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                                                                    EXHIBIT 13.1
IPC HOLDINGS, LTD. AND SUBSIDIARIES
PORTIONS OF ANNUAL REPORT


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

The following is a discussion of the results of operations and financial
position of IPC Holdings, Ltd. References to "we", "our" or "IPC" mean IPC
Holdings together with its wholly-owned subsidiaries, IPCRe Limited ("IPCRe"),
and IPCRe Services Limited. This discussion should be read in conjunction with
our Consolidated Financial Statements and related notes, for the year ended
December 31, 2000.

GENERAL

        We commenced operations in July 1993. Because of the volatile nature of
property catastrophe reinsurance, the financial data included in this discussion
are not necessarily indicative of our future financial condition or results of
operations.

        In our discussion below, when we refer to written premiums, we include
new and renewal business, reinstatement premiums and premium adjustments on
current and prior year contracts. Renewal dates for property catastrophe
reinsurance policies are generally concentrated in the first quarter of each
calendar year. Generally, about 60% (by volume) of premiums we write each year
are for contracts which have effective dates in January, about 20% in April,
about 10% in July, and the remainder at other times throughout the year.
Premiums are generally due in installments over the contract term, with each
installment generally received within 30 days after the due date. Premiums are
earned on a pro rata basis over the contract period, which is generally twelve
months.

        Property catastrophe reinsurers tend to experience significant
fluctuations in operating results because of, among other factors, competition,
frequency of occurrence or severity of catastrophic events, changes in levels of
underwriting capacity, and general economic conditions. Underwriting results of
primary property insurers and prevailing general economic conditions
significantly influence demand for reinsurance. After suffering from
deteriorating financial results because of increased severity or frequency of
claims, some primary insurers seek to protect their balance sheets or improve
their future earnings by purchasing more reinsurance. The supply of reinsurance
is related to prevailing prices, the levels of insured losses and the level of
industry capital which, in turn, may fluctuate in response to changes in rates
of return on investments being earned in the reinsurance industry. As a result
of these factors, the property catastrophe reinsurance business is a cyclical
industry characterized by both periods of intense price competition due to
excessive underwriting capacity and periods when shortages of capacity permit
favourable premium levels. Since underwriting capacity reflects the amount of
shareholders' investment (also known as "policyholders' surplus" in mutual
companies), increases in the frequency and severity of losses suffered by
insurers can significantly affect these cycles. Conversely, the absence of
severe or frequent catastrophic events could result in declining premium rates
in the global market. We have experienced and expect to continue to experience,
the effects of both types of cyclicality.

        Events from 1996 to 2000 demonstrate the volatility of catastrophe
reinsurance business. In 1996, 1997 and 2000, few catastrophic events occurred.
Consequently, few claims were made on IPCRe. Conversely, many catastrophic
events occurred in 1998 and 1999 in many parts of the world, including Hurricane
Georges (estimated industry-wide insured losses in excess of U.S.$4 billion), a
hailstorm which struck Sydney, Australia (U.S.$1.6 billion), Hurricane Floyd
(U.S.$2.2 billion) and cyclones Anatol, Lothar and Martin that struck several
parts of Europe in December, 1999 (in excess of U.S.$9 billion).

        From 1996 to 1999, there was an increase in the supply of reinsurance
capacity, which caused downward pressure on pricing. For the January 1998 and
1999 renewal cycles, premium rates declined by an average of 15% and 10%,
respectively. For the January 2000 renewal cycle, due to the increased levels of
claim activity, premium rates were at a similar level to 1999, with some
contracts having small rate increases, while others had minor decreases. Because
of the significant losses incurred by many reinsurers during 2000 as a result of
events in late 1999, there has been a contraction of capacity during 2000, with
the result that renewals during the fourth quarter of 2000 and the first quarter
of 2001 have seen premium rates increasing by between 10% and 20%, on average.

RESULTS OF OPERATIONS

        YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

        In the twelve months ended December 31, 2000, IPCRe wrote gross premiums
of $93.8 million, compared to $97.2 million and $111.3 million written in the
years ended December 31, 1999 and 1998, respectively. These writings included
reinstatement premiums, which are premiums paid by ceding companies to reinstate
reinsurance coverage following a claim. Reinstatement premiums were $2.1
million, $9.8 million and $6.3 million, for the


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years ended December 31, 2000, 1999 and 1998, respectively. Also, in both 2000
and 1999, IPCRe had increased participation and additional business from
existing clients, and selectively wrote business for new clients. In 1999, these
increases were more than offset by rate reductions, generally in the range of
10%, but as high as 15% in some cases. In addition, during 2000 IPCRe decided
not to renew some contracts with unsatisfactory rates or terms.

        Our written premiums were further affected in 2000 and 1999 by cessions
of premiums to a proportional reinsurance facility, which became effective
January 1, 1999. (See Note 5 to the Consolidated Financial Statements - "Ceded
Reinsurance".) In the years ended December 31, 2000 and 1999, premiums ceded to
this facility were $4.8 million and $3.8 million, respectively, reducing net
premium writings for those years to $88.9 million and $93.3 million,
respectively, compared to $111.3 million in 1998. This represents reductions of
net written premiums of 4.7% and 16.1%.

        Premiums earned were $87.0 million, $95.0 million and $120.1 million in
the years ended December 31, 2000, 1999 and 1998, respectively, representing
reductions of 8.4% and 20.9%. Earned premiums declined as a result of the
decrease in net written premiums, but also changed disproportionately to written
premiums, primarily because some contracts written in 1999 had policy periods
greater than twelve months. Excluding reinstatement premiums, which are fully
earned when written, net premiums earned declined by 25.2% from $113.8 million
in the year ended December 31, 1998 to $85.1 million in the year ended December
31, 1999, and then declined a further 0.4% to $84.8 million in 2000.

        We earned net investment income of $31.1 million in the year ended
December 31, 2000 compared to $30.3 million earned in the year ended December
31, 1999, and $30.1 million in the year ended December 31, 1998. These amounts
are net of investment expenses, which were primarily investment management and
custodial fees payable to subsidiaries of American International Group, Inc.
("AIG"). (See Note 9 to the Consolidated Financial Statements - "Related Party
Transactions".) These fees totaled $1.6 million, $1.6 million and $1.4 million
in the years ended December 31, 2000, 1999 and 1998, respectively. The increase
in net investment income from 1999 to 2000 resulted from a higher average
overall yield on investments of 5.2% in 2000, compared to 5.1% the prior year.
In 1999, the increase in investment income over 1998 was due to a higher average
investment asset base, which increased 4.9% from $569.4 million during 1998 to
$597.4 million during 1999. This increase was offset in part by a lower average
yield of approximately 5.1%, compared to the average yield of 5.3% in 1998. At
December 31, 2000 the portfolio consisted of high quality, fixed maturity
investments, and shares of stock in the companies which comprise the S & P 500.

        With respect to net realized gains from the sale of investments, we had
a $0.5 million gain for the year ended December 31, 2000, compared to gains of
$30.4 million and $7.0 million for the years ended December 31, 1999 and 1998,
respectively. In May, 1999, we realized substantial gains from the sale, and
subsequent repurchase, of our equity portfolio. Net gains and losses generally
fluctuate from period to period, depending on the securities sold, as
recommended by our investment advisor. Net unrealized gains on our investment
portfolio (see Note 3 to the Consolidated Financial Statements - "Investments")
were $4.6 million at December 31, 2000, compared to net unrealized losses of
$(5.4) million at December 31, 1999, and net unrealized gains of $30.9 million
at December 31, 1998. The increases in value in 2000 were primarily the result
of changes in intermediate term interest rates.

        Losses and loss adjustment expenses incurred were $53.7 million, $129.4
million and $61.5 million in the years ended December 31, 2000, 1999 and 1998,
respectively. The level of insured losses from catastrophic events around the
world declined significantly in 2000, compared to the high frequency and
severity of events during 1999 and 1998. However, much of the incurred losses in
2000 were the result of prior year events, which occurred in the latter portion
of 1999.

During 1999, significant catastrophes included:

        -       The explosion at the Rouge Industries steel mill in Michigan in
                March;
        -       An April hailstorm in Sydney which caused a record amount of
                insured losses for Australia;
        -       Record-breaking losses from tornadoes in the mid-Western United
                States in May;
        -       Earthquakes in Turkey and Taiwan;
        -       Various hurricanes, most notably Hurricane Floyd in September;
        -       Typhoon Bart in Japan in late September;
        -       Windstorm Anatol in Scandinavia in December;
        -       Cyclones Lothar and Martin which hit France and other parts of
                western Europe, in late December.

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In 1998, catastrophic events included:

        -       Icestorms in the U.S. and Canada in January;
        -       Floods in the U.K. in April;
        -       Various windstorms in the U.S. in May and June, including
                Cat.#51;
        -       Hurricanes Bonnie, Georges and Mitch;
        -       Typhoons which struck both Korea and Japan;
        -       A cyclone which struck India; and
        -       Two satellite failures.

        In 2000, the only major events which resulted in claims for IPC were an
explosion at the Kuwait National Petroleum refinery, a satellite loss and the
winter floods and storms which affected parts of Europe. These events resulted
in incurred losses of approximately $4.6 million in 2000. All other events in
2000 produced incurred losses totalling $8.9 million. The balance of the losses
we incurred in 2000 were the result of the development of claims from prior year
events, in particular Cyclones Lothar and Martin, claims from which saw
development of approximately $23 million. Of our net incurred losses in 1999,
$35 million related to the Sydney hailstorm, $35 million to the European
windstorms in December, and $11 million to Hurricane Floyd. In 1998, $24.0
million related to Hurricane Georges. Other losses for 1999 and 1998 resulted
from various other natural and man-made disasters, as well as from the
development of claims from current and prior year marine and aviation business.
Loss payments during the years ended December 31, 2000, 1999 and 1998 were $96.8
million, $74.3 million and $37.4 million, respectively. Our loss and loss
expense ratio (the ratio of losses and loss adjustment expenses incurred to
premiums earned) for 2000 was 61.7%, compared to 136.2% in 1999 and 51.2% in
1998.

