<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
                                   FORM 10-K

(Mark One)

<TABLE>
<S>        <C>
      /X/                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                           SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

                              For the fiscal year ended December 31, 1996

                                                  OR

      / /              TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                           SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

                           For the Transition period from                to

                                    Commission file number 1-10545
</TABLE>

                            ------------------------

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

<TABLE>
<S>                                             <C>
                   DELAWARE                                       13-3355897
       (State or other jurisdiction of               (I.R.S. Employer Identification No.)
        incorporation or organization)

      80 PINE STREET, NEW YORK, NEW YORK                            10005
   (Address of principal executive offices)                       (Zip Code)

                                        (212) 770-2000
                     (Registrant's telephone number, including area code)
</TABLE>

                         ------------------------------

          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

<TABLE>
<CAPTION>
                                                                           NAME OF EACH EXCHANGE ON
                   TITLE OF EACH CLASS                                         WHICH REGISTERED
---------------------------------------------------------  ---------------------------------------------------------
<S>                                                        <C>
         Common Stock, Par Value $1.00 per Share                         New York Stock Exchange, Inc.

    SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
</TABLE>

                            ------------------------

    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 ____X____                  No _________

    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. ____X____

    The aggregate market value of the shares of all classes of voting stock of
the registrant held by non-affiliates of the registrant on January 31, 1997 was
approximately $858,764,183 computed upon the basis of the closing sales price of
the Common Stock on that date. For purposes of this computation, shares held by
directors (and shares held by any entities in which they serve as officers) and
officers of the registrant have been excluded. Such exclusion is not intended,
nor shall it be deemed, to be an admission that such persons are affiliates of
the registrant.

    As of January 31, 1997, there were outstanding 23,022,710 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 shareholders of the
registrant scheduled to be held on May 22, 1997 are incorporated by reference in
Part III of this Form 10-K.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
                 TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                PAGE
                                                                                                             -----------
<C>         <S>                                                                                              <C>
                                                        PART I
  Item  1.  Business.......................................................................................           1
  Item  2.  Properties.....................................................................................          19
  Item  3.  Legal Proceedings..............................................................................          19
  Item  4.  Submission of Matters to a Vote of Security Holders............................................          19

                                                        PART II
  Item  5.  Market for the Registrant's Common Stock and Related Stockholder Matters.......................          21
  Item  6.  Selected Financial Data........................................................................          22
  Item  7.  Management's Discussion and Analysis of Financial Condition and Results of Operations..........          23
  Item  8.  Financial Statements and Supplementary Data....................................................          29
  Item  9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...........          51

                                                       PART III
  Item 10.  Directors and Executive Officers of the Registrant.............................................          51
  Item 11.  Executive Compensation.........................................................................          51
  Item 12.  Security Ownership of Certain Beneficial Owners and Management.................................          51
  Item 13.  Certain Relationships and Related Transactions.................................................          51

                                                        PART IV
  Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K................................          52
</TABLE>

    The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. This Form 10-K, the Company's Annual
Report to Stockholders, any proxy statement, any Form 10-Q or any Form 8-K of
the Company or any other written or oral statements made by or on behalf of the
Company may include forward-looking statements which reflect the Company's
current views with respect to future events and financial performance. These
forward-looking statements are subject to certain uncertainties and other
factors that could cause actual results to differ materially from such
statements. These uncertainties and other factors (which are described in more
detail elsewhere in this Form 10-K) include, but are not limited to,
uncertainties relating to general economic conditions and cyclical industry
conditions, uncertainties relating to government and regulatory policies,
volatile and unpredictable developments (including catastrophes), the legal
environment, the uncertainties of the reserving process, the competitive
environment in which the Company operates, the uncertainties inherent in
international operations, and interest rate fluctuations. The words "believe,"
"expect," "anticipate," "project" and similar expressions identify
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of their dates. The
Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
<PAGE>
                                     PART I

ITEM 1. BUSINESS

INTRODUCTION

    Transatlantic Holdings, Inc. (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) 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 registered
public offering, with the result that approximately 35% of the Company's
outstanding common stock became publicly owned. From June 1990 through December
31, 1996, an additional 12.2% of the Company's outstanding common stock has
become publicly owned as a result of sales by certain of such stockholders. At
December 31, 1996, AIG beneficially owned approximately 49% of the Company's
outstanding common stock.

    The Company, through its wholly-owned subsidiaries, TRC, Trans Re Zurich
(TRZ), acquired in 1996 (See Note 1 of Notes to Consolidated Financial
Statements), and Putnam (contributed to TRC in 1995), offers reinsurance
capacity for a full range of property and casualty products on a treaty and
facultative basis, directly and through brokers, to insurance and reinsurance
companies, in both the domestic and international markets. One or both of TRC
and Putnam is licensed, accredited, authorized or can serve as a reinsurer in 50
states, Puerto Rico and the District of Columbia in the United States. TRC is
licensed by the federal government of and seven provinces in Canada. TRC is also
licensed in Japan, the United Kingdom, Hong Kong and the Dominican Republic and
is registered or authorized as a foreign reinsurer in Peru, Colombia, Argentina
(where it also maintains a representative office in Buenos Aires, Transatlantic
Re (Argentina) S.A.), Chile, Mexico, Ecuador, Guatemala, Venezuela and France.
TRZ is licensed as a reinsurer in Switzerland. TRH's (Transatlantic Holdings,
Inc. and its subsidiaries) principal lines of reinsurance include general
liability (including professional liability), medical malpractice, automobile
liability (including nonstandard risks), ocean marine and aviation and surety
and credit in the casualty lines, and fire and allied lines in the property
lines. Reinsurance is provided for most major lines of insurance on both
excess-of-loss and pro rata bases.

    Each of TRC and Putnam is currently rated "A+ (Superior)", the second
highest classification, by A.M. Best Company (Best's) and "AA", the second
highest major rating classification, by Standard and Poor's Corporation (S&P).
TRZ is rated "A-" by S&P. Best's and S&P are independent industry rating
organizations. A publication of Best's indicates that the "A+ (Superior)" rating
is assigned to those companies which in Best's opinion have achieved superior
overall performance when compared to standards of the property and casualty
insurance industry established by Best's and that have a very strong ability to
meet their respective policyholder obligations over a long period of time. A
publication of S&P advises that insurers who receive a claims-paying ability
rating of "AA" offer excellent financial security, and their capacity to meet
policyholder obligations is strong under a variety of economic and underwriting
conditions. Insurers who receive a claims-paying ability rating of "A-" offer
good financial security, but capacity to meet policyholder obligations is
somewhat susceptible to adverse economic and underwriting conditions. These
ratings are based upon factors that may be of concern to policy or contract
holders, but may not reflect the considerations applicable to an equity
investment in an insurance or reinsurance company.

                                       1
<PAGE>
    The statutory surplus of TRC of $953 million as of December 31, 1996, would
have ranked TRC as the 6th largest domestic reinsurer according to statistics
distributed by the Reinsurance Association of America. Although TRC and, its
wholly-owned subsidiary, Putnam are separate entities, together they would also
have ranked as the 4th largest domestic reinsurer based upon combined statutory
net premiums written of $1,065 million and 5th based upon combined statutory net
income of $132 million for the year ended December 31, 1996, according to such
statistics.

THE REINSURANCE BUSINESS

    Reinsurance is an arrangement whereby one or more insurance companies, the
"reinsurer," agrees to indemnify another insurance company, the "ceding
company," for all or part of the insurance risks underwritten by the ceding
company. Reinsurance can provide four 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; it provides
catastrophe protection to lessen the impact of large or multiple losses; it
stabilizes results by leveling fluctuations in the ceding company's loss ratio;
and it helps the ceding company maintain acceptable surplus and reserve ratios.

    There are two major classes of reinsurance: treaty reinsurance and
facultative reinsurance. Treaty reinsurance is a contractual arrangement that
provides for the automatic reinsuring of a type or category of risk underwritten
by the ceding company. Facultative reinsurance is the reinsurance of individual
risks. Rather than agreeing to reinsure all or a portion of a class of risk, the
reinsurer separately rates and underwrites each risk. Facultative reinsurance is
normally purchased to cover risks not covered by treaty reinsurance or for
individual risks covered by reinsurance treaties that are in need of capacity
beyond that provided by such treaties.

    A ceding company's reinsurance program may involve pro rata and
excess-of-loss reinsurance on both a treaty and facultative basis. Under pro
rata reinsurance (also referred to as proportional), the ceding company and the
reinsurer share the premiums as well as the losses and expenses in an agreed
proportion. Under excess-of-loss reinsurance, the reinsurer agrees to reimburse
the ceding company for all losses in excess of a predetermined amount up to a
predetermined limit. Premiums paid by the ceding company to the reinsurer for
excess-of-loss coverage are generally not proportional to the premiums that the
ceding company receives because the reinsurer does not assume a proportionate
risk.

    In pro rata reinsurance, the reinsurer generally pays the ceding company a
ceding commission. Generally, the ceding commission is based on the ceding
company's cost of obtaining the business being reinsured (i.e., brokers' and
agents' commissions, local taxes, settlement costs and administrative expenses).
There is usually no ceding commission on excess-of-loss reinsurance and
therefore the pricing mechanism used by reinsurers is a rate applicable to
premiums of the individual policy or policies subject to the reinsurance
agreement.

    In general, casualty insurance protects the insured against financial loss
arising out of its obligation to others for loss or damage to their person or
property. Property insurance protects the insured against financial loss arising
out of the loss of property or its use caused by an insured peril. Property and
casualty reinsurance protects the ceding company against loss to the extent of
the reinsurance coverage provided. A greater degree of unpredictability is
generally associated with casualty risks and catastrophe-exposed property risks,
and there tends to be a greater lag in the reporting and settlement of casualty
reinsurance claims, due to the nature of casualty risks and their greater
potential for litigation.

GENERAL

    TRH reinsures risks from a broad spectrum of industries throughout the
United States and foreign countries. A significant portion of the reinsurance
written by TRH is assumed from AIG and its subsidiaries (the "AIG Group") and
therefore reflects their underwriting philosophy and diversified insurance
products. Approximately $232 million (18%), $189 million (17%) and $198 million
(21%) of

                                       2
<PAGE>
gross premiums written by TRH in the years 1996, 1995 and 1994, respectively,
were attributable to reinsurance purchased by the AIG Group. (For a discussion
of TRH's business with the AIG Group, see "Relationship with the AIG Group.")

    In 1996, TRH's activities in the United States were conducted through its
worldwide headquarters in New York and its regional office in Chicago, which
underwrites facultative business only. All domestic treaty business is
underwritten by, or under the close supervision of, senior officers of TRH
located in New York. TRH's headquarters in New York, the Miami office
(underwriting business from Latin America and the Caribbean) and international
offices in Toronto, London, Paris, Zurich, Hong Kong and Tokyo can offer treaty
as well as facultative reinsurance. In addition, TRH operates a representative
office in Buenos Aires. Non-U.S. business (representing risks underwritten by
the Miami office and the other international offices) accounted for
approximately 40%, 31% and 28% of net premiums written in 1996, 1995 and 1994,
respectively. In 1996, the increase in foreign net premiums written emanated
from newly-acquired subsidiary, TRZ, the London branch, and the Paris branch,
which was opened in late 1995 and recorded no premium volume in that year.
London branch net premiums written totaled $249.8 million, or 22% of worldwide
net premiums written. The significant increase in foreign premiums in 1995
compared to 1994 was due, in large part, to the increase in premium volume in
TRH's London branch. These increases were primarily reported in treaty business.
(For a discussion of certain conditions associated with international business
see "Regulation" and Note 11 of Notes to Consolidated Financial Statements.)

    Casualty reinsurance constitutes the larger portion of TRH's business,
accounting for 67%, 67% and 65% of net premiums written in 1996, 1995 and 1994,
respectively. As a general matter, due to the longer period of time necessary to
settle casualty claims, casualty reinsurance underwriting tends to involve
variables (such as those discussed in the paragraph immediately following) that
are not as predictable as those in property reinsurance underwriting. The
greater degree of uncertainty associated with casualty business as a result of
these variables tends to produce a more volatile result over a period of time,
although property reinsurance is also subject to significant year to year
volatility due to major natural disasters. TRH also seeks to focus on more
complex risks within the casualty and property lines, and to adjust its mix of
business to take advantage of market opportunities. For example, in 1994, in
response to such market opportunities, TRH significantly increased the amount of
property reinsurance in its portfolio mix. The higher proportion of property
business, including property catastrophe business, compared to prior years,
increases the potential for volatile underwriting results caused by major
natural disasters.

    In general, the overall operating results (including investment performance)
and changes to certain components of stockholders' equity of the property and
casualty insurance and reinsurance industry, and TRH (both domestically and
internationally), in particular, are subject to significant fluctuations due to
competition, catastrophic events, economic and social conditions, foreign
currency rate fluctuations, interest rates and other factors, such as changes in
tax laws, tort laws and the regulatory environment.

                                       3
<PAGE>
    The following table presents certain underwriting information concerning
TRH's casualty and property business for the periods indicated:(5)
<TABLE>
<CAPTION>
                                                                   YEARS ENDED DECEMBER 31,
                               -------------------------------------------------------------------------------------------------
<S>                            <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
                                                                                                               NET
                                                                                                         LOSSES AND LOSS
                                    NET PREMIUMS WRITTEN              NET PREMIUMS EARNED              ADJUSTMENT EXPENSES
                               -------------------------------  -------------------------------  -------------------------------

<CAPTION>
                                 1996       1995       1994       1996       1995       1994       1996       1995       1994
                               ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
                                                                     (dollars in millions)
<S>                            <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
Casualty
  General
    Liability(1)(3)(4).......  $   203.7  $   241.0  $   241.5  $   213.8  $   235.7  $   244.7  $   183.4  $   214.7  $   207.2
  Medical Malpractice........      131.9      115.7       96.4      135.6      111.2       91.8      121.1       89.1       74.7
  Automobile Liability.......      168.7      138.3      108.5      161.9      128.3      111.0      156.9       95.9       80.6
  Ocean Marine and
    Aviation(3)(4)...........      142.0      113.9       67.8      143.3      112.4       65.0      100.2      119.1       71.6
  Surety and Credit(2).......       52.6       29.1       16.2       45.3       25.9       12.9       29.6       14.2        7.1
  Other(2)(4)................       61.3       38.4       34.4       61.8       39.1       38.7       47.0       18.1       14.1
                               ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
    Total Casualty...........      760.2      676.4      564.8      761.7      652.6      564.1      638.2      551.1      455.3
                               ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
Property(3)(4)
  Fire(3)(4).................      190.3      129.1      139.9      174.1      146.3      135.8      107.0       76.2      115.4
  Allied Lines(2)............       68.7       75.9       44.8       70.1       63.3       44.1       29.7       40.8       28.9
  Inland Marine(2)(4)........       37.0       49.6       38.4       38.3       45.7       35.5       26.3       32.4       36.6
  Homeowners Multiple
    Peril....................       34.8       49.3       56.1       41.1       48.2       49.7       19.0       31.8       30.6
  Other(2)...................       51.5       28.9       22.7       45.3       25.1       22.0       21.3       14.6       15.1
                               ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
    Total Property...........      382.3      332.8      301.9      368.9      328.6      287.1      203.3      195.8      226.6
                               ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
      Total..................  $ 1,142.5  $ 1,009.2  $   866.7  $ 1,130.6  $   981.2  $   851.2  $   841.5  $   746.9  $   681.9
                               ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
                               ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------

<CAPTION>
<S>                            <C>        <C>        <C>
                                        LOSS AND LOSS
                                     ADJUSTMENT EXPENSE
                                            RATIO
                               -------------------------------
                                 1996       1995       1994
                               ---------  ---------  ---------
<S>                            <C>        <C>        <C>
Casualty
  General
    Liability(1)(3)(4).......       85.8       91.1       84.7
  Medical Malpractice........       89.3       80.2       81.3
  Automobile Liability.......       96.9       74.8       72.6
  Ocean Marine and
    Aviation(3)(4)...........       69.9      106.0      110.2
  Surety and Credit(2).......       65.4       54.7       55.0
  Other(2)(4)................       76.0       46.4       36.5
    Total Casualty...........       83.8       84.5       80.7
Property(3)(4)
  Fire(3)(4).................       61.5       52.1       85.0
  Allied Lines(2)............       42.3       64.5       65.6
  Inland Marine(2)(4)........       68.8       70.9      103.0
  Homeowners Multiple
    Peril....................       46.2       65.9       61.6
  Other(2)...................       47.0       57.8       68.6
    Total Property...........       55.1       59.6       78.9
      Total..................       74.4       76.1       80.1
</TABLE>

------------------------------
(1) A significant portion of this line includes more complex risks such as
    professional liability (other than medical malpractice), directors' and
    officers' liability, errors and omissions and environmental impairment
    liability.

(2) In 1996, development on reserves held at December 31, 1995 significantly
    decreased the loss ratios in other casualty, allied lines, inland marine and
    other property lines and significantly increased the loss ratio in surety
    and credit.

(3) In 1995, development on reserves held at December 31, 1994 significantly
    increased the loss ratios in the general liability and ocean marine and
    aviation lines and decreased the loss ratio in the property lines,
    particularly fire. Also in 1995, included in net losses and loss adjustment
    expenses are $4.5 million from the Kobe, Japan earthquake in the property
    lines.

(4) In 1994, development on reserves held at December 31, 1993 significantly
    increased the loss ratios in general liability, fire and inland marine lines
    and decreased the loss ratio in the other casualty line. Also in 1994,
    included in net losses and loss adjustment expenses are $10 million from
    USAir's Pittsburgh accident in the ocean marine and aviation line and $20
    million from the Northridge, California earthquake in property lines.

(5) See Management's Discussion and Analysis of Financial Condition and Results
    of Operations for a discussion of TRH's underwriting components.

    Treaty reinsurance constitutes the larger portion of TRH's business,
accounting for 90%, 87% and 84% of net premiums written in 1996, 1995 and 1994,
respectively.

                                       4
<PAGE>
    The following table presents certain information concerning TRH's treaty and
facultative business for the periods indicated:
<TABLE>
<CAPTION>
                                                                               TREATY
                                                                 -----------------------------------
<S>                                                              <C>        <C>          <C>
                                                                      YEARS ENDED DECEMBER 31,
                                                                 -----------------------------------

<CAPTION>
                                                                  1996(1)     1995(2)       1994
                                                                 ---------  -----------  -----------
                                                                            (in millions)
<S>                                                              <C>        <C>          <C>
Gross premiums written.........................................  $ 1,145.0   $   959.1    $   783.9
Net premiums written...........................................    1,033.7       879.9        729.5
Net premiums earned............................................    1,013.0       854.8        722.7
<CAPTION>

                                                                             FACULTATIVE
                                                                 -----------------------------------
                                                                      YEARS ENDED DECEMBER 31,
                                                                 -----------------------------------
                                                                   1996        1995         1994
                                                                 ---------  -----------  -----------
                                                                            (in millions)
<S>                                                              <C>        <C>          <C>
Gross premiums written.........................................  $   170.9  $    177.8   $    173.2
Net premiums written...........................................      108.8       129.3        137.2
Net premiums earned............................................      117.6       126.4        128.5
</TABLE>

------------------------------
(1) In 1996 compared to 1995, treaty premiums increased significantly in
   automobile liability (including nonstandard risks), ocean marine, surety and
   credit, other casualty, medical malpractice and other property lines. Treaty
   premiums also increased significantly in the fire line, principally from
   international business. Treaty premium decreases were recorded in the general
   liability line, including certain specialty casualty classes. International
   operations contributed significantly to treaty premium growth. (See
   Management's Discussion and Analysis of Financial Condition and Results of
   Operations for further discussion of premium fluctuations.)

(2) In 1995 compared to 1994, treaty premiums increased primarily in medical
    malpractice, automobile liability (including nonstandard risks), ocean
    marine and aviation and allied lines. International operations, particularly
    London, contributed significantly to treaty premium growth.

TREATY REINSURANCE

    Treaty reinsurance accounted for approximately $1,145.0 million of gross
premiums written and $1,033.7 million of net premiums written in 1996,
approximately 67% of which resulted from casualty lines treaties, with the
remainder from property lines treaties. Approximately 56% of treaty gross
premiums written in 1996 represented treaty reinsurance written on a pro rata
basis and the balance represented treaty reinsurance written on an
excess-of-loss basis. Approximately 12% of treaty gross premiums written in 1996
were attributable to the AIG Group. Such premiums were primarily written on a
pro rata basis. The majority of TRH's non-AIG Group treaty premiums were also
written on a pro rata basis. As pro rata business is a proportional sharing of
premiums and losses among ceding company and reinsurer, generally, the
underwriting results of such business more closely reflect the underwriting
results of the business ceded than do the results of excess-of-loss business.

