments is due largely to increases of
$296 million in fixed maturities available for sale and $223 million in short-term investments. The increase in investments generally reflects the investment of net operating
cash inflows and changes in the fair value of investments.

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2008 compared to 2007Revenues increased slightly due to increases in net premiums written, net of the change in unearned premiums, and net investment
income, largely offset by an increase in realized net capital losses. Changes in foreign currency exchange rates between the U.S. dollar and the currencies in which premiums are written in 2008 as
compared to 2007 lessened the increase in net premiums written by $10.0 million. Revenues increased in the Paris branch and in TRZ, largely offset by a decrease in the London branch. Net
premiums earned increased principally in the credit, A&H and boiler & machinery lines offset in part by a significant decrease in the ocean marine and property lines. The increase in realized
net capital losses was due in part to OTTI. Income before income taxes for 2008 decreased due primarily to a decrease in underwriting profit and increased realized net capital losses, partially offset
by an increase in net investment income. The decrease in underwriting profit reflects a higher loss ratio, despite a reduction in net catastrophe costs, partially offset by a lower underwriting
expense ratio.

2008
includes net catastrophe costs of $22.1 million principally relating to Hurricane Ike, offset in part by favorable development on catastrophe events occurring in 2007 and
2005. 2007 includes net catastrophe costs of $47.4 million principally relating to Windstorm Kyrill in Europe and floods in the U.K.

Assets
decreased $1.88 billion in 2008 due principally to a $1.76 billion decrease in securities lending invested collateral due to TRH's termination of its participation
in the Securities Lending Program.



2009 compared to 2008Revenues increased in 2009 due largely to an increase in net premiums written, net of the change in unearned premiums and a
decrease in realized net capital losses. Changes in foreign currency exchange rates between the U.S. dollar and the currencies in which premiums are written in 2009 compared to 2008 lessened the
increase in net premiums written by $19.8 million. The increase in net premiums earned occurred principally in the surety line along with relatively smaller increases spread across several
lines. Significant increases in revenues occurred in the Tokyo and Toronto branches. Income before income taxes increased in 2009 due to an increase in underwriting profit and a decrease in realized
net capital losses. The increase in underwriting profit generally reflects a lower loss ratio and a lower commission ratio.

Assets
increased by $216 million in 2009 due principally to a $205 million increase in investments. The increase in investments is due to an increase of $294 million
in fixed maturities available for sale, partially offset by decreases of $57 million in short-term investments and $32 million in common stocks available for sale. The
increase in investments generally reflects the investment of net operating cash inflows and changes in the fair value of investments.

2008 compared to 2007Revenues increased in 2008 due to increases in net premiums written, net of the change in unearned premiums. Changes in foreign
currency exchange rates between the U.S. dollar and the currencies in which premiums are written increased net premiums written by $12.7 million in 2008 as compared to 2007. The increase in net
premiums earned occurred principally in the property line offset in part by a decrease in the other liability line. A significant increase in revenues occurred in the Miami branch, partially offset by
a significant decrease in revenues from the Toronto branch. Income before income taxes increased in 2008 due to an increase in underwriting profit. The increase in underwriting profit generally
reflects decreased loss activity in the Miami branch.

Assets
decreased by $116 million in 2008 due largely to a decrease of $184 million in reinsurance recoverable on paid and unpaid losses and LAE from related parties. The
decrease in reinsurance recoverable is largely due to a decrease in reinsurance recoverable related to losses on business assumed from an AIG subsidiary that, by prearrangement with TRH, was ceded in
an equal amount to other AIG subsidiaries.

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Financial Condition and Liquidity

As a holding company, the Company's assets consist primarily of the stock of its subsidiaries. The Company's liabilities consist
primarily of the Senior Notes and related interest payable. The Company's cash inflows depend on the availability of dividends or other statutorily permissible payments from TRC and its wholly-owned
operating subsidiaries, TRZ and Putnam. (See Note 15 of Notes to Consolidated Financial Statements for a discussion of restrictions on dividend payment and
Schedule IICondensed Financial Information of Registrant As of December 31, 2009 and 2008 and For the Years Ended December 31, 2009, 2008 and 2007 for the condensed
financial statements of the Company.) In 2009, cash inflows also included the proceeds from the issuance of the 2039 Notes. TRH considers TRC's ability to pay dividends to the Company to be adequate
for the Company's liquidity needs through the end of 2010 and thereafter for a period the length of which is difficult to predict, but which TRH believes will be at least one year. In 2009, 2008 and
2007, the Company received cash dividends, primarily from TRC, of $121.5 million, $103.5 million and $81.0 million, respectively. In accordance with the statutory formula, based
on December 31, 2009 statutory surplus, for the twelve months ended December 31, 2009, TRC could have paid dividends to the Company of approximately $401.6 million without
regulatory approval. The Company uses cash primarily to pay interest to the holders of the Senior Notes, dividends to its common stockholders and, to a lesser extent, operating expenses. In 2009, the
Company also used cash to repurchase a portion of the 2015 Notes and repurchase common shares. In 2008, the Company also used cash to repurchase a portion of the 2015 Notes.

Sources
of funds for the operating subsidiaries consisted primarily of premiums, reinsurance recoveries, investment income and proceeds from sales, redemptions and the maturing of
investments. Funds are applied by the operating subsidiaries primarily to the purchase of investments and the payments of claims, commissions, ceded reinsurance premiums, operating expenses, income
taxes and, through the end of 2008, securities lending payables. Premiums are generally received substantially in advance of related claims payments. Cash and cash equivalents are maintained for the
payment of claims and expenses as they become due. TRH does not anticipate any material capital expenditures in the foreseeable future.

While
the expected payout pattern of liabilities (see the contractual obligations table later in this section) is considered in the investment management process, it is not the only
factor considered as TRH has historically funded its claims payments from current operating cash flows. As a result of such funding history, TRH has not historically maintained a credit facility,
though it may do so in the future. TRH's primary investment goal is to optimize after-tax income through a high quality diversified taxable fixed maturity and tax-exempt
municipal fixed maturity portfolio, while maintaining an adequate level of liquidity. See discussion later in this section of the potential liquidity strain that could arise as a result of significant
acceleration of paid losses beyond TRH's ability to fund such cash needs.

At
December 31, 2009, total investments were $12.32 billion compared to $10.23 billion at December 31, 2008, an increase of $2.09 billion. The most
significant components of this increase were an increase in net unrealized appreciation (depreciation) of investments which increased
investments by $687 million (see discussion of the change in unrealized appreciation (depreciation) of investments, net of tax, included later in this section) and $1.38 billion of net
purchases of investments. In addition, the impact of foreign currency exchange rate changes between the U.S. dollar and certain currencies in which investments are denominated increased total
investments in 2009 compared to 2008.

The
increase in investments occurred largely in fixed maturities and short-term investments. The increase in fixed maturities is due in part to a significant increase in net
unrealized appreciation on fixed maturities and significant net purchases of fixed maturities. The increase in short-term investments is due in part to the proceeds from the issuance of
the 2039 Notes in November 2009.

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The
following table summarizes the investments of TRH (on the basis of carrying value) as of December 31, 2009 and 2008:

December 31, 2009

December 31, 2008Amount

Percent

Amount

Percent(dollars in thousands)Fixed maturities:Held to maturity (at amortized cost):States, municipalities and political subdivisions

$
1,214,238


9.8
%
$
1,218,603


11.9
%Available for sale (at fair value):Corporate


2,317,041


18.8


2,094,029


20.5U.S. Government and government agencies


528,808


4.3


45,198


0.4Foreign government


553,541


4.5


280,598


2.8States, municipalities and political subdivisions


5,668,828


46.0


5,149,093


50.3Asset-backed:RMBS


258,445


2.1


291,311


2.8CMBS


93,191


0.8


115,505


1.1Other asset-backed


34,918


0.3


37,337


0.4Total available for sale


9,454,772


76.8


8,013,071


78.3Total fixed maturities


10,669,010


86.6


9,231,674


90.2Equities available for sale:Common stocks


481,515


3.9


425,645


4.2Nonredeemable preferred stocks


25,097


0.2


98,230


0.9Total equities


506,612


4.1


523,875


5.1Other invested assets


256,437


2.1


243,795


2.4Short-term investments


883,336


7.2


230,213


2.3Total investments

$
12,315,395


100.0
%
$
10,229,557


100.0
%


TRH's
fixed maturities classified as held to maturity and available for sale are predominantly investment grade, liquid securities. Approximately 45.3% and 44.5% of the
non-asset-backed fixed maturities will mature in less than 10 years as of December 31, 2009 and 2008, respectively. By their nature, asset-backed fixed maturities do not
generally have single maturity dates. The average duration of these fixed maturities was 3.7 years as of December 31, 2009 and 6.0 years as of December 31, 2008. The
decrease in duration as of December 31, 2009 compared to December 31, 2008 is due to a change in the calculation which more appropriately captures the underlying characteristics of the
fixed maturities, such as call features on municipal bonds. Activity within the fixed maturities available for sale portfolio for the periods under discussion includes strategic portfolio realignments
to optimize after-tax income. TRH adjusts its mix of taxable and tax-exempt investments, as appropriate, generally as a result of strategic investment and tax planning
considerations. With respect to the fixed maturities which are classified as held to maturity and carried at amortized cost, TRH has the positive intent and ability to hold each of these securities to
maturity.

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The
following table summarizes the ratings of fixed maturities held to maturity and available for sale (on the basis of carrying value):

Ratings as of December 31, 2009(1)AAA

AA

A

BBB

Below
BBB or
Not-Rated(2)

Total(dollars in millions)Held to maturity:States, municipalities and political subdivisions

$
591

$
480

$
121

$
22

$


$
1,214Available for sale:Corporate


386


733


1,013


173


12


2,317U.S. Government and government agencies


529














529Foreign government


335


178


28





13


554States, municipalities and political subdivisions


2,467


2,583


606





13


5,669Asset-backed:RMBS


194


27





10


27


258CMBS


69


2


12


10





93Other asset-backed


26








9





35Total available for sale


4,006


3,523


1,659


202


65


9,455Total fixed maturities

$
4,597

$
4,003

$
1,780

$
224

$
65

$
10,669Percent of total fixed maturities


43.1
%

37.5
%

16.7
%

2.1
%

0.6
%

100.0
%


(1)Principally
Standard & Poor's ratings.(2)Consists
of $1 million of B rated securities, $27 million of CCC rated securities and $37 million of not-rated securities.


Through 2008, TRH participated in the Securities Lending Program, whereby certain securities (principally fixed maturities available for sale)
from its portfolio were loaned to third parties. Under such program, TRH loaned securities to counterparties and received collateral, generally cash, which was invested to earn a spread. The
collateral received was invested in separate portfolios containing floating rate bonds (i.e.,fixed maturities), including asset-backed
securities, and interest-bearing cash
equivalents. These portfolios were maintained in segregated accounts for TRH by the program manager. The collateral was returned to the counterparties when the loaned securities were returned to TRH
at a future date. In the fourth quarter of 2008, TRH terminated its participation in the Securities Lending Program.

Prior
to the fourth quarter of 2008, the transfers of securities in exchange for collateral under the Securities Lending Program were accounted for as secured borrowings. Securities
lending invested collateral was shown on the balance sheet at fair value. A liability was recorded in an amount equal to the collateral received, reflecting TRH's obligation to return the collateral
when the loaned securities were returned. Income earned on invested collateral, net of interest payable to the collateral provider, was included in net investment income. As a result of conditions
affecting the financial and credit markets, in the fourth quarter of 2008, counterparties were successful in negotiating significantly reduced collateral levels
(i.e., collateral received as a percentage of the fair value of the security loaned). Due to the lower collateral levels, during the fourth quarter of
2008, many of such loaned securities were accounted for as sales at the time of transfer and as purchases when the securities were subsequently returned.

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Gross
unrealized gains and losses and net unrealized gains (losses) on all fixed maturities and equities at December 31, 2009 and 2008 were as follows:

Gross Unrealized
Gains

Gross Unrealized
Losses

Net Unrealized
Gains (Losses)(in millions)As of December 31, 2009:Fixed maturities (including held to maturity and carried at amortized cost)(1)

$
401.3

$
(171.3
)
$
230.0Equities


67.8


(2.1
)

65.7As of December 31, 2008:Fixed maturities (including held to maturity and carried at amortized cost)(1)

$
178.1

$
(468.0
)
$
(289.9
)Equities


22.9


(81.5
)

(58.6
)


(1)At
December 31, 2009, includes no gross unrealized gains and gross unrealized losses of ($34.0) million on fixed maturities rated below BBB and gross
unrealized gains of $0.1 million and gross unrealized losses of ($0.1) million on fixed maturities which are not-rated. At December 31, 2008, includes gross unrealized gains
of $0.2 million and gross unrealized losses of ($1.0) million on fixed maturities rated below BBB. The vast majority of the increase in gross unrealized losses on fixed maturities rated below
BBB at December 31, 2009 compared to December 31, 2008 is related to the reclassification of OTTI losses pursuant to the adoption of new accounting guidance on April 1, 2009.


In general, the increase in unrealized gains (losses) in 2009 is largely due to net unrealized appreciation of states, municipalities and
political subdivisions and corporate fixed maturities and equities available for sale partially offset by $110.1 million related to the reclassification of OTTI losses, previously charged to
earnings, to accumulated other comprehensive income (loss) due to the adoption of new accounting guidance on fixed maturity OTTI criteria. In general, the net unrealized appreciation of states,
municipalities and political subdivisions and corporate fixed maturities and equities available for sale, reflect improvements in credit and financial markets in 2009 compared to year-end
2008. (SeeDisruption in Global Credit and Financial MarketsandItem 1A.Risk
Factors.See Note 4 of Notes to Consolidated Financial Statements ("Note 4") for additional details about gross unrealized gains and
losses on fixed maturities and equities.)

Generally,
reserve changes result from the setting of reserves on current accident year business, the adjustment of prior accident year reserves based on new information
(i.e., reserve development), payments of losses and LAE for which reserves were previously established, and the impact of changes in foreign currency
exchange rates.

At
December 31, 2009, gross loss reserves totaled $8.61 billion, an increase of $484.6 million, or 6.0% over 2008. The increase in gross loss reserves includes the
impact of changes in foreign currency exchange rates since the end of 2008 and gross loss reserve development.

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The components of gross loss reserves as of December 31, 2009 and 2008 by major class of business, split between reported ("case") amounts and losses and
LAE IBNR amounts is presented below:

2009

Gross Loss ReservesCase

IBNR

Total(in millions)Casualty:Other liability(1)

$
1,192.7

$
2,655.5

$
3,848.2Accident and health


233.0


122.5


355.5Medical malpractice


478.2


785.0


1,263.2Ocean marine and aviation


430.3


184.3


614.6Auto liability


298.5


209.8


508.3Surety and credit


138.7


158.1


296.8Other


420.5


393.0


813.5Total casualty


3,191.9


4,508.2


7,700.1Property:Fire


453.2


172.7


625.9Allied lines


56.4


67.3


123.7Auto physical damage


33.1


38.3


71.4Homeowners multiple peril


14.5


8.2


22.7Other


46.3


19.0


65.3Total property


603.5


305.5


909.0Total

$
3,795.4

$
4,813.7

$
8,609.1


2008

Gross Loss ReservesCase

IBNR

Total(in millions)Casualty:Other liability(1)

$
1,125.2

$
2,366.7

$
3,491.9Accident and health


277.5


100.3


377.8Medical malpractice


437.6


744.5


1,182.1Ocean marine and aviation


394.3


217.4


611.7Auto liability


287.3


190.4


477.7Surety and credit


113.9


152.0


265.9Other


353.4


374.2


727.6Total casualty


2,989.2


4,145.5


7,134.7Property:Fire


433.5


218.7


652.2Allied lines


84.9


74.5


159.4Auto physical damage


24.5


43.5


68.0Homeowners multiple peril


13.3


14.6


27.9Other


59.7


22.6


82.3Total property


615.9


373.9


989.8Total

$
3,605.1

$
4,519.4

$
8,124.5


(1)A
large majority of the amounts within the other liability line relates to complex risks such as E&O and D&O, to general casualty risks and, to a much
lesser extent, environmental impairment liability.


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Gross loss reserves represent the accumulation of estimates for losses occurring on or prior to the balance sheet date. Gross case reserves are
principally based on reports and individual case estimates received from ceding companies. The IBNR portion of gross loss reserves is based on past experience and other factors. The methods used to
determine such estimates and to establish the resulting reserves are continually reviewed and updated. Any adjustments are reflected in income currently.

At
December 31, 2009, reinsurance recoverable on gross loss reserves totaled $725.3 million (a component of reinsurance recoverable on paid and unpaid losses on the
Consolidated Balance Sheet, which is net of an allowance for uncollectible reinsurance recoverable of approximately $12 million), a decrease of $38.1 million, or 5.0%, from the prior
year-end. Of the amount of reinsurance recoverable on paid and unpaid losses and LAE, which totaled $747.1 million as of December 31, 2009, $375 million represented
balances that were unsecured. Of such unsecured balances, $36 million was due from related parties and 96% of the remaining balance was due from companies rated A- or better. (See
Note 16.)

Net
loss reserves totaled $7.87 billion at December 31, 2009, an increase of $522.7 million, or 7.1%, from the prior year-end. The overall increase in
net loss reserves was due in part to the exchange rate impact of the changes in certain foreign currency exchange rates against the U.S. dollar since the end of 2008 which served to increase net loss
reserves by $264.6 million. 2009 includes paid losses and LAE, net of reinsurance recovered, relating to net catastrophe losses of approximately $108 million relating to events occurring
in 2008, 2007 and 2005. 2008 includes paid losses and LAE, net of reinsurance recovered, relating to net catastrophe losses of $94 million, relating to events occurring in 2008, 2007 and 2005.
2007 included paid losses and LAE, net of reinsurance recovered, relating to net catastrophe losses of approximately $89 million, relating to events occurring in 2007 and 2005. An analysis of
the change in net loss reserves from year-end 2008 to year-end 2009 is included in Note 6 of Notes to Consolidated Financial Statements.

Net
loss reserves include amounts for risks relating to environmental impairment and asbestos-related illnesses totaling $163 million and $152 million at
December 31, 2009 and 2008, respectively, including $30 million and $28 million at the aforementioned dates, respectively, relating to such losses occurring in 1985 and prior. As
TRC, the major operating subsidiary of the Company, commenced operations in 1978, the great majority of TRH's environmental and asbestos-related net loss reserves arose from contracts entered into
after 1985 that were underwritten specifically as environmental or asbestos-related coverages rather than as standard general liability coverages,
where the environmental or asbestos-related liabilities were neither clearly defined nor specifically excluded. The reserves carried for these claims, including IBNR reserves, are based upon known
facts and current law. However, significant uncertainty exists in determining the amount of ultimate liability for environmental impairment and asbestos-related losses, particularly for those
occurring in 1985 and prior. This uncertainty is due to inconsistent court resolutions and judicial interpretations with respect to underlying policy intent and coverage and uncertainties as to the
allocation of responsibility for resultant damages, among other things.

Because
the reserving process is inherently difficult and subjective, actual losses may materially differ from reserves and related reinsurance recoverables reflected in TRH's
consolidated financial statements, and, accordingly, may have a material effect on future results of operations, financial condition and cash flows. And while there is also the possibility of changes
in statutes, laws, regulations and other factors that could have a material effect on these liabilities and, accordingly, the financial statement elements cited immediately above, TRH believes that
its loss reserves carried at December 31, 2009 are adequate.

SeeCritical Accounting Estimatesfor a discussion of the significant assumptions and factors considered in the reserve setting process.

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In
the ordinary course of business, TRH is involved in lawsuits, arbitrations and other formal and informal dispute resolution procedures, the outcomes of which will determine TRH's
rights and obligations under reinsurance agreements and other more general contracts. In some disputes, TRH seeks to enforce its rights under an agreement or to collect funds owing to it. In other
matters, TRH is resisting attempts by others to enforce alleged rights. Such disputes are resolved through formal and informal means, including litigation, arbitration and mediation. (See Item 3.Legal Proceedings.)

In
all such matters, TRH believes that its positions are legally and commercially reasonable. TRH also regularly evaluates those positions, and where appropriate, establishes or adjusts
loss reserves to reflect its evaluation. TRH's aggregate loss reserves take into account the possibility that TRH may not ultimately prevail in each and every disputed matter. TRH takes into
consideration changes in judicial interpretation of legal liability and policy coverages, changes in claims handling practices and inflation. TRH considers not only monetary increases in the cost of
what it reinsures, but also changes in societal factors that influence jury verdicts and case law, TRH's approach to claim resolution, and, in turn, claim costs. TRH believes its aggregate loss
reserves reduce the potential that an adverse resolution of one or more of these matters, at any point in time, would have a material impact on TRH's financial condition or results of operations.
However, there can be no assurance that adverse resolutions of such matters in any one period or in the aggregate will not result in a material adverse effect on TRH's results of operations or
financial condition.

For
2009, TRH's net operating cash inflows were $951.5 million, a decrease of $145.0 million from 2008. The decrease results, in large part, from a decrease in cash
received from underwriting activities.

For
2008, TRH's net operating cash inflows totaled $1.10 billion, an increase of $69.7 million from 2007. The increase is due in large part to decreased income taxes paid
and an increase in investment income received, partially offset by decreased cash flows from underwriting activities, including decreased collection of reinsurance recoverable.