        Acquisition costs, which are typically a percentage of premiums written,
consist primarily of commissions and brokerage fees paid to intermediaries for
the production of premiums written, and excise taxes. Brokerage commissions on
property catastrophe excess of loss contracts typically range from 5% to 10% of
written premiums. Acquisition costs incurred were $9.0 million, $13.0 million
and $17.0 million for the years ended December 31, 2000, 1999 and 1998,
respectively, after deferring those costs related to the unearned portion of
premiums written. These represent decreases of 30.5% and 23.2% during 2000 and
1999, respectively. The reductions are due, primarily, to the reductions in
earned premiums. In addition, certain contracts contain profit commission
clauses or "no claims" bonuses, which return a portion of the net underwriting
profits generated from those contracts as a commission to the reinsureds. With
the increase in claims activity in 1999, accruals for these commissions were
significantly reduced. Also, in 2000, we reduced an accrual for brokerage which
had been based on overly conservative assumptions.

        General and administrative expenses were $9.3 million, $9.6 million and
$10.7 million for the years ended December 31, 2000, 1999 and 1998,
respectively. These figures include fees paid to subsidiaries of AIG for
administrative services, which are based on a percentage of premiums written,
and were $2.3 million, $2.5 million and $3.0 million for the years ended
December 31, 2000, 1999 and 1998 respectively. In 2000, other operating costs
which were significantly lower than the 1999 level were: advertising, travel,
communications and shareholder reports. In 1999, those costs which were at a
lower level than 1998 included: travel, legal fees, data processing, and credit
facility fees. In 1998, general and administrative expenses included the upfront
cost and ongoing fees in respect of IPCRe's $300.0 million standby credit
facility. Our expense ratio (the ratio of acquisition costs plus general and
administrative expenses, to earned premiums) was 21.1%, 23.9% and 23.0% for the
years ended December 31, 2000, 1999 and 1998, respectively.

        The following table summarizes the loss and loss expense ratio, expense
ratio and combined ratio (sum of loss and loss expense ratio plus expense ratio)
for the years ended December 31, 2000, 1999 and 1998, respectively:

<TABLE>
<CAPTION>
                                      Year ended December 31,
                                  --------------------------------
                                     2000       1999       1998
                                     ----       ----       ----
<S>                               <C>          <C>        <C>
     Loss and loss expense ratio      61.7%     136.2%      51.2%
     Expense ratio                    21.1%      23.9%      23.0%
     Combined ratio                   82.8%     160.1%      74.2%
</TABLE>

        Net income for the years ended December 31, 2000, 1999 and 1998 was
$44.2 million, $3.2 million and $67.7 million, respectively. Excluding the
effects of realized gains and losses arising from the sale of investments, net
operating income was $43.7 million for the year ended December 31, 2000,
compared to a net operating loss of $(27.1) million for the year ended December
31, 1999, and net operating income of $60.7 million for the year ended December
31, 1998. Net operating income (loss) amounts are equivalent to $1.71, $(1.04),
and $2.29 per common share, respectively, on a diluted basis.



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LIQUIDITY AND CAPITAL RESOURCES

        IPC Holdings is a holding company that conducts no reinsurance
operations of its own. During 1997, IPC Holdings incorporated a subsidiary in
the United Kingdom called IPCRe Services Limited, which carried out a
representative function in Europe on behalf of IPCRe. IPCRe Services ceased
trading in January, 2000. During 1998, IPCRe incorporated a subsidiary in
Ireland called IPCRe Europe Limited, which underwrites selected reinsurance
business in Europe. IPC Holdings' cash flows are limited to distributions from
IPCRe and IPCRe Services by way of loans or dividends. The dividends that IPCRe
may pay are limited under Bermuda legislation and IPCRe's revolving credit
facility.

        Under Bermuda law, IPCRe may not in any financial year pay any dividends
greater than 25% of its statutory capital and surplus at the prior year end,
unless it has filed an affidavit with the Bermuda Registrar of Companies stating
that the declaration of those dividends has not caused IPCRe to fail to meet its
solvency margin and minimum liquidity ratio. In addition, IPCRe is prohibited
from declaring or paying any dividend during any financial year if it would
cause IPCRe to fail to meet its solvency margin and minimum liquidity ratio. The
maximum dividend payable by IPCRe in accordance with the foregoing restrictions
as of January 1, 2001 was approximately $139 million.

        IPCRe maintains a five-year, $300 million revolving credit facility with
a syndicate of lenders led by Bank One N.A. (formerly the First National Bank of
Chicago). The credit facility limits the amount of dividends that may be paid by
IPCRe to IPC Holdings to the lesser of i) IPCRe's aggregate positive net income
from March 31, 1998 to the end of the then-current fiscal quarter over the
aggregate amount of all dividends and distributions paid during the same period,
or ii) IPCRe's positive consolidated net income for the prior four fiscal
quarters over the aggregate amount of all dividends and distributions paid
during the same period. IPCRe obtained waivers for this covenant from the
lenders in the facility, in order to pay dividends in September and December,
1999. Neither the Company nor IPCRe paid dividends during 2000.

        Our sources of funds consist of premiums written, losses recovered from
retrocedents, investment income and proceeds from sales and redemptions of
investments. Cash is used primarily to pay losses and loss adjustment expenses,
brokerage commissions, excise taxes, premiums retroceded, general and
administrative expenses and dividends. We generated or (used) cash flows from
operations of $(7.4) million, $28.7 million and $84.8 million in the years ended
December 31, 2000, 1999 and 1998 respectively. These amounts represent the
difference between premiums collected and investment earnings realized, and
losses and loss adjustment expenses paid, underwriting and other expenses paid
and investment losses realized. Cash flows from operations differ, and may
continue to differ, substantially from net income. To date, we have invested all
cash flows not required for operating purposes or payment of dividends. The
potential for a large catastrophe means that unpredictable and substantial
payments may need to be made within relatively short periods of time. Hence,
future cash flows cannot be predicted with any certainty and may vary
significantly between periods. As noted above, loss payments during the years
ended December 31, 2000 and 1999 were $96.8 million and $74.3 million,
respectively.

        Under U.S. generally accepted accounting principles, we are not
permitted to establish loss reserves with respect to property catastrophe
reinsurance until the occurrence of an event which may give rise to a claim. As
a result, only loss reserves applicable to losses incurred up to the reporting
date may be set aside, with no allowance for the provision of a contingency
reserve to account for expected future losses. Claims arising from future
catastrophic events can be expected to require the establishment of substantial
reserves from time to time.

        Setting appropriate reserves for catastrophes is an inherently uncertain
process. Loss reserves represent our estimates, at a given point in time, of
ultimate settlement and administration costs of losses incurred (including
incurred but not reported losses). We regularly review and update these
estimates, using the most current information available to us. Consequently, the
ultimate liability for a catastrophic loss is likely to differ from the original
estimate. Whenever we determine that any existing loss reserves are inadequate,
we are required to increase the loss reserves with a corresponding reduction,
which could be material, in our operating results in the period in which the
deficiency is identified. The establishment of new reserves, or the adjustment
of reserves for reported claims, could result in significant upward or downward
changes to our financial condition or results of operations in any particular
period.

        With the exception of cash holdings, our funds are primarily invested in
fixed maturity securities, the market value of which is subject to fluctuation
depending on changes in prevailing interest rates, and also equities comprising
the S & P 500. We do not hedge our investment portfolio against interest rate
risk. Accordingly, an increase in interest rates may result in losses, both
realized and unrealized, on our investments (see "Quantitative and Qualitative
Disclosure about Market Risk" below for further explanation).



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        As of December 31, 2000 all of our investments were classified as
"Available for Sale". Investments are carried at fair market value and any
unrealized gains or losses are reported as accumulated other comprehensive
income within shareholders' investment. At December 31, 2000 and 1999,
shareholders' investment was $559.3 million and $504.9 million, respectively.

        At December 31, 2000, 83.3% of our fixed maturity investment portfolio
consisted of cash, U.S. Treasuries or other government agency issues, and
investments with a AAA or AA rating. The primary rating source is Moody's
Investors Services Inc. At December 31, 2000 the portfolio had an average life
of 3.1 years and an average modified duration of 2.7 years.

        Our functional currency is the U.S. dollar. Our operating currency is
generally also the U.S. dollar. However, premiums receivable and losses payable
in respect of a significant portion of our business are denominated in
currencies of other countries, principally industrial countries. Consequently,
we may, from time to time, experience currency exchange gains and losses that
could affect our financial position and results of operations. In 2000, we
incurred net foreign exchange losses of $(2.3) million, compared to $(0.4)
million in 1999, and $(0.4) million in 1998. The increase in the net loss was
primarily the result of significant declines in the value of several currencies
during 2000, in particular the Australian dollar, Euro, and British pound. We
currently do not - and as a practical matter cannot - hedge our U.S. dollar
currency exposure with respect to potential claims until a loss payable in a
non-U.S. dollar currency occurs, after which we may match such liability with
assets denominated in the same currency, as we have done on three occasions, or
enter forward purchase contracts for specific currencies, which we did during
2000. This type of exposure could be substantial. We also have not hedged our
non-U.S. dollar currency exposure with respect to premiums receivable, which
generally are collected over the relevant contract term. Our practice is to
exchange non-U.S. dollar denominated premiums upon receipt. Foreign currency
investments have been infrequently made, generally for the purpose of improving
overall portfolio yield. At December 31, 2000, we had no forward contract hedges
outstanding.