    TRH's treaty business consists primarily of lines of business within general
liability (including professional liability), medical malpractice, automobile
liability, ocean marine and aviation, surety and credit, fire and allied lines.
A significant portion of TRH's business within these lines (primarily general
liability and medical malpractice) is derived from certain more complex risks.
TRH also underwrites non-traditional reinsurance, which blends funding
characteristics with more traditional risk transfer.

    TRH's treaty underwriting process emphasizes a team approach between TRH's
underwriters, actuaries and claims staff, as appropriate. Treaties are reviewed
for compliance with TRH's underwriting guidelines and objectives and certain
larger treaties are evaluated in part based upon actuarial analyses conducted by
TRH. The generic 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 thereunder. TRH also at times conducts
underwriting audits at the offices of a prospective ceding company before
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

                                       5
<PAGE>
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 business, TRH generally seeks to lead treaty
arrangements. The lead reinsurer on a treaty generally accepts one of the
largest percentage shares of the treaty and represents the other participating
reinsurers 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. TRH has generally not set terms
and conditions as lead underwriter with respect to AIG Group treaty reinsurance,
although it may do so in the future. (See "Relationship with the AIG Group.")
When TRH does not lead the treaty, it may still suggest changes to any aspect of
the treaty. In either case, TRH may reject any treaty business offered to it by
the AIG Group or others 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 on the treaty, prior business experience with the
ceding company, overall financial position, operating results and Best's and
S&P'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 4,100 treaties in effect for the current
underwriting year. In 1996, no single treaty exceeded 4% of gross premiums
written. 4 of TRH's 15 largest treaties in effect in 1996 were with the AIG
Group. No ceding company, other than AIG Group companies, accounted for more
than 7% of total treaty gross premiums written in 1996.

    Non-U.S. treaty business accounted for approximately 38% of TRH's total net
premiums written for the year ended December 31, 1996.

FACULTATIVE REINSURANCE

    During 1996, TRH wrote approximately $170.9 million of gross premiums
written and $108.8 million of net premiums written of facultative reinsurance,
approximately 63% of which represented casualty risks with the balance
comprising property risks. The majority of facultative gross premiums written in
1996 represented facultative reinsurance written on an excess-of-loss basis.
Facultative lines of business are generally similar to the lines of business
discussed under "Treaty Reinsurance" above, including the underwriting of
certain more complex risks. 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 56% of facultative gross premiums written in 1996 were
attributable to AIG Group companies. Except for AIG Group companies, no single
ceding company accounted for more than 5% of total facultative gross premiums
written in 1996. Non-U.S. facultative business accounted for approximately 3% of
TRH's total net premiums written for the year ended December 31, 1996.

RETENTION LEVELS AND RETROCESSION ARRANGEMENTS

    TRC and Putnam enter into retrocession arrangements for many of the same
reasons primary insurers seek reinsurance, including reducing the effect of
individual or aggregate losses and increasing gross premium writings and risk
capacity without requiring additional capital.

    Under TRH's underwriting guidelines and retrocession arrangements in effect
at the end of 1996 for worldwide property treaty risks, generally, the maximum
net retention for property catastrophe excess-of-loss contracts is $9.6 million,
with a quota share retrocession of up to $3.9 million, for a maximum gross
underwriting capacity of $13.5 million. For other property treaty risks, the
maximum net retention and gross capacity is generally $5.0 million.

                                       6
<PAGE>
    For property facultative risks, TRH's U.S. offices may retain a maximum of
$1.0 million, with retrocession of up to an additional $9.0 million, for a
maximum gross underwriting capacity of $10.0 million. For non-U.S. property
facultative risks, the maximum net retention is $3.0 million, the maximum
retrocession is $12.0 million and the maximum gross capacity is $15.0 million.
Certain facultative retrocessions are subject to a per event aggregate limit.

    TRH's net property account is further protected by catastrophe reinsurance
as described immediately following the table below.

    For both treaty and facultative casualty risks, the maximum net retention is
$5.0 million. For treaty casualty risks the maximum retrocession and maximum
gross capacity are $5.0 million and $10.0 million, respectively. For facultative
casualty risks, the maximum retrocession and gross capacity are $2.5 million and
$7.5 million, respectively.

    The following table illustrates TRH's maximum net retention, maximum
retrocession and maximum gross capacity under its underwriting guidelines at the
end of 1996:

<TABLE>
<CAPTION>
                                                                                                     MAXIMUM
                                                                    MAXIMUM NET        MAXIMUM        GROSS
                                                                     RETENTION      RETROCESSION    CAPACITY
                                                                 -----------------  -------------  -----------
<S>                                                              <C>                <C>            <C>
                                                                                    (in millions)
Property
    Treaty (Worldwide)
        Catastrophe excess-of-loss.............................      $     9.6        $     3.9     $    13.5
        Other..................................................            5.0               --           5.0
    Facultative
        U.S. ..................................................            1.0              9.0          10.0
        Non-U.S. ..............................................            3.0             12.0          15.0
Casualty (Worldwide)
    Treaty.....................................................            5.0              5.0          10.0
    Facultative................................................            5.0              2.5           7.5
</TABLE>

    The entire net property book worldwide was protected by reinsurance
providing up to $52 million of coverage for one event and $75 million in the
aggregate in 1996, in excess of a retention of $17.5 million for the first event
and $15.0 million for subsequent events. In 1996, with respect to workers'
compensation, TRH maintained a catastrophe program that provided $30 million of
coverage per occurrence for treaty and facultative business combined after a
deductible of $3 million is exhausted. For the 1994 accident year, TRH protected
its entire net book of business with $50 million of coverage in respect of
losses incurred in excess of a 74% loss ratio, subject to a per occurrence
property catastrophe deductible.

    Average gross lines and net retentions on risks assumed historically have
been smaller than the maximums permissible under the underwriting guidelines.
Underwriting guidelines, including gross lines and net retention levels, may be
changed and limited exceptions are made by TRH from time to time. For example,
in casualty clash business, where ceding companies use reinsurance to control
losses from various insured parties involved in the same event, our maximum net
retention and gross capacity is $7.5 million.

    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 and letters of credit to collateralize
reinsurance recoverables. Such funds 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, 1996, TRH had in place 66 active retrocessional
arrangements for current and prior underwriting years with 330
retrocessionnaires, and reinsurance recoverable on paid and unpaid losses
totaled $367.8 million. (See Note 10 of Notes to Consolidated Financial
Statements for amounts recoverable from AIG Group companies.)

                                       7
<PAGE>
MARKETING

    TRH provides property and casualty reinsurance capacity directly and through
brokers to insurance and reinsurance companies in both the domestic and
international markets. TRH believes its worldwide network of offices and its
relationship with the AIG Group help position TRH to take advantage of market
opportunities.

    AIG Group business is obtained directly from the ceding company. No ceding
company, other than the AIG Group companies, has accounted for more than 10% of
TRH's revenues in any of the last five years.

    Non-AIG Group treaty business is produced primarily through brokers, while
non-AIG Group facultative business is produced both directly and through
brokers. In 1996, approximately 86% of TRH's non-AIG Group business was written
through brokers and the balance was written directly. TRH's largest single
broker accounted for 11% of TRH's gross premiums written in 1996. TRH's largest
10 brokers accounted for an aggregate of approximately 39% of such gross
premiums written. TRH does not believe that the loss of any one broker's
business would have a material adverse effect on TRH. Brokerage fees generally
are paid by reinsurers. TRH believes that its emphasis on seeking the lead
position in non-AIG Group 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. Reinsurance business from any ceding company, whether
new or renewal, is subject to acceptance by TRH.

    Effective January 1, 1995, TRC and Putnam entered into a quota share
reinsurance agreement whereby TRC assumed all of Putnam's reinsurance
liabilities and immediately thereafter, Putnam assumed 5% of TRC's total assumed
reinsurance liabilities, net of retrocessions. Thereafter, TRC cedes 5% of its
assumed reinsurance, net of other retrocessions, to Putnam pursuant to this
quota share reinsurance agreement. Presently all of Putnam's business is assumed
from TRC pursuant to this quota share reinsurance agreement. From January 1,
1991 through December 31, 1994, TRC ceded 33% of its assumed reinsurance, net of
other retrocessions, to Putnam, pursuant to an agreement with terms similar to
the current agreement discussed immediately above. These agreements were entered
into for operational reasons and are believed to have had no material impact on
TRH's financial position or results of operations.

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

    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. To recognize liabilities for unpaid losses and loss
adjustment expenses (LAE), insurers and reinsurers establish reserves, which are
balance sheet liabilities representing 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.

                                       8
<PAGE>
    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 does not report any liability to the reinsurer.

    TRH also establishes reserves to provide for the estimated expenses of
settling claims, including legal and other fees, and the general expenses of
administering the claims adjustment process (i.e. LAE), and the losses and loss
adjustment expenses incurred but not reported (IBNR). TRH calculates LAE and
IBNR reserves by using generally accepted actuarial reserving techniques to
project the ultimate liability for losses and loss adjustment expenses. Such
reserves are periodically revised by TRH to adjust for changes in the expected
loss development pattern over time. TRH has an in-house actuarial staff which
periodically reviews its loss reserves, and therefore does not retain any
outside actuarial firm to review its loss reserves.

    Losses and loss adjustment expenses, net of related reinsurance recoverable,
are charged to income as incurred. Unpaid losses and loss adjustment expenses
represent the accumulation of case reserves and IBNR. 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 reported and unreported losses and
establishing resulting reserves and related reinsurance recoverable are
continually reviewed and updated, and adjustments resulting therefrom 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
changes in the legal and tort environment 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 most
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. Thus, actual losses and loss
adjustment expenses may deviate, perhaps substantially, from estimates of
reserves reflected in the Company's consolidated financial statements.

    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 and even then the ultimate net liability may be less
than or greater than the revised estimates. TRH does not otherwise adjust
downward those claims reported to it by ceding companies or discount any of its
reserves for reported or unreported claims in any line of its business for
anticipated investment income.

    TRH's reserves include amounts related to environmental impairment and
asbestos-related illnesses. (See Management's Discussion and Analysis of
Financial Condition and Results of Operations and Note 2(e) of Notes to
Consolidated Financial Statements for further discussion.)

    The "Analysis of Consolidated Net Loss and Loss Adjustment Expense Reserve
Development" which follows presents the development of balance sheet loss and
loss adjustment expense reserves for calendar

                                       9
<PAGE>
years 1986 through 1996. The upper half of the table shows the cumulative
amounts paid during successive years related to the opening reserve. For
example, with respect to the net loss and loss adjustment expense reserve of
$573.0 million as of December 31, 1987, by the end of 1996 (nine years later)
$519.8 million had actually been paid in settlement of those reserves. In
addition, as reflected in the lower section of the table, the original reserve
of $573.0 million was reestimated to be $721.4 million at December 31, 1996.
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 and
overall claim frequency and severity patterns. The net deficiency or 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 redundancy
of $7.7 million at December 31, 1996 related to December 31, 1995 net loss and
loss adjustment expense reserves of $1,985.8 million, represents the cumulative
amount by which net reserves for 1995 have developed favorably during 1996.

    Each amount other than the original reserves in the top half of the table
below includes the effects of all changes in amounts for prior periods. For
example, if a loss settled in 1989 for $150,000 was first reserved in 1986 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
in each of the years in the period 1986 through 1988 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.

                                       10
<PAGE>
     ANALYSIS OF CONSOLIDATED NET LOSS AND LOSS ADJUSTMENT EXPENSE RESERVE
                              DEVELOPMENT(1)(2)(3)
<TABLE>
<CAPTION>
                         1986       1987       1988       1989       1990       1991       1992       1993       1994       1995
                       ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------
<S>                    <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>

<CAPTION>
                                                                      (in thousands)
<S>                    <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
Net unpaid losses and
  loss adjustment
  expenses, December
  31:(4).............  $ 433,750  $ 572,960  $ 691,046  $ 889,742  $1,064,214 $1,241,160 $1,386,092 $1,503,389 $1,727,380 $1,985,786
Paid (cumulative) as
  of:
  One year later.....    132,880    194,121    149,228    170,680    190,484    198,463    281,641    312,923    338,947    396,647
  Two years later....    267,651    285,165    235,860    303,175    336,547    396,739    497,557    506,681    594,508
  Three years
    later............    309,382    336,310    313,810    383,518    443,578    526,776    633,737    681,388
  Four years later...    342,558    386,151    355,899    460,239    534,824    614,555    760,091
  Five years later...    379,734    409,918    406,292    519,814    586,303    699,667
  Six years later....    396,375    443,588    446,659    550,019    645,657
  Seven years
    later............    423,294    472,656    463,757    599,451
  Eight years
    later............    442,721    482,986    505,859
  Nine years later...    451,032    519,816
  Ten years later....    485,762
Net liability
  reestimated as
  of:(4)
  End of year........    433,750    572,960    691,046    889,742  1,064,214  1,241,160  1,386,092  1,503,389  1,727,380  1,985,786
  One year later.....    433,827    568,273    682,449    887,830  1,062,280  1,238,929  1,409,008  1,518,361  1,723,926  1,978,062
  Two years later....    442,785    571,650    665,867    887,991  1,072,552  1,250,809  1,425,146  1,516,299  1,729,924
  Three years
    later............    448,266    572,610    682,267    909,820  1,084,635  1,260,763  1,426,424  1,522,635
  Four years later...    464,443    602,847    711,611    928,640  1,095,054  1,268,476  1,437,271
  Five years later...    497,563    645,100    737,070    942,530  1,102,404  1,269,583
  Six years later....    548,658    674,925    754,906    947,862  1,110,499
  Seven years
    later............    583,316    695,593    758,012    963,041
  Eight years
    later............    606,936    700,721    778,386
  Nine years later...    615,112    721,441
  Ten years later....    633,449
  Net (deficiency)
    redundancy.......  $(199,699) $(148,481) $ (87,340) $ (73,299) $ (46,285) $ (28,423) $ (51,179) $ (19,246) $  (2,544) $   7,724

<CAPTION>
                         1996
                       ---------
<S>                    <C>
<S>                    <C>
Net unpaid losses and
  loss adjustment
  expenses, December
  31:(4).............  $2,383,528
Paid (cumulative) as
  of:
  One year later.....
  Two years later....
  Three years
    later............
  Four years later...
  Five years later...
  Six years later....
  Seven years
    later............
  Eight years
    later............
  Nine years later...
  Ten years later....
Net liability
  reestimated as
  of:(4)
  End of year........  2,383,528
  One year later.....
  Two years later....
  Three years
    later............
  Four years later...
  Five years later...
  Six years later....
  Seven years
    later............
  Eight years
    later............
  Nine years later...
  Ten years later....
  Net (deficiency)
    redundancy.......
</TABLE>

------------------------------
(1) This table excludes data related to TRZ, a non-U.S. subsidiary acquired in
    the third quarter of 1996, for 1995 and prior years as such data is not
    available.

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

(3) Data have been affected by transactions between TRH and the AIG Group. (See
    "Relationship with the AIG Group" and Notes 8 and 10 of Notes to
    Consolidated Financial Statements.)

(4) Represents gross liability for unpaid losses and loss adjustment expenses
    net of related reinsurance recoverable.

                                       11
<PAGE>

<TABLE>
<CAPTION>
ANALYSIS OF NET UNPAID LOSSES AND
LOSS ADJUSTMENT EXPENSES AND
NET REESTIMATED LIABILITY(1)                          1992         1993         1994         1995         1996
-------------------------------------------------  -----------  -----------  -----------  -----------  -----------
<S>                                                <C>          <C>          <C>          <C>          <C>
                                                                           (in thousands)
End of year:
Gross liability..................................  $ 1,769,486  $ 1,890,178  $ 2,167,316  $ 2,388,155  $ 2,733,055
Related reinsurance recoverable..................      383,394      386,789      439,936      402,369      349,527
                                                   -----------  -----------  -----------  -----------  -----------
Net liability....................................  $ 1,386,092  $ 1,503,389  $ 1,727,380  $ 1,985,786  $ 2,383,528
                                                   -----------  -----------  -----------  -----------  -----------
                                                   -----------  -----------  -----------  -----------  -----------
One year later:
Gross reestimated liability......................  $ 1,807,550  $ 1,930,343  $ 2,138,947  $ 2,326,770
Reestimated related reinsurance recoverable......      398,542      411,982      415,021      348,708
                                                   -----------  -----------  -----------  -----------
Net reestimated liability........................  $ 1,409,008  $ 1,518,361  $ 1,723,926  $ 1,978,062
                                                   -----------  -----------  -----------  -----------
                                                   -----------  -----------  -----------  -----------
Two years later:
Gross reestimated liability......................  $ 1,857,100  $ 1,945,407  $ 2,091,724
Reestimated related reinsurance recoverable......      431,954      429,108      361,800
                                                   -----------  -----------  -----------
Net reestimated liability........................  $ 1,425,146  $ 1,516,299  $ 1,729,924
                                                   -----------  -----------  -----------
                                                   -----------  -----------  -----------
Three years later:
Gross reestimated liability......................  $ 1,875,877  $ 1,894,754
Reestimated related reinsurance recoverable......      449,453      372,119
                                                   -----------  -----------
Net reestimated liability........................  $ 1,426,424  $ 1,522,635
                                                   -----------  -----------
                                                   -----------  -----------
Four years later:
Gross reestimated liability......................  $ 1,818,521
Reestimated related reinsurance recoverable......      381,250
                                                   -----------
Net reestimated liability........................  $ 1,437,271
                                                   -----------
                                                   -----------
Gross (deficiency) redundancy as of December 31,
  1996...........................................  $   (49,035) $    (4,576) $    75,592  $    61,385
                                                   -----------  -----------  -----------  -----------
                                                   -----------  -----------  -----------  -----------
</TABLE>

--------------------------
(1) This table excludes data related to TRZ for 1995 and prior years.

    The trend depicted in the latest development year in the reestimated net
liability portion of the "Analysis of Consolidated Net Loss and Loss Adjustment
Expense Reserve Development" table and in the "Analysis of Net Unpaid Losses and
Loss Adjustment Expenses and Net Reestimated Liability" table reflects net
favorable development. In the other liability line, favorable development on
losses occurring in more recent years was offset by adverse development in 1984
and prior years. In addition, in more recent years, favorable development,
particularly in the fire, allied line and aircraft lines was partially offset by
adverse development in the automobile liability line. Included in the table
immediately above, significant favorable development in the gross reestimated
liability in the latest development year resulted in significant reductions in
the reestimated related reinsurance recoverable, with no effect on the net
reestimated liability. (See Management's Discussion and Analysis of Financial
Condition and Results of Operations.)

    The deficiencies shown in the table for the reserves carried for all years
prior to 1995 generally reflect the adverse development for losses occurring
from 1981 to 1985 which is common throughout the industry. A number of industry
and external factors combined during this period to drive loss frequency and
severity to unexpectedly high levels.

    From 1985 to 1991, casualty business generally had increased as a percentage
of net premiums written. As a result of this change in the underlying book of
business, TRH believes that the length of time needed for TRH's unpaid loss and
loss adjustment expense reserves to be ultimately paid for those years will
generally continue to increase. For 1992 through 1996, the length of time needed
for reserves to be ultimately paid may decrease compared to 1991 due, in large
part, to a shift in the business mix towards lines with shorter loss payment
patterns and the return of loss and loss adjustment expense reserves

                                       12
<PAGE>
associated with the reduced participation in one of TRH's then largest assumed
treaties from 1992 through 1995.

    The increase in the level of net losses and loss adjustment expenses paid in
respect of reserves carried at December 31, 1986 and 1987 was due to certain
treaties with the AIG Group. Because of the nature of such treaties, the payment
of losses occurred earlier than would be expected given the payment pattern for
overall TRH losses excluding these treaties. Cumulative losses paid Two Years
Later, of $285.2 million and $267.7 million, relating to reserves held at
December 31, 1987 and 1986, respectively, include amounts paid under such
treaties of $86 million and $115 million, respectively. TRH has no remaining
liability with respect to these treaties.

    With respect to non-U.S. subsidiary TRZ, acquired in mid-1996, gross and net
loss and loss adjustment expense reserves totaled $176.3 million at the date of
acquisition. There was no reserve development between the acquisition date and
December 31, 1996. In addition, gross and net losses and loss adjustment
expenses paid in 1996 related to the opening reserve totaled $50.5 million. At
December 31, 1996, TRZ's gross and net reserves totaled $184.0 million. Accident
year information for prior years was not available. Amounts for TRZ are included
in the table below in 1996.

