UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C. 20549
 
 FORM
10-Q
 
 x
              QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the quarterly period ended September 30, 2008ORo
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the transition period from __________ to
  __________
 
 Commission
File Number: 001-31341
 
 Platinum
      Underwriters Holdings, Ltd.(Exact
      name of registrant as specified in its
charter)
 
 Bermuda
              
              98-0416483(State
      or other jurisdiction of incorporation or organization)
              
              (I.R.S.
      Employer Identification No.)
 
 The
      Belvedere Building
                69
      Pitts Bay Road
                Pembroke,
      Bermuda
              
              HM
      08(Address
      of principal executive offices)
              
              (Zip
      Code)
 
 (441)
295-7195
 (Registrant's
telephone number, including area code)
 
 Not
Applicable
 (Former
name, former address and former fiscal year, if changed since last
report)
 
 Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.      YesX
No ___
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company.  See the definitions of "accelerated filer”, “large
accelerated filer" and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.
  Large
      accelerated filer
              X
              
              Accelerated
      filerNon-accelerated
      filer
              
              (Do
      not check if a smaller reporting company)
              Smaller
      reporting company
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).     Yes  No
X_
 
 As of
October 14, 2008, there were outstanding 47,706,861 common shares, par
value $0.01 per share, of the registrant.
  
  PLATINUM
UNDERWRITERS HOLDINGS, LTD.
 QUARTERLY
REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2008
 
 TABLE OF
CONTENTS
 PagePART
      I  –  FINANCIAL INFORMATIONItem
      1.
              Condensed
      Consolidated Financial StatementsConsolidated
      Balance Sheetsas
      of September 30, 2008 (Unaudited) and December 31,
      2007
              1Consolidated
      Statements of Operations and Comprehensive Incomefor
      the Three and Nine Months Ended September 30, 2008 and 2007
      (Unaudited)
              2Consolidated
      Statements of Changes in Shareholders’ Equityfor
      the Nine Months Ended September 30, 2008 and 2007
      (Unaudited)
              3Consolidated
      Statements of Cash Flowsfor
      the Nine Months Ended September 30, 2008 and 2007
      (Unaudited)
              4Notes
      to Condensed Consolidated Financial Statementsfor
      the Three and Nine Months Ended September 30, 2008 and 2007
      (Unaudited)
              5Item
      2.
              Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
              17Item
      3.
              Quantitative
      and Qualitative Disclosures about Market Risk
              33Item
      4.
              Controls
      and Procedures
              34PART
      II  –  OTHER INFORMATIONItem
      2.
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              36Item
      6.
              Exhibits
              36SIGNATURES
              37
 
 
 
 PART
I - FINANCIAL INFORMATION
  ITEM
      1.
              CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Consolidated Balance Sheets
 ($ in
thousands, except share data)
 
 
 (Unaudited)September 30,
      2008
              
              
              December 31,
      2007ASSETSInvestments:Fixed
      maturity available-for-sale securities at fair value
                (amortized
      cost – $3,598,487 and $3,214,981, respectively)
              
              $
              3,414,639
              
              
              $
              3,191,923Fixed
      maturity trading securities at fair value
                (amortized
      cost – $143,448 and $170,952,
      respectively)
              
              
              144,307
              
              
              
              169,818Preferred
      stocks (cost – $3,087 and $12,246, respectively)
              
              
              3,087
              
              
              
              9,607Short-term
      investments
              
              
              95,979
              
              
              
              13,876Total
      investments
              
              
              3,658,012
              
              
              
              3,385,224Cash
      and cash equivalents
              
              
              600,681
              
              
              
              1,076,279Accrued
      investment income
              
              
              30,932
              
              
              
              34,696Reinsurance
      premiums receivable
              
              
              295,914
              
              
              
              244,360Reinsurance
      recoverable on ceded losses and loss adjustment expenses
              
              
              12,425
              
              
              
              27,979Prepaid
      reinsurance premiums
              
              
              14,706
              
              
              
              9,369Funds
      held by ceding companies
              
              
              146,470
              
              
              
              165,604Deferred
      acquisition costs
              
              
              58,731
              
              
              
              70,508Deferred
      tax assets
              
              
              65,518
              
              
              
              43,342Other
      assets
              
              
              21,984
              
              
              
              21,389Total
      assets
              
              $
              4,905,373
              
              
              $
              5,078,750LIABILITIES
      AND SHAREHOLDERS’ EQUITYLiabilitiesUnpaid
      losses and loss adjustment expenses
              
              $
              2,460,185
              
              
              $
              2,361,038Unearned
      premiums
              
              
              261,979
              
              
              
              298,498Debt
      obligations
              
              
              250,000
              
              
              
              250,000Ceded
      premiums payable
              
              
              4,731
              
              
              
              4,559Commissions
      payable
              
              
              122,699
              
              
              
              100,204Other
      liabilities
              
              
              33,387
              
              
              
              66,074Total
      liabilities
              
              
              3,132,981
              
              
              
              3,080,373Shareholders’
      EquityPreferred
      shares, $.01 par value, 25,000,000 shares authorized, 5,750,000 shares
      issued and outstanding
              
              
              57
              
              
              
              57Common
      shares, $.01 par value, 200,000,000 shares authorized, 47,706,861 and
      53,779,914 shares issued and outstanding, respectively
              
              
              477
              
              
              
              538Additional
      paid-in capital
              
              
              1,116,050
              
              
              
              1,338,466Accumulated
      other comprehensive loss
              
              
              (170,257
              )
              
              
              (24,339
              )Retained
      earnings
              
              
              826,065
              
              
              
              683,655Total
      shareholders' equity
              
              
              1,772,392
              
              
              
              1,998,377Total
      liabilities and shareholders' equity
              
              $
              4,905,373
              
              
              $
              5,078,750
   See
accompanying Notes to the Condensed Consolidated Financial
Statements.
  - 1
-
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Consolidated Statements of Operations and Comprehensive
Income (Loss) (Unaudited)
 For the
Three and Nine Months Ended September 30, 2008 and 2007
 ($ in
thousands, except per share data)
 
 Three
      Months Ended
                September 30,
              
              
              Nine
      Months Ended
                September 30,2008
              
              
              2007
              
              
              2008
              
              
              2007Revenue:Net
      premiums earned
              
              $
              280,725
              
              
              
              290,310
              
              
              
              840,558
              
              
              $
              871,076Net
      investment income
              
              
              48,043
              
              
              
              54,283
              
              
              
              144,037
              
              
              
              160,666Net
      realized losses on investments
              
              
              (18,214
              )
              
              
              (864
              )
              
              
              (18,353
              )
              
              
              (2,521
              )Other
      expense
              
              
              (1,686
              )
              
              
              (659
              )
              
              
              (5,892
              )
              
              
              (3,645
              )Total
      revenue
              
              
              308,868
              
              
              
              343,070
              
              
              
              960,350
              
              
              
              1,025,576Expenses:Net
      losses and loss adjustment expenses
              
              
              270,863
              
              
              
              163,923
              
              
              
              524,458
              
              
              
              510,267Net
      acquisition expenses
              
              
              56,320
              
              
              
              51,445
              
              
              
              182,999
              
              
              
              156,392Operating
      expenses
              
              
              21,153
              
              
              
              28,161
              
              
              
              67,943
              
              
              
              77,475Net
      foreign currency exchange (gains) losses
              
              
              6,134
              
              
              
              (1,429
              )
              