        Our investment portfolio does not currently include options, warrants,
swaps, collars or similar derivative instruments. Our investment policy
guidelines provide that financial futures and options and foreign exchange
contracts may not be used in a speculative manner, but may be used, subject to
certain numerical limits, only as part of a defensive strategy to protect the
market value of the portfolio.

        IPCRe is not a licensed insurer in the United States and therefore,
under the terms of most of its contracts with U.S.-based companies, must provide
security to reinsureds to cover unpaid liabilities in a form acceptable to state
insurance commissioners. Typically, this type of security takes the form of a
letter of credit issued by an acceptable bank, the establishment of a trust, or
a cash advance. Currently IPCRe obtains letters of credit through one commercial
bank pursuant to a $27.5 million facility. In turn, IPCRe provides the bank
security by giving the bank a lien over certain of IPCRe's investments in an
amount not to exceed the aggregate letters of credit outstanding to a maximum of
$27.5 million. At December 31, 2000, 1999 and 1998, there were outstanding
letters of credit of $22.3 million, $23.8 million and $12.4 million,
respectively.

        To further enhance liquidity, in July 1998, IPCRe entered into the
revolving credit facility described above. The facility contains certain
financial covenants, including minimum net worth provisions, restrictions on the
amount of dividends that IPCRe may pay and certain investment restrictions. No
amounts have been drawn under this facility. We believe that this facility, and
the relatively high quality of our investment portfolio, provides sufficient
liquidity to meet our cash demands.

        Neither IPC Holdings nor IPCRe or their subsidiaries have any material
commitments for capital expenditures.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

        The investment portfolio of IPCRe is exposed to market risk. Market risk
is the risk of loss of fair value resulting from adverse fluctuations in
interest rates, foreign currency exchange rates and equity prices.

        Measuring potential losses in fair values has become the focus of risk
management efforts by many companies. Such measurements are performed through
the application of various statistical techniques. One such technique is Value
at Risk ("VaR"). VaR is a summary statistical measure that uses historical
interest and foreign currency exchange rates and equity prices and estimates of
the volatility and correlation of each of these rates and prices to calculate
the maximum loss that could occur within a given statistical confidence level
and time horizon.

        We believe that statistical models alone do not provide a reliable
method of monitoring and controlling market risk. While VaR models are
relatively sophisticated, the quantitative market risk information is limited by
the



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<PAGE>   7


assumptions and parameters established in creating the related models.
Therefore, such models are tools and do not substitute for the experience or
judgement of senior management.

        Our investment managers performed a VaR analysis, to estimate the
maximum potential loss of fair value for each segment of market risk, as of
December 31, 2000. The analysis calculated the VaR with respect to the net fair
value of our financial instrument assets as of December 31, 2000 using
historical simulation methodology. Previous analyses performed as of December
31, 1998 and 1999, respectively, used the variance covariance (delta normal)
methodology. This methodology was used because of system limitations experienced
by the previous provider of the analyses. A benefit of using the current
methodology is that it captures second-order effects such as gamma that are not
included using the delta-normal methodology. At December 31, 2000 the VaR of
IPCRe's investment portfolio was approximately $7.1 million, which represents a
95th percentile value change over a one-month time horizon. This result was
obtained through historical simulation using approximately 750 days (3 years) of
historical interest rate and equity market data.

        The following table presents the VaR of each component of market risk of
IPCRe's investment portfolio at December 31, 2000 and 1999, respectively, and
the average for the year ended December 31, 2000, calculated using the VaR at
the beginning, ending and mid-year points (expressed in thousands of U.S.
dollars):

<TABLE>
<CAPTION>
                                                              Average for
                                                              -----------
                      MARKET RISK           2000        1999     2000
                                            ----        ----     ----
<S>                                        <C>         <C>     <C>
    Currency                                $  270     $   283     $   276
    Interest Rate                            5,220       6,930       5,896
    Equity                                   6,099       8,644       6,994
---------------------------------------------------------------------------
    Sum of Risk                             11,589      15,857      13,166
    Diversification Benefit                 (4,499)     (4,358)     (4,251)
---------------------------------------------------------------------------
    TOTAL NET RISK                          $7,090     $11,499     $ 8,915
---------------------------------------------------------------------------
</TABLE>

        The primary reason for the reduction in VaR from December 31, 1999 to
December 31, 2000 is the reduction in the equity element of the total portfolio,
together with the reductions in interest rates that took place during the latter
half of 2000.

        IPCRe's balances receivable and liabilities for losses from reinsurance
contracts it has written, are also exposed to the risk of changes in value
resulting from adverse fluctuations in foreign currency exchange rates. To an
extent, the impact on loss reserves of a movement in an exchange rate, will be
partly offset by the impact on assets (receivables and cash/investments)
denominated in the same currency. In 2000, movements in certain non-U.S. dollar
currencies' exchange rates showed some volatility, especially the Euro and
Australian dollar, which declined by as much as 15.5% and 20.8%, respectively,
during the year, before recovering by 10.6% and 7.4% by December 31, 2000. To
reduce the potential impact of exchange rate movements between the U.S. dollar,
Australian dollar and the Euro, on the liabilities arising out of the Sydney
hailstorm of April 1999 and the European storms of December 1999, Australian
Dollars and Euros were purchased in February 2000 for future delivery to match
anticipated pay-out patterns of the liabilities. Such transactions were designed
to provide a potential offset of the impact of exchange rate movements through
asset/liability matching. At December 31, 2000 we held U.S.$5.1 million in
Australian dollar time deposits. From a risk perspective, we do not believe that
the impact of exchange rate movements in respect of receivables or loss reserves
on our overall VaR at December 31, 2000 to be material.

YEAR 2000 DISCLOSURE STATEMENT

        IPCRe is principally an excess of loss property catastrophe reinsurer.
IPCRe's reinsurance policies did not specifically include Y2K as a covered event
and IPCRe did not intend to provide specific coverage for losses arising from
Y2K events. We carefully monitored the terms of policy renewals with respect to
the extent that they oblige us to provide such coverage and, with respect to
renewals in 1999, we declined certain business.

        Although no significant property damage has been reported with Y2K as
its primary cause, a limited number of commercial policyholders have sought a
response from their property insurers for compensation for remedial costs. These
cases involve a creative interpretation of the sue and labour clause in
policies, which is designed to compensate policyholders for costs involved in
efforts to mitigate losses from insured events. The outcome of these cases is
uncertain but, given the limited number of cases, we currently believe that such
cases are unlikely to have a significant impact, if any, on IPCRe's operations.



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<PAGE>   8


EFFECTS OF INFLATION

        IPCRe estimates the effect of inflation on its business and reflects
these estimates in the pricing of its reinsurance contracts. Because of the
relatively short claims settlement cycle associated with its reinsurance
portfolio, IPCRe generally does not take into account the effects of inflation
when estimating reserves. The actual effects of inflation on the results of
IPCRe cannot be accurately known until claims are ultimately settled. Levels of
inflation also affect investment returns.




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<PAGE>   9



IPC HOLDINGS, LTD. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2000 AND 1999
TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS




                                       8
<PAGE>   10



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS




To the Board of Directors and Shareholders of
IPC Holdings, Ltd.:


We have audited the accompanying consolidated balance sheets of IPC Holdings,
Ltd. (a Bermuda Company) and subsidiaries as of December 31, 2000 and 1999, and
the related consolidated statements of income, comprehensive income,
shareholders' investment and cash flows for each of the years in the three year
period ended December 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of IPC Holdings, Ltd.
and subsidiaries as of December 31, 2000 and 1999 and the results of their
operations and their cash flows for each of the years in the three year period
ended December 31, 2000 in conformity with accounting principles generally
accepted in the United States.






/s/ Arthur Andersen
-------------------
Hamilton, Bermuda
February 2, 2001



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<PAGE>   11




IPC HOLDINGS, LTD. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2000 AND 1999
(Expressed in thousands of United States dollars except for per share amounts)

<TABLE>
<CAPTION>
                                                                             2000           1999
                                                                         -------------  -------------
<S>                                                                     <C>            <C>
ASSETS:
   Fixed maturity investments:
      Available for sale, at fair market value (Amortized cost 2000:
         $519,194; 1999: $501,424)                                      $    523,660   $    487,826
   Equity investments, available for sale (Cost 2000: $65,348; 1999:
   $70,699)                                                                   65,462         78,859
   Cash and cash equivalents                                                   9,409         28,069
   Reinsurance balances receivable                                            25,419         21,460
   Deferred premiums ceded                                                     1,120            384
   Loss reserves recoverable                                                   1,187          4,585
   Accrued investment income                                                  15,304         13,689
   Deferred acquisition costs                                                  2,249          1,980
   Prepaid expenses and other assets                                           3,680          4,090
                                                                         -------------  -------------

                                                                        $    647,490   $    640,942
                                                                         =============  =============

LIABILITIES:
   Reserve for losses and loss adjustment expenses                      $     61,358   $    111,441
   Unearned premiums                                                          19,068         16,364
   Reinsurance balances payable                                                  920          1,190
   Deferred commissions                                                          202             33
   Accounts payable and accrued liabilities                                    6,672          6,983
                                                                         -------------  -------------

                                                                              88,220        136,011
                                                                         -------------  -------------

SHAREHOLDERS' INVESTMENT:
   Share capital - 2000: 25,039,713 shares outstanding, par value
      $0.01; 1999: 25,033,932 shares outstanding, par value $0.01                250            250
   Additional paid-in capital                                                299,929        299,833
   Retained earnings                                                         254,511        210,286
   Accumulated other comprehensive income (loss)                               4,580         (5,438)
                                                                         -------------  -------------