    The following table presents a reconciliation of beginning and ending net
reserve balances for the years indicated. For TRH, there is no difference in
reserves for losses and loss adjustment expenses net of reinsurance recoverable
on unpaid losses and loss adjustment expenses whether determined in accordance
with generally accepted accounting principles or statutory accounting
principles.

                           RECONCILIATION OF RESERVE
                  FOR NET LOSSES AND LOSS ADJUSTMENT EXPENSES

<TABLE>
<CAPTION>
                                                                     1996        1995        1994
                                                                  ----------  ----------  ----------
<S>                                                               <C>         <C>         <C>
                                                                            (in thousands)
Reserve for net unpaid losses and loss adjustment expenses at
  beginning of year(1)..........................................  $1,985,786  $1,727,380  $1,503,389
                                                                  ----------  ----------  ----------
Trans Re Zurich reserves acquired, as of acquisition date.......     176,260          --          --
                                                                  ----------  ----------  ----------
Net losses and loss adjustment expenses incurred in respect of
  losses occurring in:
    Current year................................................     849,235     750,326     666,932
    Prior years.................................................      (7,724)     (3,454)     14,972
                                                                  ----------  ----------  ----------
      Total.....................................................     841,511     746,872     681,904
                                                                  ----------  ----------  ----------
Net losses and loss adjustment expenses paid in respect of
  losses occurring in:
    Current year................................................     172,875     149,519     144,990
    Prior years.................................................     447,154     338,947     312,923
                                                                  ----------  ----------  ----------
      Total.....................................................     620,029     488,466     457,913
                                                                  ----------  ----------  ----------
Reserve for net unpaid losses and loss adjustment expenses at
  end of year(1)................................................  $2,383,528  $1,985,786  $1,727,380
                                                                  ----------  ----------  ----------
                                                                  ----------  ----------  ----------
</TABLE>

--------------------------
(1) In TRH's balance sheet and in accordance with Statement of Financial
    Accounting Standards (SFAS) No. 113, unpaid losses and loss adjustment
    expenses are presented before deduction of related reinsurance recoverable.
    (See Notes 2 and 5 of Notes to Consolidated Financial Statements.)

    In each of 1996 and 1995, the increase in current year paid losses compared
to the prior year is attributable, in large part, to increases in premium volume
and a shift in the business mix to lines with shorter payment patterns in recent
years. (See Management's Discussion and Analysis of Financial Condition and
Results of Operations for further analysis of incurred and paid loss activity.)

                                       13
<PAGE>
INVESTMENT OPERATIONS

    TRH's investments must largely comply with the insurance laws of the state
of New York, their domiciliary state, 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 bonds, preferred and common stocks, real estate mortgages
and real estate. The Finance Committee of the Company's Board of Directors and
senior management oversee investments, establish TRH's investment strategy and
implement investment decisions with the assistance of certain AIG Group
companies, which act as financial advisors and managers of TRH's investment
portfolio and, in connection therewith, make the selection of particular
investments. Other than as set forth above, there are no guidelines or policies
with respect to the specific composition of TRH's overall investment portfolio
or the composition of its bond portfolio by rating or maturity.

    TRH's current investment strategy seeks to maximize after-tax income through
a high quality diversified taxable bond and tax-exempt municipal bond 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. (See Management's Discussion and
Analysis of Financial Condition and Results of Operations.) The equity portfolio
is structured to achieve capital appreciation primarily through investment in
quality growth companies.

    The following table reflects investment results for TRH for each of the five
years in the period ended December 31, 1996.

                               INVESTMENT RESULTS

<TABLE>
<CAPTION>
                                                                       PRE-TAX NET      PRE-TAX
                     YEARS ENDED                          AVERAGE       INVESTMENT     EFFECTIVE    PRE-TAX REALIZED
                    DECEMBER 31,                       INVESTMENTS(1)   INCOME(2)      YIELD(3)     NET CAPITAL GAINS
                   ---------------                     --------------  ------------  -------------  -----------------
<S>                                                    <C>             <C>           <C>            <C>
                                                                           (dollars in thousands)
  1996...............................................   $  3,286,514    $  192,636           5.9%       $  18,668
  1995...............................................      2,742,704       172,876           6.3           11,119
  1994...............................................      2,427,894       153,594           6.3           14,911
  1993...............................................      2,190,336       138,902           6.3            5,697
  1992...............................................      1,906,266       129,971           6.8           11,103
</TABLE>

------------------------------
(1) Average of the beginning and ending carrying values of investments and cash
    for the year, excluding non-interest bearing cash. Bonds available for sale,
    revalued from amortized cost upon adoption of SFAS No. 115 as of December
    31, 1993, bonds included in a trading portfolio as of December 31, 1992,
    common stocks and nonredeemable preferred stocks are carried at fair market
    value. Other bonds and redeemable preferred stocks are carried at amortized
    cost.

(2) After investment expenses, excluding realized net capital gains.

(3) Pre-tax net investment income for the year divided by average investments
    for the same year.

                                       14
<PAGE>
    The following table summarizes the investments of TRH (on the basis of
carrying value) as of December 31, 1996:
<TABLE>
<CAPTION>
                                                                                       BREAKDOWN OF INVESTMENTS
                                                                                       -------------------------
<S>                                                                                    <C>           <C>
                                                                                           DECEMBER 31, 1996
                                                                                       -------------------------

<CAPTION>
                                                                                          AMOUNT       PERCENT
                                                                                       ------------  -----------
                                                                                        (dollars in thousands)
<S>                                                                                    <C>           <C>
Bonds held to maturity (at amortized cost):
  U.S. Government and government agency bonds........................................  $      4,365         0.1%
  Domestic and foreign municipal bonds...............................................     1,120,768        31.9
                                                                                       ------------       -----
                                                                                          1,125,133        32.0
                                                                                       ------------       -----
Bonds available for sale (at market value):
  Corporate bonds....................................................................       417,352        11.9
  U.S. Government and government agency bonds........................................       527,175        15.0
  Foreign government bonds...........................................................       386,842        11.0
  Domestic and foreign municipal bonds...............................................       604,308        17.2
                                                                                       ------------       -----
                                                                                          1,935,677        55.1
                                                                                       ------------       -----
Preferred stocks.....................................................................         5,642         0.2
                                                                                       ------------       -----
Common stocks........................................................................       386,723        11.0
                                                                                       ------------       -----
Short-term investments...............................................................        59,191         1.7
                                                                                       ------------       -----
    Total investments................................................................  $  3,512,366       100.0%
                                                                                       ------------       -----
                                                                                       ------------       -----
</TABLE>

    The carrying value of bonds and equities available for sale are subject to
significant volatility from changes in their market values. (See Management's
Discussion and Analysis of Financial Condition and Results of Operations.)

    As of December 31, 1996, the market value of the total investment portfolio
was $3,569.9 million.

    The following table indicates the composition of the bond portfolio of TRH
by rating as of December 31, 1996:

<TABLE>
<CAPTION>
                      BREAKDOWN OF BOND                           HELD TO      AVAILABLE
                    PORTFOLIO BY RATING(1)                       MATURITY      FOR SALE       TOTAL
             -----------------------------------                -----------  -------------  ---------
<S>                                                             <C>          <C>            <C>
U.S. Government and government agency bonds...................         0.1%         17.2%        17.3%
Foreign government bonds......................................          --          12.6         12.6
Aaa...........................................................        17.7          13.6         31.3
Aa............................................................        13.5          12.6         26.1
A.............................................................         4.1           4.9          9.0
Baa...........................................................         0.3           0.2          0.5
Not rated (2).................................................         1.1           2.1          3.2
                                                                       ---           ---    ---------
      Total...................................................        36.8%         63.2%       100.0%
                                                                       ---           ---    ---------
                                                                       ---           ---    ---------
</TABLE>

------------------------------
(1) Ratings are as assigned by Moody's Investors Service, Inc. (Moody's).

(2) Of the bonds not rated by Moody's as of December 31, 1996, 2.5% of the bond
    portfolio was rated investment grade by either Standard & Poor's
    Corporation, Dominion Bond Rating Service Limited (Canada) or Japanese Bond
    Rating Institute (Japan) and 0.7% of bonds available for sale represented
    non-government securities not rated by such services.

    At December 31, 1996, TRH had no real estate or derivative financial
instruments. (See Note 3 of Notes to Consolidated Financial Statements.)

                                       15
<PAGE>
    In December 1992, TRH made a $5 million minority investment in nonredeemable
preferred stock of the Galtney Group, Inc., a privately held holding company
whose subsidiaries are involved in brokering, underwriting and managing
insurance risks for the healthcare industry. Business assumed by TRH, which is
assumed from or placed by Galtney Group, Inc. companies, represented
approximately 4% of gross premiums written by TRH in 1996.

COMPETITION

    The reinsurance business is highly competitive in virtually all lines. With
certain limited exceptions, conditions (including pricing and contract terms) in
these lines have continued to weaken in recent years. With the property and
casualty insurance and reinsurance industry just having completed its ninth
consecutive year of generally soft market conditions, the Company cannot predict
with any reasonable certainty, if, when or to what extent market conditions as a
whole will improve.

    TRH faces competition from new market entrants and from market participants
that devote greater amounts of capital to the types of business written by TRH.
In recent years, increased market capacity, significant domestic and
international merger and acquisition activity, and in 1996, the reemergence of
Lloyd's of London, have added to competitive pressures. The ultimate impact on
the market of these events is uncertain.

    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, Best's and S&P's ratings, the states or other jurisdictions where the
reinsurer is licensed, accredited, authorized or can serve as a reinsurer,
premiums charged, other 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 United States and international reinsurance markets with
numerous major international reinsurance companies and numerous domestic
reinsurance companies, some of which have greater financial and other resources
than TRH. While TRC and Putnam, on a combined basis, would rank in the top 10%
of domestic reinsurers, on the basis of net premiums written, they are a less
significant reinsurer in international reinsurance markets. TRH's competitors
include independent reinsurance companies, subsidiaries or affiliates of
established worldwide insurance companies, reinsurance departments of certain
primary insurance companies and domestic and European underwriting syndicates.
Many of these competitors have been operating for substantially longer than TRH
and have established long-term and continuing business relationships throughout
the industry, which can be a significant competitive advantage. Although most
reinsurance companies operate in the broker market, most of TRH's largest
competitors work directly with ceding companies, competing with brokers.
According to the Reinsurance Association of America, there were 49 domestic
reinsurers for which results were reported in their quarterly survey as of
December 31, 1996.

    TRH believes that the reinsurance industry, including the brokerage
industry, will continue to undergo further consolidation (i.e. the largest
reinsurers will write a larger portion of total industry premiums) and, to
compete effectively, significant size and financial strength will attain greater
importance.

EMPLOYEES

    At December 31, 1996, TRH had approximately 335 employees. Approximately 190
employees were located in the New York headquarters; 35 employees were located
in Chicago and Miami (serving Latin America) and 110 employees were located in
other international offices. None of TRH's employees in the United States are
represented by labor unions.

                                       16
<PAGE>
REGULATION

    The rates and contract terms of reinsurance agreements are generally not
subject to regulation by any governmental authority. This contrasts with primary
insurance agreements, the rates and policy terms of which are generally closely
regulated by state insurance departments. 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 associated with
reinsurance agreements.

    The Company, TRC, TRZ and Putnam are subject to the insurance statutes,
including 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 and general business operations.

    Such 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 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 Insurance Department for such acquisition. For the purposes of the New
York Insurance Law, any investor acquiring ten percent or more of the Common
Stock of the Company would be presumed to be acquiring "control" of the Company
and its subsidiaries, unless the New York Insurance Department determines upon
application that such investor would not control the Company. An investor who
would be deemed to be acquiring control of the Company would be required to
obtain the approval of the New York Insurance Department prior to such
acquisition. In addition, such investor would become subject to various ongoing
reporting requirements in New York and in certain other states.

    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 insurance official. The regulation and supervision
relate primarily to the standards of solvency that must be met and maintained,
including risk-based capital measurements, the licensing of reinsurance, the
nature of and limitations on investments, restrictions on the size of risks
which may be insured under a single contract, deposits of securities for the
benefit of ceding companies, methods of accounting, periodic examinations of the
affairs 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. In general, such regulation is for the protection of the ceding
companies and, ultimately, their policyholders rather than securityholders.

    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,
inadequately capitalized insurance companies may 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 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. The
statutory surplus of each of the Company's subsidiaries significantly exceeded
the risk-based capital requirements as of December 31, 1996.

                                       17
<PAGE>
    TRC and Putnam are subject to examination of their affairs by the insurance
departments of the states in which they are licensed, authorized or accredited.
The insurance department of New York, TRC's and Putnam's domiciliary state,
generally conducts a triennial examination of insurance companies domiciled in
New York. The most recent examinations of TRC and Putnam covered the years from
1989 for TRC and 1990 for Putnam through December 31, 1993. The report on
examination for TRC has not been filed. The Putnam report was filed as of
November 22, 1995. The Putnam report and reports filed related to the
immediately prior triennial examinations of both companies disclosed no material
deficiencies.

    Through the "credit for reinsurance" mechanism, TRC and Putnam are
indirectly subject to the effects of regulatory requirements imposed by
jurisdictions 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 loss adjustment
expense 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.

    In addition to licensing requirements, TRH's international operations are
also 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, and are subject to local economic, political and social
conditions. In addition, TRH's results of operations and net unrealized currency
translation gain or loss (a separate component of stockholders' equity) are
subject to volatility as the value of the foreign currencies fluctuate relative
to the U.S. dollar. Regulations governing constitution of technical reserves and
remittance balances in some countries may hinder remittance of profits and
repatriation of assets.

RELATIONSHIP WITH THE AIG GROUP

AIG

    AIG is a holding company which, through its subsidiaries, is primarily
engaged in a broad range of insurance and insurance-related activities and
financial services in the United States and abroad. U.S.-based property and
casualty insurance subsidiaries of AIG currently attain the highest rating
classification assigned by both Best's and S&P. The AIG Group is one of the
largest purchasers of reinsurance in the insurance industry based on premiums
ceded.

CONTROL OF THE COMPANY

    As of December 31, 1996, AIG owned approximately 49% of the Company's
outstanding Common Stock. Four of the Company's 9 current directors, including
the Chairman, are officers of AIG and hold the following positions with AIG: Mr.
Greenberg is a Director and the Chairman and Chief Executive Officer; Mr.
Matthews is a Director and Vice Chairman; Mr. Howard I. Smith is the Executive
Vice President, Chief Financial Officer and Comptroller and Mr. Tizzio is a
Director and President.

AIG GROUP REINSURANCE

    From 1977 through June 1990, TRH and AIG had an agreement granting TRH a
right of first acceptance to participate in substantially all property and
casualty reinsurance purchased by the AIG Group. AIG continues to grant TRH a
right of first acceptance under terms similar to those in effect under the above
mentioned agreement. TRH either accepts or rejects the AIG Group reinsurance
offered based upon TRH's assessment of risk selection, pricing, terms and
conditions. Historically, and with few exceptions, TRH has generally not set
terms and conditions as lead underwriter with respect to the AIG

                                       18
<PAGE>
Group treaty reinsurance; however, TRH may in the future set terms and
conditions with respect to such business as lead underwriter and intends that
the terms and conditions of any such reinsurance will be negotiated on an arms'
length basis. The operating management of TRH is not employed by the AIG Group,
and the Underwriting Committee of the Board of Directors of the Company, which
includes directors of the Company who are not employees of the AIG Group,
monitor TRH's underwriting policies.

    Approximately $232 million (18%), $189 million (17%) and $198 million (21%)
of gross premiums written by TRH in the years 1996, 1995 and 1994, respectively,
were attributable to reinsurance purchased by the AIG Group, for the production
of which TRH paid ceding commissions to the AIG Group of approximately $33
million, $40 million and $52 million, respectively, in such years. TRH has no
goal with respect to the proportion of AIG Group versus non-AIG Group business
it accepts. TRH's objective in determining its business mix is to evaluate each
underwriting opportunity individually with a view to maximizing overall
underwriting results.

    TRH retroceded gross premiums written to the AIG Group in the years 1996,
1995 and 1994 of approximately $80.8 million, $71.8 million and $58.9 million,
respectively, and received ceding commissions of approximately $8.0 million,
$6.7 million and $6.0 million, respectively, for the production of such business
in such years.

ITEM 2. PROPERTIES

    One-half of the office space of TRH's New York headquarters, and its Hong
Kong and Toronto offices are rented from AIG, which either owns the property or
leases it from others. The remaining office space of TRH's headquarters and the
Chicago, Miami, Buenos Aires, Tokyo, London, Paris and Zurich offices, are
rented from third parties. The leases for the office space occupied by TRH's New
York headquarters expire in 2005.

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
financial position.

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 1996.

                                       19
<PAGE>
               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 December 31,
1996.(1)

<TABLE>
<CAPTION>
                                                                                                              SERVED AS
                                                                                                             DIRECTOR OR
     NAME                                                                POSITION                 AGE       OFFICER SINCE
------------------------------------------------------------  ------------------------------      ---      ---------------
<S>                                                           <C>                             <C>          <C>
Robert F. Orlich............................................  President, Chief Executive
                                                                Officer and Director                  49           1990(2)
Paul A. Bonny...............................................  Senior Vice President                   40           1994(3)
Robert V. Mucci.............................................  Senior Vice President and
                                                                Actuary                               39           1990(2)
Steven S. Skalicky..........................................  Senior Vice President and
                                                                Controller                            48           1995
David W. Smith..............................................  Senior Vice President and
                                                                General Counsel                       48           1990(2)
Javier E. Vijil.............................................  Senior Vice President                   44           1996(4)
Louis Curreri...............................................  Vice President                          45           1990(2)
Elizabeth M. Tuck...........................................  Secretary                               40           1991
M.R. Greenberg..............................................  Chairman of the Board                   71           1986
James Balog.................................................  Director                                68           1988
Ikuo Egashira...............................................  Director                                66           1995
John M. Fowler..............................................  Director                                48           1989
John J. Mackowski...........................................  Director                                70           1990
Edward E. Matthews..........................................  Director                                65           1986
Howard I. Smith.............................................  Director                                52           1994
Thomas R. Tizzio............................................  Director                                58           1990(2)
</TABLE>

------------------------
(1) Joseph F. Murphy, a director as of December 31, 1996, died in January 1997.
    Mr. Murphy served as a director of the Company since April 1990, and prior
    thereto, was a director of TRC, but not of the Company.

(2) Prior to April 1990, such person was a director or an officer of TRC and
    Putnam, but not of the Company.

(3) Prior to May 1994, Mr. Bonny was an officer of TRC and Putnam, but not of
    the Company.

(4) Mr. Vijil was elected as a Senior Vice President of the Company on May 22,
    1996. From November 1994 to May 1996, Mr. Vijil was a Senior Vice President
    of TRC and Putnam, but not of the Company. From August 1993 to November
    1994, Mr. Vijil was an officer of TRC and Putnam, but not of the Company.
    Prior to August 1993, Mr. Vijil was an officer of Cigna Reinsurance Company.

    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 1995, Mr. Skalicky served as an officer of certain AIG Group companies,
with his most recent position as Assistant Vice President and Deputy
Comptroller, AIG. Since January 1991, Ms. Tuck has also served as the Secretary
of a number of AIG Group companies and, prior to that time, she served in
various capacities in the AIG Corporate Secretary's office since July 1986. Mr.
David Smith and Mr. Howard Smith are not related.

                                       20
<PAGE>
                                    PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

    (a) The following table sets forth the high and low closing sales prices per
share of the Company's Common Stock, as reported on the New York Stock Exchange
Composite Tape for each of the four quarters of 1996 and 1995:

<TABLE>
<CAPTION>
                                                                            1996                    1995
                                                                   ----------------------  ----------------------
<S>                                                                <C>          <C>        <C>          <C>
                                                                       HIGH       LOW         High        Low
                                                                      -------   -------      --------  ---------
First Quarter....................................................      75       67 5/8       61 3/8     52 1/4
Second Quarter...................................................      70       62 1/2       65 1/2     61 3/8
Third Quarter....................................................      72 3/8   65 3/4       70 1/8     62 5/8
Fourth Quarter...................................................      80 1/2   68 5/8       73 5/8     64 5/8
</TABLE>

    (b) The approximate number of holders of Common Stock, as of January 31,
1997, was 3,043.