As
significant losses from catastrophes occurring in prior years remain unpaid, TRH expects that payments relating to these events will negatively impact operating cash flows in 2010 and
perhaps thereafter.

If
paid losses accelerated significantly beyond TRH's ability to fund such paid losses from current operating cash flows, TRH would be compelled to liquidate a portion of its investment
portfolio and/or arrange for financing. Such events that may cause such a liquidity strain could be the result of several catastrophic events occurring in a relatively short period of time. Additional
strain on liquidity could occur if the investments sold to fund such cash needs were sold in a depressed marketplace and/or reinsurance recoverable on paid losses became uncollectible.

Based
on its history of consistently strong operating cash flows, the present composition of its investment portfolio (including present levels of cash, cash equivalents, short-term
investments and other liquid investment classes) and consideration of its cash needs, TRH considers its liquidity to be adequate through the end of 2010 and thereafter for a period the length of which
is difficult to predict, but which TRH believes will be at least one year.

TRH's
stockholders' equity totaled $4.03 billion at December 31, 2009, an increase of $836.2 million from year-end 2008. The net increase consisted
primarily of net income of $477.7 million and other comprehensive income of $399.0 million, partially offset by cash dividends declared of $52.5 million.

The
abovementioned other comprehensive income consisted of net unrealized appreciation of investments, net of income taxes, of $446.3 million, partially offset by net unrealized
foreign currency translation loss from functional currencies, net of income taxes, of ($47.4) million. The net unrealized appreciation of investments, net of income taxes, is composed principally of
increases of $367.0 million in net unrealized appreciation (depreciation) of fixed maturities available for sale, principally states, municipalities and political subdivision and corporate
fixed maturities, and an increase of $80.8 million in

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unrealized
appreciation of equities available for sale. (See Note 4 for details of gross unrealized gains and losses by security type.)

Net
unrealized appreciation (depreciation) of investments, net of income taxes, is subject to significant volatility resulting from changes in the fair value of fixed maturities
available for sale, equities available for sale and other invested assets. Fair values may fluctuate due to changes in general economic and political conditions, market interest rates, prospects of
investee companies and other factors.

In
December 2009, the Company's Board of Directors authorized the repurchase of up to $200 million of its shares from time to time in the open market or via privately negotiated
transactions through December 31, 2011. In 2009, the Company repurchased 59,600 shares of it common stock at an aggregate cost of $3.1 million. The Company did not repurchase shares of
its common stock in 2008 or 2007. (SeeItem 5.Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.)

In
November 2009, the Company issued $350 million principal amount of the 2039 Notes, all of which remains outstanding as of December 31, 2009. In 2009 and 2008, TRH
repurchased $30 million and $25 million, respectively, principal amount of the 2015 Notes from non-related parties. $695 million and $725 million principal amount of the
2015 Notes were outstanding at December 31, 2009 and 2008, respectively. SeeResults of Operationsfor the gain realized on the early
extinguishment of the 2015 Notes in 2009 and 2008.

As
of December 31, 2009, the amounts due and the estimated period between year-end 2009 and the dates of payment, under specified contractual obligations of TRH are as
follows:

Total

Less Than
1 Year

1-3 Years

3-5 Years

More Than
5 Years(in thousands)Long-term debt(1)

$
2,124,778

$
67,963

$
135,925

$
135,925

$
1,784,965Operating leases


86,191


12,338


22,556


17,332


33,965Gross loss reserves


8,609,105


1,986,894


2,455,099


1,565,190


2,601,922Other(2)


921


921








Total

$
10,820,995

$
2,068,116

$
2,613,580

$
1,718,447

$
4,420,852


(1)Includes
anticipated interest payments.(2)Represents
commitments to invest in limited partnerships.


With respect to commitments and contingent liabilities, see Note 18 of Notes to Consolidated Financial Statements.

Risk
Based Capital ("RBC") standards, promulgated by the National Association of Insurance Commissioners ("NAIC"), relate an individual company's statutory policyholders' surplus to the
risk inherent in its overall operations and set thresholds at which certain company and regulatory corrective actions are mandated. At December 31, 2009 the statutory surpluses of TRC and
Putnam each exceeded the level of surplus required under RBC requirements for regulatory attention.

Catastrophe Exposure

The nature of TRH's business exposes it to losses from various catastrophe events. In a catastrophe event, losses from many insureds
across multiple lines of
business may result directly or indirectly from such single occurrence. In order to control such exposures, TRH employs a combination of measures, including setting targets for the amount of its
exposure in key geographic zones and product lines that are prone to catastrophic events, monitoring and modeling accumulated exposures and purchasing catastrophe reinsurance when deemed cost
effective.

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Natural
disasters such as hurricanes, earthquakes and other catastrophes have the potential to adversely affect TRH's operating results by material amounts. Other risks, such as an
outbreak of a pandemic disease, a major terrorist event, the bankruptcy of a major company, or a marine and/or aviation disaster, could also have a materially adverse effect on TRH's business and
operating results to an extent that may be only partially offset by reinsurance.

TRH
evaluates catastrophic events and assesses the probability of occurrence and magnitude through the use of industry recognized models and other techniques. TRH supplements these
models by periodically monitoring the exposure risks of its operations and adjusting such modeled output accordingly.

It
is important to recognize that there is no single standard methodology to project the possible losses from catastrophe exposures. Further, there are no industry standard assumptions
to be utilized in projecting these losses and the form and quality of the data obtained from ceding companies used in these models are not uniformly compatible with the data requirements of all
models. The use of different methodologies and assumptions could materially change the projected losses. Therefore, these modeled losses may not be comparable to estimates made by other companies.

While
the analytical tools used to estimate catastrophe exposure are useful in both pricing and monitoring catastrophe risk, the estimates derived by use of these techniques are
inherently uncertain and do not reflect TRH's maximum exposures to these events. While the models are frequently updated, these projections are nevertheless inherently imprecise. It is highly likely
that TRH's losses will vary, perhaps materially, from these estimates.

Projections
of potential catastrophe losses are typically expressed in terms of the probable maximum loss ("PML"). TRH defines PML as its anticipated maximum loss (taking
into account contract limits) caused by a single catastrophic event affecting a broad contiguous area. These modeled losses are estimated based upon contracts in force at January 1, 2010.

The
following is an overview of such modeled PMLs from property, engineering, marine and energy exposures and the associated natural perils that TRH deems most significant. The estimated
amount of these modeled losses are presented in three ways: (a) gross losses; (b) pre-tax net catastrophe costs (i.e., gross
losses, net of reinsurance and the impact of net reinstatement premiums); and (c) after-tax net catastrophe costs (i.e., the net cost
to TRH). The reduction for reinsurance assumes that all reinsurers fulfill their obligations to TRH in accordance with contract terms. The values provided have a likelihood of being exceeded in any
single year of 1.0% or 0.4%.

1.0%

0.4%Gross
Losses

Pre-Tax Net
Catastrophe
Costs

After-Tax Net
Catastrophe
Costs

Gross
Losses

Pre-Tax Net
Catastrophe
Costs

After-Tax Net
Catastrophe
Costs(in millions)Europe, Wind

$
840

$
721

$
469

$
999

$
861

$
559Florida, Wind


518


493


320


920


853


555California, Earthquake


493


468


304


864


794


516Northeast U.S., Wind


464


432


281


952


874


568Japan, Earthquake


414


332


216


519


418


272


"Europe, Wind" has the highest modeled after-tax net catastrophe costs arising out of events with a 1.0% probability of being exceeded
and would represent 11.6% of TRH's stockholders' equity at December 31, 2009. "Northeast U.S., Wind" has the highest modeled after-tax net catastrophe costs arising out of events
with a 0.4% probability of being exceeded and would represent 14.1% of TRH's stockholders' equity at December 31, 2009. If multiple severe catastrophic events occur in any one year, the
potential economic cost to the company could be materially higher than any one of the amounts shown above.

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There
is much uncertainty and imprecision in the compilation of these estimates at many stages in the process. Moreover, the makeup of TRH's in-force business is constantly
changing as new business is added and existing contracts terminate or expire, including contracts for reinsurance coverage purchased by TRH. In addition, these estimates take into account what TRH
believes to be the most likely accumulation of territories and/or lines of business in a catastrophic natural peril event, but there can be no assurance that TRH has captured every possible scenario
in its analysis. As a result of these factors, among others, there can be no assurance that TRH will not experience after-tax net catastrophe costs from individual events that will exceed
these estimates by a material amount. There also can be no assurance that TRH will not experience catastrophe events more frequently than the modeled probabilities would suggest. In any given year,
catastrophe events could have a material adverse effect on TRH's financial condition, results of operations, cash flows and liquidity.

See
Note 10 for catastrophe costs incurred in 2009, 2008 and 2007.

Disruption in Global Credit and Financial Markets

In mid-2007, the U.S. residential mortgage market began to experience serious disruption due to credit quality
deterioration in a significant portion of loans originated, particularly to non-prime and sub-prime borrowers; evolving changes in the regulatory environment; a residential
housing market characterized by a slowing pace of transactions and declining prices; increased cost of borrowings for mortgage participants; a rising unemployment rate; increased delinquencies in
non-mortgage consumer credit; and illiquid credit markets. In addition, the financial strength of certain bond insurers has been compromised to varying degrees by losses these entities
experienced due in part to the coverage they provide for domestic RMBS. These conditions continued through 2008 and into 2009, expanding into the broader global credit markets and resulting in greater
volatility, a steep decline in equity markets, less liquidity, widening of credit spreads, a lack of price transparency, increased credit losses in certain markets and the collapse of several
prominent financial institutions. By the end of 2009, the disruptions to the global credit and financial markets had moderated as the markets started to stabilize or, in some cases, recover. TRH
cannot predict whether current trends will continue, deteriorate or improve.

These
issues carry risk relating to certain lines of business TRH underwrites because disruption in the credit and financial markets may increase claim activity in lines such as D&O,
E&O, credit, and to a limited extent mortgage guaranty business, among others. TRH also participates in the mortgage market through investments in mortgage-backed securities.

The
operating results and financial condition of TRH have been and may continue to be adversely affected by factors related to the market disruptions referred to above, among others. The
duration and severity of the downward cycle could extend further if there is an increase in the severity of the economic difficulties being experienced around the world, including the U.S. TRH expects
that the difficulties in the economy may continue to have an adverse effect on TRH's operating results in the future. TRH also incurred realized and unrealized market valuation losses in 2009, 2008
and 2007 on its available for sale securities, including asset-backed fixed maturities. The impact on TRH's operations with exposure to the residential mortgage market will be somewhat dependent on
future market conditions.

TRH's
operating results, investment portfolio and overall consolidated financial condition could be further adversely impacted if global economic conditions deteriorate in the future,
although TRH
attempts to mitigate these, as well as other financial and operational risks, by disciplined underwriting of a diversified book of business, generally conservative investment strategies and risk
management. While TRH cannot predict with any certainty the ultimate impact the recent economic deterioration will have on TRH, these events may have a material adverse effect on TRH's results of
operations, financial condition and cash flows and the Company's stock price.

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Recent Accounting Standards

See Note 2(l) of Notes to Consolidated Financial Statements for a discussion of recent accounting standards and their
application to TRH.

Item 7A.Quantitative and Qualitative Disclosures About Market Risk

TRH's operations are exposed to market risk. Market risk is the risk of loss of fair value resulting from adverse fluctuations in
interest rates, equity prices and foreign currency exchange rates. TRH's market risk exposures arise from the following:



TRH
analyzes market risk using Value at Risk ("VaR"). VaR is a summary statistical measure that applies the estimated volatility and correlation of market factors of TRH's market
position. The output from the VaR calculation is the maximum loss that could occur over a defined period of time given a certain probability. VaR measures not only the size of the individual exposures
but also the interaction between different market exposures, thereby providing a portfolio approach to measuring market risk.

While
VaR models are relatively sophisticated, the quantitative market risk information generated is limited by the assumptions and parameters established in creating the related models.
TRH believes that statistical models alone do not provide a reliable method of monitoring and controlling market risk. Therefore, such models are tools and do not substitute for the experience or
judgment of senior management.

TRH
has performed VaR analyses to estimate the maximum potential loss of fair value for financial instruments for each type of market risk. In this analysis, financial instrument assets
include all investments, cash and accrued investment income. Financial instrument liabilities include unpaid losses and LAE and unearned premiums, each net of reinsurance, and the Senior Notes.

TRH
calculated the VaR with respect to net fair values at each quarter end in 2009 and 2008. The VaR number represents the maximum potential loss as of those dates that could be incurred
with a 95% confidence (i.e., only 5% of historical scenarios show losses greater than the VaR figures) within a one-month holding
period. Starting in the second quarter of 2009, TRH refined the calculations of VaR compared to prior periods. For the values calculated as of December 31, 2009, September 30, 2009 and
June 30, 2009 (September 30, 2009 and June 30, 2009 are not presented herein, but included in the calculation of the average, high and low values for the year ended
December 31, 2009), TRH employed a variance-covariance methodology that entails modeling the linear sensitivities of all the assets and liabilities to a broad set of systematic market risk
factors and idiosyncratic risk factors. Risk factor returns are assumed to be joint-normally distributed. The most recent two years of historical changes in these risk factors are utilized.
Information prior to second quarter 2009 that was utilized in calculating the information presented below have been calculated using the historical simulation methodology. TRH does not believe that
the differences between methods materially affect an evaluation of the potential impact that market risk may have on TRH. TRH expects to use the variance-covariance methodology for future period data.

TRH's
market risk analyses do not provide weight to risks relating to market issues such as liquidity and the credit-worthiness of investments.

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The
following table presents the year-end, average, high and low VaRs on a diversified basis and of each component of market risk for 2009 and 2008. The diversified VaR is
usually smaller than the sum of its components due to correlation effects.

2009

2008Year-End

Average

High

Low

Year-End

Average

High

Low(in millions)Diversified

$
170

$
192

$
276

$
91

$
91

$
168

$
200

$
91Interest rate


140


149


216


84


84


160


194


84Equity


80


94


138


80


83


70


83


58Currency


49


58


79


47


57


37


57


28


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Item 8.Financial Statements and Supplementary Data

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

PageReport of Independent Registered Public Accounting Firm

80Consolidated Balance Sheets As of December 31, 2009 and 2008

81Consolidated Statements of Operations For the Years Ended December 31, 2009, 2008 and
2007

82Consolidated Statements of Stockholders' Equity For the Years Ended December 31, 2009, 2008 and
2007

83Consolidated Statements of Cash Flows For the Years Ended December 31, 2009, 2008 and 2007

84Consolidated Statements of Comprehensive Income (Loss) For the Years Ended December 31, 2009, 2008
and 2007

85Notes to Consolidated Financial Statements

86Schedules:ISummary of InvestmentsOther than Investments in Related Parties As of December 31, 2009

S-1IICondensed Financial Information of Registrant As of December 31, 2009 and 2008 and For the Years Ended December 31, 2009,
2008 and 2007

S-2IIISupplementary Insurance Information As of December 31, 2009, 2008 and 2007 and For the Years Then Ended

S-5IVReinsurance For the Years Ended December 31, 2009, 2008 and 2007

S-6VISupplementary Information Concerning Property/Casualty Insurance Operations As of December 31, 2009, 2008 and 2007 and For the
Years Then Ended

S-7


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Report of Independent Registered Public Accounting Firm

To
the Board of Directors and Stockholders of
Transatlantic Holdings, Inc.:

In
our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Transatlantic
Holdings, Inc. and its subsidiaries (the "Company") at December 31, 2009 and 2008, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the
financial statement schedules listed in the accompanying index present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated
financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria
established inInternal ControlIntegrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
The Company's management is responsible for these financial statements and financial statement schedules, for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to
express opinions on these financial statements, on the financial statement schedules, and on the Company's internal control over financial reporting based on our integrated audits. We conducted our
audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the
financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As
discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for other-than-temporary impairment of
debt securities in 2009 in connection with its adoption of new accounting guidance.

A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/
PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, New York
February 24, 2010

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TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES        CONSOLIDATED BALANCE SHEETS        As of December 31, 2009 and 2008

2009

2008(in thousands, except share data)ASSETSInvestments:Fixed maturities:Held to maturity, at amortized cost (fair value: 2009$1,271,397; 2008$1,210,432)

$
1,214,238

$
1,218,603Available for sale, at fair value (amortized cost: 2009$9,281,934; 2008$8,294,813)


9,454,772


8,013,071Equities, available for sale, at fair value:Common stocks (cost: 2009$417,365; 2008$479,714)


481,515


425,645Nonredeemable preferred stocks (cost: 2009$23,559; 2008$102,804)


25,097


98,230Other invested assets


256,437


243,795Short-term investments, at cost (approximates fair value)


883,336


230,213Total investments


12,315,395


10,229,557Cash and cash equivalents


195,723


288,920Accrued investment income


148,055


141,563Premium balances receivable, net


591,300


665,187Reinsurance recoverable on paid and unpaid losses and loss adjustment expenses


747,073


790,499Deferred acquisition costs


237,466


239,610Prepaid reinsurance premiums


60,251


84,238Deferred income taxes


454,483


692,345Other assets


193,913


245,019Total assets

$
14,943,659

$
13,376,938LIABILITIES AND STOCKHOLDERS' EQUITYUnpaid losses and loss adjustment expenses

$
8,609,105

$
8,124,482Unearned premiums


1,187,526


1,220,133Senior notes


1,033,087


722,243Other liabilities


79,561


111,860Total liabilities


10,909,279


10,178,718Commitments and contingent liabilities (see Note 18)Preferred Stock, $1.00 par value; shares authorized: 200910,000,000; 20085,000,000; none issued





Common Stock, $1.00 par value; shares authorized: 2009200,000,000; 2008100,000,000; shares issued: 200967,431,121;
200867,353,258


67,431


67,353Additional paid-in capital


283,036


268,027Accumulated other comprehensive income (loss)


69,701


(257,690
)Retained earnings


3,639,200


3,142,449Treasury Stock, at cost: 20091,048,500; 2008988,900 shares of common stock


(24,988
)

(21,919
)Total stockholders' equity


4,034,380


3,198,220Total liabilities and stockholders' equity

$
14,943,659

$
13,376,938


The
accompanying notes are an integral part of the consolidated financial statements.

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TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF OPERATIONS        For the Years Ended
December 31, 2009, 2008 and 2007

2009

2008

2007(in thousands, except per share data)Revenues:Net premiums written

$
3,986,101

$
4,108,092

$
3,952,899Decrease (increase) in net unearned premiums


52,981


(40,703
)

(50,230
)Net premiums earned


4,039,082


4,067,389


3,902,669Net investment income


467,402


440,451


469,772Realized net capital (losses) gains:Total other-than-temporary impairments


(96,527
)

(317,790
)

(27,137
)Less: Total other-than-temporary impairments recognized in other comprehensive income (loss)


13,445





Other-than-temporary impairments charged to earnings


(83,082
)

(317,790
)

(27,137
)Other realized net capital gains (losses)


12,441


(117,751
)

36,526Total realized net capital (losses) gains


(70,641
)

(435,541
)

9,389Gain on early extinguishment of debt


9,869


10,250


Total revenues


4,445,712


4,082,549


4,381,830Expenses:Net losses and loss adjustment expenses


2,679,171


2,907,227


2,638,033Net commissions


927,918


980,626


980,121Decrease (increase) in deferred acquisition costs


12,406


(6,956
)

(16,901
)Other underwriting expenses


158,181


131,555


115,760Interest on senior notes


43,454


43,359


43,421Other, net


28,549


23,515


25,644Total expenses


3,849,679


4,079,326


3,786,078Income before income taxes


596,033


3,223


595,752Income taxes (benefits):Current


96,771


45,277


182,612Deferred


21,600


(144,308
)

(74,001
)Total income taxes (benefits)


118,371


(99,031
)

108,611Net income

$
477,662

$
102,254

$
487,141Net income per common share:Basic

$
7.20

$
1.54

$
7.37Diluted


7.15


1.53


7.31Weighted average common shares outstanding:Basic


66,381


66,270


66,124Diluted


66,802


66,722


66,654


The
accompanying notes are an integral part of the consolidated financial statements.

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TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY        For the Years
Ended December 31, 2009, 2008 and 2007

2009

2008

2007(in thousands, except per share data)Common Stock:Balance, beginning of year

$
67,353

$
67,222

$
67,027Issued under stock compensation plans


78


131


195Balance, end of year


67,431


67,353


67,222Additional paid-in capital:Balance, beginning of year


268,027


249,853


228,480Excess of proceeds (costs) over par value of common stock issued under stock compensation plans


1,514


(1,052
)

5,846Contributed capital


13,495


19,226


15,527Balance, end of year


283,036


268,027


249,853Accumulated other comprehensive income (loss):Balance, beginning of year


(257,690
)

(34,692
)

42,626Net change for year


613,783


(343,074
)

(118,950
)Deferred income tax effect on above net change


(214,823
)

120,076


41,632Cumulative effect of accounting change, net of tax


(71,569
)




Balance, end of year


69,701


(257,690
)

(34,692
)Retained earnings:Balance, beginning of year


3,142,449


3,088,578


2,642,056Net income


477,662


102,254


487,141Cash dividends declared (per common share: 2009$0.79; 2008$0.73; 2007$0.62)


(52,480
)

(48,383
)

(40,619
)Cumulative effect of accounting change, net of tax


71,569





Balance, end of year


3,639,200


3,142,449


3,088,578Treasury Stock:Balance, beginning of year


(21,919
)

(21,919
)

(21,919
)Acquisition of treasury stock


(3,069
)




Balance, end of year


(24,988
)

(21,919
)

(21,919
)Total stockholders' equity

$
4,034,380

$
3,198,220

$
3,349,042


The
accompanying notes are an integral part of the consolidated financial statements.