              
              3,263
              
              
              
              (2,887
              )Interest
      expense
              
              
              4,752
              
              
              
              5,457
              
              
              
              14,253
              
              
              
              16,368Total
      expenses
              
              
              359,222
              
              
              
              247,557
              
              
              
              792,916
              
              
              
              757,615Income
      (loss) before income tax expense (benefit)
              
              
              (50,354
              )
              
              
              95,513
              
              
              
              167,434
              
              
              
              267,961Income
      tax expense (benefit)
              
              
              (5,014
              )
              
              
              4,210
              
              
              
              5,246
              
              
              
              13,175Net
      income (loss)
              
              
              (45,340
              )
              
              
              91,303
              
              
              
              162,188
              
              
              
              254,786Preferred
      dividends
              
              
              2,602
              
              
              
              2,602
              
              
              
              7,806
              
              
              
              7,806Net
      income (loss) attributable to common shareholders
              
              $
              (47,942
              )
              
              
              88,701
              
              
              
              154,382
              
              
              $
              246,980Earnings
      (loss) per share:Basic
      earnings (loss) per share
              
              $
              (0.99
              )
              
              
              1.50
              
              
              
              3.09
              
              
              $
              4.15Diluted
      earnings (loss) per share
              
              $
              (0.99
              )
              
              
              1.37
              
              
              
              2.81
              
              
              $
              3.79Comprehensive
      income (loss):Net
      income (loss)
              
              $
              (45,340
              )
              
              
              91,303
              
              
              
              162,188
              
              
              $
              254,786Other
      comprehensive income (loss):Net
      change in unrealized gains and losses on available-for-sale securities,
      net of deferred taxes
              
              
              (102,921
              )
              
              
              23,718
              
              
              
              (145,918
              )
              
              
              853Cumulative
      translation adjustments, net of deferred taxes
              
              
              –
              
              
              
              1
              
              
              
              –
              
              
              
              (675
              )Comprehensive
      income (loss)
              
              $
              (148,261
              )
              
              
              115,022
              
              
              
              16,270
              
              
              $
              254,964Shareholder
      dividends:Preferred
      dividends declared
              
              $
              2,602
              
              
              
              2,602
              
              
              
              7,806
              
              
              $
              7,806Preferred
      dividends declared per share
              
              
              0.45
              
              
              
              0.45
              
              
              
              1.36
              
              
              
              1.36Common
      dividends declared
              
              
              3,842
              
              
              
              4,639
              
              
              
              11,972
              
              
              
              14,250Common
      dividends declared per share
              
              $
              0.08
              
              
              
              0.08
              
              
              
              0.24
              
              
              $
              0.24
 
 
 See
accompanying Notes to the Condensed Consolidated Financial
Statements.
  - 2
-
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Consolidated Statements of Changes in Shareholders’
Equity (Unaudited)
 For the
Nine Months Ended September 30, 2008 and 2007
 ($ in
thousands)
 2008
              
              
              2007Preferred
      shares:Balances
      at beginning and end of periods
              
              $
              57
              
              
              $
              57Common
      shares:Balances
      at beginning of period
              
              
              538
              
              
              
              597Exercise
      of common share options
              
              
              11
              
              
              
              10Issuance
      of common shares
              
              
              3
              
              
              
              –Purchase
      of common shares
              
              
              (75
              )
              
              
              (35
              )Balances
      at end of period
              
              
              477
              
              
              
              572Additional paid-in
      capital:Balances
      at beginning of period
              
              
              1,338,466
              
              
              
              1,545,979Exercise
      of common share options
              
              
              25,885
              
              
              
              22,629Issuance
      of common shares
              
              
              1,693
              
              
              
              –Share
      based compensation
              
              
              10,303
              
              
              
              6,102Settlement
      of equity awards
              
              
              (999
              )
              
              
              –Purchase
      of common shares
              
              
              (260,323
              )
              
              
              (116,938
              )Tax
      benefit of share options
              
              
              1,025
              
              
              
              949Balances
      at end of period
              
              
              1,116,050
              
              
              
              1,458,721Accumulated other
      comprehensive loss:Balances
      at beginning of period
              
              
              (24,339
              )
              
              
              (44,289
              )Net
      change in unrealized gains and losses on available-for-sale securities,
      net of deferred taxes
              
              
              (145,918
              )
              
              
              853Net
      change in cumulative translation adjustments, net of deferred
      taxes
              
              
              –
              
              
              
              (675
              )Balances
      at end of period
              
              
              (170,257
              )
              
              
              (44,111
              )Retained
      earnings:Balances
      at beginning of period
              
              
              683,655
              
              
              
              355,717Net
      income
              
              
              162,188
              
              
              
              254,786Preferred
      share dividends
              
              
              (7,806
              )
              
              
              (7,806
              )Common
      share dividends
              
              
              (11,972
              )
              
              
              (14,250
              )Balances
      at end of period
              
              
              826,065
              
              
              
              588,447Total
      shareholders’ equity
              
              $
              1,772,392
              
              
              $
              2,003,686
   See
accompanying Notes to the Condensed Consolidated Financial
Statements.
  - 3
-
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Consolidated Statements of Cash Flows
(Unaudited)
 For the
Nine Months Ended September 30, 2008 and 2007
 ($ in
thousands)
  2008
              
              
              2007Operating
      Activities:Net
      income
              
              $
              162,188
              
              
              $
              254,786Adjustments
      to reconcile net income to cash provided by operations:Depreciation
      and amortization
              
              
              5,810
              
              
              
              9,580Net
      realized losses on investments
              
              
              18,353
              
              
              
              2,521Net
      foreign currency exchange (gains) losses
              
              
              3,263
              
              
              
              (2,887
              )Share
      based compensation
              
              
              10,303
              
              
              
              6,102Deferred
      income tax expense
              
              
              (9,938
              )
              
              
              (9,960
              )Trading
      securities activities
              
              
              5,639
              
              
              
              (45,124
              )Changes
      in assets and liabilities:(Increase)
      decrease in accrued investment income
              
              
              3,764
              
              
              
              (1,235
              )(Increase)
      decrease in reinsurance premiums receivable
              
              
              (53,657
              )
              
              
              81,568Decrease
      in funds held by ceding companies
              
              
              19,134
              
              
              
              73,004Decrease
      in deferred acquisition costs
              
              
              11,777
              
              
              
              8Increase
      in net unpaid losses and loss adjustment expenses
              
              
              126,161
              
              
              
              6,627Increase
      (decrease) in net unearned premiums
              
              
              (41,856
              )
              
              
              9,706Increase
      (decrease) in ceded premiums payable
              
              
              172
              
              
              
              (16,069
              )Increase
      (decrease) in commissions payable
              
              
              22,495
              
              
              
              (35,110
              )Net
      changes in other assets and liabilities
              
              
              (19,214
              )
              
              
              9,363Other
      net
              
              
              (4,188
              )
              
              
              935Net
      cash provided by operating activities
              
              
              260,206
              
              
              
              343,815Investing
      Activities:Proceeds
      from sale of fixed maturity available-for-sale securities
              
              
              80,126
              
              
              
              84,816Proceeds
      from maturity or paydown of fixed maturity available-for-sale
      securities
              
              
              860,063
              
              
              
              840,229Acquisition
      of fixed maturity available-for-sale securities
              
              
              (1,341,153
              )
              
              
              (1,231,479
              )Proceeds
      from sale of other invested asset
              
              
              –
              
              
              