                                                                             559,270        504,931
                                                                         -------------  -------------

                                                                        $    647,490   $    640,942
                                                                         =============  =============
</TABLE>




  The accompanying notes are an integral part of these consolidated financial
                                   statements



                                       10
<PAGE>   12




IPC HOLDINGS, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
FOR EACH OF THE YEARS IN THE THREE YEAR PERIOD ENDED DECEMBER 31, 2000
(Expressed in thousands of United States dollars except for per share amounts)

<TABLE>
<CAPTION>
                                                              2000           1999           1998
                                                          -------------  -------------  -------------
<S>                                                      <C>            <C>            <C>
REVENUES:
   Gross premiums written                                $     93,757   $     97,162   $    111,265
   Premiums ceded                                              (4,827)        (3,816)             -
                                                          -------------  -------------  -------------
   Net premiums written                                        88,930         93,346        111,265
   Change in unearned premiums                                 (1,969)         1,621          8,860
                                                          -------------  -------------  -------------
   Premiums earned                                             86,961         94,967        120,125
   Net investment income                                       31,089         30,327         30,053
   Realized gains (losses), net on investments                    544         30,355          7,014
                                                          -------------  -------------  -------------

                                                              118,594        155,649        157,192
                                                          -------------  -------------  -------------

EXPENSES:
   Losses and loss adjustment expenses, net                    53,661        129,362         61,459
   Acquisition costs, net                                       9,049         13,028         16,968
   General and administrative expenses                          9,311          9,641         10,680
   Exchange loss, net                                           2,348            411            371
                                                          -------------  -------------  -------------

                                                               74,369        152,442         89,478
                                                          -------------  -------------  -------------

NET INCOME                                               $     44,225   $      3,207   $     67,714
                                                          =============  =============  =============

Basic net income per common share                        $       1.77   $       0.13   $       2.71
Diluted net income per common share                      $       1.73   $       0.12   $       2.55

Weighted average number of common shares - basic           25,034,414     25,033,932     25,031,211
Weighted average number of common shares - diluted         25,497,671     25,988,116     26,547,062
</TABLE>





  The accompanying notes are an integral part of these consolidated financial
                                   statements




                                       11
<PAGE>   13




IPC HOLDINGS, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
FOR EACH OF THE YEARS IN THE THREE YEAR PERIOD ENDED DECEMBER 31, 2000
(Expressed in thousands of United States dollars)

<TABLE>
<CAPTION>
                                                              2000           1999           1998
                                                          -------------  -------------  -------------
<S>                                                      <C>            <C>            <C>
NET INCOME                                               $     44,225   $      3,207   $     67,714
                                                          -------------  -------------  -------------

OTHER COMPREHENSIVE INCOME (LOSS):
   Holding gains (losses), net on investments during
   period                                                      10,562         (6,024)        28,479
   Reclassification adjustment for (gains) losses
      included in net income                                     (544)       (30,355)        (7,014)
                                                          -------------  -------------  -------------

                                                               10,018        (36,379)        21,465
                                                          -------------  -------------  -------------

COMPREHENSIVE INCOME (LOSS)                              $     54,243   $    (33,172)  $     89,179
                                                          =============  =============  =============

</TABLE>










  The accompanying notes are an integral part of these consolidated financial
                                   statements




                                       12
<PAGE>   14



IPC HOLDINGS, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
FOR EACH OF THE YEARS IN THE THREE YEAR PERIOD ENDED DECEMBER 31, 2000
(Expressed in thousands of United States dollars except for per share amounts)

<TABLE>
<CAPTION>
                                                              2000           1999           1998
                                                          -------------  -------------  -------------
<S>                                                      <C>            <C>            <C>
COMMON SHARES PAR VALUE $0.01:
   Balance, beginning of year                            $        250   $        250   $        250
   Additional shares issued                                         -              -              -
                                                          -------------  -------------  -------------

   Balance, end of year                                  $        250   $        250   $        250
                                                          =============  =============  =============

ADDITIONAL PAID-IN CAPITAL:
   Balance, beginning of year                            $    299,833   $    299,833   $    299,533
   Additional paid-in capital on shares issued                     96              -            300
                                                          -------------  -------------  -------------

   Balance, end of year                                  $    299,929   $    299,833   $    299,833
                                                          =============  =============  =============

RETAINED EARNINGS:
   Balance, beginning of year                            $    210,286   $    234,928   $    219,034
   Net income                                                  44,225          3,207         67,714
   Dividends                                                        -        (27,849)       (51,820)
                                                          -------------  -------------  -------------

   Balance, end of year                                  $    254,511   $    210,286   $    234,928
                                                          =============  =============  =============

ACCUMULATED OTHER COMPREHENSIVE INCOME
   (LOSS):
   Balance, beginning of year                            $     (5,438)  $     30,941   $      9,476
   Other comprehensive income (loss)                           10,018        (36,379)        21,465
                                                          -------------  -------------  -------------

   Balance, end of year                                  $      4,580   $     (5,438)  $     30,941
                                                          =============  =============  =============

</TABLE>






  The accompanying notes are an integral part of these consolidated financial
                                   statements



                                       13
<PAGE>   15




IPC HOLDINGS, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR EACH OF THE YEARS IN THE THREE YEAR PERIOD ENDED DECEMBER 31, 2000
(Expressed in thousands of United States dollars)

<TABLE>
<CAPTION>
                                                              2000           1999           1998
                                                          -------------  -------------  -------------
<S>                                                      <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                            $     44,225   $      3,207   $     67,714
   Adjustments to reconcile net income to cash (used
      in) provided by operating activities:
      Amortization of investment (discounts)
      premiums, net                                              (478)             9            542
      Realized (gains) losses, net on investments                (544)       (30,355)        (7,014)
      Changes in, net:
         Reinsurance balances receivable                       (3,959)          (713)         6,976
         Funds held by reinsured companies                          -          2,434         (2,422)
         Deferred premiums ceded                                 (736)          (384)             -
         Loss reserves recoverable                              3,398         (4,585)             -
         Accrued investment income                             (1,615)         1,063           (378)
         Deferred acquisition costs                              (269)            68            545
         Prepaid expenses and other assets                        410           (961)        (1,571)
         Reserve for losses and loss adjustment
         expenses                                             (50,083)        59,215         24,636
         Unearned premiums                                      2,704         (1,238)        (8,860)
         Reinsurance balances payable                            (270)         1,190              -
         Deferred commissions                                     169             33              -
         Accounts payable and accrued liabilities                (311)          (328)         4,637
                                                          -------------  -------------  -------------

                                                               (7,359)        28,655         84,805
                                                          -------------  -------------  -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of equity investments                             (5,836)       (81,908)        (3,633)
   Proceeds from sales of equity investments                   12,087        110,798         17,804
   Purchases of fixed maturity investments                   (224,097)      (315,316)      (335,087)
   Proceeds from sales of fixed maturity investments          194,449        233,673        264,325
   Proceeds from maturities of fixed maturity
   investments                                                 12,000         59,050         34,526
                                                          -------------  -------------  -------------

                                                              (11,397)         6,297        (22,065)
                                                          -------------  -------------  -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Additional share capital                                        96              -            300
   Cash dividends paid to shareholders                              -        (27,849)       (51,820)
                                                          -------------  -------------  -------------

                                                                   96        (27,849)       (51,520)
                                                          -------------  -------------  -------------


NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS          (18,660)         7,103         11,220

                                                          -------------  -------------  -------------
CASH AND CASH EQUIVALENTS, beginning of year                   28,069         20,966          9,746
                                                          -------------  -------------  -------------

CASH AND CASH EQUIVALENTS, end of year                   $      9,409   $     28,069   $     20,966
                                                          =============  =============  =============
</TABLE>




  The accompanying notes are an integral part of these consolidated financial
                                   statements




                                       14
<PAGE>   16





IPC HOLDINGS, LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
(Expressed in thousands of United States dollars except for per share amounts)


1.      GENERAL

IPC Holdings, Ltd. (the "Company") was incorporated in Bermuda on May 20, 1993
and through its wholly-owned subsidiary, IPCRe Limited (formerly known as
International Property Catastrophe Reinsurance Company, Ltd.) ("IPCRe"),
provides reinsurance of property catastrophe risks worldwide, substantially all
on an excess-of-loss basis. Property catastrophe reinsurance covers
unpredictable events such as hurricanes, windstorms, hailstorms, earthquakes,
volcanic eruptions, fires, freezes, industrial explosions and other man-made or
natural disasters. IPCRe's loss experience will generally include infrequent
events of great severity. IPCRe's clients include many of the leading insurance
companies in the world. Approximately 42% of premiums written in 2000 related to
U.S. risks. The balance of IPCRe's covered risks are located principally in
Europe, Japan and Australia/New Zealand.

On December 20, 1995, the Board of Directors of the Company approved a plan to
register shares for sale to the public. On December 20, 1995, the Board of
Directors of the Company also approved an exchange of the capital stock of the
Company whereby the existing voting and non-voting shares of the Company were
exchanged for Common Shares (the "Exchange"). The existing shareholders received
25,000 new Common Shares for each voting or non-voting share held at the time of
the offering. Share information presented in the consolidated financial
statements, including these notes, gives effect to the Exchange.

On March 13, 1996, the Company completed an initial public offering in which
13,521,739 common shares held by existing shareholders were sold. All of the
shares sold were sold by existing shareholders. Consequently, the Company did
not receive any of the proceeds of the offering. The Company paid certain
expenses related to the offering, including certain expenses on behalf of the
selling shareholders.

On June 27, 1997, the Company incorporated a subsidiary in the United Kingdom,
named IPCRe Services Limited. This subsidiary's purpose was to perform the same
functions that were previously performed by the Company's representative office
in London. IPCRe Services Limited ceased trading in January, 2000 and is in the
process of being struck off the Register of Companies.