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TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF CASH FLOWS        For the Years Ended December 31,
2009, 2008 and 2007

2009

2008

2007(in thousands)Cash flows from operating activities:Net income

$
477,662

$
102,254

$
487,141Adjustments to reconcile net income to net cash provided by operating activities:Changes in unpaid losses and loss adjustment expenses, unearned premiums and prepaid reinsurance premiums


476,003


179,086


537,967Changes in premium and reinsurance balances receivable and payable, net


111,329


236,445


293,485Change in deferred acquisition costs


2,144


8,471


(16,901
)Change in accrued investment income


(27,390
)

28,575


(36,969
)Realized net capital losses (gains) from investments


62,156


407,455


(33,582
)Changes in current and deferred income taxes


48,377


(218,090
)

(82,327
)Change in unrealized net foreign exchange (gains) losses


(187,288
)

307,364


(152,642
)Changes in other assets and liabilities, net


(49,375
)

(8,923
)

10,448Other, net


37,867


53,850


20,190Total adjustments


473,823


994,233


539,669Net cash provided by operating activities


951,485


1,096,487


1,026,810Cash flows from investing activities:Proceeds of fixed maturities available for sale sold


1,229,268


4,346,358


1,348,583Proceeds of fixed maturities available for sale redeemed or matured


600,939


619,493


490,205Proceeds of fixed maturities held to maturity redeemed





25,000


Proceeds of equities available for sale sold


944,695


877,755


1,189,392Purchase of fixed maturities available for sale


(2,514,442
)

(5,157,138
)

(2,782,062
)Purchase of equities available for sale


(849,162
)

(899,896
)

(1,191,044
)Net sale (purchase) of other invested assets


14,902


(22,265
)

6,115Net sales (purchases) in securities lending invested collateral





1,329,619


(305,987
)Net purchase of short-term investments


(791,086
)

(173,520
)

(20,329
)Change in other liabilities for securities in course of settlement


40,479


(84,369
)

1,198Other, net


(16,456
)

(10,398
)

5,947Net cash (used in) provided by investing activities


(1,340,863
)

850,639


(1,257,982
)Cash flows from financing activities:Net change in securities lending payable





(1,845,822
)

305,987Dividends to stockholders


(51,780
)

(46,382
)

(39,019
)Common stock issued


1,579


(924
)

6,042Acquisition of treasury stock


(3,069
)




Repurchase of senior notes


(19,612
)

(14,750
)

Net proceeds from issuance of senior notes


336,929





Other, net


1,254


2,946


790Net cash provided by (used in) financing activities


265,301


(1,904,932
)

273,800Effect of exchange rate changes on cash and cash equivalents


30,880


(8,706
)

7,540Change in cash and cash equivalents


(93,197
)

33,488


50,168Cash and cash equivalents, beginning of year


288,920


255,432


205,264Cash and cash equivalents, end of year

$
195,723

$
288,920

$
255,432Supplemental cash flow information:Income taxes paid, net

$
(108,713
)
$
(119,474
)
$
(184,592
)Interest paid on senior notes


(40,394
)

(43,113
)

(43,125
)


The accompanying notes are an integral part of the consolidated financial statements.

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TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)        For
the Years Ended December 31, 2009, 2008 and 2007

2009

2008

2007(in thousands)Net income

$
477,662

$
102,254

$
487,141Other comprehensive income (loss):Net unrealized appreciation (depreciation) of investments, net of tax:Net unrealized holding losses of fixed maturities on which other-than-temporary impairments were taken


(13,445
)




Net unrealized holding gains (losses) on all other securities


635,091


(772,771
)

(121,603
)Reclassification adjustment for losses (gains) included in net income


64,989


417,705


(34,018
)Deferred income tax (charge) benefit


(240,322
)

124,273


54,467446,313


(230,793
)

(101,154
)Net unrealized currency translation (loss) gain, net of tax:Net unrealized currency translation (loss) gain


(72,852
)

11,992


36,671Deferred income tax benefit (charge)


25,499


(4,197
)

(12,835
)(47,353
)

7,795


23,836Other comprehensive income (loss)


398,960


(222,998
)

(77,318
)Comprehensive income (loss)

$
876,622

$
(120,744
)
$
409,823


The
accompanying notes are an integral part of the consolidated financial statements.

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TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Nature of Operations

Transatlantic Holdings, Inc. (the "Company", and collectively with its subsidiaries, "TRH") is a holding company, incorporated in the state of Delaware, which owns all of the
common stock of Transatlantic Reinsurance Company® ("TRC"). TRC owns all of the common stock of Trans Re Zurich ("TRZ") and Putnam Reinsurance Company ("Putnam"). Prior to June 10,
2009 and as of December 31, 2008 and 2007, American International Group, Inc. ("AIG", and collectively with its subsidiaries, the "AIG Group") beneficially owned approximately 59% of the
Company's outstanding shares. On June 10, 2009, AIG and American Home Assurance Company ("AHAC"), a wholly owned subsidiary of AIG, consummated the secondary public offering of
29.9 million issued and outstanding shares of the common stock of the Company owned by AIG and AHAC. According to the Form 13F filed on February 18, 2010 by AIG, as of
December 31, 2009, the AIG Group had sole voting authority over 9.2 million shares of the Company's common stock, representing approximately 13.8% of the Company's outstanding shares as
of December 31, 2009. (See Note 14 for additional discussion regarding AIG's beneficial ownership of the Company.)

TRH,
through its operating subsidiaries TRC, TRZ and Putnam, offers reinsurance capacity for a full range of property and casualty products to insurers and reinsurers on a treaty and
facultative basis, with an emphasis on specialty classes. Including domestic as well as international risks, TRH's
principal lines of business are other liability (including directors' and officers' liability ("D&O"), errors and omissions liability ("E&O") and general casualty), medical malpractice, ocean marine
and aviation, auto liability (including non-standard risks), accident and health and surety and credit in the casualty lines, and fire, allied lines, auto physical damage and homeowners
multiple peril lines in the property lines (which include property catastrophe risks). Casualty lines represented 71.3%, 69.8% and 71.0% of net premiums written in 2009, 2008 and 2007, respectively.
The balance represented property lines.

2. Summary of Significant Accounting Policies

(a) Basis of Presentation:The consolidated financial statements include the accounts of the Company and its majority owned
subsidiaries. The Company
consolidates subsidiaries in which it holds a controlling financial interest. Entities where the Company holds 20% to 50% of the voting rights and alternative investments in which TRH holds a 5% or
greater interest or where it has more than a minor influence over the operations of the investee are accounted for under the equity method.

The
accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). All material intercompany accounts and
transactions have been eliminated. Certain reclassifications and format changes have been made to prior years' amounts to conform to the 2009 presentation.

Subsequent
events through the time of filing of this Form 10-K on February 24, 2010, were evaluated for potential recognition or disclosure in the financial
statements.

(b) Use of Estimates:The preparation of financial statements in conformity with GAAP requires the use of estimates and
assumptions that affect the
reported amounts and related disclosures. TRH relies on historical experience and on various other assumptions that it believes to be reasonable, under the circumstances, to make judgments about the
carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates.

TRH
believes its most critical accounting estimates are those with respect to loss reserves, fair value measurements of certain financial assets,
other-than-temporary impairments ("OTTI") of investments,

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premium
revenues and deferred acquisition costs, as they require management's most significant exercise of judgment on both a quantitative and qualitative basis in the preparation of TRH's
consolidated financial statements and footnotes. The accounting estimates that result require the use of assumptions about certain matters that are highly uncertain at the time of estimation. To the
extent actual experience differs from the assumptions used, TRH's results of operations and financial condition would be affected, possibly materially.

(c) Investments:Fixed maturities are classified as held to maturity and carried at amortized cost if TRH has the positive intent
and ability to hold
each of these securities to maturity. When TRH does not have the positive intent to hold fixed maturities to maturity, such fixed maturities are classified as available for sale and carried at fair
value. Premiums and discounts arising from the purchase of fixed maturities are treated as yield adjustments over their estimated lives, until maturity or call date, if applicable. Common stocks and
non-redeemable preferred stocks are carried at fair value. See Note 3 for TRH's methodology for determining the fair value of its investments.

Other
invested assets primarily include alternative investments in which TRH holds a 5% or greater interest or where TRH has more than a minor influence over operations of the investee
and TRH's 40% interest in Kuwait Reinsurance Company (K.S.C.). Such investments are accounted for on the equity method. In applying the equity method of accounting, TRH consistently uses the most
recently available financial information for each of these investments for the period ended one to three months prior to the end of TRH's reporting period. The financial statements of these investees
are generally audited on an annual basis. The carrying value of such investments represents TRH's share of the net asset value of these entities. The changes in such net asset values for investments
carried on the equity method, other than the portion related to TRH's share of the investees' changes in accumulated other comprehensive income (loss) ("AOCI"), are recorded in net investment income.
In 2009, the fair value option was elected for one alternative investment and this instrument is carried at fair value and unrealized gains and losses on this instrument are reported in earnings
through net investment income.

Short-term
investments are carried at cost or amortized cost, which approximates fair value, and principally include money market instruments, treasury bills and commercial paper.

Through
2008, TRH participated in a securities lending program (the "Securities Lending Program") managed by a subsidiary of AIG, whereby certain securities (principally fixed maturities
available for sale) from its portfolio were loaned to third parties. Under such program, TRH loaned securities to counterparties and received collateral, generally cash, which was invested to earn a
spread. The collateral was returned to the counterparties when the loaned securities were returned to TRH at a future date. In the fourth quarter of 2008, TRH terminated its participation in the
Securities Lending Program.

Prior
to the fourth quarter of 2008, the transfers of securities in exchange for collateral under the Securities Lending Program were accounted for as secured borrowings. Securities
lending invested collateral was shown on the balance sheet at fair value. A liability was recorded in an amount equal to the collateral received, reflecting TRH's obligation to return the collateral
when the loaned securities were returned. Income earned on invested collateral, net of interest payable to the collateral provider, was included in net investment income. As a result of conditions
affecting the financial and credit markets, in the fourth quarter of 2008, counterparties were successful in negotiating significantly reduced collateral levels
(i.e., collateral received as a percentage of the fair value of the security loaned). Due to the lower

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2. Summary of Significant Accounting Policies (Continued)

collateral
levels, during the fourth quarter of 2008, many of such loaned securities were accounted for as sales at the time of transfer and as purchases when the securities were subsequently
returned.

Unrealized
gains and losses from fixed maturities available for sale, equities available for sale and other invested assets, are reported as a separate component of AOCI, net of deferred
income taxes, in stockholders' equity. Investments in fixed maturities and equities are recorded on a trade date basis.

Each
quarter, TRH evaluates its investments for OTTI. See Note 4(g) for the criteria TRH uses to evaluate if an investment is a candidate for OTTI.

In
periods subsequent to the recognition of OTTI on fixed maturity securities, which are not credit related, TRH generally accretes the discount or amortizes the reduced premium
resulting from the reduction in cost basis into income over the remaining life of the security.

(d) Cash and Cash Equivalents:Cash and cash equivalents, which are principally interest-bearing, generally include cash
deposited in demand deposits
at banks and highly liquid investments with original maturities of 90 days or less.

(e) Deferred Acquisition Costs:Acquisition costs, consisting primarily of net commissions incurred on business conducted
through reinsurance
contracts or certificates, are deferred, and then amortized over the period in which the related premiums are earned, generally one year. Anticipated losses and loss adjustment expenses ("LAE") and
estimated remaining costs of servicing the contracts are considered in the evaluation of recoverability of acquisition costs to be deferred. Anticipated investment income is not considered in such
evaluation.

(f) Deferred Income Taxes:Deferred tax assets and liabilities are recorded for the effects of temporary differences between the
tax basis of an
asset or liability and its reported amount in the consolidated financial statements. TRH assesses its ability to realize deferred tax assets considering all available evidence including earnings
history, the timing, character and amount of future earnings potential, the reversal of taxable temporary differences and the tax planning strategies available to legal entities when recognizing
deferred tax assets. See Note 5 for further discussion of income taxes.

(g) Unearned Premiums and Premium Revenues:In recent years, premiums from treaty contracts have approximated 97% of net
premiums written, while
facultative contracts have approximated 3%. For pro rata treaty contracts, premiums written and earned are based on reports received from ceding companies. For excess-of-loss
treaty contracts, premiums are generally recorded as written based on contract terms. Premiums are earned ratably over the term of the related coverages. Unearned premiums and prepaid reinsurance
premiums represent the portion of gross premiums written and ceded premiums written, respectively, relating to the unexpired terms of such coverages. Premiums written and earned, along with related
costs, for which data has not been reported by the ceding companies, are estimated based on historical patterns and other relevant information. These estimates are subject to change when actual data
for such estimated items becomes available. In the Consolidated Statements of Operations, premiums written and earned and the change in unearned premiums are presented net of reinsurance ceded.

(h) Net Investment Income:Net investment income consists primarily of:



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(i) Realized Net Capital Gains and Losses:Realized capital gains and losses principally emanate from the following sources:



(j) Losses and LAE:Unpaid losses and LAE ("gross loss reserves") are principally based on reports and individual case estimates
received from ceding
companies. The incurred but not reported ("IBNR") portion of gross loss reserves is based on past experience and other factors. The methods used to determine such estimates and to establish the
resulting reserves are continually reviewed and updated. Any adjustments are reflected in income currently. Net losses and LAE incurred consists of the estimated ultimate cost of settling claims
incurred within the reporting period (net of related reinsurance recoverable), including IBNR claims, plus changes in estimates of prior period losses.

The
estimation of loss reserves is inherently difficult and subjective, especially in view of changing legal and economic environments which impact the development of loss reserves, and
therefore quantitative techniques frequently have to be supplemented by subjective considerations and managerial judgment. In addition, trends that have affected development of liabilities in the past
may not necessarily occur or affect liability development to the same degree in the future.

While
the reserving process is difficult for ceding companies, the inherent uncertainties of estimating loss reserves are even greater for reinsurers, due primarily to the
longer-term nature of much reinsurance business, the diversity of development patterns among different types of reinsurance treaties or facultative contracts, the necessary reliance on the
ceding companies for information regarding reported claims and differing reserving practices among ceding companies, which are subject to change without notice. TRH writes a significant amount of
non-proportional assumed casualty reinsurance as well as proportional assumed reinsurance of excess liability business for classes such as medical malpractice, D&O, E&O and general
casualty. Claims from such classes can exhibit greater volatility over time than most other classes due to their low frequency, high severity nature and loss cost trends that are more difficult to
predict.

Losses
and loss adjustment expenses net of related reinsurance recoverable ("net loss reserves") include amounts for risks relating to environmental impairment and asbestos-related
illnesses. The great majority of TRH's environmental and asbestos-related net loss reserves arose from contracts entered into after 1985 that were underwritten specifically as environmental or
asbestos-related coverages rather than from standard general liability coverages, where the environmental or asbestos-related liabilities were neither clearly defined nor specifically excluded. The
reserves carried at December 31, 2009 and

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2. Summary of Significant Accounting Policies (Continued)

2008
for such claims, including IBNR reserves, are based upon known facts and current law at the respective balance sheet dates. However, significant uncertainty exists in determining the amount of
ultimate liability for environment impairment and asbestos-related losses, particularly for those occurring in 1985 and prior. This uncertainty is due to inconsistent court resolutions and judicial
interpretations with respect to underlying policy intent and coverage and uncertainties as to the allocation of responsibility for resultant damages, among other things. Further, there is always the
possibility of changes in statutes, laws, regulations and other factors that could have a material effect on these liabilities and, accordingly, future earnings.

(k) Currency Translation:Assets and liabilities related to investing activities and denominated in foreign currencies are
translated into U.S.
dollars at period-end exchange rates. All other assets and liabilities denominated in foreign currencies, which are principally related to underwriting activities, are translated using
rates prior to period-end. The effect of changes in rates used compared to period-end rates are reviewed and any material differences are recorded. Income and expense accounts are translated at
average exchange rates for the year. The resulting unrealized currency translation gain (loss) for functional currencies is recorded, net of tax, in AOCI, a component of stockholders' equity.

Transaction
gains and losses on assets and liabilities denominated in foreign currencies are recorded as a component of realized net capital (losses) gains during the period in which
they occur.

(l) Recent Accounting Standards:



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3. Fair Value Measurements



TRH measures at fair value on a recurring basis financial instruments included principally in its available for sale securities
portfolios and certain short-term investments. The fair value of a financial

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3. Fair Value Measurements (Continued)

instrument
is the amount that would be received to sell an asset in an orderly transaction between willing, able and knowledgeable market participants at the measurement date.

The
degree of judgment used in measuring the fair value of financial instruments generally correlates with the level of pricing observability. Financial instruments with quoted prices in
active markets generally have more pricing observability and less judgment is used in measuring fair value. Conversely, financial instruments traded in other-than-active
markets or that do not have quoted prices have less observability and are measured at fair value using valuation models or other pricing techniques that require more judgment. An active market is one
in which transactions for the asset being valued occurs with sufficient frequency and volume to provide pricing information on an ongoing basis. An other-than-active market is
one in which there are few transactions, the prices are not current, price quotations vary substantially either over time or among market makers, or in which little information is released publicly
for the asset being valued. Pricing observability is affected by a number of factors, including the type of financial instrument, whether the financial instrument is new to the market and not yet
established, the characteristics specific to the transaction and general market conditions.

A
further discussion of the most significant categories of investments carried at fair value on a recurring basis follows:



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TRH also measures the fair value of certain assets on a non-recurring basis, generally quarterly, annually, or when events
or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. These assets primarily include held-to-maturity fixed maturities, which are
carried on the balance sheet at amortized cost, and equity method investments. When TRH determines that the carrying value of these assets may not be recoverable, TRH records the assets at fair value
with the loss recognized in income as a realized capital loss. In such cases, TRH measures the fair value of these assets using the techniques discussed above for fixed maturity and equity securities.



Assets recorded at fair value in the consolidated balance sheet are measured and classified in a hierarchy for disclosure purposes
consisting of three levels based on the observability of inputs available in the marketplace used to measure the fair values as discussed below:



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In the second quarter of 2009, TRH adopted new accounting guidance which, among other things, requires additional disclosures for fixed
maturity and equity securities by major security type. Prior period information is not required to be disaggregated in this Form 10-K and therefore, prior periods have not been
reclassified.

The
following table presents information about assets measured at fair value on a recurring basis at December 31, 2009 and 2008 and indicates the level of the fair value
measurement based on the levels of the inputs used:

Level 1

Level 2

Level 3

Total(in millions)As of December 31, 2009Assets(1):Fixed maturities available for sale:U.S. Government and government agencies

$


$
528.8

$


$
528.8States, municipalities and political subdivisions





5,668.8





5,668.8Foreign governments





552.1


1.4


553.5Corporate





2,317.1





2,317.1Asset-backed:RMBS





239.9


18.6


258.5CMBS





60.5


32.7


93.2Other asset-backed





17.3


17.6


34.9Total fixed maturities available for sale





9,384.5


70.3


9,454.8Common stocks available for sale


481.5








481.5Nonredeemable preferred stocks available for sale





17.6


7.5


25.1Other invested assets








72.2


72.2Short-term investments(2)





846.3





846.3Total

$
481.5

$
10,248.4

$
150.0

$
10,879.9As of December 31, 2008Assets(1):Fixed maturities available for sale

$
19.1

$
7,908.6

$
85.4

$
8,013.1Common stocks available for sale


425.6








425.6Nonredeemable preferred stocks available for sale





95.7


2.5


98.2Other invested assets


0.1





33.2


33.3Short-term investments(2)


1.5


89.2





90.7Cash and cash equivalents(2)





51.2





51.2Total

$
446.3

$
8,144.7

$
121.1

$
8,712.1


(1)Represents
only items measured at fair value.(2)Short-term
investments and cash equivalents in Level 2 are carried at cost or amortized cost which approximates fair value.


At December 31, 2009 and 2008, Level 3 assets totaled $150.0 million and $121.1 million, respectively, representing
1.4% and 1.4%, respectively, of total assets measured at fair value on a recurring basis.

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3. Fair Value Measurements (Continued)

The following tables present analyses of the changes during 2009 and 2008 in Level 3 assets measured at fair value on a recurring basis and the realized and unrealized gains
(losses) recorded in income during 2009 and 2008 related to those assets that remained on the consolidated balance sheet at December 31, 2009 and 2008:

Net realized/unrealized
gains (losses) included in:Purchases,
sales,
issuances
and
settlements,
netBalance
beginning
of year

Net
investment
income

Realized
net capital
gains
(losses)(1)

AOCI

Transfer of
investments

Transfers
in (out) of
Level 3

Balance,
end of year(in millions)2009Fixed maturities available for sale:States, municipalities and political subdivisions

$


$


$


$
0.1

$
11.4

$


$
(11.5
)
$
Foreign governments


0.7





0.1


(0.1
)

(0.7
)




1.4


1.4Asset-backed:RMBS


35.1


3.2


(10.9
)

10.8


(22.7
)




3.1


18.6CMBS


36.7


(0.3
)

(14.5
)

26.1


(33.3
)




18.0


32.7Other asset-backed


12.9


1.6


(2.8
)

0.1


(3.5
)




9.3


17.6Nonredeemable preferred stocks available for sale


2.5

















5.0


7.5Other invested assets


33.2


14.9





(0.9
)

25.0








72.2Other assets








(5.3
)




5.3








Total

$
121.1

$
19.4

$
(33.4
)
$
36.1

$
(18.5
)
$


$
25.3

$
150.0


(1)There
were $1.7 million of OTTI related to RMBS fixed maturities available for sale that was recorded in realized net capital losses in 2009 on
instruments still held at December 31, 2009.