              4,745Net
      change in short-term investments
              
              
              (80,559
              )
              
              
              (5,859
              )Net
      cash used in investing activities
              
              
              (481,523
              )
              
              
              (307,548
              )Financing
      Activities:Dividends
      paid to preferred shareholders
              
              
              (7,806
              )
              
              
              (7,806
              )Dividends
      paid to common shareholders
              
              
              (11,972
              )
              
              
              (14,250
              )Proceeds
      from exercise of share options
              
              
              25,896
              
              
              
              22,640Purchase
      of common shares
              
              
              (260,399
              )
              
              
              (116,973
              )Net
      cash used in financing activities
              
              
              (254,281
              )
              
              
              (116,389
              )Net
      decrease in cash and cash equivalents
              
              
              (475,598
              )
              
              
              (80,122
              )Cash
      and cash equivalents at beginning of period
              
              
              1,076,279
              
              
              
              851,652-Cash
      and cash equivalents at end of period
              
              $
              600,681
              
              
              $
              771,530Supplemental
      disclosures of cash flow information:Income
      taxes paid
              
              $
              27,900
              
              
              $
              21,470Interest
      paid
              
              $
              9,375
              
              
              $
              16,110
   See
accompanying Notes to the Condensed Consolidated Financial
Statements.
  - 4
-
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Notes to the Condensed Consolidated Financial Statements
(Unaudited)
 For the
Three and Nine Months Ended September 30, 2008 and 2007
   1.
      Basis of
      Presentation
  Platinum
Underwriters Holdings, Ltd. ("Platinum Holdings") is a Bermuda holding company
organized in 2002.  Platinum Holdings and its consolidated
subsidiaries (collectively, the "Company") operate through two licensed
reinsurance subsidiaries:  Platinum Underwriters Bermuda, Ltd.
("Platinum Bermuda") and Platinum Underwriters Reinsurance, Inc. ("Platinum
US").  The terms "we," "us," and "our" also refer to Platinum Holdings
and its consolidated subsidiaries, unless the context otherwise
indicates.  Through December 31, 2006 we also underwrote business
through Platinum Re (UK) Limited ("Platinum UK"), our other licensed reinsurance
subsidiary.  In 2007, Platinum UK ceased underwriting reinsurance
business.  We provide property and marine, casualty and finite risk
reinsurance coverages, through reinsurance intermediaries, to a diverse
clientele of insurers and select reinsurers on a worldwide basis.
  The
condensed consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States ("U.S. GAAP")
and include the accounts of Platinum Holdings and its consolidated subsidiaries,
including Platinum Bermuda, Platinum US, Platinum UK, Platinum Underwriters
Finance, Inc. ("Platinum Finance"), Platinum Regency Holdings ("Platinum
Regency"), Platinum Administrative Services, Inc. and Platinum UK Services
Company Limited.  All material inter-company transactions have been
eliminated in preparing these condensed consolidated financial
statements.  The condensed consolidated financial statements included
in this report as of and for the three and nine months ended September 30,
2008 and 2007 are unaudited and include adjustments consisting of normal
recurring items that management considers necessary for a fair presentation
under U.S. GAAP.  These condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and
related notes included in our Annual Report on Form 10-K for the year ended
December 31, 2007.
  The
preparation of financial statements requires us 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 materially differ from these
estimates.  The results of operations for any interim period are not
necessarily indicative of results for the full year.
  New
Accounting Pronouncements
  In
February 2007, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities" ("SFAS 159").  SFAS 159
permits an entity to irrevocably elect fair value on a contract-by-contract
basis as the initial and subsequent measurement attribute for many financial
assets and liabilities and certain other items.  Most provisions of
SFAS 159 are elective.  Entities electing the fair value measurement
attributes of SFAS 159 are required to recognize changes in fair values in
earnings and to expense upfront costs and fees associated with the items for
which the fair values option is elected.  SFAS 159 is effective for
fiscal years beginning after November 15, 2007.  We adopted SFAS
159 as of January 1, 2008.  However, we have not yet elected to
apply the fair value measurement attributes of SFAS 159 to any financial assets
or liabilities, and therefore our adoption of SFAS 159 did not have any effect
on our financial condition or results of operations.
  In March
2008, the FASB issued Statement of Financial Accounting Standards No. 161,
"Disclosure about Derivative Instruments and Hedging Activities – an amendment
of FASB Statement No. 133" ("SFAS 161").  SFAS 161 amends and expands
the disclosure requirements in Statement of Financial Accounting Standards No.
133, “Accounting for Derivative Instruments and Hedging Activities” about an
entity’s derivative and hedging activities and how these activities affect an
entity’s financial position, financial performance and cash flows, thereby
improving the transparency of financial reporting.  SFAS 161 is
effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008, with early application
encouraged.  We are currently evaluating the impact that SFAS 161 may
have, if any, on the presentation of our consolidated financial
statements.
  - 5
-
  2.
      Investments
  Investments
classified as available-for-sale are carried at fair value as of the balance
sheet date.  Net changes in unrealized investment gains and losses on
available-for-sale securities, net of deferred taxes, for the nine months ended
September 30, 2008 and 2007 were as follows ($ in
thousands):
  2008
              
              
              2007Net
      change in fair value
              
              $
              (158,157
              )
              
              $
              2,894Deferred
      taxes
              
              
              12,239
              
              
              
              (2,041
              )Net
      change in unrealized investment gains and losses
              
              $
              (145,918
              )
              
              $
              853
 
 Gross
unrealized gains and losses on available-for-sale securities as of
September 30, 2008 were $11,043,000 and $194,891,000,
respectively.  As of September 30, 2008 there were a total of 499
issues in an unrealized loss position in our investment portfolio, with the
single largest unrealized loss being a U.S. Government security with an
amortized cost of $411,509,000 and an unrealized loss of
$8,353,000.  Corporate, mortgage-backed and asset-backed securities
represent the largest categories within our available-for-sale portfolio and
consequently accounted for the greatest amount of our overall unrealized loss as
of September 30, 2008.  Investment holdings within our corporate
portfolio were diversified across approximately 30 industry sectors and within
each sector across many individual issuers and issues.  As of
September 30, 2008 there were 166 corporate issues in an unrealized loss
position, with the single largest unrealized loss being $3,204,000 on an
amortized cost of $17,963,000.  Investment holdings within the
mortgage-backed and asset-backed portfolio were diversified across a number of
sub-categories.  As of September 30, 2008 there were 259 issues
within the mortgage-backed and asset-backed portfolio in an unrealized loss
position, with the single largest unrealized loss being an asset- backed
security with an amortized cost of $10,088,000 and an unrealized loss of
$4,864,000.
  The
unrealized losses on securities classified as available-for-sale, aggregated by
investment category and length of time that individual securities have been in a
continuous unrealized loss position as of September 30, 2008, were as
follows ($ in thousands):
  Fair
      Value
              
              
              Unrealized
                LossLess than twelve
      months:U.S.
      Government
              
              $
              403,156
              
              
              $
              8,353U.S.
      Government agencies
              
              
              213,597
              
              
              
              2,878Corporate
      bonds
              
              
              415,058
              
              
              
              25,264Mortgage-backed
      and asset-backed securities
              
              
              749,808
              
              
              
              49,359Municipal
      bonds
              
              
              171,583
              
              
              
              5,732Foreign
      governments and states
              
              
              37,457
              
              
              