On September 10, 1998, IPCRe incorporated a subsidiary in Ireland, named IPCRe
Europe Limited. This company underwrites selected reinsurance business in
Europe.

2.      SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation
of consolidated financial statements in conformity with generally accepted
accounting principles 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
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The significant accounting
policies are as follows:

a)      Principles of consolidation

        The consolidated financial statements include the accounts of the
        Company and its wholly-owned subsidiaries, IPCRe, and IPCRe Services
        Limited (together "IPC"). All significant intercompany transactions have
        been eliminated in consolidation.



                                       15
<PAGE>   17




b)      Premiums and acquisition costs

        Premiums written are recorded at the policy inception date and are based
        on information received from ceding companies. Subsequent premium
        adjustments, if any, are recorded in the period in which they are
        determined. Premiums are earned on a pro-rata basis over the period for
        which reinsurance coverage is provided. Unearned premiums represent the
        portion of premiums written which is applicable to the unexpired terms
        of the policies in force.

        Acquisition costs, consisting primarily of commissions and brokerage
        expenses incurred at policy issuance, are deferred and amortized to
        income over the period in which the related premiums are earned.
        Deferred acquisition costs are limited to estimated realizable value
        based on related unearned premium, anticipated claims and expenses and
        investment income.

c)      Reserve for losses and loss adjustment expenses

        The reserve for losses and loss adjustment expenses, which includes an
        allowance for losses and loss adjustment expenses incurred but not
        reported, is based on reports, individual case estimates received from
        ceding companies, actuarial determinations and management's estimates.
        For certain catastrophic events there is considerable uncertainty
        underlying the assumptions and associated estimated reserves for losses
        and loss adjustment expenses. Reserves are reviewed regularly and, as
        experience develops and new information becomes known, the reserves are
        adjusted as necessary. Such adjustments, if any, are reflected in
        results of operations in the period in which they become known.

d)      Investments

        Investments consist of fixed income securities and common stock.
        Investments are stated at market value as determined by the most
        recently traded price of each security at the balance sheet date. By
        policy, IPCRe invests in high-grade marketable securities. All
        investments are defined as available-for-sale securities under the
        provisions of Statement of Financial Accounting Standards No. ("SFAS")
        115, "Accounting for Certain Investments in Debt and Equity Securities".
        Unrealized gains and losses are included as a separate component of
        shareholders' investment.

        Investments are recorded on a trade date basis. Realized gains and
        losses on sales of investments are determined on the basis of first-in,
        first-out. Investment income is recognized when earned and includes the
        amortization of premiums and accretion of discounts on investments.

e)      Translation of foreign currencies

        Transactions in foreign currencies are translated into U.S. dollars at
        the rate of exchange prevailing at the date of each transaction.
        Monetary assets and liabilities denominated in foreign currencies are
        translated into U.S. dollars at the exchange rates in effect on the
        balance sheet date. Foreign currency revenues and expenses are
        translated at the average exchange rates prevailing during the period.
        Exchange gains and losses, including those arising from forward exchange
        contracts, are included in the determination of net income. IPC's
        functional currency is the U.S. dollar, since it is the single largest
        currency in which IPC transacts its business. The U.S. dollar is also
        the currency in which IPC holds, and will continue to hold, most of its
        investments and in which investment returns are measured.



                                       16
<PAGE>   18




f)      Cash and cash equivalents

        Cash and cash equivalents include amounts held in banks and time
        deposits with maturities of less than three months from the date of
        purchase.

g)      Net income per common share

        The Company has adopted Statement of Financial Accounting Standards No.
        128, "Earnings per Share", which requires dual presentation of basic and
        diluted earnings per share. Diluted net income per common share is
        computed by dividing net income by the weighted average number of shares
        of common stock and common stock equivalents outstanding during the
        year. Stock options are considered common stock equivalents for the
        purpose of calculating diluted net income per common share, and were
        included in the weighted average number of shares outstanding using the
        Treasury Stock method.

h)      Stock incentive compensation plan

                In 1997, the Company adopted Statement of Financial Accounting
        Standard No. 123 ("SFAS 123"), "Accounting for Stock-based
        Compensation". As permitted under this standard, the Company has elected
        to follow Accounting Principles Board Opinion No. 25, "Accounting for
        Stock Issued to Employees", in accounting for its stock options and
        accordingly, recognizes compensation expense for stock option grants to
        the extent that the fair value of the stock exceeds the exercise price
        of the option at the measurement date.

i)      Accounting For Derivatives

        The Financial Accounting Standards Board ("FASB") issued Statement of
        Financial Accounting Standard No. 133 ("SFAS 133"), "Accounting for
        Derivative Instruments and Hedging Activities". Subsequently, FASB
        issued Statement of Financial Accounting Standard No. 137, ("SFAS 137")
        which effectively deferred the implementation date of SFAS 133 to
        periods beginning after June 15, 2000. Management does not believe the
        impact of the adoption of SFAS 133 on IPC's financial position or
        results of operations to be material.

3.      INVESTMENTS

a)      The cost or amortized cost, gross unrealized gains, gross unrealized
        losses and market value of investments available for sale by category as
        of December 31, 2000 and December 31, 1999 are as follows:

<TABLE>
<CAPTION>
                                                Cost or          Gross         Gross
                                               Amortized      Unrealized    Unrealized      Market
    December 31, 2000                             Cost           Gains        Losses        Value
    -----------------                          ----------     ----------    ----------    ---------
<S>                                            <C>           <C>            <C>           <C>
    U.S. Government and government agencies    $  125,877     $    1,965    $   (1,050)   $ 126,792
    Other governments                              77,811          1,303          (216)      78,898
    Corporate                                     263,044          1,923        (1,445)     263,522
    Supranational entities                         52,462          1,996           (10)      54,448
                                               ----------     ----------    ----------    ---------
                                               $  519,194     $    7,187    $   (2,721)   $ 523,660
                                               ==========     ==========    ==========    =========

    Equity investments                         $   65,348     $   11,078    $  (10,964)   $  65,462
                                               ==========     ==========    ==========    =========
</TABLE>




                                       17
<PAGE>   19






<TABLE>
<CAPTION>
                                                Cost or      Gross       Gross
                                               Amortized   Unrealized  Unrealized     Market
    December 31, 1999                            Cost        Gains       Losses        Value
    -----------------                         ----------   ----------  ----------   ---------
<S>                                           <C>          <C>          <C>         <C>
    U.S. Government and government agencies   $   84,901   $      15   $   (4,946)  $  79,970
    Other governments                            133,913           2       (2,278)    131,637
    Corporate                                    241,668          92       (6,172)    235,588
    Supranational entities                        40,942          15         (326)     40,631
                                              ----------   ---------   ----------   ---------
                                              $  501,424   $     124   $  (13,722)  $ 487,826
                                              ==========   =========   ==========   =========

    Equity investments                        $   70,699   $  14,167   $   (6,007)  $  78,859
                                              ==========   =========   ==========   =========
</TABLE>

b)      The contractual maturity dates of fixed maturity investments available
        for sale as of December 31, 2000 are as follows:

<TABLE>
<CAPTION>
                                                                         Amortized      Market
                                                                           Cost         Value
                                                                        -----------   -----------
<S>                                                                    <C>            <C>
    Due in one year or less                                            $   26,116    $   26,010
    Due after one year through five years                                 478,753       482,844
    Due after five years through ten years                                 14,325        14,806
                                                                        -----------   -----------
                                                                       $  519,194    $  523,660
                                                                        ===========   ===========
</TABLE>


        Expected maturities may differ from contractual maturities because
        borrowers may have the right to prepay obligations with or without
        prepayment penalties.

c)      Pledged assets

        In the normal course of business IPCRe provides security to reinsureds
        if requested. Such security takes the form of a letter of credit or a
        cash advance. Letters of credit are issued by a bank at the request of
        IPCRe.

        Under an agreement effective September 20, 1994, amended in 1999, IPCRe
        provides the bank security by giving the bank a lien over certain of
        IPCRe's investments in an amount not to exceed the aggregate letters of
        credit outstanding to a maximum of $27,500 (1999: $27,500). As of
        December 31, 2000 and 1999 the bank had outstanding letters of credit of
        $22,339 and $23,774, respectively.

d)      Net investment income

<TABLE>
<CAPTION>
                                                             2000         1999         1998
                                                          -----------  -----------  -----------
<S>                                                      <C>          <C>          <C>
    Interest on fixed maturity investments               $   30,357   $   29,315  $   30,256
    Interest on cash and cash equivalents                     1,211        1,844         781
    Net amortization of discounts (premiums) on
        investments                                             478            9        (542)
                                                          -----------  -----------  -----------
                                                             32,046       31,168      30,495
    Net dividend income from equities                           611          748         980
    Less: investment expenses                                (1,568)      (1,589)     (1,422)
                                                          -----------  -----------  -----------
    Net investment income                                $   31,089   $   30,327  $   30,053
                                                          ===========  ===========  ===========
</TABLE>


                                       18
<PAGE>   20



e)      Proceeds from sales of available for sale securities for the years ended
        December 31, 2000, 1999 and 1998 were $206,536, $344,471 and $282,129,
        respectively. Components of realized gains and losses are summarized in
        the following table:

    <TABLE>
    <CAPTION>
                                                             2000         1999        1998
                                                          -----------  ----------- ------------
<S>                                                      <C>           <C>        <C>
    Fixed maturity investments:
    --------------------------
       Gross realized gains                              $     367     $  1,021        $4,002
       Gross realized losses                                  (724)        (987)         (407)
                                                          -----------  ----------- ------------
       Net realized (losses) gains                            (357)          34         3,595
                                                          -----------  ----------- ------------