Net realized/unrealized
gains (losses) included in:Purchases,
sales,
issuances
and
settlements,
netBalance
beginning
of year

Net
investment
income

Realized
net capital
gains
(losses)(1)

AOCI

Transfer of
investments

Transfers
in (out) of
Level 3

Balance,
end of year(in millions)2008Fixed maturities available for sale

$
0.5

$
0.6

$
(15.4
)
$
(6.1
)
$
(0.8
)
$
53.8

$
52.8

$
85.4Nonredeemable preferred stocks available for sale


2.5




















2.5Other invested assets


18.3


1.1





0.5


22.8





(9.5
)

33.2Securities lending invested collateral


151.3


0.5


(11.5
)

1.0


(3.0
)

(53.8
)

(84.5
)

Other assets








(3.2
)




3.2








Total

$
172.6

$
2.2

$
(30.1
)
$
(4.6
)
$
22.2

$


$
(41.2
)
$
121.1


(1)There
were $52.8 million of OTTI related to fixed maturities available for sale that was recorded in realized net capital losses in 2008 on
instruments still held at December 31, 2008.


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Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3. As a result, the
unrealized gains and losses on instruments held at December 31, 2009 and 2008 may include changes in fair value that were attributable to both observable inputs
(e.g., changes in market interest rates) and unobservable inputs (e.g., changes in unobservable
long-dated volatilities).

Net
unrealized depreciation related to Level 3 investments approximated $23.9 million and $22.7 million at December 31, 2009 and 2008, respectively.

(e) Assets Measured at Fair Value on a Non-Recurring Basis

None
of TRH's assets were written down to fair value on a non-recurring basis during 2009 and 2008.

4. Investments

(a) Statutory Deposits

Investments
with carrying values of $606 million and $552 million at December 31, 2009 and 2008, respectively, were deposited with governmental authorities as
required by law. The substantial majority of these deposits are fixed maturities and common stocks available for sale.

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4. Investments (Continued)

(b) Gross Unrealized Gains and Losses

The
amortized cost and fair value of fixed maturities at December 31, 2009 and 2008 are summarized as follows:

Gross UnrealizedAmortized Cost

Gains

Losses

Fair Value

OTTI(1)(in millions)2009Fixed maturities held to maturity and carried at amortized cost:States, municipalities and political subdivisions

$
1,214,238

$
59,959

$
(2,800
)
$
1,271,397

$
Fixed maturities available for sale and carried at fair value:U.S. Government and government agencies

$
528,290

$
3,414

$
(2,896
)
$
528,808

$
States, municipalities and political subdivisions


5,513,019


189,987


(34,178
)

5,668,828


Foreign governments


543,011


18,876


(8,346
)

553,541


Corporate


2,228,438


120,554


(31,951
)

2,317,041


(386
)Asset-backed:RMBS


334,226


707


(76,488
)

258,445


(107,107
)CMBS


99,436


6,836


(13,081
)

93,191


Other asset-backed


35,514


1,006


(1,602
)

34,918


Total

$
9,281,934

$
341,380

$
(168,542
)
$
9,454,772

$
(107,493
)2008Fixed maturities held to maturity and carried at amortized cost:States, municipalities and political subdivisions

$
1,218,603

$
30,069

$
(38,240
)
$
1,210,432

$
Fixed maturities available for sale and carried at fair value:U.S. Government and government agencies

$
40,783

$
4,565

$
(150
)
$
45,198

$
States, municipalities and political subdivisions


5,354,696


57,452


(263,055
)

5,149,093


Foreign governments


275,262


5,827


(491
)

280,598


Corporate


2,089,766


78,946


(74,683
)

2,094,029


Asset-backed


534,306


1,205


(91,358
)

444,153


Total

$
8,294,813

$
147,995

$
(429,737
)
$
8,013,071

$



(1)Represents
the non-credit portion of OTTI, not adjusted for subsequent changes in unrealized gain or loss, taken on securities still held as of year-end
(including the pre-tax CEA, see Note 2(l)), pursuant to accounting guidance adopted on April 1, 2009. See Note 2(l) for additional information.


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4. Investments (Continued)




At December 31, 2009 and 2008, net unrealized appreciation (depreciation) of equities available for sale included gross gains of
$67.8 million and $22.9 million, respectively, and gross losses of ($2.1) million and ($81.5) million, respectively.

(c) Contractual Maturities of Fixed Maturities

The
amortized cost and fair value of fixed maturities at December 31, 2009 by contractual maturity are as follows. Expected maturities may differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Investments in fixed maturities exclude short-term investments.

Amortized
Cost

Fair Value(in thousands)Fixed maturities held to maturity:Due after one year through five years

$
26,404

$
29,134Due after five years through ten years


179,431


188,135Due after ten years


1,008,403


1,054,128Total

$
1,214,238

$
1,271,397Fixed maturities available for sale:Non-asset-backed:Due in one year or less

$
382,318

$
396,340Due after one year through five years


1,765,544


1,843,738Due after five years through ten years


2,133,705


2,208,330Due after ten years


4,531,192


4,619,810Asset-backed(1)


469,175


386,554Total

$
9,281,934

$
9,454,772


(1)Asset-backed
fixed maturities by their nature do not generally have single maturity dates.


(d) Net Investment Income

An
analysis of net investment income follows:

Years Ended December 31,2009

2008

2007(in thousands)Fixed maturities

$
424,075

$
427,620

$
395,823Equities


14,211


19,735


25,639Other invested assets (including alternative investments)


20,898


(18,999
)

37,755Other


19,841


22,056


19,206Total investment income


479,025


450,412


478,423Investment expenses


(11,623
)

(9,961
)

(8,651
)Net investment income

$
467,402

$
440,451

$
469,772


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TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. Investments (Continued)

(e) Investment Gains and Losses:

Realized
net capital (losses) gains are summarized as follows:

Years Ended December 31,2009

2008

2007(in thousands)Realized net capital (losses) gains resulted from:Total OTTI

$
(96,527
)
$
(317,790
)
$
(27,137
)Less: OTTI recognized in OCI


13,445





OTTI charged to earnings


(83,082
)

(317,790
)

(27,137
)Sales and redemptions of securities


12,794


(99,914
)

61,155Net foreign currency transaction losses


(353
)

(17,837
)

(24,629
)Total

$
(70,641
)
$
(435,541
)
$
9,389Realized net capital (losses) gains by source:Fixed maturities

$
(41,813
)
$
(88,478
)
$
(1,399
)Equities available for sale


(23,204
)

(220,261
)

37,247Securities lending invested collateral





(105,703
)

(1,830
)Net foreign currency transaction losses


(353
)

(17,837
)

(24,629
)Other


(5,271
)

(3,262
)

Total

$
(70,641
)
$
(435,541
)
$
9,389


The
change in net unrealized appreciation (depreciation) of investments is summarized as follows:

Years Ended December 31,2009

2008

2007(in thousands)Change in net unrealized appreciation (depreciation) of investments, before deferred income tax effect:Fixed maturities carried at amortized cost

$
65,330

$
(38,247
)
$
(7,541
)Fixed maturities carried at fair value


564,687


(346,256
)

(53,286
)CEA of adoption of new accounting guidance (see Note 2(l))


(110,107
)




Equities available for sale carried at fair value


124,331


(47,120
)

(63,576
)Other(1)


(2,383
)

38,311


(38,759
)Total

$
641,858

$
(393,312
)
$
(163,162
)


(1)Includes
net unrealized appreciation (depreciation) from securities lending invested collateral of $41.2 million and ($41.2) million in 2008 and
2007, respectively.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. Investments (Continued)




Gross realized gains and gross realized losses on sales of TRH's available for sale securities and securities lending invested collateral were as
follows:

2009

2008

2007Gross
Realized
Gains

Gross
Realized
Losses

Gross
Realized
Gains

Gross
Realized
Losses

Gross
Realized
Gains

Gross
Realized
Losses(in millions)Fixed maturities

$
47.3

$
(49.4
)
$
101.4

$
(62.3
)
$
4.4

$
(5.4
)Equities


78.4


(58.3
)

51.1


(176.6
)

90.2


(28.3
)Securities lending invested collateral











(8.0
)

0.1


(1.9
)


Equity securities sold at a loss in 2009, 2008 and 2007 were in a continuous unrealized loss position for 12 months or less and did not
meet the conditions of TRH's accounting policy to be considered OTTI at any quarter-end prior to the time of sale. (See Note 4(g) for the criteria TRH uses to evaluate if an equity
investment is considered OTTI.)

In
2009, sales of fixed maturity available for sale securities, which produced pre-tax gross realized losses of $49.4 million, related primarily to corporate, municipalities and
asset-backed securities.

Gross
realized losses on sales of fixed maturity available for sale securities were generally the result of (a) TRH's desire to manage the duration of the investment portfolio as
part of its overall view of prudent management of an available for sale fixed maturity investment portfolio; (b) the disposition of certain securities that, based on TRH's judgment, were
unlikely to provide on a relative basis as attractive a return as alternative securities entailing comparable risks; and (c) repositioning of the investment portfolio in light of the transition
to a new investment manager in the third quarter of 2009.

In
2009, securities in the equities available for sale portfolio were sold for a number of reasons, including the repositioning of TRH's equity portfolio with respect to the continuing
changes in the investment and credit markets during 2009 and the desire over time to take advantage of tax-basis capital loss carry-backs to prior years that had capital gains. TRH's
equity security investment strategy includes the intent to optimize total investment return through active management, which can lead to selling securities at a gain or loss due to changing market
conditions and as market opportunities arise.

In
2008, sales of fixed maturity available for sale securities, which produced pre-tax gross realized losses of $62 million, related primarily to corporate, municipalities, U.S.
Government and U.S. Government agency securities.

Of
such amount, gross realized losses of $44 million (which is a component of the $16 million of realized net capital losses discussed in Note 4(h)) related to the
"deemed sales" treatment accorded transfers of securities under the Securities Lending Program in the fourth quarter of 2008 as a result of significantly reduced collateral levels.

In
addition, sales generating approximately $18 million of gross realized losses resulted, in part, from TRH's desire to manage the duration of the investment portfolio as part of
its overall view of prudent management of an available for sale fixed maturity investment portfolio, and were also driven by unprecedented financial and credit market turmoil where TRH determined,
subsequent to prior reporting dates, that a sale of such investments was a preferred alternative to their retention as the market became highly volatile and uncertain.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. Investments (Continued)

In
2008, securities in the equities available for sale portfolio were sold for a number of reasons, including the unprecedented market turmoil and severe changes in the investment and
credit markets, short-term changes in investment philosophies prompted by the worsening credit markets and the desire over time to take advantage of tax-basis capital loss
carry-backs to prior years that had capital gains. TRH's equity security investment strategy includes the intent to optimize total investment return through active management, which can lead to
selling securities at a gain or loss due to changing market conditions and as market opportunities arise.

As
discussed in Note 4(g), the OTTI amounts on certain fixed maturities are separated into credit loss and non-credit loss components. The credit loss impairments are
recognized in earnings as realized capital losses, while the non-credit loss impairments are recorded in OCI. The following table sets forth the amount of credit loss impairments on fixed
maturities held by TRH as of December 31, 2009, for which a portion of the OTTI amount was recorded in OCI.

2009(in millions)Beginning balance (April 1, 2009)

$
21.4New securities subject to credit impairment losses


11.8Credit impaired securities fully disposed for which there was no prior intent or requirement to sell


(28.7
)Ending balance

$
4.5


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. Investments (Continued)

(f) Aging of Gross Unrealized Losses

As
of December 31, 2009 and 2008, the aging of the gross unrealized losses with respect to all fixed maturities and equities, grouped by months in a continuous unrealized loss
position, was as follows:

Less than 12 Months

12 Months or more

TotalFair Value

Gross
Unrealized
Losses

Fair Value

Gross
Unrealized
Losses

Fair Value

Gross
Unrealized
Losses(in millions)2009Fixed maturitiesU.S. Government and government agencies

$
298

$
(3
)
$


$


$
298

$
(3
)States, municipalities and political subdivisions


470


(7
)

451


(30
)

921


(37
)Foreign governments


227


(5
)

16


(3
)

243


(8
)Corporate


593


(9
)

244


(23
)

837


(32
)Asset-backed:RMBS


75


(52
)

101


(24
)

176


(76
)CMBS


1


*


45


(13
)

46


(13
)Other asset-backed


3


*


13


(2
)

16


(2
)Total fixed maturities


1,667


(76
)

870


(95
)

2,537


(171
)Equities available for sale


81


(2
)







81


(2
)Total

$
1,748

$
(78
)
$
870

$
(95
)
$
2,618

$
(173
)


2008Fixed maturitiesU.S. Government and government agencies

$
10

$
*

$


$


$
10

$
*States, municipalities and political subdivisions


3,055


(173
)

624


(128
)

3,679


(301
)Foreign governments


15


(1
)







15


(1
)Corporate


657


(51
)

155


(24
)

812


(75
)Asset-backed


129


(33
)

216


(58
)

345


(91
)Total fixed maturities


3,866


(258
)

995


(210
)

4,861


(468
)Equities available for sale


269


(81
)

1


(1
)

270


(82
)Total

$
4,135

$
(339
)
$
996

$
(211
)
$
5,131

$
(550
)


*Rounds
to less than 1 million.


At December 31, 2009, the carrying value of TRH's fixed maturity and equity securities aggregated $11.18 billion with aggregate
pre-tax gross unrealized losses of $173 million. Additional information about these securities is as follows:



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. Investments (Continued)



At
December 31, 2009, TRH held 351 and 102 individual fixed maturity and equity investments, respectively, that were in an unrealized loss position, of which, 129 individual fixed
maturity investments were in a continuous unrealized loss position for 12 months or more.

As
of December 31, 2009 and 2008, no single issuer accounted for more than 10% and 5%, respectively, of the aggregate gross unrealized losses.

At
December 31, 2009 and 2008, the gross unrealized losses for all fixed maturities and equities available for sale included the following concentrations:

2009

Concentration

Gross
Unrealized Losses(in millions)RMBS

$
76States, municipalities and political subdivisions


37Banking and financial institutions


30CMBS


13Foreign governments


8Other


9Total

$
173


2008

Concentration

Gross
Unrealized Losses(in millions)States, municipalities and political subdivisions

$
301Banking and financial institutions


91RMBS


71Energy


15CMBS


14Technology


12Other


46Total

$
550


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TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. Investments (Continued)

The
fair value of fixed maturities in an unrealized loss position at December 31, 2009 and 2008, by contractual maturity, is shown below:

2009

2008(in millions)Non-asset-backed:Due in one year or less

$
116

$
74Due after one year through five years


536


409Due after five years through ten years


515


554Due after ten years


1,132


3,479Asset-backed(1)


238


345Total

$
2,537

$
4,861


(1)Asset-backed
fixed maturities by their nature do not generally have single maturity dates.


(g) Evaluating Investments for OTTI

Each
quarter, TRH evaluates its investments for OTTI such that a security is considered a candidate for OTTI if it meets any of the following criteria:



The
determination that a security has incurred OTTI requires the judgment of management and consideration of the fundamental condition of the issuer, its near-term prospects
and all the relevant facts and circumstances. The above criteria also consider circumstances of a rapid and severe market valuation decline, such as that experienced in credit markets in recent years,
in which TRH could not reasonably assert that the impairment period would be temporary (severity losses). The analysis of any individual security for OTTI is performed based on its functional
currency. Additional criteria considered includes a security's business prospects, the investment's credit ratings and whether there have been any recent downgrades, whether the issuer is current on
all payments in accordance with the contractual terms of the investment and is expected to meet all of its obligations under the term of the investment, market values, issuer specific financial
information and available information from asset managers and rating agencies for individual securities.

OTTI
on all investments other than fixed maturities are recognized through earnings as a realized capital loss. OTTI on fixed maturities prior to the second quarter of 2009 were
recognized through earnings as a realized capital loss. Effective in the second quarter of 2009, at each balance sheet date,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. Investments (Continued)

TRH
recognizes an OTTI on a fixed maturity in an unrealized loss position if (a) TRH intends to sell the security; (b) it is more likely than not TRH will be required to sell the
security prior to an anticipated recovery in fair value, in order to meet a liquidity, regulatory or other business need; or (c) TRH determines it will not recover the entire amortized cost
basis of the security.

If
TRH intends to sell an impaired fixed maturity, or if it is more likely than not it will have to be sold, the total amount of the unrealized loss position is recognized in earnings as
a realized capital loss. On a quarterly basis, TRH develops for fixed maturities, a best estimate of the present value of expected cash flows on a security by security basis. TRH recognizes OTTI equal
to the difference between the present value of expected cash flows and the amortized cost basis of the security, if the results of the cash flow analysis indicate TRH will not recover the full amount
of its amortized cost basis in the investment. This amount is the credit component of the OTTI and is recorded in earnings as a realized capital loss. The difference between the total unrealized loss
position on the security and the OTTI amount recognized in earnings is non-credit related and is recorded in OCI as "net unrealized holding losses of fixed maturities on which
other-than-temporary impairments were taken".

If
a loss is recognized from a sale subsequent to a balance sheet date pursuant to changes in circumstances, the loss is recognized in the period in which the intent to hold the security
to recovery no longer existed.

TRH
evaluated the significant categories of fixed maturity investments in an unrealized loss position for OTTI. For state, municipality and political subdivision securities, TRH takes
into account the taxing power of the issuer, source of revenue, credit risk and credit enhancements and pre-refunding. For asset-backed securities, TRH discounted its best estimate of
future cash flows at an effective rate equal to the original effective yield of the security. Those models included TRH's assumptions about prepayment speeds, default and delinquency rates, and
underlying collateral (if any), as well as credit ratings, credit enhancements and other observable market data. For corporate fixed maturities, TRH reviewed business prospects, credit ratings and
available information from asset managers and rating agencies for individual securities.

Fixed
maturities in an unrealized loss position principally consist of highly-rated corporate, state, municipality or political subdivision and asset-backed fixed maturities. While 2009
saw significant improvement in each of these sectors, the fixed maturities most impacted by the market events of 2008 remained in an unrealized loss position. TRH did not consider the unrealized
losses on these impaired fixed maturities to be credit related. In making these determinations, TRH has considered factors specific to the securities that have unrealized losses coupled with TRH's
history of
consistently strong operating cash flows, levels of cash, cash equivalents and liquid investment classes, as well as its short and medium-term cash needs. TRH does not intend to sell these
securities, and will not likely be required to sell these securities before an anticipated recovery in fair value. Other considerations included the length of time and extent to which the security has
been in an unrealized loss position, observable adverse conditions specifically related to the issuer or industry sector of the security, conditions in the country of issuance or primary market for
the security, historical and implied volatility of the security's fair value, defaults on principal or interest payments, and recoveries or further declines in fair value subsequent to the balance
sheet date.

At
December 31, 2009, the pre-tax gross unrealized loss for all equities was $2 million, of which none were in an unrealized loss position over
12 months. As these equities did not meet TRH's criteria for OTTI

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. Investments (Continued)

of
equity securities and TRH has the intent and ability to hold these securities to recovery, TRH determined that there was no OTTI on these securities.

(h) Securities Lending Program

Through
2008, TRH participated in the Securities Lending Program managed by a subsidiary of AIG, whereby certain securities (principally fixed maturities available for sale) from its
portfolio were loaned to third parties. Under such program, TRH loaned securities to counterparties and received collateral, generally cash, which was invested to earn a spread. The collateral
received was invested in separate portfolios containing floating rate bonds (i.e.,fixed maturities), including asset-backed securities, and
interest-bearing cash equivalents. These portfolios were maintained in segregated accounts for TRH by the program manager. The collateral was returned to the counterparties when the loaned securities
were returned to TRH at a future date. In the fourth quarter of 2008, TRH terminated its participation in the Securities Lending Program.

Prior
to the fourth quarter of 2008, the transfers of securities in exchange for collateral under the Securities Lending Program were accounted for as secured borrowings. Securities
lending invested collateral was shown on the balance sheet at fair value. A liability was recorded in an amount equal to the collateral received, reflecting TRH's obligation to return the collateral
when the loaned securities were returned. Income earned on invested collateral, net of interest payable to the collateral provider, was included in net investment income. As a result of conditions
affecting the financial and credit markets, in the fourth quarter of 2008, counterparties were successful in negotiating significantly reduced collateral levels
(i.e., collateral received as a percentage of the fair value of the security loaned). Due to the lower collateral levels, during the fourth quarter of
2008, many of such loaned securities were accounted for as sales at the time of transfer and as purchases when the securities were subsequently returned. The sale and return of such securities
resulted in realized net capital losses of $16 million in 2008.

In
2008, TRH repaid certain securities lending payables using cash from sources other than the sale of securities lending invested collateral. In that regard, fixed maturities were
transferred from the securities lending invested collateral portfolio to the fixed maturities available for sale portfolio. Such transferred securities included CMBS, RMBS and other asset-backed
securities.