              719Total
              
              $
              1,990,659
              
              
              $
              92,305Twelve months or
      more:U.S.
      Government
              
              $
              2,609
              
              
              $
              51U.S.
      Government agencies
              
              
              –
              
              
              
              –Corporate
      bonds
              
              
              165,369
              
              
              
              29,794Mortgage-backed
      and asset-backed securities
              
              
              343,989
              
              
              
              71,892Municipal
      bonds
              
              
              7,967
              
              
              
              576Foreign
      governments and states
              
              
              1,446
              
              
              
              273Total
              
              $
              521,380
              
              
              $
              102,586Total:U.S.
      Government
              
              $
              405,765
              
              
              $
              8,404U.S.
      Government agencies
              
              
              213,597
              
              
              
              2,878Corporate
      bonds
              
              
              580,427
              
              
              
              55,058Mortgage-backed
      and asset-backed securities
              
              
              1,093,797
              
              
              
              121,251Municipal
      bonds
              
              
              179,550
              
              
              
              6,308Foreign
      governments and states
              
              
              38,903
              
              
              
              992Total
              
              $
              2,512,039
              
              
              $
              194,891
 
 - 6
-
  We
routinely review our available-for-sale investments to determine whether
unrealized losses represent temporary changes in fair value or were the result
of "other-than-temporary impairments."  The process of determining
whether a security is other-than-temporarily impaired requires judgment and
involves analyzing many factors.  These factors include, but are not
limited to:  the overall financial condition of the issuer, the length
and magnitude of an unrealized loss, specific credit events, the collateral
structure and the credit support that may be applicable to mortgage-backed and
asset-backed securities.  We also consider our ability and intent to
hold a security for a sufficient period of time for the value to recover the
unrealized loss, which is based, in part, on current and anticipated future
positive net cash flows from operations that generate sufficient liquidity in
order to meet our obligations.  If we determine that an unrealized
loss on a security is other-than-temporary, we write down the carrying value of
the security and record a realized loss in the consolidated statement of
operations.
  During
the three months ended September 30, 2008, the financial markets
experienced a loss of liquidity and significant adverse credit events that in
turn led to widespread declines in the value of financial
instruments.  The fair values of the securities in our
available-for-sale investment portfolio decreased significantly during the three
months ended September 30, 2008 as a result of these financial market
events.  Charges relating to other-than-temporary impairments were
$13,096,000 and $809,000 in the three months ended September 30, 2008 and
2007, respectively; charges relating to other-than-temporary impairments were
also $13,096,000 and $809,000 in the nine months ended September 30, 2008
and 2007, respectively.  These charges were included in net realized
losses on investments in the consolidated statement of
operations.  During the three months ended September 30, 2008, we
sold bonds and cash equivalents issued by financial institutions resulting in a
realized loss of $4,225,000.
  3.
      Fair Value
      Measurements
  We
adopted Statement of Financial Accounting Standards No. 157, “Fair Value
Measurements” ("SFAS 157") as of January 1, 2008.  SFAS 157
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at
the measurement date.  This statement establishes a framework for
measuring fair value and expands disclosures regarding fair value measurements
in accordance with U.S. GAAP.  The fair value hierarchy gives the
highest priority to quoted prices in active markets for identical assets or
liabilities (Level 1) and the lowest priority to fair values derived from
unobservable inputs (Level 3).  The level in the fair value hierarchy
within which the fair value measurement in its entirety falls shall be
determined based on the lowest level input that is significant to the fair value
measurement in its entirety.
  We
consider prices for actively traded treasury securities and exchange traded
preferred stocks to be based on quoted prices in active markets for identical
assets (Level 1 as defined by SFAS 157).  The fair values of our other
fixed maturities, which generally include mortgage-backed and asset-backed
securities, corporate bonds, municipal bonds, and bonds issued by U.S.
government-sponsored enterprises, foreign governments and states, are based on
prices obtained from independent pricing vendors, index providers, or
broker-dealers using observable inputs (Level 2 as defined by SFAS
157).  The observable inputs used in standard market valuation pricing
models may include but are not limited to: credit ratings, interest rates and
yield curves at commonly quoted intervals, volatilities, prepayment speeds, loss
severities, credit risks and default rates.  The fair values of our
insurance linked derivative instruments, which are included in other liabilities
in the consolidated balance sheet, are determined by management primarily using
unobservable inputs through the application of our own assumptions and internal
valuation pricing models (Level 3 as defined by SFAS 157).
  The
following table presents the fair value measurement levels for all assets and
liabilities which the Company has recorded at fair value as of
September 30, 2008 ($ in thousands):
  Fair
      Value MeasurementUsing:Total
              
              
              Level
      1
              
              
              Level
      2
              
              
              Level
      3Assets:Fixed
      maturity available-for-sale securities
              
              $
              3,414,639
              
              
              
              505,658
              
              
              
              2,908,981
              
              
              $
              –Fixed
      maturity trading securities
              
              
              144,307
              
              
              
              63,227
              
              
              
              81,080
              
              
              
              –Preferred
      stocks
              
              
              3,087
              
              
              
              3,087
              
              
              
              –
              
              
              
              –Short-term
      investments
              
              
              95,979
              
              
              
              –
              
              
              
              95,979
              
              
              
              –Total
              
              $
              3,658,012
              
              
              
              571,972
              
              
              
              3,086,040
              
              
              $
              –Liabilities:Insurance
      linked derivative instruments
              
              
              7,165
              
              
              
              –
              
              
              
              –
              
              
              
              7,165Total
              
              $
              7,165
              
              
              
              –
              
              
              
              –
              
              
              $
              7,165
 
 - 7
-
  The
following table presents the reconciliation of the beginning and ending fair
value measurements of our Level 3 liabilities, consisting of derivative
instruments, measured at fair value using significant unobservable inputs for
the nine months ended September 30, 2008, ($ in
thousands):
  Beginning
      balance at January 1, 2008
              
              $
              –Purchases,
      issuances, and settlements
              
              
              1,250Total
      unrealized and realized losses included in earnings
              
              
              (8,415
              )Ending
      balance at September 30, 2008
              
              
              (7,165
              )Losses
      for the period attributable to the change in unrealized losses relating to
      liabilities outstanding
              
              $
              (7,165
              )
 