    Equity investments:
    ------------------
       Gross realized gains                                  2,790       33,604         3,753
       Gross realized losses                                (1,889)      (3,283)         (334)
                                                          -----------  ----------- ------------
       Net realized gains                                      901       30,321         3,419
                                                          -----------  ----------- ------------

    Total net realized gains                             $     544     $ 30,355   $     7,014
                                                          ===========  =========== ============
</TABLE>


        Changes in net unrealized gains (losses) were $10,018, $(36,379) and
        $21,465, respectively, for the years ended December 31, 2000, 1999 and
        1998.

f)      The following table summarizes the composition of the fair value of all
        cash and cash equivalents and fixed maturity investments by rating:

<TABLE>
<CAPTION>
                                                                 December 31,    December 31,
                                                                    2000            1999
                                                                --------------  --------------
<S>                                                             <C>             <C>
    Cash and cash equivalents                                           1.8%            5.4%
    U.S. Government and government agencies                            23.8%           15.5%
    AAA                                                                29.0%           30.5%
    AA                                                                 28.7%           39.3%
    A                                                                  16.7%            9.3%
                                                                --------------  --------------
                                                                      100.0%          100.0%
                                                                ==============  ==============
</TABLE>


        The primary rating source is Moody's Investors Service Inc. ("Moody's").
        When no Moody's rating is available, Standard & Poor's Corporation ("S &
        P") ratings are used.

g)      IPCRe holds shares of stock in all of the companies which comprise the
        Standard & Poor's 500 Index ("S & P 500"). The number of shares of stock
        held is such that their weighting within IPCRe's portfolio matches the
        weighting of each stock within the index.

4.      FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table presents the carrying values and estimated fair values of
IPC's financial instruments as of December 31, 2000 and December 31, 1999:

<TABLE>
<CAPTION>
                                          December 31, 2000           December 31, 1999
                                      --------------------------  ---------------------------
                                       Carrying          Fair        Carrying        Fair
                                         Value          Value         Value          Value
                                      ------------  ------------  -------------  ------------
<S>                                  <C>           <C>           <C>            <C>
Cash and cash equivalents            $      9,409  $      9,409  $     28,069   $     28,069
Fixed maturity investments                523,660       523,660       487,826        487,826
Equity investments                         65,462        65,462        78,859         78,859
</TABLE>

The carrying amount of cash and cash equivalents approximates fair value because
of the short maturity of those instruments. The fair values of investments are
based on quoted market prices provided by either independent pricing services or
when such prices are not available, by reference to broker or underwriter bid
indications.


                                       19
<PAGE>   21


5.      CEDED REINSURANCE

IPCRe utilizes reinsurance to reduce its exposure to large losses. Effective
January 1, 1999, IPCRe arranged a proportional reinsurance facility. Business
covered is property catastrophe business written by IPCRe, and provides coverage
up to $50 million in each of at least 5 named zones, plus potentially other
zones of IPCRe's choosing, provided that they do not accumulate with the named
zones. The United States and the Caribbean are excluded zones. The named zones
are the United Kingdom; Europe (excluding the U.K.); Australia / New Zealand;
Japan and Canada. Business ceded to the facility is solely at the discretion of
IPCRe. Within these limitations, IPCRe may designate the treaties to be included
in the facility, subject to IPCRe retaining at least 50% of the risk. The
premium ceded is pro rata, less brokerage and an override commission. A
subsidiary of AIG is a participating reinsurer, and committed a 10%
participation on a direct basis. Most reinsurers participating in the facility
have ratings of AA or above, and the minimum rating is A. Although reinsurance
agreements contractually obligate the reinsurers to reimburse IPCRe for the
agreed upon portion of its gross paid losses, they do not discharge IPCRe's
primary liability. Management believes that the risk of non-payment by the
reinsurers is minimal.

Premiums ceded to the reinsurance facility for the year ended December 31, 2000
and 1999, respectively were $4,827 and $3,816 written, of which $4,091 and
$3,432 were expensed. Balances payable to the participants are displayed as
reinsurance balances payable on the Balance Sheet.

6.      COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL

On June 29, 1993 shareholders contributed total funds of $300,000 through a
private placement offering of which $483 was used to pay placement costs.

The authorized share capital of the Company as of December 31, 2000 and December
31, 1999 consisted of the following:

<TABLE>
<CAPTION>
                                                            Shares                    Additional
December 31, 2000                          Authorized     Issued and     Share         Paid-in
-----------------                            Shares       Fully Paid     Capital       Capital
                                             ------       ----------     -------       -------
<S>                                       <C>             <C>            <C>         <C>
Voting common shares, par value U.S.
   $0.01 each                               75,000,000    25,039,713     $    250    $   299,929
Preferred shares, par value U.S.
   $0.01 each                               25,000,000             -            -              -

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

                                                            Shares                    Additional
December 31, 1999                          Authorized     Issued and     Share         Paid-in
-----------------                            Shares       Fully Paid     Capital       Capital
                                             ------       ----------     -------       -------
<S>                                        <C>           <C>            <C>           <C>
Voting common shares, par value U.S.
   $0.01 each                               75,000,000    25,033,932  $       250    $   299,833
Preferred shares, par value U.S.
   $0.01 each                               25,000,000           -              -              -
</TABLE>

There are various restrictions on the ability of certain shareholders to dispose
of their shares.

The Company did not pay dividends during 2000.

In March, June, September and December 1999, respectively, the Company paid
quarterly dividends of $0.3175, $0.3175, $0.3175 and $0.16, per share to holders
of its common shares.

In March, June, September and December 1998, respectively, the Company paid
quarterly dividends of $0.3175, $0.3175, $0.3175 and $0.3175, per share to
holders of its common shares. In addition, in March 1998, the Company paid a
special dividend of $0.80 per share to holders of its common shares.



                                       20
<PAGE>   22




7.  SHARE PURCHASE OPTIONS

In conjunction with the private placement offering discussed in Note 6, the
Company granted to American International Group, Inc. ("AIG") an option to
acquire up to 2,775,000 common shares at an exercise price of $12.7746 per share
(the "AIG Option"). The $12.7746 exercise price per share at the time of the
private placement was equal to the price paid per share by all of the Company's
shareholders, other than AIG (which paid $9.60 per share). Following
consummation of the offering referred to in Note 1, the AIG Option is
exercisable in certain circumstances, generally upon an offering of common stock
subsequent to the initial public offering referred to in Note 1, upon
amalgamation, merger, or sale of the assets of the Company or at certain dates
between June 29, 2001 and June 23, 2003 provided that the book value per share
on such dates is at least 175% of the exercise price.

The Company also adopted a Stock Option Plan (the "Plan"), effective February
15, 1996. Under the amended Plan, approved by shareholders in June 1999, at the
discretion of the Compensation Committee of the Board of Directors (the
"Committee"), the Company may grant to certain employees up to 577,500 common
shares, $0.01 par value (1999: 577,500 common shares, $0.01 par value). The
exercise price of the options granted under the Plan shall be as determined by
the Committee in its sole discretion, including, but not limited to, the book
value per share or the publicly traded market price per share.

On February 15, 1996 and July 25, 1996, the Company granted options to acquire
85,249 common shares to officers and management employees at an exercise price
of $16.54 per common share which equaled the book value per common share as of
December 31, 1995. Between January 2, 1997 and December 31, 2000, the Company
granted options to acquire common shares to officers and management employees at
exercise prices ranging from $13.375 and $32.1875 per common share, which
equaled the opening market prices on the dates of grant. Such options vest at a
rate of 25% annually and lapse on the tenth anniversary of issue.

The effect on net income and net income per common share of recording
compensation expense under the provisions of SFAS 123, "Accounting for
Stock-based Compensation", versus compensation expense under the provisions of
APB Opinion No. 25 is not material for the years ended December 31, 2000, 1999
and 1998.

A summary of the status of the Company's stock option plan as of December 31,
2000, 1999 and 1998 and changes during the years then ended is presented in the
tables and narrative below:

<TABLE>
<CAPTION>
                                         2000                   1999                  1998
                                --------------------    -------------------    -------------------
                                Number of   Exercise     Number    Exercise     Number    Exercise
                                  Shares      Price     of Shares    Price     of Shares    Price
                                  ------      -----     ---------    -----     ---------    -----
<S>                             <C>         <C>         <C>        <C>         <C>        <C>
Outstanding, beginning of year    187,813   $ 23.87       125,938  $ 24.38        90,767  $ 18.87

Granted                           109,000   $ 15.19        61,875  $ 22.81        51,500  $ 32.19

Exercised                           5,781   $ 16.54             -        -        16,329  $ 18.36
Forfeited                               -         -             -        -             -        -
Expired                                 -         -             -        -             -        -

Outstanding, end of year          291,032   $ 20.76       187,813  $ 23.87       125,938  $ 24.38

Exercisable, end of year          101,000   $ 22.77        50,642  $ 22.02        10,969  $ 18.65
Weighted average fair value of
options granted (per share)     $    6.79               $    6.66              $   11.73
</TABLE>

The fair value of options granted during 2000 was estimated using the
Black-Scholes option pricing model, using assumed risk-free rates of interest of
between 6.00% and 6.40%; expected dividend yields of 0.00% to 4.16%; an expected
life of 7 years; and an expected volatility of 55% to 66%.

The fair value of options granted on January 4, 1999 was estimated using the
Black-Scholes option pricing model, using an assumed risk-free rate of interest
of 4.62%; an expected dividend yield of 5.567%; an expected life of 7 years; and
an expected volatility of 45%.