5. Income Taxes (Benefits)

The Company files a U.S. consolidated federal income tax return with its domestic subsidiaries, which includes foreign operations. TRC will include as part of its taxable income
those items of income of the non-U.S. subsidiary, TRZ, which are subject to U.S. income tax currently, pursuant to Subpart F income rules of the Internal Revenue Code, and included,
as appropriate, in the consolidated federal income tax return.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Income Taxes (Benefits) (Continued)

The
U.S. federal income tax rate was 35% for 2009, 2008 and 2007. Actual tax expense (benefit) on income before income taxes differs from the "expected" amount computed by applying the
U.S. federal income tax rate because of the following:

Years Ended December 31,2009

2008

2007Amount

Percent of
Income Before
Income Taxes

Amount

Percent of
Income Before
Income Taxes

Amount

Percent of
Income Before
Income Taxes(dollars in thousands)"Expected" tax expense

$
208,612


35.0
%
$
1,128


35.0
%
$
208,513


35.0
%Adjustments:Tax-exempt interest


(90,928
)

(15.2
)

(89,359
)

(2,772.8
)

(82,866
)

(13.9
)Dividends received deduction


(2,022
)

(0.3
)

(4,867
)

(151.0
)

(5,011
)

(0.8
)Recognition of previously uncertain tax benefit














(5,300
)

(0.9
)Interest on net tax refunds


(1,073
)

(0.2
)

(3,656
)

(113.4
)

(4,279
)

(0.7
)Other


3,782


0.6


(2,277
)

(70.8
)

(2,446
)

(0.5
)Actual tax expense (benefit)

$
118,371


19.9
%
$
(99,031
)

(3,073.0
)%
$
108,611


18.2
%Foreign and domestic components of actual tax expense (benefit):Foreign

$
29,273




$
73,814




$
117,172Domestic:Current


67,498





(28,537
)




65,440Deferred


21,600





(144,308
)




(74,001
)$
118,371




$
(99,031
)



$
108,611


Income
(loss) before income taxes from Domestic operations was $327.1 million, ($263.9) million and $268.1 million in 2009, 2008 and 2007, respectively. Income before
income taxes from foreign operations was $269.0 million, $267.1 million and $327.6 million in 2009, 2008 and 2007, respectively.

The
domestic current tax expense for 2009 includes a tax capital loss of $209.2 million. Of that amount, $21.3 million can be carried back to prior years and the remainder
can be carried forward five years to offset future capital gains. The domestic deferred tax expense for 2009 is net of $56.7 million resulting from minimum tax credit carryforwards. By law,
minimum tax credits may be carried forward indefinitely. The domestic current tax benefit for 2008 includes the tax benefit on $100.3 million of tax capital loss carrybacks to prior years. The
actual capital loss included in the 2008 U.S. consolidated tax return was $114.0 million. The 2009 tax expense includes an adjustment to align the amounts reflected in the 2008 tax expense with
the amounts included in the 2008 income tax return. In addition, the 2008 deferred tax benefit includes the reversal of a previously recorded minimum tax credit carryforward in the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Income Taxes (Benefits) (Continued)

amount
of $15.0 million. The domestic deferred tax benefit for 2007 includes $32.9 million resulting from a minimum tax credit carryforward.

The
components of the net deferred income tax asset at December 31, 2009 and 2008 were as follows:

2009

2008(in thousands)Deferred income tax assets:Unpaid losses and LAE, net of related reinsurance recoverable

$
329,753

$
327,154Unearned premiums, net of prepaid reinsurance premiums


78,005


79,537Cumulative translation adjustment


49,655


25,517Benefit from amended tax returns


8,204


8,204Minimum tax credit carryforward


102,025


45,334OTTI write-downs for investments held


31,388


123,382Foreign tax credit carryforward


10,461


61,233Net unrealized depreciation of investments





114,671Other


48,852


30,926Total deferred income tax assets


658,343


815,958Deferred income tax liabilities:Deferred acquisition costs


84,921


89,263Net unrealized appreciation of investments


87,190


Other


31,749


34,350Total deferred income tax liabilities


203,860


123,613Net deferred income tax asset

$
454,483

$
692,345


No
valuation allowance has been recorded as TRH has concluded that it is more likely than not that TRH will fully realize the deferred tax assets. The most significant deferred tax
assets arise from the discounting of loss reserves, minimum tax credit carryforwards and realized and unrealized losses on investments. TRH's strong history of operating earnings supports its
conclusion that it has the ability to realize the full benefits associated with all deferred tax assets, particularly the assets associated with the discounting of loss reserves and minimum tax
credits, which may be carried forward indefinitely. In addition to TRH's strong history of operating earnings, TRH also has a strong history of generating capital gains to offset capital losses.
During 2007 and 2006, TRH generated
$135 million of capital gains on a tax basis that are available for carryback of losses generated in 2008 and 2009. TRH also notes that while the OTTI write-downs on its fixed maturity
securities are reflected as realized losses for GAAP purposes, the securities continue to be held in its available for sale portfolio and, as such, the carryforward period for capital losses on a tax
basis has not begun to run. Finally, TRH's strong history of positive operating cash flow, having generated $3.07 billion over the last three years, supports the conclusion that TRH has the
ability to hold until maturity, or until the values recover, those fixed income securities that have been written down, as well as those securities that are in an unrealized loss position.

At
January 1, 2007, the total amount of TRH's liability for unrecognized tax benefit, excluding interest and penalties, was $5.3 million. In 2007, TRH recognized this
previously uncertain tax benefit. As a result, income tax expense for 2007 was reduced by $5.3 million. At December 31, 2009 and 2008, TRH has no liability for unrecognized tax benefits.
TRH does not presently anticipate any material change in unrecognized tax benefits during the next twelve months.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. Income Taxes (Benefits) (Continued)

There were no unrecognized tax positions in 2009 or 2008. The table below reconciles the total amounts of unrecognized tax positions, including interest and penalties, if any, from the
beginning of 2007 to the end of 2007:

Total
Unrecognized
Tax Positions
Beginning of Year

Tax
Additions/
Increases
of prior
years

Tax
Reductions/
(Decreases)
of prior
years

Expiration of
Statute

Settlements

Total
Unrecognized
Tax Positions
End of Year(in thousands)2007Current Period Positions

$


$


$


$


$


$
Prior Period Positions


5,300





(5,300
)







Total Positions

$
5,300

$


$
(5,300
)
$


$


$



Interest
and penalties relating to unrecognized tax benefits/expenses are recognized in income tax expense, when applicable. As of December 31, 2009 and 2008, there was
$10.2 million and $9.1 million, respectively, of net interest receivable on income taxes. There was no liability for interest or penalties accrued as of December 31, 2009. Current
income tax expense was reduced by $1.1 million, $3.7 million and $4.3 million of interest on net tax refunds in 2009, 2008 and 2007, respectively.

The
following table lists the tax years that remain subject to examination by major tax jurisdiction as of December 31, 2009:

Major Tax Jurisdiction

Open Tax YearsCanada

2004 - 2008France

2007 - 2008Japan

2007 - 2008Switzerland

2007 - 2008United Kingdom

2005 - 2008United States

2004 - 2008


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Liability for Gross Loss Reserves

The activity in gross loss reserves is summarized as follows:

Years Ended December 31,2009

2008

2007(in thousands)At beginning of year:Gross loss reserves

$
8,124,482

$
7,926,261

$
7,467,949Less reinsurance recoverable


775,404


1,026,545


1,260,729Net loss reserves


7,349,078


6,899,716


6,207,220Net losses and LAE incurred in respect of losses occurring in:Current year


2,718,119


2,907,711


2,549,653Prior years


(38,948
)

(484
)

88,380Total


2,679,171


2,907,227


2,638,033Net losses and LAE paid in respect of losses occurring in:Current year


620,517


565,613


508,511Prior years


1,800,491


1,550,437


1,593,614Total


2,421,008


2,116,050


2,102,125Foreign exchange effect


264,584


(341,815
)

156,588At end of year:Net loss reserves


7,871,825


7,349,078


6,899,716Plus reinsurance recoverable


737,280


775,404


1,026,545Gross loss reserves

$
8,609,105

$
8,124,482

$
7,926,261


There
were no significant net catastrophe losses for events occurring in 2009. In addition, in 2009, TRH decreased its estimates of the ultimate amounts of net losses occurring in 2008
and prior years by $38.9 million. This net favorable development was comprised of net favorable development of
$219.1 million for losses occurring in 2002 to 2008, offset by net adverse development of $180.2 million relating to losses occurring in 2001 and prior.

Significant
net favorable development was recorded for losses occurring in the fire ($104.1 million) and allied lines ($42.4 million) lines, each arising principally from
losses occurring in 2007 to 2008, and the surety and credit line ($25.3 million), arising principally from losses occurring in 2004 to 2008. The line of business with the most significant net
adverse development recorded in 2009 was the other liability line ($120.4 million), arising principally from losses occurring in 2001 and prior, partially offset by favorable development from
losses occurring between 2004 and 2006. The other liability line includes certain specialty casualty classes, such as D&O and E&O, and general casualty classes. In addition, significant net adverse
development was recorded in 2009 for losses occurring in the fidelity ($30.0 million) line, arising principally from losses occurring in 2007 to 2008.

The
favorable development in 2004 through 2008 results generally from favorable loss trends. The net adverse development arising from losses occurring in 2001 and prior, generally
relates to various excess casualty lines such as general liability and excess umbrella liability which were impacted by late reported high layer excess claims. Ceding companies and their reinsurers
continue to experience

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Liability for Gross Loss Reserves (Continued)

increased
loss costs relative to expectations as loss emergence patterns continue to lengthen as regards the soft market years of 1997 through 2001.

TRH
writes a significant amount of non-proportional assumed casualty reinsurance as well as proportional assumed reinsurance of excess liability business for such volatile
classes as medical malpractice, D&O, E&O and general casualty. At the primary level, there are significant risk factors which contribute to the variability and unpredictability of the loss trend
factor for this business such as jury awards, social inflation, medical inflation, tort reforms and court interpretations of coverage. In addition, as a reinsurer, TRH is also highly dependent upon
the claims reserving and reporting practices of its cedants, which vary greatly by size, specialization and country of origin and whose practices are subject to change without notice.

2008
includes net catastrophe losses incurred of $180.4 million, principally relating to Hurricane Ike. In addition, in 2008, TRH decreased its estimates of the ultimate amounts
of net losses occurring in 2007 and prior years by $0.5 million. This net favorable development was comprised of net favorable development of $209.7 million for losses occurring in 2003
to 2007, offset by net adverse development of $209.2 million relating to losses occurring in 2002 and prior.

Significant
net favorable development was recorded for losses occurring in the allied lines ($43.6 million) and fire ($11.6 million) lines, each arising principally from
losses occurring in 2007, and in the homeowners multiple peril ($17.0 million) and auto liability ($13.2 million) lines, each arising
principally from losses occurring in 2005 to 2007. The line of business with the most significant net adverse development recorded in 2008 was the other liability line ($79.6 million), arising
principally from losses occurring between 1997 and 2002, partially offset by favorable development from losses occurring in 2004 to 2006. The other liability line includes certain specialty casualty
classes, such as D&O and E&O, and general casualty classes. In addition, significant net adverse development was recorded in 2008 for losses occurring in the medical malpractice ($35.4 million)
line, arising principally from losses occurring in 1995 to 2001 and in 2006.

The
favorable development in 2004 through 2007 results generally from favorable loss trends. The net adverse development arising from losses occurring in years 1998 through 2001, which
represent the great majority of the 2002 and prior development, generally relates to the fact that for many classes within these years, ceding companies continue to experience increased loss costs
relative to expectations, coupled with an unexpected lengthening of the loss emergence patterns. Generally, loss activity was greater than expected from losses occurring in the D&O and E&O classes,
although to a lesser extent than in previous calendar year periods. Also, classes such as medical malpractice and excess umbrella were impacted by late reported high layer excess claims to a greater
extent than expected. Contributing to this increase, is the fact that many policies during this period covered underlying contracts that extended over multiple years, which contributed to recent
reported loss activity exceeding previous expectations. This has led to an increase in both the frequency and severity of claims entering the reinsured excess-of-loss coverage
layers at later points in time than had previously been experienced.

2007
includes net catastrophe losses incurred of $64.5 million, principally relating to European Windstorm Kyrill and floods in the U.K. In addition, in 2007, TRH determined that
its estimates of the ultimate amounts of net losses occurring in 2006 and prior years needed to be increased as a result of greater than expected loss activity in 2007. As a result of that
determination, TRH increased net losses and LAE incurred by $88.4 million, representing significant net adverse development in 2007 of losses occurring in all prior years. This net adverse
development was comprised of $368.9 million relating to losses occurring in 2002 and prior, partially offset by net favorable development of $280.5 million, principally relating to
losses occurring in 2006 and, to a lesser extent, 2005 and 2004. The line of business

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Liability for Gross Loss Reserves (Continued)

with
the most significant net adverse development recorded in 2007 was the other liability line ($221 million), arising principally from losses occurring in 1998 to 2002 for reasons similar to
those discussed earlier for the other liability line development in 2008. In addition, significant net adverse development was recorded in 2007 in the medical malpractice line ($38 million),
arising principally from losses occurring between 1998 and 2002. These increases to incurred losses were offset in part by net favorable development occurring most significantly in the fire line
($84 million), arising principally from losses occurring in 2006, and in the allied lines ($43 million) and homeowners multiple peril ($34 million) lines, each arising principally
from losses occurring between 2004 and 2006.

Net
development on losses occurring in prior years, for all periods discussed above, includes amounts relating to catastrophe events. See Note 10 for such amounts.

7. Senior Notes

In December 2005, the Company completed a public offering of $750 million aggregate principal amount of its 5.75% senior notes due on December 14, 2015 (the "2015 Notes").
Of the $750 million principal amount of the 2015 Notes offered, $450 million principal amount was purchased by certain subsidiaries of AIG. In 2009 and 2008, TRH repurchased portions of
the 2015 Notes from non-related parties as detailed below:

2009

2008

2007(in millions)Principal amount repurchased

$
30

$
25

$
Repurchase price


20


15


Gain on early extinguishment of debt


10


10





In
November 2009, the Company completed a public offering of $350 million aggregate principal amount of its 8.00% senior notes due on November 30, 2039 (the
"2039 Notes" and together with the 2015 Notes, the "Senior Notes"). The net proceeds from the offering will be used for general corporate purposes which, depending on market conditions, may include
repurchases of the Company's common stock and the 2015 Notes.

The
balance sheet carrying value, unamortized original issue discount, outstanding principal amount and fair value of the Senior Notes are presented below. The unamortized original issue
discount is being amortized over the term of the notes on the effective interest rate method. The fair values are based on quoted market prices.

As of December 31, 2009

As of December 31, 20082015 Notes

2039 Notes

2015 Notes

2039 Notes(in millions)Balance sheet carrying amount

$
692.8

$
340.3

$
722.2

$
Unamortized original issue discount


2.2


9.7


2.8


Outstanding principal amount


695.0


350.0


725.0


Fair value


712.5


359.3


469.4





Interest
expense incurred and paid in connection with the Senior Notes was as follows:

Years Ended December 31,2009

2008

2007(in thousands)Interest expense incurred

$
43,454

$
43,359

$
43,421Interest paid


40,394


43,113


43,125


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TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. Common Stock

Common stock activity for each of the three years in the period ended December 31, 2009 was as follows:

2009

2008

2007Shares outstanding, beginning of year


66,364,358


66,233,570


66,037,708Issued under stock compensation plans


77,863


130,788


195,862Acquisition of treasury stock


(59,600
)




Shares outstanding, end of year


66,382,621


66,364,358


66,233,570


9. Net Income Per Common Share

Net income per common share has been computed in the following table based upon weighted average common shares outstanding.

Years Ended December 31,2009

2008

2007(in thousands, except per share data)Net income (numerator)

$
477,662

$
102,254

$
487,141Weighted average common shares outstanding used in the computation of net income per common share:Average shares issued


67,374


67,259


67,113Less: Average shares in treasury


(993
)

(989
)

(989
)Average outstanding sharesbasic (denominator)


66,381


66,270


66,124Average potential shares from stock compensation(1)


421


452


530Average outstanding sharesdiluted (denominator)


66,802


66,722


66,654Net income per common share:Basic

$
7.20

$
1.54

$
7.37Diluted


7.15


1.53


7.31


(1)2009
excludes the effect of 2.2 million anti-dilutive shares (from a total of 3.2 million potential shares). 2008 excludes the
effect of 1.3 million anti-dilutive shares (from a total of 3.1 million potential shares). 2007 excludes the effect of 0.6 million anti-dilutive shares
(from a total of 3.0 million potential shares).


10. Impact of Catastrophe Costs

Net catastrophe costs represent TRH's best estimates, including net changes from prior estimates, of the aggregate ultimate costs to be incurred relating to significant catastrophe
events based upon information available at the time the estimate was made. These catastrophe cost estimates reflect significant judgment relating to many factors, including the ultimate resolution of
certain legal and other issues.

Gross
and ceded reinstatement premiums serve to increase or decrease, respectively, net premiums written and earned by such amounts in their respective periods. Reinstatement premiums
may arise on both assumed and ceded business as a result of contractual provisions found in certain catastrophe excess-of-loss reinsurance contracts that require additional
premium to be paid in the event of a loss to reinstate coverage for the remaining portion of the contract period.

There
were no significant net catastrophe costs for events occurring during 2009. Net catastrophe costs in 2008 principally related to Hurricane Ike. Net catastrophe costs in 2007
principally related to

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. Impact of Catastrophe Costs (Continued)

European
Windstorm Kyrill and floods in the U.K. Net catastrophe costs also include estimated changes in net catastrophe costs incurred relating to events occurring in prior years.

Summaries
of the components of pre-tax net catastrophe costs for 2009, 2008 and 2007 are presented below:

Years Ended December 31,2009

2008

2007(in millions)Net losses and LAE incurred from catastrophe events occurring in:Current year

$


$
190.8

$
53.3Prior years


(8.0
)

(10.4
)

11.2Total net losses and LAE incurred from catastrophe events


(8.0
)

180.4


64.5Net ceded (assumed) reinstatement premiums


2.4


(10.7
)

(9.3
)Net catastrophe costs

$
(5.6
)
$
169.7

$
55.2Losses and LAE incurred from catastrophe events:Gross

$
(0.9
)
$
187.0

$
68.2Ceded


(7.1
)

(6.6
)

(3.7
)Net


(8.0
)

180.4


64.5Reinstatement premiums:Gross


3.1


(11.4
)

(9.6
)Ceded


(0.7
)

0.7


0.3Net


2.4


(10.7
)

(9.3
)Net catastrophe costs

$
(5.6
)
$
169.7

$
55.2


A
summary of pre-tax net catastrophe costs by segment for 2009, 2008 and 2007 is presented below:

Years Ended December 31,2009

2008

2007(in millions)Domestic

$
0.8

$
147.4

$
8.0International:Europe


(5.8
)

22.1


47.4Other


(0.6
)

0.2


(0.2
)Total international


(6.4
)

22.3


47.2Total

$
(5.6
)
$
169.7

$
55.2


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TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. Accumulated Other Comprehensive Income (Loss)

The components of AOCI and changes in such amounts between years are as follows:

Net Unrealized
Appreciation
(Depreciation)
of Investments
without Non-
credit OTTI, Net
of Tax

Net Unrealized
Appreciation
(Depreciation)
of Investments
with Non-credit
OTTI, Net
of Tax

Net Unrealized
Currency
Translation
Loss, Net
of Tax

Accumulated
Other
Comprehensive
Income (Loss)(in thousands)Balance, December 31, 2006

$
119,118

$


$
(76,492
)
$
42,626Change during the year


(101,154
)




23,836


(77,318
)Balance, December 31, 2007


17,964





(52,656
)

(34,692
)Change during the year


(230,793
)




7,795


(222,998
)Balance, December 31, 2008


(212,829
)




(44,861
)

(257,690
)CEA, net of tax (see Note 2(l))





(71,569
)




(71,569
)Change during the year


419,505


26,808


(47,353
)

398,960Balance, December 31, 2009

$
206,676

$
(44,761
)
$
(92,214
)
$
69,701




12. Pension, Other Postretirement Benefits and Incentive Savings Plans

Through various dates in 2009, TRH's employees continued to participate in certain benefit plans sponsored by the AIG Group, including noncontributory defined benefit ("DB") pension
plans, defined contribution ("DC") pension plans and other postretirement benefit plans. A substantial majority of TRH's employees were eligible to participate in these plans. Certain of the
pension plans were multiemployer plans in that they do not separately identify plan benefits and plan assets attributable to participating companies. For such plans, only contributions paid or accrued
were charged to expense.

After
December 31, 2009, TRH employees no longer participate in any benefit plans sponsored or administered by the AIG Group. TRH employees now participate in DB pension, DC
pension and other post retirement benefit plans sponsored and maintained by TRH. In general, vested and unvested benefits accrued through the end of 2009 by TRH employees participating in AIG
sponsored plans have been assumed by a new corresponding TRH pension plan, and in the case of the U.S. DB pension plans, benefits have been frozen as of December 31, 2009. In 2010, an AIG DB
pension plan will transfer funds related to TRH employees' prior participation in such plan into a new frozen DB pension plan sponsored by TRH. For the period beginning in 2010, TRH has established
new DC pension plans to replace the AIG DB pension plans. These plans are not material to results of operations, financial condition or cash flows.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. Pension, Other Postretirement Benefits and Incentive Savings Plans (Continued)

The
charges made to operations for benefit plans administered by the AIG Group for 2009, 2008 and 2007 were $7.0 million, $6.4 million and $4.4 million,
respectively.