    (c) In 1996, the Company declared a quarterly dividend of $0.12 per common
share in March, May and September and $0.135 in December. In 1995, the Company
declared a quarterly dividend of $0.10 per common share in March, May and
September and $0.12 in December. The Company paid each dividend in the quarter
following the date 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.

    The Company is a holding company whose principal source of income is
dividends from TRC. The payment of dividends by TRC and its wholly-owned
subsidiaries, Trans Re Zurich and Putnam, is restricted by insurance
regulations. (See Note 9 of Notes to Consolidated Financial Statements.)

                                       21
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA

                 TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES

    The following Selected Consolidated Financial Data is prepared in accordance
with generally accepted accounting principles. This data should be read in
conjunction with the Consolidated Financial Statements and accompanying notes
included elsewhere herein.
<TABLE>
<CAPTION>
                                                                   YEARS ENDED DECEMBER 31,
                                             --------------------------------------------------------------------
<S>                                          <C>           <C>           <C>           <C>           <C>
                                               1996(1)         1995          1994          1993          1992
                                             ------------  ------------  ------------  ------------  ------------

<CAPTION>
                                                            (in thousands, except per share data)
<S>                                          <C>           <C>           <C>           <C>           <C>
STATEMENT OF OPERATIONS DATA:
  Net premiums written.....................  $  1,142,515  $  1,009,227  $    866,665  $    631,023  $    482,435
  Net premiums earned......................     1,130,633       981,177       851,183       581,056       477,841
  Net investment income....................       192,636       172,876       153,594       138,902       129,971
  Realized net capital gains...............        18,668        11,119        14,911         5,697        11,103
  Total revenues...........................     1,341,937     1,165,172     1,019,688       725,655       618,915
  Operating income.........................       197,518       165,320       122,545        96,573        84,603
  Income before income taxes and cumulative
    effect of accounting changes...........       196,320       163,799       119,262        93,618        83,806
  Income before cumulative effect of
    accounting changes.....................       154,860       131,858       101,627        86,743        71,655
  Cumulative effect of accounting
    changes(2).............................            --            --            --        46,340            --
  Net income...............................       154,860       131,858       101,627       133,083        71,655
PER COMMON SHARE:(3)
  Income before cumulative effect of
    accounting changes.....................          6.74          5.75          4.44          3.79          3.13
  Cumulative effect of accounting
    changes(2).............................            --            --            --          2.02            --
  Net income...............................          6.74          5.75          4.44          5.81          3.13
  Cash dividends declared..................          0.50          0.42          0.37          0.30          0.25
BALANCE SHEET DATA
  (AT YEAR END):
  Investments and cash.....................     3,589,889     2,987,915     2,497,062     2,361,067     2,022,605
  Total assets.............................     4,379,141     3,898,967     3,457,779     3,169,581     2,826,172
  Unpaid losses and loss adjustment
    expenses...............................     2,733,055     2,388,155     2,167,316     1,890,178     1,769,486
  Unearned premiums........................       343,936       291,568       249,098       222,625       167,557
  Stockholders' equity.....................     1,137,306       988,502       763,368       771,854       562,276
</TABLE>

------------------------
(1) TRH, through its wholly-owned subsidiary TRC, acquired Trans Re Zurich (TRZ)
    in the third quarter of 1996. TRZ's results for the second half of 1996 are
    included in the Consolidated Financial Statements and accompanying notes
    included elsewhere herein.

(2) Represents a benefit of $47,000 and a charge of $660 for the cumulative
    effect of adoption of accounting standards related to income taxes (SFAS No.
    109) and postretirement benefits (SFAS No. 106), respectively.

(3) Weighted average common shares outstanding was 22,983 for 1996, 22,939 for
    1995, 22,902 for 1994, 22,886 for 1993 and 22,867 for 1992.

                                       22
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

FINANCIAL STATEMENTS

    The following discussion refers to the consolidated financial statements of
Transatlantic Holdings, Inc. and its subsidiaries (TRH) as of December 31, 1996
and 1995 and for each of the three years in the period ended December 31, 1996,
which are presented elsewhere herein.

    American International Group, Inc. and subsidiaries (the AIG Group) own
approximately 49% of the Company's outstanding Common Stock. Financial data
discussed below have been affected by certain transactions between TRH and the
AIG Group. (See Notes 8 and 10 of Notes to Consolidated Financial Statements.)

ACQUISITION OF TRANS RE ZURICH

    In the third quarter of 1996, Transatlantic Holdings, Inc. (the Company),
through its wholly-owned subsidiary, Transatlantic Reinsurance Company (TRC),
acquired all of the outstanding shares of Trans Re Zurich (TRZ), formerly known
as Guardian Ruckversicherungs-Gesellschaft ("Guardian Re"), an international
reinsurance company based in Zurich, Switzerland, for approximately $105 million
in cash. Assets of TRZ totaled $366.8 million at the date of acquisition.

    This acquisition was accounted for as a purchase. Accordingly, TRZ's results
for the second half of 1996 are included in the consolidated results of the
Company for 1996. This acquisition has not had a material effect on financial
position or net income.

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. Gross premiums assumed and reinsurance ceded are
initially deferred and then are credited or charged to income, respectively,
over the terms of the underlying contracts or certificates in force. The
deferred amounts constitute the unearned premium reserve or prepaid reinsurance
premium and are generally ratably credited or charged, respectively, to income
over the contract periods. 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.

    The following table shows net premiums written, net premiums earned and net
investment income of TRH for the periods indicated:
<TABLE>
<CAPTION>
                                                                        YEARS ENDED DECEMBER 31,
                                             ------------------------------------------------------------------------------
<S>                                          <C>        <C>            <C>        <C>              <C>        <C>
                                                       1996                       1995                       1994
                                             ------------------------  --------------------------  ------------------------

<CAPTION>
                                                          % CHANGE                   % Change                   % Change
                                                            FROM                       From                       From
                                              AMOUNT     PRIOR YEAR     Amount      Prior Year      Amount     Prior Year
                                             ---------  -------------  ---------  ---------------  ---------  -------------
                                                                         (dollars in millions)
<S>                                          <C>        <C>            <C>        <C>              <C>        <C>
Net premiums written.......................  $ 1,142.5         13.2%   $ 1,009.2          16.4%    $   866.7         37.3%
Net premiums earned........................    1,130.6         15.2        981.2          15.3         851.2         46.5
Net investment income......................      192.6         11.4        172.9          12.6         153.6         10.6
</TABLE>

    Generally as a result of more favorable conditions in certain sectors of the
market in 1996 as compared to other sectors, net premiums written increased in
1996. Net premiums written by our international locations increased by 48.2%
compared to 1995, to $462.7 million, while domestic premiums decreased by 2.5%
to $679.8 million. International business represented 40.5% of total net
premiums written. International net premiums written increased significantly in
treaty property, motor, ocean marine

                                       23
<PAGE>
and other liability lines, aided by $78.2 million of net premiums written by
newly-acquired TRZ. The decrease in domestic net premiums written was due to
significant market competition. Decreases in domestic property lines and certain
specialty and general casualty classes other than medical malpractice were
partially offset by increases in treaty workers' compensation, motor (including
nonstandard risks), medical malpractice, surety and marine lines. On a worldwide
basis, property lines business represented 33.5% of net premiums written in 1996
compared to 33.0% in 1995. The balance represented casualty lines. The increased
amount of property business increases the potential for volatile underwriting
results caused by major natural disasters. Treaty volume represented 90.5% of
net premiums written in 1996 compared to 87.2% in 1995. The balance represented
facultative accounts. The net increases noted above were primarily from treaty
business and generally resulted from increased coverage provided.

    Generally as a result of more favorable conditions in certain sectors of the
market in 1995 as compared to other sectors, premiums increased as compared to
1994 in specialty casualty lines, particularly medical malpractice, and in auto
liability (including nonstandard risks), ocean marine, surety and credit lines
and decreased in certain general casualty classes. Property lines premiums also
increased in 1995 versus 1994 due primarily to an increase in allied lines and,
as a group, represented 33.0% of net premiums written in 1995 compared to 34.8%
in 1994. In addition, approximately one-half of the increase in 1995 premium
volume emanated from the international locations, particularly TRH's London
office, which recorded significant premium increases in the ocean marine and
auto liability lines. International business increased to 30.9% of net premiums
written in 1995 compared to 28.0% in 1994. The increases noted above were
primarily from treaty business and generally resulted from increased coverage
provided. (See Note 11 of Notes to Consolidated Financial Statements.)

    The increase in net premiums earned in each of 1996 and 1995 compared to the
respective prior year amounts resulted primarily from the significant growth in
net premiums written in both years. Net investment income grew each year due to
significant cash flow available for investment which was generated by operating
activities. In 1996, the growth was offset, in part, by generally lower
available yields on bonds purchased as compared to yields on bonds disposed of
in the past year. In 1996, TRZ contributed $8.4 million to net investment
income. (See Note 3 of Notes to Consolidated Financial Statements.)

    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.

    The following table sets forth TRH's combined ratios and the components
thereof for the years indicated:

<TABLE>
<CAPTION>
                                                                                            YEARS ENDED DECEMBER 31,
                                                                                         -------------------------------
<S>                                                                                      <C>        <C>        <C>
                                                                                           1996       1995       1994
                                                                                         ---------  ---------  ---------
Loss and loss adjustment expense ratio.................................................       74.4       76.1       80.1
Underwriting expense ratio.............................................................       26.9       26.1       25.6
Combined ratio.........................................................................      101.3      102.2      105.7
</TABLE>

    TRH's 1996 results did not include any significant catastrophe loss
activity. In addition, as a result of net decreases in estimates of losses
occurring in prior years, net losses and loss adjustment expenses incurred were
reduced by $7.7 million in 1996. In the other liability line, favorable
development on losses occurring in more recent years was offset by adverse
development in 1984 and prior years. In addition, in more recent years,
favorable development, particularly in the fire, allied line and aircraft lines
was partially offset by adverse development in the auto liability line.

    1995 results included $4.5 million of losses from the Kobe, Japan
earthquake. In addition, these results benefited from net favorable development
on losses occurring in prior years of $3.5 million. Favorable development in
1995 from losses occurring in 1992 through 1994, particularly in the fire lines
in 1994, was partially offset by adverse development from casualty treaty losses
occurring in 1982 and prior

                                       24
<PAGE>
years. In 1994, TRH's results included $20 million of losses from the
Northridge, California earthquake and $10 million from USAir's Pittsburgh
accident. 1994 results also included $15.0 million of losses resulting from net
adverse development of losses occurring in prior years. Adverse development from
casualty treaties prior to 1984 and property treaties in 1992 was partially
offset by favorable development on 1992 and prior fidelity treaty losses.

    At December 31, 1996, reserves for unpaid losses and loss adjustment
expenses totaled $2.73 billion, an increase of $344.9 million over the prior
year. This increase included reserves acquired of $176.3 million upon the
purchase of TRZ in the third quarter of 1996. Also at December 31, 1996,
reinsurance recoverable on unpaid losses and loss adjustment expenses totaled
$336.2 million, a decrease of $53.8 million, or 13.8%, from the prior year. (See
Note 10 of Notes to Consolidated Financial Statements.) TRH's reserves and
related recoverables represent estimates of all future liability and reinsurance
recoverable thereon for losses occurring on or prior to the balance sheet date.
Net losses and loss adjustment expenses are charged to income as incurred.
Unpaid losses and loss adjustment expenses are principally based on reports and
individual case estimates received from ceding companies. A provision is
included for losses and loss adjustment expenses incurred but not reported on
the basis of past experience and other factors. The methods of making such
estimates and for establishing the resulting reserves and related recoverables
are continually reviewed and updated, and any adjustments resulting therefrom
are reflected in income currently. 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 numerous judgments which
are made as to expected trends in average claim severity. Because the reserving
process is inherently difficult and subjective, actual net losses and loss
adjustment expenses may deviate, perhaps substantially, from estimates of
reserves and reinsurance recoverable on such amounts reflected in TRH's
consolidated financial statements.

    Reserves for the reinsurance of risks related to environmental impairment
and asbestos-related illnesses amounted to $78 million and $75 million at
December 31, 1996 and 1995, respectively. The majority of TRH's environmental
and asbestos-related liabilities arise from contracts entered into after 1984.
These obligations generally arose from contracts 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 for such
claims, including incurred but not reported claims (IBNR), are based upon known
facts and current law. However, significant uncertainty exists as, among other
things, there are inconsistent court resolutions with respect to underlying
policy intent and coverage, an increasing number of new claims and uncertainties
as to the allocation of responsibility for clean up costs of hazardous waste
dump sites. The government's refusal to release parties from liability and the
possibility of dramatic changes from the Congressional re-evaluation of
Superfund add to this uncertainty. Additional liabilities which cannot be
currently measured may emerge in the future and this emergence may have a
material adverse effect on future earnings. TRH believes that these claims
reserves, as well as all other claims reserves carried at December 31, 1996, are
adequate.

    The increase of the underwriting expense ratio in 1996 compared to 1995
consisted of an increase in the ratio of net commissions to net premiums written
of 0.5 and an increase in the other operating expense ratio of 0.3. The increase
of the underwriting expense ratio in 1995 compared to 1994 consisted of an
increase in the net commission ratio of 0.8 and a decrease in the other
operating expense ratio of 0.3.

    Other deductions generally include currency translation gains and losses and
other miscellaneous income and expenses. 1994 includes a provision for
unrecoverable reinsurance receivables of $2.8 million.

    Realized net capital gains on the disposition of investments totaled $18.7
million in 1996, $11.1 million in 1995 and $14.9 million in 1994. Income before
income taxes was $196.3 million in 1996, $163.8 million in 1995 and $119.3
million in 1994. The increase in income before income taxes in 1996 over 1995
resulted

                                       25
<PAGE>
from increased net investment income and realized net capital gains, and
improved underwriting results. The increase in income before income taxes in
1995 compared to 1994 was due to an improvement in underwriting results, caused,
in large part, by reduced catastrophe loss activity, and increased net
investment income, partially offset by a reduction in realized net capital
gains.

    The provisions for federal and foreign income taxes were $41.5 million in
1996, $31.9 million in 1995 and $17.6 million in 1994. The Company and its
domestic subsidiaries, TRC and Putnam Reinsurance Company (Putnam), filed
consolidated federal income tax returns for the years under discussion, except
those for 1996 which are not yet due. The tax burden among the companies is
allocated in accordance with a tax sharing agreement. 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.

    On a consolidated basis, the effective tax rates were 21.1% in 1996, 19.5%
in 1995 and 14.8% in 1994. The increase in the effective tax rate in each of
1996 and 1995 as compared to the respective prior year rates is due, in large
part, to higher earnings and a lower proportion of tax-exempt investment income
to income before income taxes in each of 1996 and 1995 as compared to the
respective prior year.

    Net income for 1996 was $154.9 million, or $6.74 per common share, versus
$131.9 million, or $5.75 per common share in 1995 and $101.6 million, or $4.44
per common share in 1994. Reasons for these changes are as discussed above.

FINANCIAL CONDITION AND LIQUIDITY

    As a holding company, the Company's assets consist primarily of the stock of
TRC and the Company's future cash flows depend on the availability of dividends
or other statutorily permissible payments from TRC and its wholly-owned
operating subsidiaries, TRZ and Putnam. (See Note 9 of Notes to Consolidated
Financial Statements for a discussion of restrictions on dividend payment.)
Sources of funds for the operating subsidiaries consist primarily of premiums,
reinsurance recoverables, investment income and proceeds from sales, redemptions
and the maturing of investments. Funds are applied primarily to payments of
claims, ceded reinsurance premiums, insurance operating expenses, income taxes
and investments in fixed income and equity securities. Premiums are generally
received substantially in advance of related claims payments. Cash and
short-term investments 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.

    At December 31, 1996, total investments and cash were $3,589.9 million
compared to $2,987.9 million at December 31, 1995. This increase is principally
due to net cash provided by operating activities which totaled $373.4 million in
1996, investments and cash acquired upon the purchase of TRZ, net of purchase
price, of $246.4 million and net unrealized appreciation of investments
available for sale during the year of $3.7 million. (See Note 3 of Notes to
Consolidated Financial Statements.)

    TRH's operating cash flow in 1996 and 1995 surpassed the respective prior
year amounts due, in part, to a significant increase in net premium volume and
increased net investment income received, partially offset by increased
commissions and paid losses. International operations, most significantly
London, accounted for 67.1%, 62.0% and 85.6% of net positive operating cash
flow, other than cash flow from net investment income, (i.e. primarily, assumed
premiums received less ceded premiums paid, net commissions paid, net losses
paid and other operating expenses) in 1996, 1995 and 1994, respectively. In each
of 1996 and 1995 as compared to the respective prior year, the increase in paid
losses is principally due to increases in premium volume and a shift in the
business mix towards lines with shorter loss payment patterns in recent years.

    TRH believes that its balance of cash and short-term investments of $136.7
million as of December 31, 1996 and its future cash flows will be sufficient to
meet TRH's cash requirements through the end of 1997

                                       26
<PAGE>
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 fixed maturity investments, approximately 87.1% of total investments
as of December 31, 1996, are predominantly investment grade, liquid securities
concentrated in maturities of less than 10 years. Also as of that date,
approximately 11.2% of total investments were in common and nonredeemable
preferred stocks and the remaining 1.7% consisted of short-term investments. In
considering the impact of inflation in conducting its operations, TRH structures
investment maturities to minimize the effects of interest rate fluctuations on
operating results. Based on the foregoing, TRH considers its liquidity to be
adequate through the end of 1997 and thereafter for a period the length of which
is difficult to predict, but which TRH believes will be at least one year.

    As of December 31, 1996, a significant portion of the bond portfolio was
classified as available-for-sale and carried at market value. Fixed maturity
investments are carried at amortized cost when it is TRH's positive intent to
hold these securities to maturity and TRH has the ability to do so. Most
activity within the bonds available for sale portfolio for the years under
discussion represented strategic portfolio realignments, partially for tax
purposes. TRH adjusts its mix of taxable and tax-exempt investments, as
appropriate, generally as a result of strategic investment and tax planning
considerations. As of December 31, 1996, bonds held to maturity had gross
unrealized gains of $58.9 million and gross unrealized losses of $1.3 million.
Gross unrealized gains and losses on bonds available for sale as of December 31,
1996 amounted to $56.3 million and $4.9 million, respectively.

    As of December 31, 1996, 17.3% of the bond portfolio represented U.S.
Government and government agency bonds and 12.6% represented foreign government
bonds. Of the remainder, 57.4% were rated Aaa or Aa by Moody's, an additional
12.0% were also rated investment grade or better by Moody's or similar foreign
or domestic services and 0.7% were not rated. Also, as of December 31, 1996, TRH
had no real estate or derivative financial instruments. (See Note 3 of Notes to
Consolidated Financial Statements.)

    TRH's stockholders' equity increased to $1,137.3 million at December 31,
1996, an increase of $148.8 million over year-end 1995. The net increase was
comprised principally of net income of $154.9 million and a $2.4 million net
increase in unrealized appreciation of investments, net of deferred income
taxes, which consists of an increase of $25.8 million from equities and a
decrease of $23.4 million from bonds available for sale. Unrealized appreciation
(depreciation) of investments, net of deferred income taxes, is subject to
significant volatility resulting from changes in the market value of bonds and
equities available for sale. Market values may fluctuate due to changes in
general economic conditions, market interest rates and other factors.
Stockholders' equity was reduced during the year by dividends declared of $11.4
million.

    Insurance practices and regulatory guidelines suggest that property and
casualty insurance companies maintain a statutory ratio of net premiums written
to policyholders' surplus of not more than approximately 3 to 1. For the
reinsurance industry, a ratio of 2 to 1 is generally considered more prudent.
For the year ended December 31, 1996, based on statistics distributed by the
Reinsurance Association of America, the reinsurance industry's average ratio of
statutory net premiums written to policyholders' surplus was approximately 0.7
to 1. For the year ended December 31, 1996, TRH's ratio was 1.1 to 1, which
includes the statutory net premiums written of TRC and Putnam on a combined
basis and the policyholders' surplus of TRC. (See Note 9 of Notes to
Consolidated Financial Statements.) TRH believes that this ratio falls within an
acceptable range and, as such, reflects an appropriate leveraging of its
surplus. Note that for U.S. statutory purposes, TRZ is carried as an equity
investment and, therefore, its net premiums written are not consolidated into
the Company's statutory total.

    In addition, risk-based capital (RBC) standards, promulgated by the National
Association of Insurance Commissioners (NAIC), relate an individual company's
statutory surplus to the risk inherent in its overall operations and sets
thresholds at which certain company and regulatory corrective actions are
mandated. At December 31, 1996, the statutory surpluses of TRC and Putnam each
significantly exceeded RBC requirements.