                                       21
<PAGE>   23

The fair value of options granted on January 2, 1998 was estimated using the
Black-Scholes option pricing model, using an assumed risk-free rate of interest
of 5.63%; an expected dividend yield of 3.945%; an expected life of 7 years; and
an expected volatility of 45%.

<TABLE>
<CAPTION>
                                        Weighted
                                         Average      Weighted                     Weighted
                     Outstanding       Contractual    Average     Exercisable       Average
    Range of        at December 31,     Periods in    Exercise   at December 31,    Exercise
 Exercise Price         2000              Years        Price          2000           Price
-----------------------------------------------------------------------------------------------
<S>                 <C>                <C>            <C>          <C>             <C>
          $13-19         147,157                8.03      $15.54         38,157         $16.54
          $19-25          92,375                7.34      $22.71         37,093         $22.63
          $25-31               0                   0       $0.00              0          $0.00
        Over $31          51,500                7.00      $32.19         25,750         $32.19
-----------------------------------------------------------------------------------------------
          $13-33         291,032                7.63      $20.76        101,000         $22.77
-----------------------------------------------------------------------------------------------
</TABLE>


8.      NET INCOME PER COMMON SHARE

A reconciliation of the numerator and the denominator for basic and diluted net
income per common share ("EPS") is given in the following table:

<TABLE>
<CAPTION>
                                                                        Amount
                                             Income       Shares       per Share
                                        ---------------------------  ------------
<S>                                     <C>             <C>          <C>
            December 31, 2000
            -----------------

            Basic EPS                   $    44,225     25,034,414   $   1.77
            Effect of Dilutive Options                     463,257
            Diluted EPS                 $    44,225     25,497,671   $   1.73

            December 31, 1999
            -----------------

            Basic EPS                   $     3,207     25,033,932   $    0.13
            Effect of Dilutive Options                     954,184
            Diluted EPS                 $     3,207     25,988,116   $    0.12

            December 31, 1998
            -----------------

            Basic EPS                   $    67,714     25,031,211   $    2.71
            Effect of Dilutive Options                   1,515,851
            Diluted EPS                 $    67,714     26,547,062   $    2.55
</TABLE>


9.      RELATED PARTY TRANSACTIONS

In addition to the share purchase options discussed in Note 7, IPC has entered
into the following transactions and agreements with companies affiliated with
AIG:

a)      Administrative services

        The Company and IPCRe are parties to an agreement with American
        International Company, Limited ("AICL"), an indirect wholly-owned
        subsidiary of AIG, under which AICL provides administrative services for
        a fee of 2.5% of the first $500,000 annual gross written premiums (1.5%
        of the next $500,000 and 1% thereafter). These fees are included in
        general and administrative expenses in the accompanying consolidated
        statements of income. This administrative services agreement terminates
        on June 30, 2003 and is automatically renewed thereafter for successive
        three year terms unless prior written notice to terminate is delivered
        by or to AICL at least 180 days prior to the end of such three year
        term. In addition, IPCRe Europe Limited is party to an agreement with
        AIG Insurance Management Services (Europe) Limited ("AIMS"), an indirect
        wholly-owned subsidiary of AIG, under which AIMS provides administrative
        services for an annual fee of approximately $30 per annum. This
        agreement may be terminated by either party subject to three months'
        written notice.


                                       22
<PAGE>   24


b)      Investment management services

        IPCRe is party to an agreement with AIG Global Investment Corp.
        (Ireland) Limited ("AIGGIC"), an indirect wholly-owned subsidiary of
        AIG, under which AIGGIC provides investment advisory and management
        services. This agreement is subject to termination by either party on 30
        days' written notice. IPCRe has agreed to pay fees to AIGGIC based on
        the month end market value of the total investment portfolio as follows:

<TABLE>
<CAPTION>
                                                    Annual Fee
    Portfolio Balance                             in Basis Points
    -----------------                             ---------------
<S>                                               <C>
    Up to $100,000                                     35
    Excess of $100,000 through $200,000                25
    Excess of $200,000                                 15
</TABLE>


        These fees are included in net investment income in the accompanying
        consolidated statements of income.

c)      Investment custodian services

        IPCRe is party to an agreement with AIG Trust Services Limited
        ("AIGTS"), an indirect wholly-owned subsidiary of AIG, under which AIGTS
        provides investment custodian services. IPCRe has agreed to pay fees of
        0.04% per annum based on the month end market value of investments held
        under custody, plus reimbursement of fees and out-of-pocket expenses.
        These fees are included in net investment income in the accompanying
        consolidated statements of income. This agreement may be terminated by
        either party upon 90 days' written notice.

        The following amounts were incurred for services provided by
        wholly-owned subsidiaries of AIG:

<TABLE>
<CAPTION>
                                                                Investment       Investment
                                              Administrative    Management        Custodian
                                                 Services        Services         Services
                                              -------------   --------------    --------------
<S>                                          <C>              <C>               <C>
    Year ended December 31, 2000             $       2,316    $        1,189    $        379
    Year ended December 31, 1999                     2,492             1,219             370
    Year ended December 31, 1998                     3,012             1,075             347
</TABLE>


        The following amounts were payable as of the balance sheet date to
        subsidiaries of AIG for these services:

<TABLE>
<S>                                          <C>
    December 31, 2000                        $        989
    December 31, 1999                                 567
</TABLE>


d)      Related Party Business

        IPCRe assumed premiums from companies affiliated with two shareholders
        of the Company. Premiums assumed were $10,004, $8,862 and $9,858,
        respectively, for the years ended December 31, 2000, 1999 and 1998. In
        addition, IPCRe assumed premiums through brokers related to shareholders
        of the Company totaling $5,308, $4,870 and $6,080, respectively, for the
        years ended December 31, 2000, 1999 and 1998. Brokerage fees and
        commissions incurred in respect of this business were approximately
        $531, $467 and $601, respectively, for the years ended December 31,
        2000, 1999 and 1998. IPCRe ceded premiums to a company affiliated with a
        shareholder (see Note 5). Premiums ceded were $483, $382 and $0,
        respectively, for the years ended December 31, 2000, 1999 and 1998. All
        such transactions were undertaken on normal commercial terms.
        Reinsurance premiums receivable due from related parties as of December
        31, 2000 and December 31, 1999 were $3,847 and $3,886, respectively.
        Reinsurance balances payable to related parties as of December 31, 2000
        and 1999 were $95 and $119, respectively.

e)      A director and executive officer of various AIG subsidiaries and
        affiliates serves as the Chairman of the Board of Directors of the
        Company and IPCRe. In addition, the managing director of AIMS serves as
        a director of IPCRe Europe Limited.


                                       23
<PAGE>   25


10. RESERVE FOR LOSSES AND LOSS ADJUSTMENT EXPENSES

Activity in the reserve for losses and loss adjustment expenses is summarized as
follows:

<TABLE>
<CAPTION>
                                             2000          1999         1998
                                             ----          ----         ----
<S>                                    <C>           <C>           <C>
Balance, beginning of year             $  106,856    $   52,226    $   27,590
                                        -----------   -----------   -----------

Net losses incurred related to:
    Current year                           13,508       116,322        55,815
    Prior years                            40,153        13,040         5,644
                                        -----------   -----------   -----------
                                           53,661       129,362        61,459
                                        -----------   -----------   -----------

Net paid losses related to:
    Current year                           (2,648)      (37,013)      (22,256)
    Prior years                           (94,104)      (37,270)      (15,100)
                                        -----------   -----------   -----------
                                          (96,752)      (74,283)      (37,356)

Effect of foreign exchange movements       (3,594)         (449)          533
                                        -----------   -----------   -----------

Total net reserves, end of year            60,171       106,856        52,226

Loss reserves recoverable, end of year      1,187         4,585             -
                                        -----------   -----------   -----------

Gross loss reserves, end of year       $   61,358    $  111,441    $   52,226
                                        ===========   ===========   ===========
</TABLE>


Losses incurred in the year ended December 31, 2000 in respect of prior years
included increases related to Cyclones Lothar and Martin which struck northern
Europe in December 1999, and Typhoon Bart which struck Japan in September 1999.

Losses incurred in the year ended December 31, 1999 in respect of prior years
included increases related to Typhoon Vicki, the cyclone which struck Gujarat
State in India, Cats# 47, 51, 54 and 56 in the United States, as well as
Hurricanes Bonnie and Mitch. In addition, there were late reported claims from
Italian crop-hail covers, a hailstorm which struck Brisbane, Australia and
winter storms which struck Ireland, in December 1998.

Losses incurred in the year ended December 31, 1998 in respect of prior years
included late reported losses in respect of a number of per risk treaties,
including events in Brazil and Malaysia, claim development for Marine business,
offset by some reductions to previously reported claims from some per risk
treaties.

An independent firm of actuaries has reviewed IPCRe's loss reserves.





                                       24
<PAGE>   26



11. WRITTEN PREMIUM BY GEOGRAPHIC REGION

Financial information relating to reinsurance premiums written by geographic
region is as follows:

<TABLE>
<CAPTION>
                               December 31, 2000      December 31, 1999      December 31, 1998
                               -----------------      -----------------      -----------------
                               Premiums               Premiums               Premiums
                                Written      %         Written      %         Written       %
                               -----------------      -----------------      -----------------
<S>                          <C>                    <C>                      <C>
Geographic Area (1)
---------------
United States                $    39,107     41.7%  $    37,043     38.1%   $   50,796     45.7%
Worldwide (2)                     14,992     16.0%       14,570     15.0%       14,050     12.6%
Worldwide
   (excluding the U.S.) (3)        4,827      5.2%        5,739      5.9%        3,513      3.2%
United Kingdom                    10,467     11.1%        9,684     10.0%       13,533     12.2%
Europe (excluding the U.K.)        8,677      9.3%        9,748     10.0%       10,022      9.0%
Japan                              4,175      4.5%        3,492      3.6%        4,139      3.7%
Australia/New Zealand              5,188      5.5%        7,774      8.0%        8,589      7.7%
Other                              6,324      6.7%        9,112      9.4%        6,623      5.9%
                               -------------------   --------------------    -------------------
                             $    93,757    100.0%  $    97,162    100.0%   $  111,265    100.0%
                               ===================   ====================    ===================
</TABLE>


(1)     Except as otherwise noted, each of these categories includes contracts
        that cover risks located primarily in the designated geographic area.