In
2009, 2008 and 2007, a portion of TRH's employees participate in plans maintained by TRH. Charges to operations for these plans are not material.

13. Stock-Based Compensation Plans

In 2009, the Company's Board of Directors (the "Board") adopted, and the stockholders approved, the Transatlantic Holdings, Inc. 2009 Long Term Equity Incentive Plan (the "2009
Plan"). The 2009 Plan permits the granting of stock options, stock appreciation rights ("SARs"), restricted stock, restricted stock units, performance awards and share awards. The maximum number of
shares available for grant under the 2009 Plan is 2,600,000 shares, of which no more than 1,000,000 may be issued in the form of incentive stock options. In addition, the maximum number of options,
SARs, performance-based restricted stock units ("Performance RSUs") and performance share units granted to an individual in any three year calendar period may not exceed 1,000,000 and the maximum
dollar amount of cash or the fair market value of shares that any individual may receive in any calendar year in respect to performance units may not exceed $5 million. As of
December 31, 2009, there were 1,773,410 shares of common stock available for issuance (no more than 1,000,000 of which may be incentive stock options) in connection with future grants of
awards under the 2009 Plan. Shares available for future issuance assume participants will earn the maximum number of Performance RSUs until the actual amounts are determined, at which time, such
shares available amount will be adjusted accordingly.

TRH
also maintains the Transatlantic Holdings Inc. Partners Plan (the "Partners Plan") and the Transatlantic Holdings, Inc. Senior Partners Plan (the "Senior Partners
Plan"). Performance RSUs awarded under the Partner Plan and the Senior Partner Plan were granted from the 2009 Plan or, prior to 2009, from the Transatlantic Holdings, Inc. 2003 Stock Incentive
Plan, as amended, (the "2003 Plan").

The
2009 Plan replaced the Transatlantic Holdings, Inc. 2000 Stock Option Plan, as amended, (the "2000 Plan") and the 2003 Plan. No further awards can be granted under the 2000
Plan or the 2003 Plan.

In
2008, the Board adopted, and the stockholders approved, the Transatlantic Holdings, Inc. 2008 Non-Employee Directors' Stock Plan (the "Non-Employee
Directors' Plan"). The Non-Employee Directors' Plan provides that equity-based or equity-related awards can be granted to non-employee directors as determined by the
Compensation Committee of the Board (the "Compensation Committee"). The maximum number of shares available for grant under the Non-Employee Directors' Plan is 100,000. As of
December 31, 2009, there were 66,000 shares of common stock available for issuance in connection with future grants of awards under the Non-Employee Directors' Plan.

At
December 31, 2009, TRH had awards outstanding from five stock-based compensation plans, (a) the 2009 Plan; (b) the 2000 Plan; (c) the 2003 Plan;
(d) the Non-Employee Directors' Plan; and (e) the Transatlantic Holdings, Inc. 1990 Employee Stock Purchase Plan, as amended (the "Stock Purchase Plan").

Expenses
relating to stock-based compensation arrangements totaled $13.2 million, $18.7 million and $14.8 million in 2009, 2008 and 2007, respectively. Income tax
benefits recognized related to stock-based compensation arrangements totaled $4.5 million, $6.4 million and $4.9 million in 2009, 2008 and 2007, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13. Stock-Based Compensation Plans (Continued)

Net
cash received (paid) from exercises of stock-based compensation was $1.6 million, ($0.9) million and $6.0 million during 2009, 2008 and 2007, respectively. The net cash
paid from exercises of stock-based compensation in 2008 is due to the payment of the employee portion of withholding taxes to governmental tax authorities on vested restricted stock units. TRH has not
paid out any cash to settle share-based payment awards in 2009, 2008 or 2007. Cash savings resulting from excess tax benefits totaled $0.2 million, $1.8 million and $1.1 million
in 2009, 2008 and 2007, respectively.

Income
tax benefits realized by TRH on stock-based compensation exercises totaled $0.8 million, $2.5 million and $2.7 million in 2009, 2008 and 2007, respectively.

Historically,
TRH has settled stock-based compensation exercises through the issuance of new shares.

The
impact on the financial statements of the Stock Purchase Plan was not material to TRH in 2009, 2008 and 2007. A discussion of the more significant stock-based compensation awards
follows.



Options
to purchase the Company's common stock ("TRH shares") were granted to certain key employees and non-employee directors at prices not less
than the New York Stock Exchange ("NYSE") closing price on the date of grant under the 2000 Plan. In general, 25% of the options become exercisable on the anniversary date of the grant in each of the
four years following the grant and expire 10 years from the date of grant.

No
options were granted in 2009. 197,500 and 210,000 options were granted in 2008 and 2007, respectively. The fair value of each option grant is estimated on the date of grant using a
binomial option pricing model. The following table presents the weighted average grant date fair value and the weighted average assumptions which were used in the calculation for options granted in
2008 and 2007:

Years Ended
December 31,2008

2007Grant date fair value

$
18.82

$
23.41Expected volatility


20.0
%

25.0
%Risk free interest rate


3.5
%

4.9
%Expected term (in years)


7.4


7.9


A
weighted average dividend yield of 0.93% and 0.82% was used in 2008 and 2007, respectively, to value the options granted and was based on the dividend yield over the twelve month
period prior to the grant date. The expected volatility was based on the historical volatility of TRH shares. The risk-free interest rate was based on the U.S. treasury yield curve in
effect at the time of grant. The expected term was calculated based on historical data on employee exercise behavior.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13. Stock-Based Compensation Plans (Continued)

A
summary of the status of options granted as of December 31, 2009 and the changes since January 1, 2009 is presented below:

Number of
Shares

Weighted
Average
Exercise Price

Weighted
Average
Remaining
Contractual Life

Aggregate
Intrinsic Value
(in thousands)Outstanding, January 1, 2009


2,392,798

$
60.60Granted





Exercised


(133,296
)

40.80Forfeited or expired


(560
)

52.66Outstanding, December 31, 2009


2,258,942


61.77

4.3 years

$
294
(1)Exercisable, December 31, 2009


2,005,812


61.14

3.8 years

$
294
(1)


(1)Represents
the aggregate intrinsic value of options outstanding and exercisable with exercise prices below the closing price of TRH shares on the NYSE on
December 31, 2009.


The aggregate intrinsic value of options exercised (the aggregate amount by which the market price of TRH shares at the time of exercise exceeded
the exercise price of options exercised) was $1.6 million, $1.0 million and $7.1 million in 2009, 2008 and 2007, respectively. A total of approximately 167,000, 190,000 and
301,000 options vested in 2009, 2008 and 2007, respectively, with aggregate grant-date fair values of $3.6 million, $3.8 million and $5.0 million in 2009, 2008 and 2007,
respectively.

As
of December 31, 2009, there was $3.1 million of total unrecognized compensation costs relating to options granted but not yet vested. Compensation expense for options
granted is recognized on a straight-line basis. These costs are expected to be recognized over a weighted average period of 1.7 years.



Service
RSUs and Performance RSUs have been granted under the 2009 Plan, the Non-Employee Directors' Plan and the 2003 Plan to officers, employees
and directors of TRH. A summary of the status of the Service RSUs and Performance RSUs granted pursuant to the 2009 Plan, Non-Employee Directors' Plan and the 2003 Plan as of
December 31, 2009 and the changes since January 1, 2009 are presented below:

Number of Units

Weighted Average
Grant Date Fair ValueService
RSUs

Performance
RSUs

Service
RSUs

Performance
RSUsUnvested, January 1, 2009


216,658


338,281

$
63.89

$
61.44Granted


411,390


264,500


41.44


37.61Additional RSUs resulting from satisfaction of performance condition





48,529





64.67Vested


(21,552
)




57.91


Forfeited or expired


(200
)




63.07


Unvested, December 31, 2009


606,296


651,310


48.87


52.00


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13. Stock-Based Compensation Plans (Continued)



Service
RSUs

Performance
RSUsUnvested RSUs as of December 31, 2009:Weighted average remaining contractual life


1.5 years


2.0 yearsAggregate intrinsic value (in thousands)

$
31,594

$
33,940




Service
RSUs have vesting dates ranging from one to four years from the date of grant. As of December 31, 2009, the great majority of Service RSUs will vest on the third
anniversary of the date of grant for those grantees with continued employment through such date. The Company reserves the right to make payment for the Service RSUs in TRH shares or the cash
equivalent of the fair value of such shares on the date of vesting.

411,390,
103,308 and 103,450 Service RSUs were granted in 2009, 2008 and 2007, respectively. The fair values of Service RSUs were estimated on the date of grant based on the closing
market price of TRH shares on the date of grant.

21,552,
146,150 and 7,597 Service RSUs vested in 2009, 2008 and 2007, respectively.

As
of December 31, 2009, there was $15.9 million of total unrecognized compensation costs relating to Service RSUs granted but not yet vested. These costs are expected to
be recognized over a weighted average period of 1.7 years.



Under
the Partners Plan, the Compensation Committee awarded to senior executives Performance RSUs with a two-year performance period ("Two-Year Performance RSUs")
that pay out in TRH shares if performance goals for a specified period are satisfied. Each Two-Year Performance RSU converts into one TRH share. Two-Year Performance RSUs
operate on the basis of successive overlapping two year performance periods, with a new period beginning each year. Recipients earn Performance RSUs based on the growth in adjusted book value per
share of TRH shares ("BVPS Growth") during the performance period. Based on the percentage of the BVPS Growth target achieved over the performance period, recipients can earn from 25% to 150% of the
awarded number of Performance RSUs. No Performance RSUs will be earned if BVPS Growth is less than 25% of target.

A
summary of unvested Two-Year Performance RSUs grants as of December 31, 2009 follows:

Year
Granted

Performance
Period
Beginning

Performance
Period End

Performance
RSUs Granted

Maximum
Number of
Performance
RSUs
Available to
be Earned

Actual
Performance
RSUs Earned

50% of Earned
Performance
RSUs Vests
on January 1,2006

January 1, 2006

December 31, 2007


42,925


64,387


64,387


2010 and 20122006

January 1, 2007

December 31, 2008


87,683


131,525


100,913


2011 and 20132008

January 1, 2008

December 31, 2009


92,925


139,388


120,374


2011 and 20122009

January 1, 2009

December 31, 2010


201,200


301,800


N/A(1)


2012 and 2013


(1)Amount
undeterminable as of December 31, 2009 as the performance period has not yet ended.


Under the Senior Partners Plan, the Compensation Committee awarded to TRH's senior-most executives Performance RSUs with a
three-year performance period ("Three-Year Performance RSUs")

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13. Stock-Based Compensation Plans (Continued)

that
pay out in TRH shares if performance goals for a specified period are satisfied. Each Three-Year Performance RSU converts into one TRH share. Three-Year Performance RSUs
operate on the basis of successive overlapping three year performance periods, with a new period beginning each year. Recipients earn Performance RSUs based on BVPS Growth during the performance
period. Based on the percentage of the BVPS Growth target achieved over the performance period, recipients can earn from 25% to 200% of the awarded number of Performance RSUs. No Performance RSUs will
be earned if BVPS Growth is less than 50% of target.

A
summary of unvested Three-Year Performance RSUs grants as of December 31, 2009 follows:

Year
Granted

Performance
Period
Beginning

Performance
Period End

Performance
RSUs Granted

Maximum
Number of
Performance
RSUs
Available to
be Earned

Actual
Performance
RSUs Earned

50% of Earned
Performance RSUs
Vests on January 1,2006

January 1, 2006

December 31, 2008


12,000


24,000


21,552


2010 and 20122007

January 1, 2007

December 31, 2009


27,000


54,000


48,090


2011 and 20132008

January 1, 2008

December 31, 2010


31,500


63,000


N/A(1)


2011 and 20122009

January 1, 2009

December 31, 2011


63,300


126,600


N/A(1)


2012 and 2013


(1)Amount
undeterminable as of December 31, 2009 as the performance period has not yet ended.


The fair values of Performance RSUs are estimated based on the NYSE closing price of TRH shares on the date of grant.

No
Performance RSUs vested in 2009, 2008 or 2007.

As
of December 31, 2009, there was $20.9 million of total unrecognized compensation costs relating to Performance RSUs granted but not yet vested. Compensation expense for
Performance RSUs is recognized on a straight-line basis. These costs are expected to be recognized over a weighted average period of 2.3 years.

14. Related Party Transactions



Prior
to June 10, 2009 and as of December 31, 2008 and 2007, AIG beneficially owned approximately 59% of the Company's outstanding shares. On
June 10, 2009, AIG and AHAC, a wholly owned subsidiary of AIG, consummated the Offering of 29.9 million issued and outstanding shares of the common stock of the Company owned by AIG and
AHAC. TRH did not receive any proceeds from the Offering. According to the Form 13F filed on February 18, 2010 by AIG, as of December 31, 2009, the AIG Group had sole voting
authority over 9.2 million shares of the Company's common stock, representing approximately 13.8% of the Company's outstanding shares as of December 31, 2009.

As
a result of the Offering, the Company is no longer considered a "controlled company" pursuant to the corporate governance listing standards of the NYSE and is no longer able to avail
itself of the exemptions from certain of the NYSE's corporate governance listing standards applicable to controlled companies (subject to the rules of the NYSE permitting a phase in period for
compliance with such corporate governance listing standards).

In
connection with the Offering, TRH entered into a Master Separation Agreement (the "MSA") with AIG and AHAC on May 28, 2009. The MSA sets forth TRH's agreements with AIG and
AHAC regarding

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. Related Party Transactions (Continued)

the
orderly separation of TRH from AIG, AHAC and their subsidiaries (the "Separation") and governs certain aspects of TRH's relationship with AIG, AHAC and their subsidiaries on a going forward basis,
including their waiver of certain rights they may have under intercompany agreements and insurance agreements.

In
connection with the Offering, TRH also entered into (a) a transition services agreement (the "TSA") with AIG; (b) a stockholders agreement (the "Stockholders Agreement")
with AIG and AHAC; and (c) a registration rights agreement (the "Registration Rights Agreement") with AIG and AHAC. The TSA sets forth TRH's agreements with AIG regarding the provision by AIG,
AHAC and their subsidiaries of limited services to TRH for a specified period of time following the Separation. As of December 31, 2009, all service agreements under the TSA have expired. The
Stockholders Agreement provides AIG and AHAC with certain information and consent rights and will subject AIG, AHAC, and their respective subsidiaries, affiliates, officers and directors to certain
standstill provisions. Additionally, pursuant to the Stockholders Agreement, AIG, AHAC and their subsidiaries are subject to voting and transfer restrictions covering their shares of the Company's
common stock. The Registration Rights Agreement provides AIG and AHAC with registration rights relating to any shares of the Company's common stock held by them. AIG and AHAC may require TRH to
register under the Securities Act of 1933 all or a portion of these shares. The registration rights are subject to certain limitations, including TRH's right to temporarily suspend the registration of
shares.

TRH
is a party to numerous contracts, agreements, licenses, permits, authorizations and other arrangements that contain provisions giving counterparties certain rights (including, in
some cases, termination rights) in the event of a change in control of the Company or its subsidiaries. If a change in control occurs, cedants may be permitted to cancel contracts on a
cut-off or run-off basis, and TRH may be required to provide collateral to secure premium and reserve balances or may be required to cancel and commute the contract, subject to
an agreement between the parties that may be settled in arbitration. If a contract is cancelled on a cut-off basis, TRH may be required to return unearned premiums, net of commissions.

The
Offering may be deemed to have constituted a change in control of TRH under a portion of TRH's non-AIG Group reinsurance agreements. Whether a ceding company would have cancellation
rights in connection with the Offering depends upon the language of its agreement with TRH. Whether a ceding company exercises any cancellation rights it has would depend on, among other factors, such
ceding company's views with respect to the prevailing market conditions, the pricing and availability of replacement reinsurance coverage and TRH's ratings. As of December 31, 2009, no cedants
have notified TRH of their intention to exercise any cancellation rights they may have as a result of the Offering.

(b) Transactions with AIG

TRH
had service and expense agreements and certain other agreements with the AIG Group which provide for the reimbursement to the AIG Group of certain administrative and operating
expenses which include, but are not limited to, investment advisory, investment recordkeeping, cash management services, office space and human resource related activities. Most of these service and
expense agreements have ceased on various dates in 2009. Under the guidance of TRH's Finance and Investment Committee of the Board of Directors and senior management, the AIG Group acted as financial
advisors and managers of TRH's investment portfolio through June 30, 2009. Effective July 1, 2009, TRH employs a third party not affiliated with AIG to provide these services. In 2009,
2008 and 2007, $8.9 million, $13.8 million and $13.8 million, respectively, of operating and investment expenses relate to services and expenses provided by the AIG Group under
these agreements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. Related Party Transactions (Continued)

Gross premiums written of approximately $263 million (6.3%), $310 million (7.0%) and $307 million (7.2%) in 2009, 2008 and 2007, respectively, were originated by the
AIG Group and ceded to TRH. These amounts exclude (a) premiums assumed that initially were insured by AIG subsidiaries as a result of TRH's marketing efforts and then ceded to TRH by
prearrangement; and (b) amounts assumed from an AIG subsidiary and ceded in an equal amount to other AIG subsidiaries. The amount of premiums assumed that initially were insured by AIG
subsidiaries as a result of TRH's marketing efforts and then ceded to TRH by prearrangement are not material. (See Note 16 for the
amount of premiums assumed from an AIG subsidiary and ceded in an equal amount to other AIG subsidiaries.)

(c) Reinsurance Recoverables on Paid and Unpaid Losses and LAE

As
of December 31, 2009 and 2008, $266.5 million and $250.5 million, respectively, of reinsurance recoverables on paid and unpaid losses and LAE were recoverable
from the AIG Group. (See Note 16.)

(d) 2015 Notes Purchased by AIG Subsidiaries

In
December 2005, certain subsidiaries of AIG purchased $450 million aggregate principal amount of the 2015 Notes. (See Note 7.)

(e) Other:TRH's employees participated in certain benefit plans administered by the AIG Group (see Note 12).

15. Dividend Restriction and Statutory Financial Data

The payment of dividends and interest on the Senior Notes by the Company is generally dependent
on the ability of its subsidiaries to pay dividends. The payment of dividends by TRC and its wholly-owned subsidiaries, TRZ and Putnam, is restricted by insurance regulations. Under New York insurance
law, TRC and Putnam may pay dividends only out of their statutory earned surplus. Such dividends are limited by statutory formula unless otherwise approved by the New York State Insurance Department
(the "NYS ID"). The statutory surplus of TRC includes the statutory surplus of Putnam since all the capital stock of Putnam is owned by TRC. At December 31, 2009, TRC had statutory earned
surplus of $2.50 billion, and, in 2009, in accordance with the statutory formula, for the twelve months ended December 31, 2009, TRC could pay dividends of approximately
$401.6 million without regulatory approval.

Statutory
surplus and net income as reported to the NYS ID were as follows:

Years Ended December 31,2009

2008

2007(in thousands)TRCStatutory surplus

$
4,016,064

$
3,534,148

$
3,368,801Statutory net income


415,534


103,448


391,666PutnamStatutory surplus


203,507


165,888


151,720Statutory net income


33,055


24,719


22,482


TRC
and Putnam each prepare statutory financial statements in accordance with accounting practices prescribed or permitted by New Yorktheir state of domicile. Prescribed
statutory accounting practices are discussed in a variety of publications of the National Association of Insurance

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. Dividend Restriction and Statutory Financial Data (Continued)

Commissioners
("NAIC"), as well as in state laws, regulations and general administrative rules. Permitted statutory accounting practices encompass all accounting practices not so prescribed. As
required by the State of New York, TRC and Putnam use the Codification of Statutory Accounting
Principles as primary guidance on statutory accounting. All material statutory accounting practices of TRC and Putnam are prescribed in the authoritative literature described above.

16. Reinsurance Ceded

In the normal course of business, TRH generally purchases reinsurance from its retrocessionnaires to reduce the effect of individual or aggregate losses, to reduce volatility in specific
lines, to improve risk adjusted portfolio returns and to increase gross premium writings and risk capacity without requiring additional capital.

TRH's
ceded reinsurance agreements consist of pro rata and excess-of-loss contracts. Under pro rata reinsurance, TRH and its retrocessionnaires share premiums,
losses and expenses in an agreed upon proportion. For consideration, generally based on a percentage of premiums of the individual policy or policies subject to the reinsurance agreement,
excess-of-loss contracts provide reimbursement to TRH for losses in excess of a predetermined amount up to a predetermined limit.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

16. Reinsurance Ceded (Continued)

Premiums
written, premiums earned and losses and LAE incurred are comprised as follows:

Years Ended December 31,2009

2008

2007(in thousands)Gross premiums written

$
4,203,777

$
4,423,241

$
4,283,563Ceded premiums written:Related parties(1)


(133,625
)

(188,468
)

(142,993
)Other


(84,051
)

(126,681
)

(187,671
)(217,676
)

(315,149
)

(330,664
)Net premiums written

$
3,986,101

$
4,108,092

$
3,952,899Gross premiums earned

$
4,283,797

$
4,365,574

$
4,232,190Ceded premiums earned:Related parties(1)


(156,137
)

(161,851
)

(135,110
)Other


(88,578
)

(136,334
)

(194,411
)(244,715
)

(298,185
)

(329,521
)Net premiums earned

$
4,039,082

$
4,067,389

$
3,902,669Gross incurred losses and LAE(2)(3)

$
2,747,213

$
3,015,155

$
2,833,203Reinsured losses and LAE ceded(2)(3)


(68,042
)

(107,928
)

(195,170
)Net losses and LAE incurred

$
2,679,171

$
2,907,227

$
2,638,033


(1)Premiums
written and earned that were ceded to related parties principally represent amounts which, by prearrangement with TRH, were assumed from an AIG
subsidiary and then ceded in an equal amount to other AIG subsidiaries.(2)See
Note 10 for gross and ceded catastrophe losses.(3)Gross
incurred losses and LAE and reinsured losses and LAE ceded include $40 million, $62 million and $74 million in 2009, 2008 and
2007, respectively, related to premiums which, by prearrangement with TRH, were assumed from an AIG subsidiary and then ceded in an equal amount to other AIG subsidiaries.