                                       27
<PAGE>
ACCOUNTING STANDARDS

    1996 ACCOUNTING STANDARD:  In June 1996, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities." This statement provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of liabilities.
In addition, it provides consistent standards for distinguishing transfers of
financial assets that are sales from transfers that are secured borrowings.

    SFAS No. 125 is effective as of January 1, 1997 and is to be applied
prospectively. However, SFAS No. 127, "Deferral of the Effective Date of Certain
Provisions of SFAS No. 125," defers, for one year, the effective date of certain
provisions of SFAS No. 125 which affect repurchase agreements, dollar-rolls,
securities lending and similar transactions. While the Company is currently
assessing the impact of the new standard, management believes that the
implementation of SFAS No. 125 will not have a material impact on results of
operations, financial position or liquidity.

    1995 ACCOUNTING STANDARD:  In October 1995, the FASB issued SFAS No. 123,
"Accounting for Stock-Based Compensation." This statement establishes new
financial accounting and reporting standards for stock-based employee
compensation plans, including stock option and stock purchase plans.
Compensation resulting from the award of stock-based compensation must be
determined based on the fair value of consideration received or fair value of
the equity instrument issued, whichever is more reliably measurable. Such
compensation expense, net of income taxes, may be recognized in the Statement of
Operations over the service period of the employee (generally the vesting
period). In lieu of recording such compensation expense, entities are permitted
to disclose its pro forma impact, net of income taxes, on reported net income
and earnings per share. Entities choosing such disclosure will continue to
measure compensation expense from stock-based compensation in the Statement of
Operations based on the intrinsic value method prescribed in Statement of the
Accounting Principles Board No. 25, "Accounting for Stock Issued to Employees."

    In accordance with the standard, TRH adopted SFAS No. 123 for the 1996
annual financial statements and chose the pro forma disclosure option of
implementation. (See Note 7 of Notes to Consolidated Financial Statements.)

    1994 ACCOUNTING STANDARD:  In October 1994, the FASB issued SFAS No. 119,
"Disclosure about Derivative Financial Instruments and Fair Value of Financial
Instruments." Among other things, this standard requires disclosure about the
amounts, nature and terms of derivative financial instruments and is effective
for fiscal years ending after December 15, 1994. In 1996, 1995 and 1994, TRH had
no derivative financial instruments as defined in SFAS No. 119.

                                       28
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

<TABLE>
<CAPTION>
                                                                                                                PAGE
                                                                                                                -----
<S>                                                                                                          <C>
Report of Independent Accountants..........................................................................          30

Consolidated Balance Sheets as of December 31, 1996 and 1995...............................................          31

Consolidated Statements of Operations for the years ended December 31, 1996,
  1995 and 1994............................................................................................          32

Consolidated Statements of Stockholders' Equity for the years ended December 31, 1996, 1995 and 1994.......          33

Consolidated Statements of Cash Flows for the years ended December 31, 1996,
  1995 and 1994............................................................................................          34

Notes to Consolidated Financial Statements.................................................................          35
</TABLE>

<TABLE>
<C>    <S>                                                                                                   <C>
Schedules:

      I --Summary of Investments--Other than Investments in Related Parties as of December 31, 1996................ S-1

     II --Condensed Financial Information of Registrant as of December 31, 1996 and 1995 and for the years ended
         December 31, 1996, 1995 and 1994.......................................................................... S-2

    III --Supplementary Insurance Information as of December 31, 1996, 1995 and 1994 and for the years then ended.. S-5

     IV --Reinsurance for the years ended December 31, 1996, 1995 and 1994......................................... S-6

     VI --Supplementary Information Concerning Property/Casualty Insurance Operations as of December 31, 1996,
         1995 and 1994 and for the years then ended................................................................ S-7
</TABLE>

                                       29
<PAGE>
                       REPORT OF INDEPENDENT ACCOUNTANTS

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

    We have audited the consolidated financial statements and the financial
statement schedules of Transatlantic Holdings, Inc. and Subsidiaries listed in
the index on page 29 of this Form 10-K. These financial statements and financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits.

    We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

    In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Transatlantic
Holdings, Inc. and Subsidiaries as of December 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedules referred to above, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all material respects,
the information required to be included therein.

                                          COOPERS & LYBRAND L.L.P.

New York, New York
February 18, 1997

                                       30
<PAGE>
                 TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

                        AS OF DECEMBER 31, 1996 AND 1995

<TABLE>
<CAPTION>
                                                                                                   1996          1995
                                                                                               ------------  ------------
<S>                                                                                            <C>           <C>
                                                                                                 (in thousands, except
                                                                                                      share data)
    A S S E T S
Investments and cash:
  Fixed maturities:
    Bonds held to maturity, at amortized cost (market value: 1996--$1,182,713;
      1995--$951,497)........................................................................  $  1,125,133  $    878,068
    Bonds available for sale, at market value (amortized cost: 1996--$1,884,274;
      1995--$1,700,599)......................................................................     1,935,677     1,788,000
  Equities:
    Common stocks available for sale, at market value (cost: 1996--$289,938;
      1995--$197,704)........................................................................       386,723       255,116
    Nonredeemable preferred stocks available for sale, at market value
      (cost: 1996--$6,276; 1995--$6,953).....................................................         5,642         6,025
  Short-term investments, at cost which approximates market value............................        59,191        12,874
  Cash and cash equivalents..................................................................        77,523        47,832
                                                                                               ------------  ------------
        Total investments and cash...........................................................     3,589,889     2,987,915
Accrued investment income....................................................................        63,213        56,806
Premium balances receivable, net of losses payable:
  Affiliates.................................................................................        15,060        27,104
  Other......................................................................................        24,035        34,740
Reinsurance recoverable on paid and unpaid losses and loss adjustment expenses:
  Affiliates.................................................................................       162,739       134,326
  Other......................................................................................       205,105       277,352
Funds held under reinsurance treaties:
  Affiliates.................................................................................         2,701         1,058
  Other......................................................................................       118,463       193,550
Deferred acquisition costs...................................................................        58,700        47,200
Prepaid reinsurance premiums.................................................................        26,617        39,716
Deferred income taxes........................................................................        93,782        87,914
Other assets.................................................................................        18,837        11,286
                                                                                               ------------  ------------
        Total assets.........................................................................  $  4,379,141  $  3,898,967
                                                                                               ------------  ------------
                                                                                               ------------  ------------

    L I A B I L I T I E S   A N D   S T O C K H O L D E R S '   E Q U I T Y
Unpaid losses and loss adjustment expenses...................................................  $  2,733,055  $  2,388,155
Unearned premiums............................................................................       343,936       291,568
Contingent commissions, expenses and taxes...................................................        18,552         6,764
Reinsurance balances payable:
  Affiliates.................................................................................         3,386        14,791
  Other......................................................................................        11,549         9,004
Funds held under reinsurance treaties:
  Affiliates.................................................................................           164           312
  Other......................................................................................        47,435       165,831
Current income taxes payable.................................................................        20,356        12,256
Payable for securities in course of settlement...............................................        32,224         3,996
Other liabilities............................................................................        31,178        17,788
                                                                                               ------------  ------------
        Total liabilities....................................................................     3,241,835     2,910,465
                                                                                               ------------  ------------
        Commitments and contingent liabilities
Preferred Stock, $1.00 par value; shares authorized: 5,000,000...............................            --            --
Common Stock, $1.00 par value; shares authorized: 50,000,000;
  shares issued: 1996--23,812,796; 1995--23,749,582..........................................        23,813        23,750
Additional paid-in capital...................................................................       201,930       199,243
Net unrealized appreciation of investments, net of
  deferred income taxes (1996--$51,644; 1995--$50,359).......................................        95,910        93,525
Net unrealized currency translation gain.....................................................         2,596         2,392
Retained earnings............................................................................       823,057       679,592
Treasury Stock, at cost; 800,000 shares......................................................       (10,000)      (10,000)
                                                                                               ------------  ------------
        Total stockholders' equity...........................................................     1,137,306       988,502
                                                                                               ------------  ------------
        Total liabilities and stockholders' equity...........................................  $  4,379,141  $  3,898,967
                                                                                               ------------  ------------
                                                                                               ------------  ------------
</TABLE>

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

                                       31
<PAGE>
                 TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
                                                                              1996          1995          1994
                                                                          ------------  ------------  ------------
<S>                                                                       <C>           <C>           <C>
                                                                           (in thousands, except per share data)
Income:
  Net premiums written..................................................  $  1,142,515  $  1,009,227  $    866,665
  Increase in net unearned premiums.....................................       (11,882)      (28,050)      (15,482)
                                                                          ------------  ------------  ------------
  Net premiums earned...................................................     1,130,633       981,177       851,183
  Net investment income.................................................       192,636       172,876       153,594
                                                                          ------------  ------------  ------------
                                                                             1,323,269     1,154,053     1,004,777
                                                                          ------------  ------------  ------------
Expenses:
  Net losses and loss adjustment expenses...............................       841,511       746,872       681,904
  Net commissions.......................................................       270,873       234,551       194,407
  Other operating expenses..............................................        35,722        28,329        27,732
  Increase in deferred acquisition costs................................        (3,687)       (9,900)       (6,900)
                                                                          ------------  ------------  ------------
                                                                             1,144,419       999,852       897,143
                                                                          ------------  ------------  ------------
                                                                               178,850       154,201       107,634
Realized net capital gains..............................................        18,668        11,119        14,911
                                                                          ------------  ------------  ------------
Operating income........................................................       197,518       165,320       122,545
Other deductions........................................................        (1,198)       (1,521)       (3,283)
                                                                          ------------  ------------  ------------
Income before income taxes..............................................       196,320       163,799       119,262
                                                                          ------------  ------------  ------------
Income taxes (benefits):
  Current...............................................................        48,000        38,886        26,318
  Deferred..............................................................        (6,540)       (6,945)       (8,683)
                                                                          ------------  ------------  ------------
                                                                                41,460        31,941        17,635
                                                                          ------------  ------------  ------------
Net income..............................................................  $    154,860  $    131,858  $    101,627
                                                                          ------------  ------------  ------------
                                                                          ------------  ------------  ------------

Net income per common share.............................................  $       6.74  $       5.75  $       4.44
                                                                          ------------  ------------  ------------
                                                                          ------------  ------------  ------------
Weighted average common shares outstanding..............................        22,983        22,939        22,902
                                                                          ------------  ------------  ------------
                                                                          ------------  ------------  ------------
</TABLE>

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

                                       32
<PAGE>
                 TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
                                                                                 1996         1995        1994
                                                                             ------------  ----------  ----------
<S>                                                                          <C>           <C>         <C>
                                                                               (in thousands, except per share
                                                                                            data)
Common Stock:
  Balance, beginning of year...............................................  $     23,750  $   23,726  $   23,691
  Issued under stock option and purchase plans.............................            63          24          35
                                                                             ------------  ----------  ----------
      Balance, end of year.................................................        23,813      23,750      23,726
                                                                             ------------  ----------  ----------
Additional paid-in capital:
  Balance, beginning of year...............................................       199,243     198,564     197,622
  Excess of proceeds over par value of common stock issued under stock
    option and purchase plans..............................................         2,687         679         942
                                                                             ------------  ----------  ----------
      Balance, end of year.................................................       201,930     199,243     198,564
                                                                             ------------  ----------  ----------
Net unrealized appreciation (depreciation) of investments, net of deferred
  income taxes:
  Balance, beginning of year...............................................        93,525     (10,590)     93,564
  Net change for year......................................................         3,670     160,176    (160,237)
  Deferred income tax on change............................................        (1,285)    (56,061)     56,083
                                                                             ------------  ----------  ----------
      Balance, end of year.................................................        95,910      93,525     (10,590)
                                                                             ------------  ----------  ----------
Net unrealized currency translation gain:
  Balance, beginning of year...............................................         2,392       4,298       2,758
  Net change for year......................................................           204      (1,906)      1,540
                                                                             ------------  ----------  ----------
      Balance, end of year.................................................         2,596       2,392       4,298
                                                                             ------------  ----------  ----------
Retained earnings:
  Balance, beginning of year...............................................       679,592     557,370     464,219
  Net income...............................................................       154,860     131,858     101,627
  Cash dividends declared (per common share: 1996--$0.50; 1995-- $0.42;
    1994--$0.37)...........................................................       (11,395)     (9,636)     (8,476)
                                                                             ------------  ----------  ----------
      Balance, end of year.................................................       823,057     679,592     557,370
                                                                             ------------  ----------  ----------
Treasury Stock:
  Balance, beginning and end of year.......................................       (10,000)    (10,000)    (10,000)
                                                                             ------------  ----------  ----------
      Total stockholders' equity...........................................  $  1,137,306  $  988,502  $  763,368
                                                                             ------------  ----------  ----------
                                                                             ------------  ----------  ----------
</TABLE>

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

                                       33
<PAGE>
                 TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
                                                                                1996        1995         1994
                                                                             ----------  -----------  -----------
<S>                                                                          <C>         <C>          <C>
                                                                                        (in thousands)
Cash flows from operating activities:
  Net income...............................................................  $  154,860  $   131,858  $   101,627
                                                                             ----------  -----------  -----------
  Adjustments 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..........................     179,651      248,443      294,325
      Changes in premium and reinsurance balances receivable and payable,
        net................................................................      92,921      (18,042)     (51,691)
      Change in deferred acquisition costs.................................      (3,687)      (9,900)      (6,900)
      Change in accrued investment income..................................      (6,407)      (5,546)      (3,221)
      Realized net capital gains...........................................     (18,668)     (11,119)     (14,911)
      Changes in funds held under reinsurance contracts, net...............     (45,100)     (11,879)     (14,613)
      Changes in current and deferred income taxes.........................         836        1,587       (7,860)
      Change in reserve for contingent commissions, expenses and taxes.....      11,788        1,164      (10,785)
      Changes in other assets and liabilities, net.........................       8,390        5,187       (2,211)
      Other, net...........................................................      (1,216)       1,077          342
                                                                             ----------  -----------  -----------
          Total adjustments................................................     218,508      200,972      182,475
                                                                             ----------  -----------  -----------
          Net cash provided by operating activities........................     373,368      332,830      284,102
                                                                             ----------  -----------  -----------
Cash flows from investing activities:
  Proceeds of bonds available for sale sold................................     472,008       77,110      106,668
  Proceeds of bonds held to maturity redeemed..............................      19,253        3,583       13,788
  Proceeds of bonds available for sale redeemed or matured.................     169,581       78,281       61,293
  Proceeds of equities sold................................................     156,895      118,605      103,342
  Purchase of bonds held to maturity.......................................    (265,741)    (201,805)     (58,975)
  Purchase of bonds available for sale.....................................    (587,663)    (248,786)    (415,489)
  Purchase of equities.....................................................    (212,030)    (163,389)     (97,259)
  Net (purchase) proceeds of short-term investments........................     (46,317)         703       (1,585)
  Change in payable for securities in course of settlement.................      28,228       (1,356)       3,520
  Investment in Trans Re Zurich, net of cash acquired......................     (66,479)          --           --
  Other, net...............................................................      (2,971)        (354)      (2,728)
                                                                             ----------  -----------  -----------
          Net cash used in investing activities............................    (335,236)    (337,408)    (287,425)
                                                                             ----------  -----------  -----------
Cash flows from financing activities:
  Dividends to stockholders................................................     (11,395)      (9,176)      (8,245)
  Proceeds from common stock issued........................................       2,750          703          977
                                                                             ----------  -----------  -----------
          Net cash from financing activities...............................      (8,645)      (8,473)      (7,268)
                                                                             ----------  -----------  -----------
Change in net unrealized currency translation gain.........................         204       (1,906)       1,540
                                                                             ----------  -----------  -----------
          Change in cash and cash equivalents..............................      29,691      (14,957)      (9,051)
Cash and cash equivalents, beginning of year...............................      47,832       62,789       71,840
                                                                             ----------  -----------  -----------
          Cash and cash equivalents, end of year...........................  $   77,523  $    47,832  $    62,789
                                                                             ----------  -----------  -----------
                                                                             ----------  -----------  -----------
</TABLE>

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

                                       34
<PAGE>
                 TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND NATURE OF OPERATIONS

    Transatlantic Holdings, Inc. (the Company) is a holding company,
incorporated in the state of Delaware, which owns all of the common stock of
Transatlantic Reinsurance Company (TRC). In addition to TRC, the Company owned
100% of Putnam Reinsurance Company (Putnam) until December 29, 1995, when the
Company contributed all the stock of Putnam to TRC.

    In the third quarter of 1996, TRC acquired all of the outstanding shares of
Trans Re Zurich (TRZ), formerly known as Guardian Ruckversicherungs-Gesellschaft
(Guardian Re), an international reinsurance company based in Zurich,
Switzerland, for approximately $105 million in cash. The acquisition was
accounted for as a purchase. Accordingly, TRZ's results for the second half of
1996 are included in the consolidated results of the Company in 1996. This
acquisition has not had a material effect on financial position or net income.

    Transatlantic Holdings, Inc. and subsidiaries (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 general
liability (including directors' and officers' liability and other professional
liability), automobile liability (including nonstandard risks), medical
malpractice and marine and aviation in the casualty lines, and fire and allied
lines in the property lines (which include property catastrophe risks). Casualty
lines represent 66.5%, 67.0% and 65.2% of net premiums written in 1996, 1995 and
1994, respectively. The balance represents property lines.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    (a)  BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION:  The
accompanying consolidated financial statements have been prepared on the basis
of generally accepted accounting principles (GAAP). Certain reclassifications
have been made to conform prior years' presentations with 1996.

    The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.

    These consolidated financial statements include the accounts of the Company
and its subsidiaries. All material intercompany accounts and transactions have
been eliminated.

    (b)  INVESTMENTS:  Bonds 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. The balance of TRH's bonds are classified as
available-for-sale and carried at market value. Common and nonredeemable
preferred stocks are carried principally at market value. Market values for
fixed maturity securities and equities are generally based upon quoted market
prices. For certain fixed maturity securities for which market prices were not
readily available, market values were estimated using values obtained from
independent pricing services. Short-term investments are carried at cost, which
approximates market value.

    Realized gains or losses on the sale of investments are determined on the
basis of specific identification. Changes in unrealized appreciation
(depreciation) of bonds available for sale and in unrealized appreciation
(depreciation) of equity investments are charged or credited, net of deferred
income taxes,

                                       35
<PAGE>
                 TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
directly to stockholders' equity. Investment income is recorded as earned.
Amortization of bond premium and the accrual of bond discount are charged or
credited to net investment income.

    (c)  CASH EQUIVALENTS:  A significant portion of cash equivalents is
invested in a money market fund managed by an American International Group, Inc.
(AIG, and collectively, with its subsidiaries, the AIG Group) subsidiary. (See
Note 8.)

    (d)  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 and estimated remaining costs of servicing the contracts are
considered in determining acquisition costs to be deferred. Anticipated
investment income is not considered in the deferral of acquisition costs.

    (e)  LOSSES AND LOSS ADJUSTMENT EXPENSES:  Losses and loss adjustment
expenses, net of related reinsurance recoverable, are charged to income as
incurred. Unpaid losses and loss adjustment expenses are principally based on
reports and individual case estimates received from ceding companies. An amount
is included for losses and loss adjustment expenses incurred but not reported
(IBNR) on the basis of past experience. The methods of making such estimates and
for establishing the resulting reserves are continually reviewed and updated,
and any adjustments resulting therefrom are reflected in income currently. TRH
does not discount its unpaid losses and loss adjustment expenses.

    Unpaid losses and loss adjustment expenses include certain amounts for the
reinsurance of risks related to environmental impairment and asbestos-related
illnesses. The majority of TRH's environmental and asbestos-related liabilities
arise from contracts entered into after 1984. These obligations generally arose
from contracts 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, 1996 for such
claims, including IBNR, are based upon known facts and current law. However,
significant uncertainty exists as, among other things, there are inconsistent
court resolutions with respect to underlying policy intent and coverage, an
increasing number of new claims and uncertainties as to the allocation of
responsibility for clean up costs of hazardous waste dump sites. The
government's refusal to release parties from liability and the possibility of
dramatic changes from the Congressional re-evaluation of Superfund add to this
uncertainty. Additional liabilities which cannot be currently measured may
emerge in the future and this emergence may have a material adverse effect on
future earnings.