(2)     Includes contracts that cover risks primarily in two or more countries,
        including the United States.

(3)     Includes contracts that cover risks primarily in two or more countries,
        excluding the United States.

12.     CONCENTRATION AND CREDIT RISK

As of December 31, 2000 and December 31, 1999, IPC held U.S. Treasury notes
which represented approximately 11% and 8%, respectively, of shareholders'
investment.

Credit risk arises out of the failure of a counterparty to perform according to
the terms of the contract. IPC does not require collateral or other security to
support financial instruments with credit risk.

A single broker accounted for approximately 36%, 33% and 25%, respectively, of
total premiums written for the years ended December 31, 2000, 1999 and 1998.
Five brokers accounted for approximately 79%, 76% and 71%, respectively, of
total premiums written for the years ended December 31, 2000, 1999 and 1998.

13.     COMMITMENTS AND CONTINGENCIES

IPCRe sometimes enters into forward foreign exchange contracts for purposes of
hedging its investment portfolio or known reinsurance losses denominated in
foreign currencies. The fair value of forward foreign exchange contracts
represents the estimated cost to IPCRe as of the balance sheet date of obtaining
the specified currency to meet the obligation of the contracts. Changes in the
value of these contracts offset the foreign exchange gains and losses in the
foreign currency denominated assets and liabilities being hedged. As of December
31, 2000 IPCRe had no forward foreign exchange contracts outstanding.

14.     CREDIT FACILITY

In July 1998, IPCRe entered into a five year, revolving credit agreement with a
syndicate of financial institutions in the amount of $300,000. The proceeds of
this facility can be used for general corporate purposes. This facility has
certain financial covenants, including minimum net worth provisions,
restrictions on the amount of dividends that IPCRe may pay to net income of the
previous twelve months, and certain investment restrictions. At December 31,
2000 no amounts have been drawn under this facility, and IPCRe was in compliance
with all covenants under this facility.



                                       25
<PAGE>   27


15. STATUTORY CAPITAL AND SURPLUS

IPCRe is registered under the Bermuda Insurance Act 1978 and Related Regulations
(the "Act") and is obliged to comply with various provisions of the Act
regarding solvency and liquidity. Under the Act, as amended in May, 1995, IPCRe
is required to maintain minimum statutory capital and surplus equal to the
greater of $100,000, 50% of net premiums written or 15% of the reserve for
losses and loss adjustment expenses. These provisions have been met as shown in
the following table:

<TABLE>
<CAPTION>
                                         December 31, 2000     December 31, 1999
                                         ------------------    ------------------
<S>                                     <C>                    <C>
 Actual statutory capital and surplus    $       557,578       $       502,709
 Minimum statutory capital and surplus   $       100,000       $       100,000
</TABLE>

IPCRe's statutory net income for the years ended December 31, 2000, 1999 and
1998, was $44,960, $4,018 and $69,305, respectively.

The Act limits the maximum amount of annual dividends or distributions paid by
IPCRe to the Company without notification to the Registrar of such payment (and
in certain cases the prior approval of the Registrar). The maximum amount of
dividends which could be paid by IPCRe to the Company at January 1, 2001 without
such notification is approximately $139,395.

16. PENSION PLAN

Effective December 1, 1995, IPC adopted a defined contribution retirement plan
for its officers and employees. Pursuant to the plan, each participant can
contribute 5% or more of their salary and IPC will contribute an amount equal to
5% of each participant's salary. In addition, IPC has entered into individual
pension arrangements with a number of specific employees. Pursuant to these
plans, IPC contributes an amount equal to 5% of each participant's salary. IPC
contributions under the various plans are fully funded, and amounted to
approximately $102, $145 and $164 in 2000, 1999 and 1998, respectively.

17. TAXES

At the present time, no income, profit, capital or capital gains taxes are
levied in Bermuda. In the event that such taxes are levied, the Company and
IPCRe have received an undertaking from the Bermuda Government exempting them
from all such taxes until March 28, 2016.

The Company and IPCRe do not consider themselves to be engaged in a trade or
business in the United States and, accordingly, do not expect to be subject to
United States income taxes.

IPCRe Services Limited is a tax-paying entity subject to the jurisdiction of the
Government of the United Kingdom. The amount of taxes incurred for 2000, 1999
and 1998 is not material to the consolidated financial statements.

IPCRe Europe Limited, upon commencement of operations, is a tax-paying entity
subject to the jurisdiction of the Government of Ireland. The amount of taxes
incurred for 2000, 1999 and 1998 is not material to the consolidated financial
statements.

18. EXCHANGE GAINS & LOSSES

The exchange gain or loss in the accompanying consolidated statements of income
comprises the net effect of realized and unrealized exchange gains and losses.
The unrealized component arises from the revaluation of certain foreign currency
assets and liabilities as of the balance sheet dates. The realized component
arises from the difference between amounts previously recorded for foreign
currency assets and liabilities and the actual amounts received or paid during
the year.



                                       26
<PAGE>   28




19. UNAUDITED QUARTERLY FINANCIAL DATA

<TABLE>
<CAPTION>
                                            Quarter       Quarter       Quarter       Quarter
                                             Ended         Ended         Ended         Ended
                                           March 31,      June 30,     Sept. 30,      Dec. 31,
                                              2000          2000          2000          2000
                                           -----------   -----------  ------------   -----------
<S>                                       <C>           <C>          <C>            <C>
Gross premiums written                    $   57,833     $  20,200   $     10,530   $    5,194
Net premiums earned                           22,727        23,519         20,195       20,520
Net investment income                          7,587         7,823          7,861        7,818
Realized (losses) gains, net                    (143)          445             13          229
Losses and loss adjustment expenses,
    net                                       14,912        22,066          7,812        8,871
Net income                                     9,811         3,476         15,029       15,909
Net income per common share - basic       $     0.39    $     0.14   $       0.60   $     0.64
Net income per common share - diluted     $     0.39    $     0.14   $       0.59   $     0.61
</TABLE>



<TABLE>
<CAPTION>
                                            Quarter       Quarter       Quarter       Quarter
                                             Ended         Ended         Ended         Ended
                                           March 31,      June 30,     Sept. 30,      Dec. 31,
                                             1999           1999         1999           1999
                                           -----------   -----------  -------------  -----------
<S>                                       <C>           <C>          <C>            <C>
Gross premiums written                    $   65,315    $   18,384   $     8,750    $    4,713
Net premiums earned                           23,778        26,932        21,299        22,958
Net investment income                          7,413         7,651         7,511         7,752
Realized gains (losses), net                   6,545        23,633           286          (109)
Losses and loss adjustment expenses,
    net                                       16,773        49,142        16,109        47,338
Net income                                    15,216         2,913         7,797       (22,719)
Net income per common share - basic       $     0.61    $     0.12   $      0.31    $    (0.91)
Net income per common share - diluted     $     0.58    $     0.11   $      0.30    $    (0.91)
</TABLE>




                                       27
<PAGE>   29




20. SUBSIDIARY FINANCIAL DATA

Summarized consolidated financial data of the subsidiary, IPCRe Limited, is as
follows:

<TABLE>
<CAPTION>
                                         Year Ended            Year Ended            Year Ended
Statement of Income                  December 31, 2000     December 31, 1999      December 31, 1998
-------------------                  -----------------     -----------------      -----------------
<S>                                <C>                   <C>                    <C>
Gross written premiums             $           93,757    $           97,162     $          111,265
Net premiums earned                            86,961                94,967                120,125
Investment income, net                         31,086                30,322                 30,038
Realized gain (loss), net                         544                30,355                  7,014
Incurred losses, net                          (53,661)             (129,362)               (61,459)
Acquisition costs, net                         (9,049)              (13,028)               (16,968)

General & admin. expenses and
  exchange loss, net                          (10,750)               (9,362)               (10,220)
                                     ------------------    ------------------     -----------------
Net Income                         $           45,131    $            3,892     $           68,530
                                     ==================    ==================     =================
Loss ratio                                       61.7%                136.2%                  51.2%

Expense ratio (excluding exchange
  loss, net)                                     20.1%                 23.1%                  22.3%
Combined ratio                                   81.8%                159.3%                  73.5%
</TABLE>


<TABLE>
<CAPTION>
Balance sheet at                     December 31, 2000     December 31, 1999
----------------                     -----------------     -----------------
<S>                                <C>                   <C>
Cash & investments                 $          598,394    $          594,684
Reinsurance balances receivable                25,419                21,459
Other assets                                   25,979                26,069
                                     -------------------   -------------------
Total assets                       $          649,792    $          642,212
                                     ===================   ===================
Unearned premiums                  $           19,068    $           16,364
Reserves for losses                            61,358               111,441
Other liabilities                               7,996                 8,186
                                     -------------------   -------------------
Total liabilities                              88,422               135,991
                                     -------------------   -------------------
Common stock                                  250,000               250,000
Additional paid-in capital                     49,500                49,500
Retained earnings                             257,290               212,159

Accumulated other comprehensive
  income (loss)                                 4,580                (5,438)
                                     -------------------   -------------------
Total liabilities and
  shareholder's investment         $          649,792    $          642,212
                                     ===================   ===================
</TABLE>


                                       28