Amounts recoverable from retrocessionnaires are recognized in a manner consistent with the claims liabilities associated with the retrocession and
are presented on the balance sheet as reinsurance recoverable on paid and unpaid losses and LAE. Such balances at December 31, 2009 and 2008 are comprised as follows:

2009

2008Related
Parties

Other

Related
Parties

Other(in thousands)Paid

$
5,518

$
16,275

$
3,802

$
23,293Unpaid


261,020


464,260


246,671


516,733Total

$
266,538

$
480,535

$
250,473

$
540,026


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

16. Reinsurance Ceded (Continued)

Ceded
reinsurance arrangements do not relieve TRH from its obligations to the insurers and reinsurers from whom it assumes business. The failure of retrocessionnaires to honor their
obligations could result in losses to TRH; consequently, an allowance has been established for estimated unrecoverable reinsurance on paid and unpaid losses totaling $12.0 million as of
December 31, 2009 and 2008. With respect to reinsurance recoverable on paid and unpaid losses and prepaid reinsurance premiums, TRH holds substantial amounts of funds, trust agreements and
letters of credit to collateralize these amounts. Such funds, trust agreements and letters of credit can be drawn on for amounts remaining unpaid beyond contract terms. No uncollateralized amounts
recoverable from a single retrocessionnaire are considered material to the financial position of TRH.

17. Segment Information

TRH conducts its business and assesses performance through segments organized along geographic lines. The Domestic segment principally includes financial data from branches in the United
States except Miami, as well as revenues and expenses of the Company (including interest expense on the Senior Notes) and stock-based compensation expense. (See Notes 7 and 13.)

Financial
data from the London and Paris branches and from Trans Re Zurich are reported in the aggregate as International-Europe and considered as one segment due to operational and
regional similarities. Data from the Miami (which serves Latin America and the Caribbean), Toronto, Hong Kong and Tokyo branches are grouped as International-Other and represents the aggregation of
segments that are generally not material. In each segment, property and casualty reinsurance is provided to insurers and reinsurers on a treaty and facultative basis, through brokers or directly to
ceding companies.

A
significant portion of the assets and liabilities of TRH's international operations relate to the countries where ceding companies and reinsurers are located. Most investments are
located in the country of domicile of these operations. In addition to licensing requirements, TRH's international operations are regulated in various jurisdictions with respect to currency, amount
and type of security deposits, amount and type of reserves and amount and type of local investment. Regulations governing constitution of technical reserves and remittance balances in some countries
may hinder remittance of profits and repatriation of assets. International operations and assets held abroad may be adversely affected by political and other developments in foreign countries,
including possibilities of tax changes, nationalization and changes in regulatory policy, as well as by consequences of hostilities and unrest. The risks of such occurrences and their overall effect
upon TRH vary from country to country and cannot easily be predicted.

While
the great majority of premium revenues and assets relate to the regions where particular offices are located, a significant portion of such amounts may be derived from other
regions of the world.

In
addition, two large international brokers, respectively, accounted for non-AIG Group business equal to 25% and 16% in 2009, 27% and 15% in 2008 and 16% and 14% in 2007, of
consolidated revenues, with a significant portion in each segment. Non-AIG Group premiums brokered by the first of the two brokers listed earlier increased significantly in 2008 compared
to 2007 as a result of acquisitions made by that broker in 2008. In each year, premiums brokered by companies acquired are included in the calculated percentages of the acquiror starting in the year
of acquisition.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

17. Segment Information (Continued)

The following table is a summary of financial data by segment:

2009

2008

2007(in thousands)Domestic:Net premiums written

$
2,051,053

$
2,035,661

$
1,948,045Net premiums earned(1)


2,064,778


2,043,053


1,933,643Net investment income


309,747


259,379


300,702Realized net capital (losses) gains


(54,923
)

(364,775
)

39,981Revenues


2,329,471


1,947,907


2,274,326Net losses and LAE


1,364,082


1,607,543


1,435,229Underwriting expenses(2)


565,250


537,379


501,855Underwriting profit (loss)(3)(4)


135,446


(101,869
)

(3,441
)Income (loss) before income taxes


327,070


(263,911
)

268,120Identifiable assets(6)


9,412,298


8,469,294


8,577,815International-Europe:Net premiums written

$
1,405,209

$
1,562,118

$
1,524,036Net premiums earned


1,442,326


1,525,334


1,498,789Net investment income


125,114


146,202


135,317Realized net capital losses


(12,640
)

(51,848
)

(20,187
)Revenues


1,554,800


1,619,688


1,613,919Net losses and LAE


1,066,717


1,051,019


951,266Underwriting expenses(2)


364,652


400,326


420,264Underwriting profit(3)(4)


10,957


73,989


127,259Income before income taxes


123,620


168,283


242,059Identifiable assets(6)


4,038,126


3,630,496


5,512,987International-Other(5):Net premiums written

$
529,839

$
510,313

$
480,818Net premiums earned


531,978


499,002


470,237Net investment income


32,541


34,870


33,753Realized net capital losses


(3,078
)

(18,918
)

(10,405
)Revenues


561,441


514,954


493,585Net losses and LAE


248,372


248,665


251,538Underwriting expenses(2)


168,603


167,520


156,861Underwriting profit(3)(4)


115,003


82,817


61,838Income before income taxes


145,343


98,851


85,573Identifiable assets(6)


1,493,235


1,277,148


1,393,525


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

17. Segment Information (Continued)

2009

2008

2007(in thousands)Consolidated:Net premiums written

$
3,986,101

$
4,108,092

$
3,952,899Net premiums earned(1)


4,039,082


4,067,389


3,902,669Net investment income


467,402


440,451


469,772Realized net capital (losses) gains


(70,641
)

(435,541
)

9,389Revenues


4,445,712


4,082,549


4,381,830Net losses and LAE


2,679,171


2,907,227


2,638,033Underwriting expenses(2)


1,098,505


1,105,225


1,078,980Underwriting profit(3)(4)


261,406


54,937


185,656Income before income taxes


596,033


3,223


595,752Identifiable assets(6)


14,943,659


13,376,938


15,484,327


(1)Net
premiums earned from related parties approximate $334.0 million, $386.5 million and $427.9 million in 2009, 2008 and 2007,
respectively, and are included mainly in Domestic.(2)Underwriting
expenses represent the sum of net commissions, (increase) decrease in deferred acquisition costs and other underwriting expenses.(3)Underwriting
profit (loss) represents net premiums earned less net losses and LAE and underwriting expenses.(4)See
Note 10 for net catastrophe costs by segment.(5)The
Miami and Toronto branch segment data are each considered significant for 2009 and/or 2008 only. Certain key Miami and Toronto data elements which are
included in International-Other are as follows:


2009

2008

2007(in thousands)Miami:Revenues

$
269,435

$
259,661

$
230,286Income before income taxes


71,924


43,667


15,467Identifiable assets


478,751


388,796


365,743Toronto:Revenues

$
115,419

$
100,142

$
121,473Income before income taxes


25,101


35,219


40,034Identifiable assets


696,204


583,378


782,092


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

17. Segment Information (Continued)

Net premiums earned by major product line are as follows:

Years Ended December 31,2009

2008

2007(in thousands)Casualty:Other liability(1)

$
1,037,628

$
1,061,291

$
1,043,888Accident and health


399,267


302,799


238,538Medical malpractice


359,030


372,498


379,792Ocean marine and aviation


305,785


329,195


350,905Auto liability


274,543


296,992


267,944Surety and credit


222,931


214,677


173,838Other


246,785


300,698


313,443Total casualty


2,845,969


2,878,150


2,768,348Property:Fire


544,641


573,741


534,175Allied lines


342,125


304,809


289,443Auto physical damage


130,989


136,934


101,348Homeowners multiple peril


77,473


72,406


83,414Other


97,885


101,349


125,941Total property


1,193,113


1,189,239


1,134,321Total

$
4,039,082

$
4,067,389

$
3,902,669


(1)A
large majority of the amounts within the other liability line relates to complex risks such as E&O and D&O, to general casualty risks and, to a lesser
extent, environmental impairment liability.


18. Commitments and Contingent Liabilities

(a) Legal Proceedings

TRH,
in common with the reinsurance industry in general, is subject to litigation in the normal course of its business. TRH does not believe that any pending litigation will have a
material adverse effect on its consolidated results of operations, financial position or cash flows.

In
the ordinary course of business, TRH is involved in lawsuits, arbitrations and other formal and informal dispute resolution procedures, the outcomes of which will determine TRH's
rights and obligations under reinsurance agreements and other more general contracts. In some disputes, TRH seeks to enforce its rights under an agreement or to collect funds owing to it. In other
matters, TRH
is resisting attempts by others to enforce alleged rights. Such disputes are resolved through formal and informal means, including litigation, arbitration and mediation.

In
all such matters, TRH believes that its positions are legally and commercially reasonable. TRH also regularly evaluates those positions, and where appropriate, establishes or adjusts
loss reserves to reflect its evaluation. TRH's aggregate loss reserves take into account the possibility that TRH may not ultimately prevail in each and every disputed matter. TRH takes into
consideration changes in judicial interpretation of legal liability and policy coverages, changes in claims handling practices and inflation.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

18. Commitments and Contingent Liabilities (Continued)

TRH
considers not only monetary increases in the cost of what it reinsures, but also changes in societal factors that influence jury verdicts and case law, TRH's approach to claim resolution, and, in
turn, claim costs. TRH believes its aggregate loss reserves reduce the potential that an adverse resolution of one or more of these matters, at any point in time, would have a material impact on TRH's
financial condition or results of operations. However, there can be no assurance that adverse resolutions of such matters in any one period or in the aggregate will not result in a material adverse
effect on TRH's results of operations or financial condition.

On
September 30, 2009, TRC initiated arbitration proceedings against United Guaranty Residential Insurance Company, United Guaranty Mortgage Indemnity Company, United Guaranty
Credit Insurance Company and United Guaranty Residential Insurance Company of North Carolina (collectively, "UGC"), each a subsidiary of the AIG Group. The arbitration proceedings involve certain
contracts related to subprime mortgages and credit default insurance pursuant to which UGC purchased reinsurance from TRC (the "Disputed Contracts"). TRC seeks in the proceedings, among other things,
to rescind the Disputed Contracts. While the final outcome cannot be predicted with certainty, TRH believes these arbitration proceedings, when resolved, will not have a material adverse effect on
TRH's consolidated results of operations, financial position or cash flows.

In
addition, from time to time, regulators commence investigations into insurance and reinsurance-industry practices. TRH has cooperated, and will continue to cooperate, in producing
documents and other information in response to subpoenas and other requests. While TRH does not believe that any of these inquiries will have a material impact on TRH's business or financial results,
it is not possible to predict with any certainty at this time what impact, if any, these inquiries may have on TRH's business or financial results.

(b) Commercial Commitments

In
the normal course of business, TRH has letters of credit outstanding as of December 31, 2009 totaling $59.6 million. These letters of credit are provided to secure
certain loss reserves and other balances due to ceding companies. Where TRH provides a letter of credit, it is generally contractually obligated to continue to provide a letter of credit to the ceding
company in the future to secure certain reserves and other balances.

(c) Leases:As of December 31, 2009, the future minimum lease payments (principally for leased office space) under various
long-term operating leases were as follows:

(in thousands)2010

$
12,3382011


11,4552012


11,1012013


8,9192014


8,413Remaining years after 2014 (from 2015 to 2021)


33,965Total

$
86,191


Rent expense approximated $12.9 million, $12.0 million and $11.3 million in 2009, 2008 and 2007, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19. Employee Retention Plan

In October 2008, TRH adopted a retention program (the "Retention Plan") covering a significant number of its employees, including its senior-most management. Salary expenses
incurred related to the Retention Plan totaled approximately $20 million and $8 million in 2009 and 2008, respectively.

20. Quarterly Financial Information (unaudited)

The following is a summary of unaudited quarterly financial data for each of the years ended December 31, 2009 and 2008. However, in the opinion of management, all adjustments,
consisting of normal recurring accruals, necessary for a fair statement of the results of operations for such periods have been made.

Three Months EndedMarch 31,

June 30,

September 30,

December 31,2009

2008

2009

2008

2009

2008

2009

2008(in thousands, except per share data)Net premiums written

$
1,047,102

$
1,035,613

$
1,006,340

$
988,524

$
972,572

$
1,094,182

$
960,087

$
989,773Net premiums earned


976,531


1,017,189


1,028,268


1,022,695


1,008,082


1,026,931


1,026,201


1,000,574Net investment income


109,818


117,209


111,201


120,493


123,205


110,433


123,178


92,316Realized net capital (losses) gains


(60,571
)

(15,051
)

(25,485
)

(59,868
)

6,600


(157,604
)

8,815


(203,018
)Total expenses


945,380


974,128


976,373


976,439


941,808


1,133,444


986,118


995,315Net income (loss)


75,236


115,653


112,284


89,733


153,263


(107,521
)

136,879


4,389Net income (loss) per common share:Basic


1.13


1.75


1.69


1.35


2.31


(1.62
)

2.06


0.07Diluted(1)


1.13


1.73


1.68


1.34


2.28


(1.62
)

2.04


0.07


(1)As
the impact of potential shares for the three-month period ended September 30, 2008 is antidilutive
(i.e., reduces the loss per common share) because there is a loss from continuing operations, potential shares are not included in the diluted net loss
per common share calculation for that period.


132

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Table of Contents

Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

There have been no changes in nor any disagreements with accountants on accounting and financial disclosure within the
twenty-four months ended December 31, 2009.

Item 9A.Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

As of the end of the period covered by this report, an evaluation was carried out by TRH's management, with the participation of TRH's
Chief Executive Officer and Chief Financial Officer, of the effectiveness of TRH's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act
of 1934). Based upon that evaluation, TRH's Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of the end of the period
covered by this report. In addition, no change in TRH's internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred
during the fourth quarter of TRH's fiscal year ended December 31, 2009 that has materially affected, or is reasonably likely to materially affect, TRH's internal control over financial
reporting.

Management's Report on Internal Control Over Financial Reporting

Management of TRH is responsible for establishing and maintaining adequate internal control over financial reporting. TRH's internal
control over financial reporting is a process designed under the supervision of TRH's principal executive and principal financial officers to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of TRH's financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.

As
of the end of TRH's 2009 fiscal year, management conducted an assessment of the effectiveness of TRH's internal control over financial reporting based on the framework established in Internal ControlIntegrated
Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on this
assessment, management has concluded that TRH's internal control over financial reporting as of December 31, 2009 is effective.

TRH's
internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of TRH; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of TRH's assets that could have a material effect on TRH's financial statements.

The
effectiveness of TRH's internal control over financial reporting as of December 31, 2009 has been audited by PricewaterhouseCoopers LLP, an independent registered
public accounting firm, as stated in their report included herein, which expresses an unqualified opinion on the effectiveness of TRH's internal control over financial reporting as of
December 31, 2009.

Item 9B.Other Information

None.

133

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Table of Contents

PART III

Item 10.Directors, Executive Officers and Corporate Governance

Information required by this Item concerning directors of Transatlantic Holdings, Inc. (the "Company," and collectively with its
subsidiaries, "TRH") and the TRH code of ethics is included in the Company's Proxy Statement for the 2010 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission (the
"SEC") within 120 days after the end of the Company's fiscal year (the "2010 Proxy Statement"), in the section captioned "Election of Directors," and such information is incorporated herein by
reference. TRH has adopted a code of ethics that applies to its principal executive officer and principal financial and accounting officer, that establishes minimum standards of professional
responsibility and ethical conduct. This code of ethics is available on TRH's website at http://www.transre.com. If TRH makes any substantive amendments to this code of ethics or grants any waiver
from a provision of this code for such persons, TRH will disclose the nature of such amendment or waiver on its website or in a report on Form 8-K. Information required by this Item
concerning compliance with Section 16(a) of the Securities Exchange Act of 1934, as amended, is included in the 2010 Proxy Statement under the caption "Election of Directors: Ownership of
Certain Securities," and such information is incorporated herein by reference.

134

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Table of Contents

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The table below sets forth the names, positions and ages of the persons who are the directors and executive officers of the Company as
of February 24, 2010.

Name

Position

Age

Served as
Director or
Officer SinceRobert F. Orlich

President and Chief Executive Officer and Director


62


1990
(1)Kenneth Apfel

Executive Vice President and Chief Actuary


51


2004
(2)Paul A. Bonny

Executive Vice President, President International Operations


53


1994Michael C. Sapnar

Executive Vice President and Chief Underwriting Officer, Domestic Operations


43


2005
(3)Steven S. Skalicky

Executive Vice President and Chief Financial Officer


61


1995Javier E. Vijil

Executive Vice President, President Latin American and Caribbean Division


56


1996Gary A. Schwartz

Senior Vice President and General Counsel


49


1999
(4)Amy M. Cinquegrana

Corporate Secretary


35


2009
(5)Richard S. Press

Chairman


71


2006
(6)Ian H. Chippendale

Director


61


2007
(7)John G. Foos

Director


60


2007
(8)John L. McCarthy

Director


62


2008
(9)Thomas R. Tizzio

Director


72


1990
(1)


(1)Prior
to April 1990, such person was a director or an officer of TRC and Putnam, but not of the Company.(2)Mr. Apfel
was named Executive Vice President and Chief Actuary of the Company, TRC and Putnam by election of the Board of Directors in September
2008. From May 2005 to the present, Mr. Apfel served as a Director of TRC and Putnam, but not of the Company. From August 2004 to September 2008, Mr. Apfel was Senior Vice President and
Chief Actuary of the Company, TRC and Putnam.(3)Mr. Sapnar
was named Executive Vice President and Chief Underwriting Officer, Domestic Operations of the Company, TRC and Putnam by election of the
Board of Directors in May 2006. From December 2005 to May 2006, Mr. Sapnar was Senior Vice President and Chief Underwriting Officer, Domestic Operations of the Company. From December 2004 to
the present, Mr. Sapnar has served as a Director of TRC and Putnam, but not of the Company. From March 2002 to May 2006, Mr. Sapnar was Senior Vice President and Chief Underwriting
Officer, Domestic Operations of TRC and Putnam.(4)Since
May 2004, Mr. Schwartz was Senior Vice President and General Counsel of the Company, TRC and Putnam. From November 2008 to March 2009,
Mr. Schwartz also was Corporate Secretary of the Company, TRC and Putnam. From July 1999 to May 2004, Mr. Schwartz was Vice President and General Counsel of the Company, TRC and Putnam.
From May 2005 to the present, Mr. Schwartz served as a Director of TRC and Putnam, but not of the Company.(5)Ms. Cinquegrana
was elected Corporate Secretary of the Company in March 2009.(6)Mr. Press
was elected Chairman in July 2009. From August 2006 to July 2009, Mr. Press served as a Director of the Company.(7)Mr. Chippendale
was elected as a Director of the Company in May 2007.(8)Mr. Foos
was elected as a Director of the Company in January 2007.(9)Mr. McCarthy
was elected as a Director of the Company in May 2008.


Except as noted, each of the executive officers has, for more than five years, occupied an executive position with the Company or companies that
are now its subsidiaries. For more than five years prior to joining the Company in February 2009, Ms. Cinquegrana served as an officer, and most recently as Secretary, of certain AIG
Group companies.

Item 11.Executive Compensation

This item is omitted because a definitive proxy statement which involves the election of directors will be filed with the SEC not later
than 120 days after the close of the fiscal year pursuant to Regulation 14A.

135

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Table of Contents

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related  Stockholder Matters

This item is omitted because a definitive proxy statement which involves the election of directors will be filed with the SEC not later
than 120 days after the close of the fiscal year pursuant to Regulation 14A.

In
addition, summarized information with respect to equity compensation granted by the Company as of December 31, 2009 is as follows:

Number of
Securities
to be Issued
Upon Exercise
of Outstanding
Options, Warrants
and Rights

Weighted Average
Exercise Price
of Outstanding
Option, Warrants
and Rights

Number of
Securities
Remaining
Available for
Future
Issuance
under Equity
Compensation
Plans (Excluding
Securities
Reflected in
Column (a))Plan Category

(a)

(b)

(c)Equity compensation plans approved by security holders:Stock options


2,258,942

$
61.77Service & performance RSUs(1)


1,455,808


Total equity compensation plans approved by security holders


3,714,750


37.56


1,839,410Equity compensation plan not approved by security holders








Total


3,714,750

$
37.56


1,839,410


(1)Includes
2,802 vested but unissued restricted stock units.


Item 13.Certain Relationships and Related Transactions, and Director Independence

This item is omitted because a definitive proxy statement which involves the election of directors will be filed with the SEC not later
than 120 days after the close of the fiscal year pursuant to Regulation 14A.