    (f)  UNEARNED PREMIUMS:  Unearned premiums represent the portion of gross
premiums written which is applicable to the unexpired terms of reinsurance
contracts or certificates in force. Accordingly, premiums written are taken into
income as earned. Unearned premiums are calculated principally by the monthly
pro rata method or are based on reports received from ceding companies. In the
Consolidated Statements of Operations, the change in unearned premiums is
presented net of the change in prepaid reinsurance premiums.

    (g)  DEFERRED INCOME TAXES:  Deferred income taxes are provided for the
expected tax effect of temporary differences between the amounts of assets and
liabilities used for financial reporting purposes and the amounts used in tax
returns.

                                       36
<PAGE>
                 TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
    (h)  CURRENCY TRANSLATION:  Assets and liabilities denominated in foreign
currencies are translated into U.S. dollars at year-end exchange rates. Income
and expense accounts are translated at average exchange rates for the year. The
resulting net translation adjustment for functional currencies is reflected as a
separate component of stockholders' equity.

    Transaction gains and losses on assets and liabilities denominated in
foreign currencies which are not designated as functional currencies are
reflected in results of operations during the period in which they occur.

    (i)  NET INCOME PER COMMON SHARE:  Net income per common share has been
computed based on the weighted average number of common shares outstanding.

    (j)  ACCOUNTING STANDARDS:

    i.  1996 ACCOUNTING STANDARD:  In June 1996, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 125, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." This statement provides accounting and
reporting standards for transfers and servicing of financial assets and
extinguishments of liabilities. In addition, it provides consistent standards
for distinguishing transfers of financial assets that are sales from transfers
that are secured borrowings.

    SFAS No. 125 is effective as of January 1, 1997 and is to be applied
prospectively. However, SFAS No. 127, "Deferral of the Effective Date of Certain
Provisions of SFAS No. 125," defers, for one year, the effective date of certain
provisions of SFAS No. 125 which affect repurchase agreements, dollar-rolls,
securities lending and similar transactions. While the Company is currently
assessing the impact of the new standard, management believes that the
implementation of SFAS No. 125 will not have a material impact on results of
operations, financial position or liquidity.

    ii.  1995 ACCOUNTING STANDARD:  In October 1995, the FASB issued SFAS No.
123, "Accounting for Stock-Based Compensation." This statement establishes new
financial accounting and reporting standards for stock-based employee
compensation plans, including stock option and stock purchase plans.
Compensation resulting from the award of stock-based compensation must be
determined based on the fair value of consideration received or fair value of
the equity instrument issued, whichever is more reliably measurable. Such
compensation expense, net of income taxes, may be recognized in the Statement of
Operations over the service period of the employee (generally the vesting
period). In lieu of recording such compensation expense, entities are permitted
to disclose its pro forma impact, net of income taxes, on reported net income
and earnings per share. Entities choosing such disclosure will continue to
measure compensation expense from stock-based compensation in the Statement of
Operations based on the intrinsic value method prescribed in Statement of the
Accounting Principles Board (APB) No. 25, "Accounting for Stock Issued to
Employees."

    In accordance with the standard, TRH adopted SFAS No. 123 for the 1996
annual financial statements and chose the pro forma disclosure option of
implementation. (See Note 7.)

    iii.  1994 ACCOUNTING STANDARD:  In October 1994, the FASB issued SFAS No.
119, "Disclosure about Derivative Financial Instruments and Fair Value of
Financial Instruments." Among other things, this standard requires disclosure
about the amounts, nature and terms of derivative financial instruments and is
effective for fiscal years ending after December 15, 1994. In 1996, 1995 and
1994, TRH had no derivative financial instruments as defined in SFAS No. 119.

                                       37
<PAGE>
                 TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. INVESTMENTS

    (a)  STATUTORY DEPOSITS:  Investments, the substantial majority of which are
bonds and common stocks available for sale, were deposited with governmental
authorities as required by law and amounted to approximately $119,000,000 and
$97,000,000 at December 31, 1996 and 1995, respectively.

    (b)  NET INVESTMENT INCOME:  An analysis of net investment income of TRH
follows:
<TABLE>
<CAPTION>
                                                                                    YEARS ENDED DECEMBER 31,
                                                                               ----------------------------------
<S>                                                                            <C>         <C>         <C>
                                                                                  1996        1995        1994
                                                                               ----------  ----------  ----------

<CAPTION>
                                                                                         (in thousands)
<S>                                                                            <C>         <C>         <C>
Fixed maturities.............................................................  $  191,348  $  171,065  $  152,812
Equities.....................................................................       5,695       4,207       3,450
Short-term investments.......................................................         362         229         393
Cash equivalents.............................................................       1,361       2,255       1,268
                                                                               ----------  ----------  ----------
  Total investment income....................................................     198,766     177,756     157,923
Investment expenses..........................................................      (6,130)     (4,880)     (4,329)
                                                                               ----------  ----------  ----------
  Net investment income......................................................  $  192,636  $  172,876  $  153,594
                                                                               ----------  ----------  ----------
                                                                               ----------  ----------  ----------
</TABLE>

    (c)  INVESTMENT GAINS AND LOSSES:  The realized net capital gains (losses)
and change in net unrealized (depreciation) appreciation of investments are
summarized as follows:
<TABLE>
<CAPTION>
                                                                                    YEARS ENDED DECEMBER 31,
                                                                               -----------------------------------
<S>                                                                            <C>         <C>         <C>
                                                                                  1996        1995        1994
                                                                               ----------  ----------  -----------

<CAPTION>
                                                                                         (in thousands)
<S>                                                                            <C>         <C>         <C>
Realized net capital gains (losses) on sale of investments:
  Fixed maturities...........................................................  $      415  $      628  $      (170)
  Equities...................................................................      18,223      10,460       15,119
  Other......................................................................          30          31          (38)
                                                                               ----------  ----------  -----------
    Realized net capital gains...............................................  $   18,668  $   11,119  $    14,911
                                                                               ----------  ----------  -----------
                                                                               ----------  ----------  -----------
Change in net unrealized (depreciation) appreciation of investments:*
  Fixed maturities carried at amortized cost.................................  $  (15,849) $   44,405  $   (52,397)
  Fixed maturities carried at market.........................................     (35,998)    115,323     (141,807)
  Equities...................................................................      39,667      44,855      (18,431)
                                                                               ----------  ----------  -----------
Change in net unrealized (depreciation) appreciation of investments..........  $  (12,180) $  204,583  $  (212,635)
                                                                               ----------  ----------  -----------
                                                                               ----------  ----------  -----------
</TABLE>

------------------------------

* Before deferred income tax effect.

                                       38
<PAGE>
                 TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. INVESTMENTS (Continued)
    (d)  FIXED MATURITIES:  The amortized cost and market value of bonds at
December 31, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
                                                                                        GROSS UNREALIZED
                                                                         AMORTIZED    --------------------
                                                                            COST        GAINS     LOSSES    MARKET VALUE
                                                                        ------------  ---------  ---------  ------------
<S>                                                                     <C>           <C>        <C>        <C>
                                                                                         (in thousands)

<CAPTION>
1996
<S>                                                                     <C>           <C>        <C>        <C>
BONDS HELD TO MATURITY AND CARRIED AT AMORTIZED COST:
  U.S. Government and government agency bonds:
    Mortgage-backed securities........................................  $      4,365  $     278  $      --   $    4,643
  States, foreign and domestic municipalities and political
    subdivisions......................................................     1,120,768     58,596      1,294    1,178,070
                                                                        ------------  ---------  ---------  ------------
      Totals..........................................................  $  1,125,133  $  58,874  $   1,294   $1,182,713
                                                                        ------------  ---------  ---------  ------------
                                                                        ------------  ---------  ---------  ------------

BONDS AVAILABLE FOR SALE AND CARRIED AT MARKET VALUE:
  U.S. Government and government agency bonds.........................  $    520,256  $   8,572  $   1,653   $  527,175
  States, foreign and domestic municipalities and political
    subdivisions......................................................       582,386     22,631        709      604,308
  Foreign governments.................................................       377,821      9,519        498      386,842
  Corporate...........................................................       403,811     15,618      2,077      417,352
                                                                        ------------  ---------  ---------  ------------
      Totals..........................................................  $  1,884,274  $  56,340  $   4,937   $1,935,677
                                                                        ------------  ---------  ---------  ------------
                                                                        ------------  ---------  ---------  ------------
</TABLE>

<TABLE>
<CAPTION>
                                                                                        Gross Unrealized
                                                                         Amortized    --------------------
                                                                            Cost        Gains     Losses    Market Value
                                                                        ------------  ---------  ---------  -------------
<S>                                                                     <C>           <C>        <C>        <C>
                                                                                         (in thousands)
1995
Bonds held to maturity and carried at amortized cost:
  U.S. Government and government agency bonds:
    Mortgage-backed securities........................................  $      5,938  $     345  $      --   $     6,283
  States, foreign and domestic municipalities and political
    subdivisions......................................................       872,130     73,084         --       945,214
                                                                        ------------  ---------  ---------  -------------
      Totals..........................................................  $    878,068  $  73,429  $      --   $   951,497
                                                                        ------------  ---------  ---------  -------------
                                                                        ------------  ---------  ---------  -------------

Bonds available for sale and carried at market value:
  U.S. Government and government agency bonds.........................  $    566,053  $  26,664  $     547   $   592,170
  States, foreign and domestic municipalities and political
    subdivisions......................................................       609,370     39,162        299       648,233
  Foreign governments.................................................       287,972     12,075        198       299,849
  Corporate...........................................................       237,204     10,694        150       247,748
                                                                        ------------  ---------  ---------  -------------
      Totals..........................................................  $  1,700,599  $  88,595  $   1,194   $ 1,788,000
                                                                        ------------  ---------  ---------  -------------
                                                                        ------------  ---------  ---------  -------------
</TABLE>

                                       39
<PAGE>
                 TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. INVESTMENTS (Continued)
    The amortized cost and market value of bonds at December 31, 1996 by
contractual maturity, are summarized 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.

<TABLE>
<CAPTION>
                                                                                     AMORTIZED
                                                                                        COST      MARKET VALUE
                                                                                    ------------  ------------
<S>                                                                                 <C>           <C>
                                                                                          (in thousands)
BONDS HELD TO MATURITY:
Due in one year or less...........................................................  $     14,523   $   14,913
Due after one year through five years.............................................       221,465      239,999
Due after five years through ten years............................................       237,521      255,104
Due after ten years...............................................................       647,259      668,054
                                                                                    ------------  ------------
                                                                                       1,120,768    1,178,070
Mortgage-backed securities........................................................         4,365        4,643
                                                                                    ------------  ------------
    Totals........................................................................  $  1,125,133   $1,182,713
                                                                                    ------------  ------------
                                                                                    ------------  ------------
BONDS AVAILABLE FOR SALE:
Due in one year or less...........................................................  $    270,773   $  274,200
Due after one year through five years.............................................     1,019,900    1,048,152
Due after five years through ten years............................................       554,074      572,429
Due after ten years...............................................................        39,527       40,896
                                                                                    ------------  ------------
    Totals........................................................................  $  1,884,274   $1,935,677
                                                                                    ------------  ------------
                                                                                    ------------  ------------
</TABLE>

    Gross gains of $6,771,000, $2,094,000 and $3,240,000 and gross losses of
$6,903,000, $2,305,000 and $3,474,000 were realized on sales of investments in
fixed maturities available for sale in 1996, 1995 and 1994, respectively.

    (e)  EQUITIES:  Gross gains of $23,621,000, $15,830,000 and $20,187,000 and
gross losses of $5,398,000, $5,370,000 and $5,068,000 were realized on sales of
equities in 1996, 1995 and 1994, respectively. At December 31, 1996 and 1995,
net unrealized appreciation of equities (before applicable income taxes)
included gross gains of $98,316,000 and $57,795,000 and gross losses of
$2,165,000 and $1,311,000, respectively.

4. FEDERAL AND FOREIGN INCOME TAXES

    (a) The Company files a U.S. consolidated federal income tax return with its
domestic subsidiaries, TRC and Putnam. 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.

                                       40
<PAGE>
                 TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. FEDERAL AND FOREIGN INCOME TAXES (Continued)
    The U.S. Federal Income tax rate is 35% for 1996, 1995 and 1994. Actual tax
expense on income before income taxes differs from the "expected" amount
computed by applying the U.S. Federal income tax rate because of the following:
<TABLE>
<CAPTION>
                                                                        YEARS ENDED DECEMBER 31,
                                          -------------------------------------------------------------------------------------
<S>                                       <C>         <C>              <C>         <C>              <C>         <C>
                                                     1996                         1995                         1994
                                          ---------------------------  ---------------------------  ---------------------------

<CAPTION>
                                                        PERCENT OF                   Percent of                   Percent of
                                                       INCOME BEFORE                Income Before                Income Before
                                            AMOUNT     INCOME TAXES      Amount     Income Taxes      Amount     Income Taxes
                                          ----------  ---------------  ----------  ---------------  ----------  ---------------
                                                                         (dollars in thousands)
<S>                                       <C>         <C>              <C>         <C>              <C>         <C>
"Expected" tax expense..................  $   68,712          35.0 %   $   57,330          35.0 %   $   41,742          35.0 %
Adjustments:
  Tax-exempt interest...................     (27,554)        (14.0)       (25,609)        (15.6)       (24,120)        (20.2)
  Dividends received deduction..........      (1,064)         (0.6)          (774)         (0.5)          (624)         (0.5)
  Other.................................       1,366           0.7            994           0.6            637           0.5
                                          ----------         -----     ----------         -----     ----------         -----
    Actual tax expense..................  $   41,460          21.1 %   $   31,941          19.5 %   $   17,635          14.8 %
                                          ----------         -----     ----------         -----     ----------         -----
                                          ----------         -----     ----------         -----     ----------         -----
Foreign and domestic components of
  actual tax expense (benefit):
  Foreign...............................  $   19,770                   $   15,237                   $    7,125
  Domestic:
    Current.............................      28,230                       23,649                       19,193
    Deferred............................      (6,540)                      (6,945)                      (8,683)
                                          ----------                   ----------                   ----------
                                          $   41,460                   $   31,941                   $   17,635
                                          ----------                   ----------                   ----------
                                          ----------                   ----------                   ----------
</TABLE>

                                       41
<PAGE>
                 TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. FEDERAL AND FOREIGN INCOME TAXES (Continued)
    (b) The components of the net deferred income tax asset at December 31, 1996
and 1995 were as follows:

<TABLE>
<CAPTION>
                                                                                               1996        1995
                                                                                            ----------  ----------
<S>                                                                                         <C>         <C>
                                                                                                (in thousands)
Deferred income tax assets:
  Unpaid losses and loss adjustment expenses, net of related
    reinsurance recoverable...............................................................  $  149,021  $  135,755
  Unearned premiums, net of prepaid reinsurance premiums..................................      22,274      17,630
  Alternative minimum tax credit carryforward.............................................          --       3,369
  Allowance for unrecoverable reinsurance.................................................       4,655       4,655
  Other...................................................................................       1,897       1,206
                                                                                            ----------  ----------
    Total deferred income tax assets......................................................     177,847     162,615
                                                                                            ----------  ----------
Deferred income tax liabilities:
  Deferred acquisition costs..............................................................      20,545      16,520
  Net unrealized appreciation of investments..............................................      51,644      50,359
  Other...................................................................................      11,876       7,822
                                                                                            ----------  ----------
    Total deferred income tax liabilities.................................................      84,065      74,701
                                                                                            ----------  ----------

    Net deferred income tax asset.........................................................  $   93,782  $   87,914
                                                                                            ----------  ----------
                                                                                            ----------  ----------
</TABLE>

    No valuation allowance has been recorded.

    (c) Income tax payments by TRH totaled $39,939,000, $31,588,000 and
$25,036,000 in 1996, 1995 and 1994, respectively.

                                       42
<PAGE>
                 TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES

    Activity in the liability for unpaid losses and loss adjustment expenses is
summarized as follows:
<TABLE>
<CAPTION>
                                                                                  YEARS ENDED DECEMBER 31,
                                                                          ----------------------------------------
<S>                                                                       <C>           <C>           <C>
                                                                              1996          1995          1994
                                                                          ------------  ------------  ------------

<CAPTION>
                                                                                       (in thousands)
<S>                                                                       <C>           <C>           <C>
At beginning of year:
  Unpaid losses and loss adjustment expenses............................  $  2,388,155  $  2,167,316  $  1,890,178
  Less reinsurance recoverable..........................................       402,369       439,936       386,789
                                                                          ------------  ------------  ------------
      Net unpaid losses and loss adjustment expenses....................     1,985,786     1,727,380     1,503,389
                                                                          ------------  ------------  ------------
Trans Re Zurich reserves acquired, as of acquisition date...............       176,260            --            --
                                                                          ------------  ------------  ------------
Net losses and loss adjustment expenses incurred in respect of losses
  occurring in:
    Current year........................................................       849,235       750,326       666,932
    Prior years.........................................................        (7,724)       (3,454)       14,972
                                                                          ------------  ------------  ------------
      Total.............................................................       841,511       746,872       681,904
                                                                          ------------  ------------  ------------
Net losses and loss adjustment expenses paid in respect of losses
  occurring in:
    Current year........................................................       172,875       149,519       144,990
    Prior years.........................................................       447,154       338,947       312,923
                                                                          ------------  ------------  ------------
      Total.............................................................       620,029       488,466       457,913
                                                                          ------------  ------------  ------------
At end of year:
  Net unpaid losses and loss adjustment expenses........................     2,383,528     1,985,786     1,727,380
  Plus reinsurance recoverable..........................................       349,527       402,369       439,936
                                                                          ------------  ------------  ------------
      Unpaid losses and loss adjustment expenses........................  $  2,733,055  $  2,388,155  $  2,167,316
                                                                          ------------  ------------  ------------
                                                                          ------------  ------------  ------------
</TABLE>

    As a result of net decreases in estimates of losses occurring in prior
years, net losses and loss adjustment expenses incurred were reduced by $7.7
million in 1996. In the other liability line, favorable development on losses
occurring in more recent years was offset by adverse development in 1984 and
prior years. In addition, in more recent years, favorable development,
particularly in the fire, allied line and aircraft lines was partially offset by
adverse development in the auto liability line.

    As a result of net decreases in estimates of losses occurring in prior
years, net losses and loss adjustment expenses incurred were reduced by $3.5
million in 1995. Favorable development in 1995 from losses occurring in 1992
through 1994, particularly in the fire line in 1994, was partially offset by
adverse development from casualty treaty losses occurring in 1982 and prior
years. As a result of increases in estimates of losses occurring in prior years,
losses incurred increased by $15.0 million in 1994. Adverse development in 1994
from casualty treaty losses occurring prior to 1984 and property treaty losses
occurring in 1992 was partially offset by favorable development on 1992 and
prior fidelity treaty losses.

6. PENSION, SAVINGS AND STOCK PURCHASE PLANS

    TRH's employees participate in benefit plans sponsored by AIG including a
noncontributory defined benefit pension plan and a voluntary savings plan (a
401(k) plan) which provides for certain matching

                                       43
<PAGE>
                 TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. PENSION, SAVINGS AND STOCK PURCHASE PLANS (Continued)
contributions. These plans cover a substantial majority of TRH's employees. The
AIG plans do not separately identify plan benefits and plan assets attributable
to employees of participating companies. In the opinion of TRH, no material
additional liability would accrue to TRH were such plan benefits and plan assets
identifiable.

    Under TRH's 1990 Employee Stock Purchase Plan, as amended, all full time
employees with at least two years of employment with the Company or any of its
subsidiaries are eligible to receive privileges to purchase shares of the
Company's Common Stock at a price which is 85% of the fair market value of such
stock on the date of subscription or the date of grant of the purchase
privilege, whichever is greater. An aggregate of 500,000 shares of Common Stock
has been authorized for subscription and 2,893 shares were purchased under the
plan in 1996.

    The charges made to operations for these plans for 1996, 1995 and 1994 were
$678,000, $555,000 and $336,000, respectively.

7. STOCK OPTION PLANS

    In each of 1994 and 1992, the Stock Option and Purchase Plan Committee
granted 20,000 options to certain non-employee directors of the Company who are
also directors, officers and employees of AIG. These options may be used to
purchase shares of the Company's common stock at $51.00 per share and $52.50 per
share for the 1994 and 1992 options, respectively, representing the fair market
value of a share of the Company's common stock at the date of grant. Such
options were granted outside of, but on substantially the same terms and
conditions as, the "Transatlantic Holdings, Inc. 1990 Stock Option Plan" (the
1990 Plan). All of the 1992 options and 10,000 of the 1994 options were
exercisable at December 31, 1996 and as of year-end, none were exercised or
forfeited. The impact of the above options on the financial statements is not
material.