 The
change in unrealized losses of $7,165,000 relating to insurance linked
derivative instruments outstanding was included in earnings for the nine months
ended September 30, 2008 and was reported in other expense in the
consolidated statement of operations.  We realized a loss of
$1,250,000 on an insurance linked derivative in the nine months ended
September 30, 2008 and such loss was also included in other expense in the
consolidated statement of operations.
  4.
      Insurance Linked
      Derivative Contracts
  We
entered into three insurance linked derivative contracts during the nine months
ended September 30, 2008.  We entered into an option agreement to
purchase industry loss warranty retrocessional protection.  The
option period was March 19, 2008 to August 27, 2008 and the entire
option fee of $1,250,000 was included in other expense in 2008.
  The
second insurance linked derivative was a contract under which we can recover up
to $120,000,000 from the counterparty if modeled losses from both a first and
second catastrophe event resulting from U.S. wind, California earthquake or
European wind exceed a specified attachment point.  The term of this
contract is from January 1, 2008 to December 31, 2008, at a cost of
$5,510,000.  The estimated net fair value of this derivative was
determined using unobservable inputs through the application of our own
assumptions and internal models based on assumptions that we believe market
participants would use.  The resulting net liability and change in net
fair value of $4,040,000 was included in other liabilities on the consolidated
balance sheets and included in other expense in the consolidated statement of
operations.
  In August
2008, we entered into an agreement with Topiary Capital Limited ("Topiary"), a
Cayman Islands special purpose vehicle.  Under the terms of our
agreement with Topiary, we will pay to Topiary $9,500,000 during each of the
three annual periods commencing August 1, 2008.  In return the
agreement provides us with the ability to recover up to $200,000,000 should two
catastrophic events involving U.S. wind, U.S. earthquake, European wind, or
Japanese earthquake occur that meet specified loss criteria during any of the
three annual periods.  Both the initial activation event and the
qualifying second event must occur in the same annual period.  The
maximum amount that we can recover over the three-year period is
$200,000,000.  Topiary collateralized its limit of loss by placing
$200,000,000 of high quality investments in a secured collateral
account.  Any recovery we make under this contract is based on an
index using insured property industry loss estimates that are compiled by
Property Claim Services, a division of Insurance Services Offices, Inc., for
certain U.S. perils, and parametric triggers for certain non-U.S. perils, and
is not based on actual losses we may incur.  Consequently, the
transaction was accounted for as a derivative and was carried at the estimated
net fair value.  The resulting net liability and change in net fair
value of $3,125,000 was included in other liabilities on our consolidated
balance sheet and other expense in our consolidated statement of
operations.  One-time fees and expenses of $4,339,000 related to the
agreement with Topiary were included in operating expenses for the three and
nine months ended September 30, 2008.
  Topiary
is a variable interest entity under the provisions of FASB Interpretation No.
46R “Consolidation of Variable Interest Entities, an interpretation of ARB No.
51”.  As we have no investment in and are not the primary
beneficiary of Topiary, we did not include this entity in our consolidated
financial statements.
  - 8
-
  5.
      Earnings Per
      Share
  The
following is a calculation of the basic and diluted earnings or loss per common
share for the three and nine months ended September 30, 2008 and 2007 (in
thousands, except per share data):
  Net
                Income
      (Loss)
              
              
              Weighted
                Average
                Common
                Shares
                Outstanding
              
              
              Earnings
                (Loss)
      Per Common
                ShareThree Months Ended
      September 30, 2008:Basic
      and diluted loss per share:Net
      loss attributable to common shareholders
              
              $
              (47,942
              )
              
              
              48,260
              
              
              $
              (0.99
              )Three Months Ended
      September 30, 2007:Basic
      earnings per share:Net
      income attributable to common shareholders
              
              $
              88,701
              
              
              
              58,946
              
              
              $
              1.50Effect
      of dilutive securities:Common
      share options, restricted common shares and common share
    units
              
              
              –
              
              
              
              2,711Conversion
      of preferred shares
              
              
              –
              
              
              
              5,053Preferred
      share dividends
              
              
              2,602
              
              
              
              –Adjusted
      net income for diluted earnings per share
              
              $
              91,303
              
              
              
              66,710
              
              
              $
              1.37Nine Months Ended
      September 30, 2008:Basic
      earnings per share:Net
      income attributable to common shareholders
              
              $
              154,382
              
              
              
              49,963
              
              
              $
              3.09Effect
      of dilutive securities:Common
      share options, restricted common shares and common share
    units
              
              
              –
              
              
              
              2,674Conversion
      of preferred shares
              
              
              –
              
              
              
              4,996Preferred
      share dividends
              
              
              7,806
              
              
              
              –Adjusted
      net income for diluted earnings per share
              
              $
              162,188
              
              
              
              57,633
              
              
              $
              2.81Nine Months Ended
      September 30, 2007:Basic
      earnings per share:Net
      income attributable to common shareholders
              
              $
              246,980
              
              
              
              59,572
              
              
              $
              4.15Effect
      of dilutive securities:Common
      share options, restricted common shares and common share
    units
              
              
              –
              
              
              
              2,499Conversion
      of preferred shares
              
              
              –
              
              
              
              5,223Preferred
      share dividends
              
              
              7,806
              
              
              
              –Adjusted
      net income for diluted earnings per share
              
              $
              254,786
              
              
              
              67,294
              
              
              $
              3.79
 
  6.
      Operating
      Segment Information
  We
conduct our worldwide reinsurance business through three operating segments:
Property and Marine, Casualty and Finite Risk.  The Property and
Marine operating segment includes principally property and marine reinsurance
coverages that are written in the United States and international
markets.  This operating segment includes property reinsurance, crop
reinsurance and marine and aviation reinsurance.  The Property and
Marine operating segment includes reinsurance contracts that are either
catastrophe excess-of-loss, per-risk excess-of-loss or proportional
contracts.  The Casualty operating segment includes principally
reinsurance contracts that cover umbrella liability, general and product
liability, professional liability, workers' compensation, casualty clash,
automobile liability, surety, trade credit, political risk and accident and
health.  The Finite Risk operating segment includes principally
structured reinsurance contracts with ceding companies whose needs may not be
met efficiently through traditional reinsurance products.  In exchange
for contractual features that limit our downside risk, reinsurance contracts
that we classify as finite risk provide the potential for significant profit
commission to the ceding company.  The classes of risks underwritten
through finite risk contracts are generally consistent with the classes covered
by traditional products.  The finite risk contracts that we underwrite
generally provide prospective protection, meaning coverage is provided for
losses that are incurred after inception of the contract, as contrasted with
retrospective coverage, which covers losses that are incurred prior to inception
of the contract.  The three main categories of finite risk contracts
are quota share, multi-year excess-of-loss and whole account aggregate stop
loss.
  - 9
-
  In
managing our operating segments, we use measures such as underwriting income and
underwriting ratios to evaluate segment performance.  We do not
allocate by segment our assets or certain income and expenses such as investment
income, interest expense and certain corporate expenses.  Total
underwriting income is reconciled to income before income tax
expense.  The measures we use in evaluating our operating segments
should not be used as a substitute for measures determined under U.S.
GAAP.  The following table summarizes underwriting activity and ratios
for the operating segments, together with a reconciliation of total underwriting
income to income before income tax expense, for the three and nine months ended
September 30, 2008 and 2007 ($ in thousands):
  Property
                and
      Marine
              
              
              Casualty
              
              
              Finite
      Risk
              
              
              TotalThree months ended
      September 30, 2008:Net
      premiums written
              
              $
              167,136
              
              
              
              106,826
              
              
              
              5,180
              
              
              $
              279,142Net
      premiums earned
              
              
              151,763
              
              
              
              124,319
              
              
              
              4,643
              
              
              
              280,725Net
      losses and LAE
              
              
              183,759
              
              
              
              86,057
              
              
              
              1,047
              
              
              
              270,863Net
      acquisition expenses
              
              
              23,691
              
              
              
              29,191
              
              
              
              3,438
              
              
              
              56,320Other
      underwriting expenses
              
              
              11,543
              
              
              
              4,948
              
              
              
              286
              
              
              
              16,777Segment
      underwriting income (loss)
              
              $
              (67,230
              )
              
              
              4,123
              
              
              
              (128
              )
              
              
              (63,235
              )Net
      investment income
              
              
              
              48,043Net
      realized losses on investments
              
              
              
              (18,214
              )Net
      foreign currency exchange losses
              
              
              
              (6,134
              )Other
      expense
              
              
              
              (1,686
              )Corporate
      expenses not allocated to segments
              
              
              
              (4,376
              )Interest
      expense
              
              
              