Item 14.Principal Accounting Fees and Services

This item is omitted because a definitive proxy statement which involves the election of directors will be filed with the SEC not later
than 120 days after the close of the fiscal year pursuant to Regulation 14A.

136

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Table of Contents

PART IV

Item 15.Exhibits and Financial Statement Schedules

(a)   Financial Statements and Exhibits



21.1



Subsidiaries of Registrant.23.1



Consent of PricewaterhouseCoopers LLP.31.1



Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by Robert F. Orlich, President and
Chief Executive Officer.31.2



Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by Steven S. Skalicky, Executive
Vice President and Chief Financial Officer.32.1



Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, by Robert F. Orlich, President and Chief Executive Officer.32.2



Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, by Steven S. Skalicky, Executive Vice President and Chief Financial Officer.


See
accompanying Exhibit Index for additional Exhibits incorporated by reference.

137

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Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TRANSATLANTIC HOLDINGS, INC.By:

/s/ ROBERT F. ORLICH Robert F. Orlich
Title:President and Chief Executive Officer


February 24,
2010

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.

Signature

Title

Date/s/ ROBERT F. ORLICH Robert F. Orlich

President and Chief Executive Officer
(principal executive officer) and Director

February 24, 2010/s/ STEVEN S. SKALICKY Steven S. Skalicky

Executive Vice President and Chief
Financial Officer (principal financial and
accounting officer)

February 24, 2010/s/ RICHARD S. PRESS Richard S. Press

Chairman

February 24, 2010/s/ IAN H. CHIPPENDALE Ian H. Chippendale

Director

February 24, 2010/s/ JOHN G. FOOS John G. Foos

Director

February 24, 2010/s/ JOHN L. MCCARTHY John L. McCarthy

Director

February 24, 2010/s/ THOMAS R. TIZZIO Thomas R. Tizzio

Director

February 24, 2010


138

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Table of Contents

SCHEDULE I

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES        SUMMARY OF INVESTMENTSOTHER THAN INVESTMENTS IN RELATED PARTIES        As of December 31, 2009

Type of Investment

Cost or
Amortized
Cost(1)

Fair
Value

Amount at
Which Shown
in the
Balance
Sheet(in thousands)Fixed maturities:U.S. Government and government agencies

$
528,290

$
528,808

$
528,808States, municipalities and political subdivisions


6,727,257


6,940,225


6,883,066Foreign governments


543,011


553,541


553,541Corporate


2,228,438


2,317,041


2,317,041Asset-backed:Residential mortgage-backed


334,226


258,445


258,445Commercial mortgage-backed


99,436


93,191


93,191Other asset-backed


35,514


34,918


34,918Total fixed maturities


10,496,172


10,726,169


10,669,010Equities:Common stocks:Public utilities and transportation


40,235


44,852


44,852Banking and financial


129,038


158,840


158,840All other


248,092


277,823


277,823Total common stocks


417,365


481,515


481,515Nonredeemable preferred stocks


23,559


25,097


25,097Total equities


440,924


506,612


506,612Other invested assets


245,862


256,437


256,437Short-term investments


883,336


883,336


883,336Total investments

$
12,066,294

$
12,372,554

$
12,315,395


(1)Investments
in fixed maturities are shown at amortized cost.


S-1

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Table of Contents

SCHEDULE II

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES    CONDENSED FINANCIAL INFORMATION OF REGISTRANT    BALANCE SHEETS    (Parent Company Only)    As of December 31, 2009 and
2008

2009

2008(in thousands,
except share data)Assets:Fixed maturities available for sale, at fair value (amortized cost: 2009$36,493; 2008$13,951)

$
36,359

$
15,483Short-term investments, at cost (approximates fair value)


323,734


3,745Cash and cash equivalents





3,938Investment in subsidiaries


4,640,617


3,852,258Dividend due from subsidiary


30,000


Other assets


50,057


57,639Total assets

$
5,080,767

$
3,933,063Liabilities:Dividends payable

$
13,300

$
12,600Senior notes


1,033,087


722,243Total liabilities


1,046,387


734,843Stockholders' equity:Preferred Stock





Common Stock


67,431


67,353Additional paid-in capital


283,036


268,027Accumulated other comprehensive income (loss)


69,701


(257,690
)Retained earnings


3,639,200


3,142,449Treasury Stock, at cost: 20091,048,500; 2008988,900 shares of common stock


(24,988
)

(21,919
)Total stockholders' equity


4,034,380


3,198,220Total liabilities and stockholders' equity

$
5,080,767

$
3,933,063


See
Notes to Condensed Financial Information of Registrant(Parent Company Only)

S-2

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Table of Contents

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES    CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)    STATEMENTS OF OPERATIONS    (Parent Company Only)    For the Years
Ended December 31, 2009, 2008 and 2007

2009

2008

2007(in thousands)Revenues:Net investment income (principally dividends from subsidiary)

$
151,907

$
95,725

$
84,047Realized net capital (losses) gains


(3,941
)

(3,161
)

482Gain on early extinguishment of debt


9,869


10,250


Equity in undistributed income of subsidiaries


366,066


42,767


442,843Total revenues


523,901


145,581


527,372Expenses:Operating expenses


19,707


18,189


15,213Interest on senior notes


43,454


43,359


43,421Total expenses


63,161


61,548


58,634Income before income taxes


460,740


84,033


468,738Income tax benefits:Current


(14,309
)

(15,634
)

(9,570
)Deferred


(2,613
)

(2,587
)

(8,833
)Total income tax benefits


(16,922
)

(18,221
)

(18,403
)Net income

$
477,662

$
102,254

$
487,141


See
Notes to Condensed Financial Information of Registrant(Parent Company Only)

S-3

---



Table of Contents

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES    CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)    STATEMENTS OF CASH FLOWS    (Parent Company Only)    For the Years
Ended December 31, 2009, 2008 and 2007

2009

2008

2007(in thousands)Cash flows from operating activities:Net income

$
477,662

$
102,254

$
487,141Adjustments to reconcile net income to net cash provided by operating activities:Equity in undistributed income of subsidiaries


(366,066
)

(42,767
)

(442,843
)Change in dividend due from subsidiary


(30,000
)

10,000


(1,000
)Other, net


(2,911
)

(5,158
)

(11,872
)Total adjustments


(398,977
)

(37,925
)

(455,715
)Net cash provided by operating activities


78,685


64,329


31,426Cash flows from investing activities:Proceeds of fixed maturities sold or matured


14,319


103


25,549Purchase of fixed maturities


(35,513
)




(12,952
)Purchase of subsidiary








(21,000
)Net purchase of short-term investments


(319,989
)

(3,745
)

Other, net


(5,300
)




Net cash used in investing activities


(346,483
)

(3,642
)

(8,403
)Cash flows from financing activities:Dividends to stockholders


(51,780
)

(46,382
)

(39,019
)Common stock issued


1,579


(924
)

6,042Acquisition of treasury stock


(3,069
)




Repurchase of senior notes


(19,612
)

(14,750
)

Net proceeds from issuance of senior notes


336,929





Other, net


(187
)

1,811


1,075Net cash provided by (used in) financing activities


263,860


(60,245
)

(31,902
)Change in cash and cash equivalents


(3,938
)

442


(8,879
)Cash and cash equivalents, beginning of year


3,938


3,496


12,375Cash and cash equivalents, end of year

$


$
3,938

$
3,496


Notes to Condensed Financial Information of Registrant(Parent Company Only) (1)The
condensed financial information of registrant should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated
Financial Statements included elsewhere herein.(2)Investment
in subsidiaries is reflected on the equity method.(3)See
Note 7 of Notes to Consolidated Financial Statements for a discussion of the senior notes.(4)Dividends received from consolidated subsidiaries totaled $121.5 million, $103.5 million and $81.0 million in 2009, 2008
and 2007, respectively.(5)The
Company's short-term investments are available for liquidity needs in 2010.


S-4

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Table of Contents

SCHEDULE III

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES        SUPPLEMENTARY INSURANCE INFORMATION        As of December 31, 2009, 2008 and 2007 and for the Years Then
Ended

Deferred
Acquisition
Costs

Unpaid
Losses
and Loss
Adjustment
Expenses

Unearned
Premiums

Net
Premiums
Earned

Net
Investment
Income

Net Losses
and Loss
Adjustment
Expenses

Net
Commissions
and Change
in Deferred
Acquisition
Costs

Other
Underwriting
Expenses

Net
Premiums
Written(in thousands)2009Property-CasualtyDomestic

$
120,061

$
5,116,056

$
600,247

$
2,064,778

$
309,747

$
1,364,082

$
478,448

$
86,802

$
2,051,053International:Europe


59,496


2,786,126


306,211


1,442,326


125,114


1,066,717


315,308


49,344


1,405,209Other


57,909


706,923


281,068


531,978


32,541


248,372


146,568


22,035


529,839Consolidated

$
237,466

$
8,609,105

$
1,187,526

$
4,039,082

$
467,402

$
2,679,171

$
940,324

$
158,181

$
3,986,1012008Property-CasualtyDomestic

$
122,447

$
4,949,708

$
616,700

$
2,043,053

$
259,379

$
1,607,543

$
471,575

$
65,804

$
2,035,661International:Europe


63,320


2,551,940


317,820


1,525,334


146,202


1,051,019


354,425


45,901


1,562,118Other


53,843


622,834


285,613


499,002


34,870


248,665


147,670


19,850


510,313Consolidated

$
239,610

$
8,124,482

$
1,220,133

$
4,067,389

$
440,451

$
2,907,227

$
973,670

$
131,555

$
4,108,0922007Property-CasualtyDomestic

$
125,883

$
4,448,545

$
632,554

$
1,933,643

$
300,702

$
1,435,229

$
445,394

$
56,461

$
1,948,045International:Europe


63,618


2,645,256


317,972


1,498,789


135,317


951,266


377,332


42,932


1,524,036Other


58,580


832,460


276,121


470,237


33,753


251,538


140,494


16,367


480,818Consolidated

$
248,081

$
7,926,261

$
1,226,647

$
3,902,669

$
469,772

$
2,638,033

$
963,220

$
115,760

$
3,952,899


S-5

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Table of Contents

SCHEDULE IV

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES        REINSURANCE        For the Years Ended December 31, 2009, 2008 and 2007

Gross
Amount

Ceded
to Other
Companies

Assumed
from Other
Companies

Net
Amount

Percentage
of Amount
Assumed to
Net(dollars in thousands)2009Premiums written:Property-Casualty




$
217,676

$
4,203,777

$
3,986,101


105
%2008Premiums written:Property-Casualty




$
315,149

$
4,423,241

$
4,108,092


108
%2007Premiums written:Property-Casualty




$
330,664

$
4,283,563

$
3,952,899


108
%


S-6

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Table of Contents

SCHEDULE VI

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES        SUPPLEMENTARY INFORMATION CONCERNING        PROPERTY/CASUALTY INSURANCE OPERATIONS        As of
December 31, 2009, 2008 and 2007 and For the Years Then Ended

Deferred
Acquisition
Costs

Unpaid
Losses
and Loss
Adjustment
Expenses

Discount
if any
Deducted

Unearned
Premiums

Net
Premiums
Earned

Net
Investment
Income

Net Losses
and Loss
Adjustment
Expenses
Related to
Current Year

Net Losses
and Loss
Adjustment
Expenses
Related to
Prior Years

Net
Commissions
and Change
in Deferred
Acquisition
Costs

Net Paid
Losses
and Loss
Adjustment
Expenses

Net
Premiums
Written(in thousands)2009

$
237,466

$
8,609,105

$


$
1,187,526

$
4,039,082

$
467,402

$
2,718,119

$
(38,948
)
$
940,324

$
2,421,008

$
3,986,1012008


239,610


8,124,482





1,220,133


4,067,389


440,451


2,907,711


(484
)

973,670


2,116,050


4,108,0922007


248,081


7,926,261





1,226,647


3,902,669


469,772


2,549,653


88,380


963,220


2,102,125


3,952,899


S-7

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Table of Contents

EXHIBIT INDEX

Exhibit
No.



Description

Location3.1



Restated Certificate of Incorporation of Transatlantic Holdings, Inc., dated September 8, 2009

Filed as an exhibit to the Company's Current Report on Form 8-K (File No. 1-10545) dated September 8, 2009 and incorporated herein by reference.3.2



Amended and Restated By-Laws of Transatlantic Holdings, Inc., dated September 8, 2009

Filed as an exhibit to the Company's Current Report on Form 8-K (File No. 1-10545) dated September 8, 2009 and incorporated herein by reference.4.1



Form of Common Stock Certificate

Filed as exhibit to the Company's Registration Statement (File No. 33-34433) and incorporated herein by reference.4.2.1



Indenture between Transatlantic Holdings, Inc. and The Bank of New York, dated December 14, 2005

Filed as exhibit to the Company's Current Report on Form 8-K (File No. 1-10545) dated December 15, 2005, and incorporated herein by reference.4.2.2



First Supplemental Indenture between Transatlantic Holdings, Inc. and The Bank of New York, dated December 14, 2005

Filed as exhibit to the Company's Current Report on Form 8-K (File No. 1-10545) dated December 15, 2005, and incorporated herein by reference.4.2.3



Underwriting Agreement among Banc of America Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Transatlantic Holdings, Inc., dated December 7, 2005

Filed as exhibit to the Company's Current Report on Form 8-K (File No. 1-10545) dated December 9, 2005, and incorporated herein by reference.4.2.4



Letter Agreement among American International Group, Inc., certain subsidiaries of American International Group, Inc. and Transatlantic Holdings, Inc., dated December 7, 2005

Filed as exhibit to the Company's Current Report on Form 8-K (File No. 1-10545) dated December 9, 2005, and incorporated herein by reference.4.2.5



Registration Rights Agreement by and among Transatlantic Holdings, Inc., American International Group, Inc. and Designated Subsidiaries of American International Group, Inc. dated February 2,
2006

Filed as exhibit to the Company's 2005 Annual Report on Form 10-K (File No. 1-10545) and incorporated herein by reference.4.2.6



Second Supplemental Indenture by and among Transatlantic Holdings, Inc. and The Bank of New York Mellon, dated November 23, 2009

Filed as exhibit to the Company's Current Report on Form 8-K (File No. 1-10545) dated November 23, 2009, and incorporated herein by reference.4.2.7



Underwriting Agreement by and among Transatlantic Holdings, Inc. and Goldman Sachs & Co. and Wells Fargo Securities, LLC, dated November 18, 2009

Filed as exhibit to the Company's Current Report on Form 8-K (File No. 1-10545) dated November 23, 2009, and incorporated herein by reference.


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Table of Contents

Exhibit
No.



Description

Location4.3.1.



Master Separation Agreement by and among American International Group, Inc., American Home Assurance Company and Transatlantic Holdings, Inc., dated May 28, 2009

Filed as an exhibit to the Company's Current Report on Form 8-K (File No. 1-10545) dated May 28, 2009 and incorporated herein by reference.4.3.2



Transition Services Agreement by and among American International Group, Inc., and Transatlantic Holdings, Inc., dated June 4, 2009

Filed as an exhibit to the Company's 2009 Quarterly Report on Form 10-Q for the quarter ended June 30, 2009 (File No. 1-10545) and incorporated herein by reference.4.3.3



Stockholders Agreement by and among American International Group, Inc., American Home Assurance Company and Transatlantic Holdings, Inc., dated June 4, 2009

Filed as an exhibit to the Company's 2009 Quarterly Report on Form 10-Q for the quarter ended June 30, 2009 (File No. 1-10545) and incorporated herein by reference.4.3.4



Registration Rights Agreement by and among American International Group, Inc., American Home Assurance Company and Transatlantic Holdings, Inc., dated June 4, 2009

Filed as an exhibit to the Company's 2009 Quarterly Report on Form 10-Q for the quarter ended June 30, 2009 (File No. 1-10545) and incorporated herein by reference.4.3.5



Voting Agreement by and between Transatlantic Holdings, Inc. and Davis Selected Advisors L.P., dated June 8, 2009

Filed as an exhibit to the Company's Current Report on Form 8-K (File No. 1-10545) dated June 10, 2009 and incorporated herein by reference.10.1



Investment Management Agreement between Transatlantic Holdings, Inc. and BlackRock Financial Management, Inc. dated June 30, 2009

Filed as exhibit to the Company's Current Report on Form 8-K (File No. 1-10545) dated July 2, 2009 and incorporated herein by reference.10.2



Transatlantic Holdings, Inc. 2000 Stock Option Plan*

Filed as exhibit to the Company's Registration Statement on Form S-8 (File No. 333-50298) and incorporated herein by reference.10.2.1



Transatlantic Holdings, Inc. 2003 Stock Incentive Plan*

Filed as exhibit to the Company's Registration Statement on Form S-8 (File No. 333-111513) and incorporated herein by reference.10.2.2



Form of Transatlantic Holdings, Inc. 2000 Stock Option Plan stock option agreement*

Filed as exhibit to the Company's 2004 Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 1-10545) and incorporated herein by reference.10.2.3



Form of Transatlantic Holdings, Inc. 2003 Stock Incentive Plan RSU award agreement*

Filed as exhibit to the Company's 2004 Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (File No. 1-10545) and incorporated herein by reference.


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Table of Contents

Exhibit
No.



Description

Location10.2.4



Amended Transatlantic Holdings, Inc. 2000 Stock Option Plan*

Filed as appendix to the Company's Definitive Proxy Statement (File No. 1-10545) dated April 18, 2008 and incorporated herein by reference.10.2.5



Amended Transatlantic Holdings, Inc. 2003 Stock Incentive Plan*

Filed as exhibit to the Company's Registration Statement on Form S-8 (File No. 333-135832) and incorporated herein by reference.10.2.6



Transatlantic Holdings, Inc. Partners Plan*

Filed as exhibit to the Company's 2006 Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (File No. 1-10545) and incorporated herein by reference.10.2.7



Transatlantic Holdings, Inc. Senior Partners Plan*

Filed as exhibit to the Company's 2006 Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (File No. 1-10545) and incorporated herein by reference.10.2.8



Transatlantic Holdings, Inc. Annual Bonus Plan*

Filed as exhibit to the Company's 2006 Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (File No. 1-10545) and incorporated herein by reference.10.2.9



Form of Transatlantic Holdings, Inc. Partners Plan Performance RSU Award Agreement*

Filed as exhibit to the Company's 2006 Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (File No. 1-10545) and incorporated herein by reference.10.2.10



Form of Transatlantic Holdings, Inc. Senior Partners Plan Performance RSU Award Agreement*

Filed as exhibit to the Company's 2006 Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 (File No. 1-10545) and incorporated herein by reference.10.2.11



Transatlantic Holdings, Inc. 2007 Executive Bonus Plan*

Filed as appendix to the Company's Definitive Proxy Statement (File No. 1-10545) dated April 20, 2007 and incorporated herein by reference.10.2.12



Transatlantic Holdings, Inc. 2008 Non-Employee Directors' Stock Plan*

Filed as exhibit to the Company's Registration Statement on Form S-8 (File No. 333-152095) and incorporated herein by reference.10.2.13



Transatlantic Holdings, Inc. Executive Severance Plan*

Filed as exhibit to the Company's Current Report on Form 8-K (File No. 1-10545) dated May 29, 2008 and incorporated herein by reference.


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Table of Contents

Exhibit
No.



Description

Location10.2.14



Form of Transatlantic Holdings, Inc. Retention Bonus Letters*

Filed as exhibit to the Company's 2008 Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 (File No. 1-10545) and incorporated herein by reference.10.2.15



Amendment No. 1 to the Transatlantic Holdings, Inc. 2003 Stock Incentive Plan*

Filed as exhibit to the Company's 2008 Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 (File No. 1-10545) and incorporated herein by reference.10.2.16



Amendment No. 1 to the Transatlantic Holdings, Inc. Partners Plan*

Filed as exhibit to the Company's 2008 Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 (File No. 1-10545) and incorporated herein by reference.10.2.17



Amendment No. 1 to the Transatlantic Holdings, Inc. Senior Partners Plan*

Filed as exhibit to the Company's 2008 Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 (File No. 1-10545) and incorporated herein by reference.10.2.18



Transatlantic Holdings, Inc. 2009 Long Term Equity Incentive Plan*

Filed as exhibit to the Company's Registration Statement on Form S-8 (File No. 333-159398) and incorporated herein by reference.10.3



Management Agreement between Transatlantic Reinsurance Company and Putnam Reinsurance Company, dated February 15, 1991

Filed as exhibit to the Company's 1995 Annual Report on Form 10-K (File No. 1-10545) and incorporated herein by reference.10.4



Quota Share Reinsurance Agreement between Transatlantic Reinsurance Company and Putnam Reinsurance Company, dated December 6, 1995

Filed as exhibit to the Company's 1995 Annual Report on Form 10-K (File No. 1-10545) and incorporated herein by reference.21.1



Subsidiaries of the registrant

Filed herewith.23.1



Consent of PricewaterhouseCoopers LLP

Filed herewith.31.1



Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by Robert F. Orlich, President and Chief Executive Officer

Filed herewith.31.2



Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, by Steven S. Skalicky, Executive Vice President and Chief Financial Officer

Filed herewith.


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Table of Contents

Exhibit
No.



Description

Location32.1



Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Robert F. Orlich, President and Chief Executive Officer

Provided herewith.32.2



Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Steven S. Skalicky, Executive Vice President and Chief Financial Officer

Provided herewith.


*Management
compensation plan.


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