    In 1995, the Company's Board of Directors adopted, and the stockholders
approved, the "1995 Stock Option Plan" (the 1995 Plan) which provides that
options may be granted to certain key employees and non-employee directors to
purchase a maximum of 1,000,000 shares of the Company's common stock at prices
not less than their fair market value at the date of grant. At December 31,
1996, 750,750 shares were reserved for future grants under the 1995 Plan.
Options granted under the plan may be used to purchase the Company's common
stock at the fair market value of each share at the date of grant. The Company
also maintains the 1990 Plan which operates under substantially the same terms
as the 1995 Plan. The 1995 Plan and the 1990 Plan are together hereinafter
referred to as the Company Plans.

    Each of the above plans provide that 25% of the options granted 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 further
options can be granted under the 1990 Plan although options outstanding continue
in force until exercise, expiration or forfeiture.

                                       44
<PAGE>
                 TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. STOCK OPTION PLANS (Continued)
    A summary of the status of the Company Plans as of December 31, 1996, 1995
and 1994 and changes during the years ended on those dates is presented below:

<TABLE>
<CAPTION>
                                             1996                        1995                        1994
                                  --------------------------  --------------------------  --------------------------
<S>                               <C>        <C>              <C>        <C>              <C>        <C>
                                                WEIGHTED                    Weighted                    Weighted
                                   NUMBER        AVERAGE       Number        Average       Number        Average
                                  OF SHARES  EXERCISE PRICE   of Shares  Exercise Price   of Shares  Exercise Price
                                  ---------  ---------------  ---------  ---------------  ---------  ---------------
Outstanding, beginning of
  year..........................    437,079     $   52.47       337,844     $   44.85       322,043     $   41.75
Granted.........................    144,350         77.00       126,125         69.00        96,500         51.00
Exercised.......................    (60,231)        43.34       (20,826)        29.16       (32,324)        26.53
Forfeited.......................    (46,940)        59.78        (6,064)        52.11       (48,375)        48.69
                                  ---------                   ---------                   ---------
Outstanding, end of year........    474,258         60.37       437,079         52.47       337,844         44.85
                                  ---------        ------     ---------        ------     ---------        ------
                                  ---------        ------     ---------        ------     ---------        ------
Exercisable, end of year........    193,615     $   47.00       184,917     $   41.47       130,425     $   36.41
                                  ---------        ------     ---------        ------     ---------        ------
                                  ---------        ------     ---------        ------     ---------        ------
Weighted average fair value of
  options granted during the
  year..........................     $25.42                      $21.65
</TABLE>

    The weighted average fair value of each option grant is estimated on the
date of grant using the "Binomial Option Price Model" with the following
weighted average assumptions used for grants in 1996 and 1995, respectively:
expected volatility of 22.5% in both years; risk-free interest rates of 6.2% and
5.6%; and expected lives of six years for each grant. An increasing dividend
schedule is used in the binomial model based on historical experience.

    The following table summarizes information about the Company Plans'
outstanding and exercisable options at December 31, 1996:

<TABLE>
<CAPTION>
                                                   OPTIONS OUTSTANDING                      OPTIONS EXERCISABLE
                                    -------------------------------------------------  ------------------------------
                                                 WEIGHTED AVERAGE
             RANGE OF                 NUMBER         REMAINING      WEIGHTED AVERAGE     NUMBER     WEIGHTED AVERAGE
         EXERCISE PRICES             OF SHARES   CONTRACTUAL LIFE    EXERCISE PRICE     OF SHARES    EXERCISE PRICE
         ----------------           -----------  -----------------  -----------------  -----------  -----------------
<S>                                 <C>          <C>                <C>                <C>          <C>
$21.63 TO $29.63..................      56,980       4.38 YEARS         $   26.18          56,980       $   26.18
$51.00 TO $54.38..................     168,028       7.10                   52.29         110,410           52.52
$69.00 TO $77.00..................     249,250       9.52                   73.63          26,225           69.00
                                    -----------                                        -----------
$21.63 TO $77.00..................     474,258       8.04                   60.37         193,615           47.00
                                    -----------                                        -----------
                                    -----------                                        -----------
</TABLE>

    The Company accounts for its stock options based on the intrinsic value
method prescribed in APB No. 25 and related interpretations, as permitted under
SFAS No. 123. Had compensation cost been charged to earnings in accordance with
the fair value method discussed in SFAS No. 123, the reduction of the Company's
net income and net income per share (on a pro forma basis) would not have been
material.

    The effects of applying SFAS No. 123 in the pro forma calculations
previously mentioned may not be indicative of future amounts as this standard
does not apply to options granted prior to 1995. Additional grants in future
years are anticipated.

                                       45
<PAGE>
                 TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. RELATED PARTY TRANSACTIONS

    As of December 31, 1996, the AIG Group beneficially owned approximately 49%
of the Company's outstanding common stock.

    TRH has 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 services, office space, data processing and payroll
processing services. In 1996, 1995 and 1994, $8,500,000, $7,700,000 and
$7,600,000, respectively, of operating and investment expenses relate to
services and expenses provided by the AIG Group under these agreements.

    Approximately $232 million (18%), $189 million (17%) and $198 million (21%)
of gross premiums written by TRH in 1996, 1995 and 1994, respectively, were
attributable to reinsurance purchased by the AIG Group, for the production of
which TRH paid ceding commissions to the AIG Group of $33 million, $40 million
and $52 million, respectively, in such years. (See Note 10 for information
relating to reinsurance ceded to related parties.)

9. DIVIDEND RESTRICTION AND STATUTORY FINANCIAL DATA

    The payment of dividends 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 Putnam may pay dividends only
out of their statutory earned surplus. Generally, the maximum amount of
dividends that a company may pay without regulatory approval in any twelve-month
period is the lesser of adjusted net investment income or 10% of statutory
policyholders' surplus as of the end of the most recently reported quarter
unless the New York Insurance Department, upon prior application, approves a
greater dividend distribution. Adjusted net investment income is defined for
this purpose to include net investment income for the twelve months immediately
preceding the declaration or distribution of the current dividend increased by
the excess, if any, of net investment income over dividends declared or
distributed during the period commencing thirty-six months prior to the
declaration or distribution of the current dividend and ending twelve months
prior thereto. At December 31, 1996 and 1995, the statutory surplus of TRC
includes the statutory surplus of Putnam since, during 1995, all the capital
stock of Putnam was contributed by the Company to TRC. Also, at December 31,
1996, TRC had statutory earned surplus of $475,872,000 and, in 1997, could pay
dividends of approximately $95,271,000 without such regulatory approval.

    Statutory surplus and net income as reported to the New York Insurance
Department were as follows:
<TABLE>
<CAPTION>
                                                                                    YEARS ENDED DECEMBER 31,
                                                                               ----------------------------------
<S>                                                                            <C>         <C>         <C>
                                                                                  1996        1995        1994
                                                                               ----------  ----------  ----------

<CAPTION>
                                                                                         (in thousands)
<S>                                                                            <C>         <C>         <C>
TRC
  Statutory surplus..........................................................  $  952,707  $  787,403  $  378,425
  Statutory net income.......................................................     185,887      63,800      55,655

Putnam
  Statutory surplus..........................................................     108,327     164,113     212,505
  Statutory net income.......................................................      12,221      98,497      30,681
</TABLE>

                                       46
<PAGE>
                 TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9. DIVIDEND RESTRICTION AND STATUTORY FINANCIAL DATA (Continued)
    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 Commissioners (NAIC),
as well as in state laws, regulations and general administrative rules.
Permitted statutory accounting practices encompass all accounting practices not
so prescribed. All material statutory accounting practices of TRC and Putnam are
prescribed in the authoritative literature described above.

10. REINSURANCE CEDED

    In the normal course of business, TRH purchases reinsurance from its
retrocessionnaires to reduce the effect of individual or aggregate losses and to
allow increased gross premium writings and afford greater risk capacity without
necessarily 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.

    Premiums written and earned and losses and loss adjustment expenses incurred
are comprised as follows:
<TABLE>
<CAPTION>
                                                                                   YEARS ENDED DECEMBER 31,
                                                                            --------------------------------------
<S>                                                                         <C>           <C>           <C>
                                                                                1996          1995         1994
                                                                            ------------  ------------  ----------

<CAPTION>
                                                                                        (in thousands)
<S>                                                                         <C>           <C>           <C>
Gross premiums assumed....................................................  $  1,315,937  $  1,136,946  $  957,084
                                                                            ------------  ------------  ----------
Reinsurance ceded:
  AIG Affiliates..........................................................        80,755        71,847      58,879
  Other...................................................................        92,667        55,872      31,540
                                                                            ------------  ------------  ----------
                                                                                 173,422       127,719      90,419
                                                                            ------------  ------------  ----------
Net premiums written......................................................  $  1,142,515  $  1,009,227  $  866,665
                                                                            ------------  ------------  ----------
                                                                            ------------  ------------  ----------

Gross premiums earned.....................................................  $  1,317,155  $  1,094,029  $  932,316
                                                                            ------------  ------------  ----------
Reinsurance ceded:
  AIG Affiliates..........................................................        78,698        66,768      58,716
  Other...................................................................       107,824        46,084      22,417
                                                                            ------------  ------------  ----------
                                                                                 186,522       112,852      81,133
                                                                            ------------  ------------  ----------
Net premiums earned.......................................................  $  1,130,633  $    981,177  $  851,183
                                                                            ------------  ------------  ----------
                                                                            ------------  ------------  ----------

Gross incurred losses and loss adjustment expenses........................  $    842,409  $    763,046  $  799,147
Reinsurance ceded.........................................................           898        16,174     117,243
                                                                            ------------  ------------  ----------
Net losses and loss adjustment expenses...................................  $    841,511  $    746,872  $  681,904
                                                                            ------------  ------------  ----------
                                                                            ------------  ------------  ----------
</TABLE>

                                       47
<PAGE>
                 TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. REINSURANCE CEDED (Continued)
    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 loss adjustment expenses. Such balances at December 31, 1996 and 1995
are comprised as follows:
<TABLE>
<CAPTION>
                                                                            1996                    1995
                                                                   ----------------------  ----------------------
<S>                                                                <C>         <C>         <C>         <C>
                                                                      AIG                     AIG
                                                                   AFFILIATES    OTHER     Affiliates    Other
                                                                   ----------  ----------  ----------  ----------

<CAPTION>
                                                                                   (in thousands)
<S>                                                                <C>         <C>         <C>         <C>
Paid.............................................................  $    9,545  $   22,072  $    2,556  $   19,122
Unpaid...........................................................     153,194     183,033     131,770     258,230
                                                                   ----------  ----------  ----------  ----------
  Total..........................................................  $  162,739  $  205,105  $  134,326  $  277,352
                                                                   ----------  ----------  ----------  ----------
                                                                   ----------  ----------  ----------  ----------
</TABLE>

    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 obligation could result in losses to TRH;
consequently, an allowance has been established for estimated unrecoverable
reinsurance on paid and unpaid losses totaling $13.3 million in each of 1996 and
1995. TRH evaluates the financial condition of its retrocessionnaires through a
security committee. With respect to reinsurance recoverable on paid and unpaid
losses and prepaid reinsurance premiums, TRH holds substantial amounts of funds
and letters of credit to collateralize these amounts. Such funds and letters of
credit can be drawn on for amounts remaining unpaid beyond contract terms. No
uncollateralized amounts recoverable from a single retrocessionnaire, other than
amounts due from AIG affiliates, are considered material to the financial
position of TRH.

11. SEGMENT INFORMATION

    A significant portion of TRH's business was conducted in countries other
than the United States. A significant portion of assets and liabilities of TRH's
international operations, other than investments, relate to the countries where
ceding companies and reinsurers of the offices 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.

    The following table is a summary of business by geographic segment. Premium
revenues from certain international operations are derived from many countries,
generally within their respective regions. With respect to London, while a
majority of premium revenues are derived from ceding companies in the United
Kingdom and continental Europe, a significant portion of premium revenues are
also derived from

                                       48
<PAGE>
                 TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. SEGMENT INFORMATION (Continued)
other regions of the world. Allocations among the segments have been made on the
basis of location of operations and assets.

<TABLE>
<CAPTION>
                                                                              INTERNATIONAL
                                                                          ----------------------
                                                              DOMESTIC      EUROPE      OTHER      CONSOLIDATED
                                                            ------------  ----------  ----------  ---------------
<S>                                                         <C>           <C>         <C>         <C>
                                                                               (in thousands)
1996
REVENUES(1)...............................................  $    840,868  $  386,126  $  114,943   $   1,341,937
INCOME BEFORE INCOME TAXES................................       140,750      44,515      11,055         196,320
IDENTIFIABLE ASSETS(2)....................................     3,259,818     788,600     330,723       4,379,141
</TABLE>

<TABLE>
<CAPTION>
                                                                                International
                                                                            ----------------------
                                                                Domestic      Europe      Other     Consolidated
                                                              ------------  ----------  ----------  -------------
<S>                                                           <C>           <C>         <C>         <C>
                                                                                (in thousands)
1995
Revenues(1).................................................  $    841,992  $  224,511  $   98,669   $ 1,165,172
Income before income taxes..................................       121,543      39,107       3,149       163,799
Identifiable assets(2)......................................     3,341,492     287,410     270,065     3,898,967
</TABLE>

<TABLE>
<CAPTION>
                                                                                International
                                                                            ----------------------
                                                                Domestic    Europe(3)     Other     Consolidated
                                                              ------------  ----------  ----------  -------------
<S>                                                           <C>           <C>         <C>         <C>
                                                                                (in thousands)
1994
Revenues(1).................................................  $    807,917  $  139,866  $   71,905   $ 1,019,688
Income before income taxes..................................        99,252      10,901       9,109       119,262
Identifiable assets(2)......................................     3,049,913     187,991     219,875     3,457,779
</TABLE>

------------------------
(1) Revenues represent the sum of net premiums earned, net investment income and
    realized net capital gains.

(2) As of December 31.

(3) In 1994, the Company's only European operations were based in London.

                                       49
<PAGE>
                 TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

    The following is a summary of unaudited quarterly financial data for each of
the years ended December 31, 1996 and 1995. However, in the opinion of
management, all adjustments, consisting of normal recurring accruals, necessary
to present fairly the results of operations for such periods have been made.
<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED
                                           ----------------------------------------------------
<S>                                        <C>          <C>        <C>            <C>
                                            MARCH 31,   JUNE 30,   SEPTEMBER 30,  DECEMBER 31,
                                              1996        1996         1996           1996
                                           -----------  ---------  -------------  -------------

<CAPTION>
                                                  (in thousands, except per share data)
<S>                                        <C>          <C>        <C>            <C>
NET PREMIUMS WRITTEN.....................   $ 251,932   $ 256,996    $ 321,708      $ 311,879
NET PREMIUMS EARNED......................     222,261     257,128      314,356        336,888
NET INVESTMENT INCOME....................      44,859      45,986       51,291         50,500
REALIZED NET CAPITAL GAINS...............       5,274       3,820        4,311          5,263
OPERATING INCOME.........................      45,739      47,352       50,454         53,973
NET INCOME...............................      36,230      37,759       39,561         41,310
NET INCOME PER COMMON SHARE..............        1.58        1.64         1.72           1.80
<CAPTION>

                                                            Three Months Ended
                                           ----------------------------------------------------
                                            March 31,   June 30,   September 30,  December 31,
                                              1995        1995         1995           1995
                                           -----------  ---------  -------------  -------------
                                                  (in thousands, except per share data)
<S>                                        <C>          <C>        <C>            <C>
Net premiums written.....................   $ 225,890   $ 232,513    $ 278,815      $ 272,009
Net premiums earned......................     225,300     232,663      252,445        270,769
Net investment income....................      41,521      42,864       43,652         44,839
Realized net capital gains...............       2,643       2,678        2,708          3,090
Operating income.........................      37,829      39,827       43,440         44,224
Net income...............................      30,512      32,591       34,484         34,271
Net income per common share..............        1.33        1.42         1.50           1.50
</TABLE>

                                       50
<PAGE>
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, 1996.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    Information required by this Item concerning directors of the Company is
included in the Company's Proxy Statement for the 1997 Annual Meeting of
Stockholders, filed with the Securities and Exchange Commission within 120 days
after the end of the Company's fiscal year (the "1997 Proxy Statement"), in the
section captioned "Election of Directors," and such information is incorporated
herein by reference. Information required by this Item concerning the executive
officers of the Company is included in Part I of this Annual Report on Form 10-K
under the section captioned "Directors and Executive Officers of the
Registrant". Information required by this Item concerning compliance with
Section 16(a) of the Securities Exchange Act of 1934, as amended, is included in
the 1997 Proxy Statement under the caption "Election of Directors: 'Ownership of
Certain Securities' ", and such information is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

    Information required by this Item is included in the 1997 Proxy Statement in
the sections captioned "Election of Directors: 'Compensation of Directors and
Executive Officers', 'Compensation Committee Interlocks and Insider
Participation' and 'Pension Benefits' ", and such information is incorporated
herein by reference. The sections of the 1997 Proxy Statement captioned
"Election of Directors: 'Committee Reports on Executive Compensation' and
'Performance Graph' " are not incorporated by reference herein.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    Information required by this Item is included in the 1997 Proxy Statement in
the sections captioned "Beneficial Ownership" and "Election of Directors:
'Ownership of Certain Securities' ", and such information is incorporated herein
by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    Information required by this Item is included in the 1997 Proxy Statement in
the section captioned "Election of Directors: 'Compensation Committee Interlocks
and Insider Participation', 'Relationship with AIG', 'AIG Group Reinsurance',
'Certain Transactions with the AIG Group' and 'Relationship with SICO and
Starr' ", and such information is incorporated herein by reference.

                                       51
<PAGE>
                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

    (a) FINANCIAL STATEMENTS AND EXHIBITS

        1. Financial Statements and Schedules
          See accompanying Index to Consolidated Financial Statements in Item 8.
    Schedules not included in the accompanying index have been omitted because
    they are not applicable.

        2. Exhibits

<TABLE>
<S>        <C>        <C>
                11.1  --Computation of Earnings Per Share for the Years Ended December 31, 1996,
                        1995 and 1994.
                21.1  --Subsidiaries of Registrant.
                23.1  --Consent of Coopers & Lybrand L.L.P.
                27.0  --Financial Data Schedule.
           See accompanying Exhibit Index for additional Exhibits incorporated by reference.
</TABLE>

    (b) REPORTS ON FORM 8-K

          No reports on Form 8-K were filed during the last quarter of 1996.

                                       52
<PAGE>
                                   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
 March 20, 1997

    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.
<TABLE>
<CAPTION>
                     SIGNATURE                                         TITLE                          DATE
---------------------------------------------------  -----------------------------------------  -----------------

<C>                                                  <S>                                        <C>
               /s/ ROBERT F. ORLICH                  President and Chief Executive Officer         March 20, 1997
 ...................................................    (principal executive officer); Director
                  Robert F. Orlich

              /s/ STEVEN S. SKALICKY                 Senior Vice President and Controller          March 20, 1997
 ...................................................    (principal financial and accounting
                 Steven S. Skalicky                    officer)

                  /s/ JAMES BALOG                    Director                                      March 20, 1997
 ...................................................
                    James Balog

                 /s/ IKUO EGASHIRA                   Director                                      March 20, 1997
 ...................................................
                   Ikuo Egashira

 ...................................................  Director
                   John M. Fowler

                /s/ M. R. GREENBERG                  Director                                      March 20, 1997
 ...................................................
                  M. R. Greenberg

               /s/ JOHN J. MACKOWSKI                 Director                                      March 20, 1997
 ...................................................
                 John J. Mackowski

              /s/ EDWARD E. MATTHEWS                 Director                                      March 20, 1997
 ...................................................
                 Edward E. Matthews

                /s/ HOWARD I. SMITH                  Director                                      March 20, 1997
 ...................................................
                  Howard I. Smith

               /s/ THOMAS R. TIZZIO                  Director                                      March 20, 1997
 ...................................................
                  Thomas R. Tizzio
</TABLE>

                                       53
<PAGE>
                                                                      SCHEDULE I

                 TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
       SUMMARY OF INVESTMENTS--OTHER THAN INVESTMENTS IN RELATED PARTIES
                            AS OF DECEMBER 31, 1996

<TABLE>
<CAPTION>
                                                                                                       AMOUNT AT
                                                                                                      WHICH SHOWN
                                                                            COST OR                      IN THE
                                                                           AMORTIZED       MARKET       BALANCE
     TYPE OF INVESTMENT                                                      COST*         VALUE         SHEET
------------------------------------------------------------------------  ------------  ------------  ------------
<S>                                                                       <C>           <C>           <C>
                                                                                       (in thousands)
Fixed maturities:
  Bonds:
    United States government and government agencies and authorities....  $    524,621  $    531,818   $  531,540
    States, foreign and domestic municipalities and political
      subdivisions......................................................     1,703,154     1,782,378    1,725,076
    Foreign governments.................................................       377,821       386,842      386,842
    Public utilities....................................................        85,158        84,425       84,425
    All other corporate.................................................       318,653       332,927      332,927
                                                                          ------------  ------------  ------------
        Total fixed maturities..........................................     3,009,407     3,118,390    3,060,810
                                                                          ------------  ------------  ------------
Equities:
  Common stocks:
    Public utilities....................................................         9,173        10,781       10,781
    Banks, trust and insurance companies................................        36,912        52,877       52,877
    Industrial, miscellaneous and all other.............................       243,853       323,065      323,065
                                                                          ------------  ------------  ------------
        Total common stocks.............................................       289,938       386,723      386,723
  Nonredeemable preferred stocks........................................         6,276         5,642        5,642
                                                                          ------------  ------------  ------------
        Total equities..................................................       296,214       392,365      392,365
                                                                          ------------  ------------  ------------
Short-term investments..................................................        59,191        59,191       59,191
                                                                          ------------  ------------  ------------
        Total investments...............................................  $  3,364,812  $  3,569,946   $3,512,366
                                                                          ------------  ------------  ------------
                                                                          ------------  ------------  ------------
</TABLE>

------------------------

* Investments in fixed maturities are shown at amortized cost.