              (4,752
              )Loss
      before income tax benefit
              
              
              $
              (50,354
              )Ratios:Net
      loss and LAE
              
              
              121.1
              %
              
              
              69.2
              %
              
              
              22.6
              %
              
              
              96.5
              %Net
      acquisition expense
              
              
              15.6
              %
              
              
              23.5
              %
              
              
              74.0
              %
              
              
              20.1
              %Other
      underwriting expense
              
              
              7.6
              %
              
              
              4.0
              %
              
              
              6.2
              %
              
              
              6.0
              %Combined
              
              
              144.3
              %
              
              
              96.7
              %
              
              
              102.8
              %
              
              
              122.6
              %Three months ended
      September 30, 2007:Net
      premiums written
              
              $
              142,549
              
              
              
              141,214
              
              
              
              8,369
              
              
              $
              292,132Net
      premiums earned
              
              
              128,380
              
              
              
              153,938
              
              
              
              7,992
              
              
              
              290,310Net
      losses and LAE
              
              
              43,396
              
              
              
              110,365
              
              
              
              10,162
              
              
              
              163,923Net
      acquisition expenses
              
              
              18,549
              
              
              
              33,403
              
              
              
              (507
              )
              
              
              51,445Other
      underwriting expenses
              
              
              12,086
              
              
              
              8,304
              
              
              
              367
              
              
              
              20,757Segment
      underwriting income (loss)
              
              $
              54,349
              
              
              
              1,866
              
              
              
              (2,030
              )
              
              
              54,185Net
      investment income
              
              
              
              54,283Net
      realized losses on investments
              
              
              
              (864
              )Net
      foreign currency exchange gains
              
              
              
              1,429Other
      expense
              
              
              
              (659
              )Corporate
      expenses not allocated to segments
              
              
              
              (7,404
              )Interest
      expense
              
              
              
              (5,457
              )Income
      before income tax expense
              
              
              $
              95,513Ratios:Net
      loss and LAE
              
              
              33.8
              %
              
              
              71.7
              %
              
              
              127.2
              %
              
              
              56.5
              %Acquisition
      expense
              
              
              14.4
              %
              
              
              21.7
              %
              
              
              (6.3
              %)
              
              
              17.7
              %Other
      underwriting expense
              
              
              9.4
              %
              
              
              5.4
              %
              
              
              4.6
              %
              
              
              7.1
              %Combined
              
              
              57.6
              %
              
              
              98.8
              %
              
              
              125.5
              %
              
              
              81.3
              %
  - 10
-
 Property
      and Marine
              
              
              
              Casualty
              
              
              
              Finite Risk
              
              
              
              TotalNine Months Ended
      September 30, 2008:Net
      premiums written
              
              $
              454,541
              
              
              
              335,295
              
              
              
              10,437
              
              
              $
              800,273Net
      premiums earned
              
              
              446,869
              
              
              
              385,059
              
              
              
              8,630
              
              
              
              840,558Net
      losses and LAE
              
              
              279,165
              
              
              
              252,233
              
              
              
              (6,940
              )
              
              
              524,458Net
      acquisition expenses
              
              
              69,119
              
              
              
              98,893
              
              
              
              14,987
              
              
              
              182,999Other
      underwriting expenses
              
              
              29,774
              
              
              
              18,734
              
              
              
              961
              
              
              
              49,469Segment
      underwriting income (loss)
              
              $
              68,811
              
              
              
              15,199
              
              
              
              (378
              )
              
              
              83,632Net
      investment income
              
              
              
              144,037Net
      realized losses on investments
              
              
              
              (18,353
              )Net
      foreign currency exchange losses
              
              
              
              (3,263
              )Other
      expense
              
              
              
              (5,892
              )Corporate
      expenses not allocated to segments
              
              
              
              (18,474
              )Interest
      expense
              
              
              
              (14,253
              )Income
      before income tax expense
              
              
              $
              167,434Ratios:Net
      loss and LAE
              
              
              62.5
              %
              
              
              65.5
              %
              
              
              (80.4
              %)
              
              
              62.4
              %Net
      acquisition expense
              
              
              15.5
              %
              
              
              25.7
              %
              
              
              173.7
              %
              
              
              21.8
              %Other
      underwriting expense
              
              
              6.7
              %
              
              
              4.9
              %
              
              
              11.1
              %
              
              
              5.9
              %Combined
              
              
              84.7
              %
              
              
              96.1
              %
              
              
              104.4
              %
              
              
              90.1
              %Nine Months Ended
      September 30, 2007:Net
      premiums written
              
              $
              399,429
              
              
              
              455,945
              
              
              
              23,398
              
              
              $
              878,772Net
      premiums earned
              
              
              373,226
              
              
              
              471,802
              
              
              
              26,048
              
              
              
              871,076Net
      losses and LAE
              
              
              149,265
              
              
              
              340,740
              
              
              
              20,262
              
              
              
              510,267Net
      acquisition expenses
              
              
              50,748
              
              
              
              105,499
              
              
              
              145
              
              
              
              156,392Other
      underwriting expenses
              
              
              32,696
              
              
              
              21,463
              
              
              
              1,994
              
              
              
              56,153Segment
      underwriting income
              
              $
              140,517
              
              
              
              4,100
              
              
              
              3,647
              
              
              
              148,264Net
      investment income
              
              
              
              160,666Net
      realized losses on investments
              
              
              
              (2,521
              )Net
      foreign currency exchange gains
              
              
              
              2,887Other
      expense
              
              
              
              (3,645
              )Corporate
      expenses not allocated to segments
              
              
              
              (21,322
              )Interest
      expense
              
              
              
              (16,368
              )Income
      before income tax expense
              
              
              $
              267,961Ratios:Net
      loss and LAE
              
              
              40.0
              %
              
              
              72.2
              %
              
              
              77.8
              %
              
              
              58.6
              %Net
      acquisition expense
              
              
              13.6
              %
              
              
              22.4
              %
              
              
              0.6
              %
              
              
              18.0
              %Other
      underwriting expense
              
              
              8.8
              %
              
              
              4.5
              %
              
              
              7.7
              %
              
              
              6.4
              %Combined
              
              
              62.4
              %
              
              
              99.1
              %
              
              
              86.1
              %
              
              
              83.0
              %
  - 11
-
  7.
      Income
      Taxes
  We
provide for income tax expense or benefit based upon income reported in the
condensed consolidated financial statements and the provisions of currently
enacted tax laws.  Platinum Holdings and Platinum Bermuda are
incorporated in Bermuda.  Under current Bermuda law, they are not
taxed on any Bermuda income or capital gains and they have received an assurance
that if any legislation is enacted in Bermuda that would impose tax computed on
profits or income, or computed on any capital asset, gain or appreciation, or
any tax in the nature of estate duty or inheritance tax, then the imposition of
any such tax will not be applicable to Platinum Holdings or Platinum Bermuda or
any of their respective operations, shares, debentures or other obligations
until March 28, 2016.  We also have subsidiaries in the U.S., the
United Kingdom and Ireland that are subject to the tax laws
thereof.  The income tax returns of our U.S. based subsidiaries that
remain open to examination are for calendar years 2003 and forward and tax years
2003 and 2004 are currently under examination.
  A
reconciliation of expected income tax expense, computed by applying a 35% income
tax rate to income before income taxes, to actual income tax expense for the
nine months ended September 30, 2008 and 2007 was as follows ($ in
thousands):
  2008
              
              
              2007Expected
      income tax expense at 35%
              
              $
              58,602
              
              
              $
              93,786Effect
      of foreign income subject to tax at rates other than 35%
              
              
              (52,275
              )
              
              
              (82,931
              )Tax
      exempt investment income
              
              
              (2,639
              )
              
              
              (1,112
              )Other,
      net
              
              
              1,558
              
              
              
              3,432Income
      tax expense
              
              $
              5,246
              
              
              $
              13,175
   8.
      Condensed
      Consolidating Financial
Information
  Platinum
Finance is a U.S. based intermediate holding company and a wholly owned
subsidiary of Platinum Regency.  The outstanding Series B 7.5% Notes,
due June 1, 2017, issued by Platinum Finance are fully and unconditionally
guaranteed by Platinum Holdings.  The Series B 6.371% Remarketed
Senior Guaranteed Notes that were issued by Platinum Finance and were due and
fully repaid on November 16, 2007, were also fully and unconditionally
guaranteed by Platinum Holdings.
  The
payment of dividends from our regulated reinsurance subsidiaries is limited by
applicable laws and statutory requirements of the jurisdictions in which the
subsidiaries operate, including Bermuda, the U.S., the United Kingdom and
Ireland.  Based on the regulatory restrictions of the applicable
jurisdictions, the maximum amount available for payment of dividends or other
distributions by Platinum US to Platinum Finance in 2008 without prior
regulatory approval is estimated to be approximately $24,796,000.  The
maximum amount available for payment of dividends or other distributions by the
reinsurance subsidiaries of Platinum Holdings in 2008, including Platinum US,
without prior regulatory approval is estimated to be approximately
$398,241,000.  During the nine months ended September 30, 2008,
dividends of $300,000,000 were paid by Platinum Bermuda to Platinum
Holdings.
  - 12
-
  The
tables below present condensed consolidating financial information of Platinum
Holdings, Platinum Finance and the non-guarantor subsidiaries of Platinum
Holdings as of September 30, 2008 and December 31, 2007 and for the
three and nine months ended September 30, 2008 and 2007
($ in thousands):
  Condensed
      Consolidating Balance Sheet
                September 30,
      2008
              
              Platinum
      Holdings
              
              
              Platinum
      Finance
              
              
              Non-guarantor
      Subsidiaries
              
              
              Consolidating
      Adjustments
              
              
              ConsolidatedASSETSTotal
      investments
              
              $
              –
              
              
              
              4,072
              
              
              
              3,653,940
              
              
              
              –
              
              
              $
              3,658,012Investment
      in subsidiaries
              
              
              1,685,523
              
              
              
              504,882
              
              
              
              295,697
              
              
              
              (2,486,102
              )
              
              
              –Cash
      and cash equivalents
              
              
              81,082
              
              
              
              12,919
              
              
              
              506,680
              
              
              
              –
              
              
              
              600,681Reinsurance
      assets
              
              
              –
              
              
              
              –
              
              
              
              528,246
              
              
              
              –
              
              
              
              528,246Other
      assets
              
              
              12,942
              
              
              
              2,848
              
              
              
              102,644
              
              
              
              –
              
              
              
              118,434Total
      assets
              
              $
              1,779,547
              
              
              
              524,721
              
              
              
              5,087,207
              
              
              
              (2,486,102
              )
              
              $
              4,905,373LIABILITIES
      AND
                SHAREHOLDERS’
      EQUITYLiabilitiesReinsurance
      liabilities
              
              $
              –
              
              
              
              –
              
              
              
              2,849,594
              
              
              
              –
              
              
              $
              2,849,594Debt
      obligations
              
              
              –
              
              
              
              250,000
              
              
              
              –
              
              
              
              –
              
              
              
              250,000Other
      liabilities
              
              
              7,155
              
              
              
              3,960
              
              
              
              22,272
              
              
              
              –
              
              
              
              33,387Total
      liabilities
              
              
              7,155
              
              
              
              253,960
              
              
              
              2,871,866
              
              
              
              –
              
              
              
              3,132,981Shareholders’
      EquityPreferred
      shares
              
              
              57
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              57Common
      shares
              
              
              477
              
              
              
              –
              
              
              
              6,250
              
              
              
              (6,250
              )
              
              
              477Additional
      paid-in capital
              
              
              1,116,050
              
              
              
              194,079
              
              
              
              1,898,211
              
              
              
              (2,092,290
              )
              
              
              1,116,050Accumulated
      other comprehensive loss
              
              
              (170,257
              )
              
              
              (25,241
              )
              
              
              (195,365
              )
              
              
              220,606
              
              
              
              (170,257
              )Retained
      earnings
              
              
              826,065
              
              
              
              101,923
              
              
              
              506,245
              
              
              
              (608,168
              )
              
              
              826,065Total
      shareholders’ equity
              
              
              1,772,392
              
              
              
              270,761
              
              
              
              2,215,341
              
              
              
              (2,486,102
              )
              
              
              1,772,392Total
      liabilities and shareholders’ equity
              
              $
              1,779,547
              
              
              
              524,721
              
              
              
              5,087,207
              
              
              
              (2,486,102
              )
              
              $
              4,905,373
   Condensed
      Consolidating Balance Sheet
                December
      31, 2007
              
              Platinum
      Holdings
              
              
              Platinum
      Finance
              
              
              Non-guarantor
      Subsidiaries
              
              
              Consolidating
      Adjustments
              
              
              ConsolidatedASSETSTotal
      investments
              
              $
              –
              
              
              
              6,661
              
              
              
              3,378,563
              
              
              
              –
              
              
              $
              3,385,224Investment
      in subsidiaries
              
              
              1,958,019
              
              
              
              504,642
              
              
              
              306,373
              
              
              
              (2,769,034
              )
              
              
              –Cash
      and cash equivalents
              
              
              39,593
              
              
              
              18,348
              
              
              
              1,018,338
              
              
              
              –
              
              
              
              1,076,279Reinsurance
      assets
              
              
              –
              
              
              
              –
              
              
              
              517,820
              
              
              
              –
              
              
              
              517,820Other
      assets
              
              
              10,815
              
              
              
              2,106
              
              
              
              86,506
              
              
              
              –
              
              
              
              99,427Total
      assets
              
              $
              2,008,427
              
              
              
              531,757
              
              
              
              5,307,600
              
              
              
              (2,769,034
              )
              
              $
              5,078,750LIABILITIES
      AND
                SHAREHOLDERS’
      EQUITYLiabilitiesReinsurance
      liabilities
              
              $
              –
              
              
              
              –
              
              
              
              2,764,299
              
              
              
              –
              
              
              $
              2,764,299Debt
      obligations
              
              
              –
              
              
              
              250,000
              
              
              
              –
              
              
              
              –
              
              
              
              250,000Other
      liabilities
              
              
              10,050
              
              
              
              1,714
              
              
              
              54,310
              
              
              
              –
              
              
              
              66,074Total
      liabilities
              
              
              10,050
              
              
              
              251,714
              
              
              
              2,818,609
              
              
              
              –
              
              
              
              3,080,373Shareholders’
      EquityPreferred
      shares
              
              
              57
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              57Common
      shares
              
              
              538
              
              
              
              –
              
              
              
              6,250
              
              
              
              (6,250
              )
              
              
              538Additional
      paid-in capital
              
              
              1,338,466
              
              
              
              193,054
              
              
              
              1,896,161
              
              
              