                                      S-1
<PAGE>
                                                                     SCHEDULE II

                 TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
                 CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                 BALANCE SHEETS
                             (PARENT COMPANY ONLY)
                        AS OF DECEMBER 31, 1996 AND 1995

<TABLE>
<CAPTION>
                                                                                              1996         1995
                                                                                          ------------  ----------
<S>                                                                                       <C>           <C>
                                                                                               (in thousands)
Assets:
  Bonds available for sale, at market value (amortized cost: 1996--$7,548;
    1995--$4,638).......................................................................  $      7,581  $    4,782
  Cash and cash equivalents.............................................................           276         286
  Investment in subsidiaries............................................................     1,129,658     983,464
  Other assets..........................................................................           748         469
  Dividends due from subsidiaries.......................................................         3,111       2,756
                                                                                          ------------  ----------
      Total assets......................................................................  $  1,141,374  $  991,757
                                                                                          ------------  ----------
                                                                                          ------------  ----------

Liabilities:
  Dividends payable.....................................................................  $      3,113  $    2,751
  Accrued liabilities...................................................................           955         504
                                                                                          ------------  ----------
      Total liabilities.................................................................         4,068       3,255
                                                                                          ------------  ----------

Stockholders' equity:
  Preferred Stock.......................................................................            --          --
  Common Stock..........................................................................        23,813      23,750
  Additional paid-in capital............................................................       201,930     199,243
  Net unrealized appreciation of investments, net of deferred income taxes
    (1996--$51,644; 1995--$50,359)......................................................        95,910      93,525
  Net unrealized currency translation gain..............................................         2,596       2,392
  Retained earnings.....................................................................       823,057     679,592
  Treasury Stock, at cost; 800,000 shares...............................................       (10,000)    (10,000)
                                                                                          ------------  ----------
      Total stockholders' equity........................................................     1,137,306     988,502
                                                                                          ------------  ----------
      Total liabilities and stockholders' equity........................................  $  1,141,374  $  991,757
                                                                                          ------------  ----------
                                                                                          ------------  ----------
</TABLE>

  See Notes to Condensed Financial Information of Registrant--(Parent Company
                                     Only)

                                      S-2
<PAGE>
                                                                     SCHEDULE II

                 TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
           CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)
                            STATEMENTS OF OPERATIONS
                             (PARENT COMPANY ONLY)
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
                                                                                  1996        1995        1994
                                                                               ----------  ----------  ----------
<S>                                                                            <C>         <C>         <C>
                                                                                         (in thousands)
Revenues:
  Net investment income (principally dividends from subsidiaries)............  $   12,426  $   10,909  $    9,825
  Equity in undistributed income of subsidiaries.............................     143,536     122,014      92,543
                                                                               ----------  ----------  ----------
      Total revenues.........................................................     155,962     132,923     102,368

Operating expenses...........................................................       1,493       1,498       1,058
                                                                               ----------  ----------  ----------
Income before income taxes...................................................     154,469     131,425     101,310
Income tax benefits--current.................................................        (391)       (433)       (317)
                                                                               ----------  ----------  ----------
      Net income.............................................................  $  154,860  $  131,858  $  101,627
                                                                               ----------  ----------  ----------
                                                                               ----------  ----------  ----------
</TABLE>

  See Notes to Condensed Financial Information of Registrant--(Parent Company
                                     Only)

                                      S-3
<PAGE>
                                                                     SCHEDULE II

                 TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
           CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Continued)
                            STATEMENTS OF CASH FLOWS
                             (PARENT COMPANY ONLY)
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
                                                                                   1996        1995        1994
                                                                                ----------  ----------  ----------
<S>                                                                             <C>         <C>         <C>
                                                                                          (in thousands)
Cash flows from operating activities:
  Net income..................................................................  $  154,860  $  131,858  $  101,627
                                                                                ----------  ----------  ----------
  Adjustments to reconcile net income to net cash provided by operating
    activities:
    Equity in undistributed income of subsidiaries............................    (143,536)   (122,014)    (92,543)
    Changes in receivable and payable to subsidiary, net......................           7        (464)       (232)
    Changes in other assets and accrued liabilities...........................         221         388        (247)
                                                                                ----------  ----------  ----------
        Total adjustments.....................................................    (143,308)   (122,090)    (93,022)
                                                                                ----------  ----------  ----------
        Net cash provided by operating activities.............................      11,552       9,768       8,605
                                                                                ----------  ----------  ----------
Cash flows from investing activities:
  Purchase of bonds...........................................................      (2,917)     (2,239)       (564)
                                                                                ----------  ----------  ----------
        Net cash used in investing activities.................................      (2,917)     (2,239)       (564)
                                                                                ----------  ----------  ----------
Cash flows from financing activities:
  Dividends to stockholders...................................................     (11,395)     (9,176)     (8,245)
  Proceeds from common stock issued...........................................       2,750         703         977
                                                                                ----------  ----------  ----------
        Net cash from financing activities....................................      (8,645)     (8,473)     (7,268)
                                                                                ----------  ----------  ----------
        Change in cash and cash equivalents...................................         (10)       (944)        773
Cash and cash equivalents, beginning of year..................................         286       1,230         457
                                                                                ----------  ----------  ----------
Cash and cash equivalents, end of year........................................  $      276  $      286  $    1,230
                                                                                ----------  ----------  ----------
                                                                                ----------  ----------  ----------
</TABLE>

------------------------

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.

                                      S-4
<PAGE>
                                                                    SCHEDULE III

                 TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
                      SUPPLEMENTARY INSURANCE INFORMATION
      AS OF DECEMBER 31, 1996, 1995 AND 1994 AND FOR THE YEARS THEN ENDED
<TABLE>
<CAPTION>
                                      UNPAID LOSSES                                                NET LOSSES    NET COMMISSIONS
                          DEFERRED       AND LOSS                                       NET         AND LOSS      AND CHANGE IN
                         ACQUISITION    ADJUSTMENT      UNEARNED     NET PREMIUMS    INVESTMENT    ADJUSTMENT       DEFERRED
                            COSTS        EXPENSES       PREMIUMS        EARNED         INCOME       EXPENSES    ACQUISITION COSTS
                         -----------  --------------  ------------  --------------  ------------  ------------  -----------------
<S>                      <C>          <C>             <C>           <C>             <C>           <C>           <C>
                                                                      (in thousands)
1996
  PROPERTY-CASUALTY....   $  58,700   $    2,733,055  $    343,936  $    1,130,633  $    192,636  $    841,511    $     267,186

1995
  Property-Casualty....   $  47,200   $    2,388,155  $    291,568  $      981,177  $    172,876  $    746,872    $     224,651

1994
  Property-Casualty....   $  37,300   $    2,167,316  $    249,098  $      851,183  $    153,594  $    681,904    $     187,507

<CAPTION>

                           OTHER
                         OPERATING    NET PREMIUMS
                          EXPENSES      WRITTEN
                         ----------  --------------
<S>                      <C>         <C>

1996
  PROPERTY-CASUALTY....  $   35,722  $    1,142,515

1995
  Property-Casualty....  $   28,329  $    1,009,227

1994
  Property-Casualty....  $   27,732  $      866,665
</TABLE>

                                      S-5
<PAGE>
                                                                     SCHEDULE IV

                 TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
                                  REINSURANCE
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

<TABLE>
<CAPTION>
                                                                                                              PERCENTAGE
                                                                       CEDED       ASSUMED                     OF AMOUNT
                                                                     TO OTHER     FROM OTHER                    ASSUMED
                                                     GROSS AMOUNT    COMPANIES    COMPANIES     NET AMOUNT      TO NET
                                                     -------------  -----------  ------------  ------------  -------------
<S>                                                  <C>            <C>          <C>           <C>           <C>
                                                                                (in thousands)
1996
  PREMIUMS WRITTEN:
    PROPERTY-CASUALTY..............................           --     $ 173,422   $  1,315,937  $  1,142,515          115%

1995
  Premiums written:
    Property-Casualty..............................           --     $ 127,719   $  1,136,946  $  1,009,227          113%

1994
  Premiums written:
    Property-Casualty..............................           --     $  90,419   $    957,084  $    866,665          110%
</TABLE>

                                      S-6
<PAGE>
                                                                     SCHEDULE VI

                 TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
                      SUPPLEMENTARY INFORMATION CONCERNING
                     PROPERTY/CASUALTY INSURANCE OPERATIONS
      AS OF DECEMBER 31, 1996, 1995 AND 1994 AND FOR THE YEARS THEN ENDED
<TABLE>
<CAPTION>
                                                                                           NET LOSSES AND LOSS
                                                                                           ADJUSTMENT EXPENSES
                          UNPAID                                                                                  NET PAID
                          LOSSES                                                                RELATED TO       LOSSES AND
            DEFERRED     AND LOSS     DISCOUNT                     NET           NET       --------------------     LOSS
           ACQUISITION  ADJUSTMENT     IF ANY      UNEARNED     PREMIUMS     INVESTMENT     CURRENT     PRIOR    ADJUSTMENT
              COSTS      EXPENSES     DEDUCTED     PREMIUMS      EARNED        INCOME        YEAR       YEARS     EXPENSES
           -----------  -----------  -----------  -----------  -----------  -------------  ---------  ---------  -----------
<S>        <C>          <C>          <C>          <C>          <C>          <C>            <C>        <C>        <C>
                                                                          (in thousands)
1996        $  58,700   $ 2,733,055      --        $ 343,936   $ 1,130,633    $ 192,636    $ 849,235  $  (7,724)  $ 620,029

1995        $  47,200   $ 2,388,155      --        $ 291,568   $   981,177    $ 172,876    $ 750,326  $  (3,454)  $ 488,466

1994        $  37,300   $ 2,167,316      --        $ 249,098   $   851,183    $ 153,594    $ 666,932  $  14,972   $ 457,913

<CAPTION>

           NET COMMISSIONS
            AND CHANGE IN
               DEFERRED          NET
             ACQUISITION      PREMIUMS
                COSTS          WRITTEN
           ----------------  -----------
<S>        <C>               <C>

1996          $  267,186     $ 1,142,515

1995          $  224,651     $ 1,009,227

1994          $  187,507     $   866,665
</TABLE>

                                      S-7
<PAGE>
                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
 EXHIBIT
   NO.                        DESCRIPTION                                           LOCATION
---------  --------------------------------------------------  --------------------------------------------------
<C>        <S>                                                 <C>
    3.1    --Certificate of Incorporation, as amended........  Filed as exhibit to the Company's Registration
                                                                 Statement (File No. 33-34433) and incorporated
                                                                 herein by reference.
    3.2    --By-Laws.........................................  Filed as exhibit to the Company's Registration
                                                                 Statement (File No. 33-34433) 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.
   10.1    --Amended and Restated Shareholders Agreement
             among American Express Company, Gulf Insurance
             Company, The Lambert Brussels Financial
             Corporation, Stoneridge Limited, Mavron Ltd.,
             American International Group, Inc., American
             Home Assurance Company, Metropolitan Life
             Insurance Company, certain trustees under an
             Indenture of Trust made by SwissRe Holding
             Limited, SwissRe Holding Limited, General Re
             Corporation, Compagnie Financiere et de
             Reassurance du Groupe AG, Daido Mutual Life
             Insurance Company, The Nichido Fire and Marine
             Insurance Company, Limited, Transatlantic Rein-
             surance Company, and PREINCO Holdings, Inc.,
             dated January 5, 1990...........................  Filed as exhibit to the Company's Registration
                                                                 Statement (File No. 33-34433) and incorporated
                                                                 herein by reference.
   10.2    --Exclusive Agency Agreement between Transatlantic
             Reinsurance Company and American Home Assurance
             Company, dated February 27, 1980................  Filed as exhibit to the Company's Registration
                                                                 Statement (File No. 33-34433) and incorporated
                                                                 herein by reference.
   10.3    --Service and Expense Agreement among PREINCO
             Holdings, Inc., Putnam Reinsurance Company, and
             American International Group, Inc. dated July 1,
             1986............................................  Filed as exhibit to the Company's Registration
                                                                 Statement (File No. 33-34433) and incorporated
                                                                 herein by reference.
   10.4    --Service and Expense Agreement between
             Transatlantic Reinsurance Company and American
             International Group, Inc., dated December 15,
             1977............................................  Filed as exhibit to the Company's Registration
                                                                 Statement (File No. 33-34433) and incorporated
                                                                 herein by reference.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT
   NO.                        DESCRIPTION                                           LOCATION
---------  --------------------------------------------------  --------------------------------------------------
<C>        <S>                                                 <C>
   10.5    --Investment Management Contract between
             Transatlantic Reinsurance Company and AIG Global
             Investors, Inc. dated August 1, 1986............  Filed as exhibit to the Company's Registration
                                                                 Statement (File No. 33-34433) and incorporated
                                                                 herein by reference.
   10.6    --Investment Management Contract between Putnam
             Reinsurance Company and AIG Global Investors,
             Inc. dated August 1, 1986.......................  Filed as exhibit to the Company's Registration
                                                                 Statement (File No. 33-34433) and incorporated
                                                                 herein by reference.
   10.7    --Transatlantic Holdings, Inc. 1990 Stock Option
             Plan*...........................................  Filed as exhibit to the Company's Registration
                                                                 Statement (File No. 33-34433) and incorporated
                                                                 herein by reference.
  10.7(a)  --Transatlantic Holdings, Inc. 1990 Employee Stock
             Purchase Plan*..................................  Filed as exhibit to the Company's Registration
                                                                 Statement (File No. 33-41474) and incorporated
                                                                 herein by reference.
  10.7(b)  --Amended Transatlantic Holdings, Inc. 1990 Stock
             Option Plan*....................................  Filed as exhibit to the Company's 1992 Quarterly
                                                                 Report on Form 10-Q for the quarter ended June
                                                                 30, 1992 (File No. 1-10545) and incorporated
                                                                 herein by reference.
  10.7(c)  --Transatlantic Holdings, Inc. 1995 Stock Option
             Plan and form of Director Option Agreement*.....  Filed as exhibits to the Company's Registration
                                                                 Statement on Form S-8 (File No. 33-99764) and
                                                                 incorporated herein by reference.
  10.7(d)  --Amendment to Transatlantic Holdings, Inc. 1990
             Employee Stock Purchase Plan, effective as of
             December 7, 1995*...............................  Filed as exhibit to the Company's Current Report
                                                                 on Form 8-K (File No. 1-10545) dated January 31,
                                                                 1996, and incorporated herein by reference.
   10.8    --Transatlantic Reinsurance Company 1989 Stock
             Option Plan*....................................  Filed as exhibit to the Company's Registration
                                                                 Statement (File No. 33-34433) and incorporated
                                                                 herein by reference
   10.9    --Transatlantic Reinsurance Company 1984 Stock
             Option Plan*....................................  Filed as exhibit to the Company's Registration
                                                                 Statement (File No. 33-34433) and incorporated
                                                                 herein by reference.
   10.10   --Transatlantic Reinsurance Company 1979 Stock
             Option Plan*....................................  Filed as exhibit to the Company's Registration
                                                                 Statement (File No. 33-34433) and incorporated
                                                                 herein by reference.


</TABLE>
            ------------------------------
            * Management compensation plan

<PAGE>

<TABLE>

<CAPTION>
<C>        <S>                                                 <C>
 EXHIBIT
   NO.                        DESCRIPTION                                           LOCATION
---------  --------------------------------------------------  --------------------------------------------------
   10.11   --Quota Share Reinsurance Treaty between National
             Union Fire Insurance Company of Pittsburgh, Pa.
             and Transatlantic Reinsurance Company, dated
             June 5, 1978....................................  Filed as exhibit to the Company's Registration
                                                                 Statement (File No. 33-34433) and incorporated
                                                                 herein by reference.
   10.12   --Quota Share Reinsurance Treaty between New
             Hampshire Insurance Company and Transatlantic
             Reinsurance Company, dated February 9, 1978.....  Filed as exhibit to the Company's Registration
                                                                 Statement (File No. 33-34433) and incorporated
                                                                 herein by reference.
   10.13   --Quota Share Reinsurance Treaty between American
             International Underwriters Overseas Ltd. and
             Transatlantic Reinsurance Company, dated
             September 22, 1978..............................  Filed as exhibit to the Company's Registration
                                                                 Statement (File No. 33-34433) and incorporated
                                                                 herein by reference.
   10.14   --Surplus Treaty between American International
             Group Companies and Transatlantic Reinsurance
             Company, dated September 29, 1989...............  Filed as exhibit to the Company's Registration
                                                                 Statement (File No. 33-34433) and incorporated
                                                                 herein by reference.
   10.15   --Quota Share Reinsurance Treaty among Lexington
             Insurance Company, Landmark Insurance Company,
             New Hampshire Insurance Company and
             Transatlantic Reinsurance Company, dated
             February 28, 1990...............................  Filed as exhibit to the Company's Registration
                                                                 statement (File No. 33-34433) and incorporated
                                                                 herein by reference.
   10.16   --Representative Facultative Insurance Certif-
             icate for Casualty Reinsurance Risk (Certif-
             icate between National Union Fire Insurance
             Company of Pittsburgh, Pa. and Transatlantic
             Reinsurance Company, dated January 9, 1990).....  Filed as exhibit to the Company's Registration
                                                                 Statement (File No. 33-34433) and incorporated
                                                                 herein by reference.
   10.17   --Representative Facultative Insurance Certif-
             icate for Property Reinsurance Risk (Certif-
             icate between American Home Assurance Company
             and Transatlantic Reinsurance Company, dated
             March 7, 1990)..................................  Filed as exhibit to the Company's Registration
                                                                 Statement (File No. 33-34433) and incorporated
                                                                 herein by reference.
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<TABLE>
<CAPTION>
 EXHIBIT
   NO.                        DESCRIPTION                                           LOCATION
---------  --------------------------------------------------  --------------------------------------------------
<C>        <S>                                                 <C>
   10.18   --Agreement between American International Group,
             Inc. and Transatlantic Reinsurance Company,
             dated December 15, 1977, providing Transatlantic
             Reinsurance Company with a right of first
             acceptance of reinsurance of risks insured by
             affiliates of American International Group,
             Inc. ...........................................  Filed as exhibit to the Company's Registration
                                                                 Statement (File No. 33-34433) and incorporated
                                                                 herein by reference.
   10.19   --Aggregate Excess Treaty between Transatlantic
             Reinsurance Company and National Union Fire
             Insurance Company of Pittsburgh, Pa., dated
             November 15, 1989...............................  Filed as exhibit to the Company's Registration
                                                                 Statement (File No. 33-34433) and incorporated
                                                                 herein by reference.
   10.20   --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.
   10.21   --Quota Share Reinsurance Agreement between
             Transtlantic 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.
   11.1    --Statement re computation of per share
             earnings........................................  Filed herewith.
   21.1    --Subsidiaries of the registrant..................  Filed herewith.
   23.1    --Consent of Coopers & Lybrand L.L.P. ............  Filed herewith.
   27.0    --Financial Data Schedule.........................  Provided herewith.
</TABLE>