              (2,089,215
              )
              
              
              1,338,466Accumulated
      other comprehensive loss
              
              
              (24,339
              )
              
              
              (2,513
              )
              
              
              (26,814
              )
              
              
              29,327
              
              
              
              (24,339
              )Retained
      earnings
              
              
              683,655
              
              
              
              89,502
              
              
              
              613,394
              
              
              
              (702,896
              )
              
              
              683,655Total
      shareholders' equity
              
              
              1,998,377
              
              
              
              280,043
              
              
              
              2,488,991
              
              
              
              (2,769,034
              )
              
              
              1,998,377Total
      liabilities and shareholders’ equity
              
              $
              2,008,427
              
              
              
              531,757
              
              
              
              5,307,600
              
              
              
              (2,769,034
              )
              
              $
              5,078,750
  - 13
-
  Consolidating
      Statement of Operations
                For
      the Three Months EndedSeptember 30,
      2008
              
              Platinum
      Holdings
              
              
              Platinum
      Finance
              
              
              Non-guarantor
      Subsidiaries
              
              
              Consolidating
      Adjustments
              
              
              ConsolidatedRevenue:Net
      premiums earned
              
              $
              –
              
              
              
              –
              
              
              
              280,725
              
              
              
              –
              
              
              $
              280,725Net
      investment income
              
              
              586
              
              
              
              129
              
              
              
              47,328
              
              
              
              –
              
              
              
              48,043Net
      realized gains (losses) on investments
              
              
              –
              
              
              
              (14
              )
              
              
              (18,200
              )
              
              
              –
              
              
              
              (18,214
              )Other
      income (expense), net
              
              
              811
              
              
              
              –
              
              
              
              (2,497
              )
              
              
              –
              
              
              
              (1,686
              )Total
      revenue
              
              
              1,397
              
              
              
              115
              
              
              
              307,356
              
              
              
              –
              
              
              
              308,868Expenses:Net
      losses and loss adjustment expenses
              
              
              –
              
              
              
              –
              
              
              
              270,863
              
              
              
              –
              
              
              
              270,863Net
      acquisition expenses
              
              
              –
              
              
              
              –
              
              
              
              56,320
              
              
              
              –
              
              
              
              56,320Operating
      expenses
              
              
              4,282
              
              
              
              63
              
              
              
              16,808
              
              
              
              –
              
              
              
              21,153Net
      foreign currency exchange losses
              
              
              –
              
              
              
              –
              
              
              
              6,134
              
              
              
              –
              
              
              
              6,134Interest
      expense
              
              
              –
              
              
              
              4,752
              
              
              
              –
              
              
              
              –
              
              
              
              4,752Total
      expenses
              
              
              4,282
              
              
              
              4,815
              
              
              
              350,125
              
              
              
              –
              
              
              
              359,222Income
      (loss) before income taxexpense
      (benefit)
              
              
              (2,885
              )
              
              
              (4,700
              )
              
              
              (42,769
              )
              
              
              –
              
              
              
              (50,354
              )Income
      tax expense (benefit)
              
              
              150
              
              
              
              (2,250
              )
              
              
              (2,914
              )
              
              
              –
              
              
              
              (5,014
              )Income
      (loss) before equity inearnings
      of subsidiaries
              
              
              (3,035
              )
              
              
              (2,450
              )
              
              
              (39,855
              )
              
              
              –
              
              
              
              (45,340
              )Equity
      in earnings of subsidiaries
              
              
              (42,305
              )
              
              
              (3,576
              )
              
              
              175,905
              
              
              
              (130,024
              )
              
              
              –Net
      income (loss)
              
              
              (45,340
              )
              
              
              (6,026
              )
              
              
              136,050
              
              
              
              (130,024
              )
              
              
              (45,340
              )Preferred
      dividends
              
              
              2,602
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              2,602Net
      income (loss) attributable tocommon
      shareholders
              
              $
              (47,942
              )
              
              
              (6,026
              )
              
              
              136,050
              
              
              
              (130,024
              )
              
              $
              (47,942
              )
   Consolidating
      Statement of Operations
                For
      the Three Months EndedSeptember 30,
      2007
              
              Platinum
      Holdings
              
              
              Platinum
      Finance
              
              
              Non-guarantor
      Subsidiaries
              
              
              Consolidating
      Adjustments
              
              
              ConsolidatedRevenue:Net
      premiums earned
              
              $
              –
              
              
              
              –
              
              
              
              290,310
              
              
              
              –
              
              
              $
              290,310Net
      investment income
              
              
              2,526
              
              
              
              644
              
              
              
              51,113
              
              
              
              –
              
              
              
              54,283Net
      realized losses on investments
              
              
              –
              
              
              
              –
              
              
              
              (
      864
              )
              
              
              –
              
              
              
              (864
              )Other
      income (expense), net
              
              
              2,623
              
              
              
              –
              
              
              
              (3,282
              )
              
              
              –
              
              
              
              (659
              )Total
      revenue
              
              
              5,149
              
              
              
              644
              
              
              
              337,277
              
              
              
              –
              
              
              
              343,070Expenses:Net
      losses and loss adjustment expenses
              
              
              –
              
              
              
              –
              
              
              
              163,923
              
              
              
              –
              
              
              
              163,923Net
      acquisition expenses
              
              
              –
              
              
              
              –
              
              
              
              51,445
              
              
              
              –
              
              
              
              51,445Operating
      expenses
              
              
              7,256
              
              
              
              105
              
              
              
              20,800
              
              
              
              –
              
              
              
              28,161Net
      foreign currency exchange gains
              
              
              –
              
              
              
              –
              
              
              
              (1,429
              )
              
              
              –
              
              
              
              (1,429
              )Interest
      expense
              
              
              –
              
              
              
              5,457
              
              
              
              –
              
              
              
              –
              
              
              
              5,457Total
      expenses
              
              
              7,256
              
              
              
              5,562
              
              
              
              234,739
              
              
              
              –
              
              
              
              247,557Income
      (loss) before income taxexpense
      (benefit)
              
              
              (2,107
              )
              
              
              (4,918
              )
              
              
              102,538
              
              
              
              –
              
              
              
              95,513Income
      tax expense (benefit)
              
              
              –
              
              
              
              (1,590
              )
              
              
              5,800
              
              
              
              –
              
              
              
              4,210Income
      (loss) before equity inearnings
      of subsidiaries
              
              
              (2,107
              )
              
              
              (3,328
              )
              
              
              96,738
              
              
              
              –
              
              
              
              91,303Equity
      in earnings of subsidiaries
              
              
              93,410
              
              
              
              11,723
              
              
              
              12,074
              
              
              
              (117,207
              )
              
              
              –Net
      income
              
              
              91,303
              
              
              
              8,395
              
              
              
              108,812
              
              
              
              (117,207
              )
              
              
              91,303Preferred
      dividends
              
              
              2,602
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              2,602Net
      income attributable tocommon
      shareholders
              
              $
              88,701
              
              
              
              8,395
              
              
              
              108,812
              
              
              
              (117,207
              )
              
              $
              88,701
  - 14
-
  Consolidating
      Statement of Operations
                For
      the Nine Months EndedSeptember 30,
      2008
              
              Platinum
      Holdings
              
              
              Platinum
      Finance
              
              
              Non-guarantor
      Subsidiaries
              
              
              Consolidating
      Adjustments
              
              
              ConsolidatedRevenue:Net
      premiums earned
              
              $
              –
              
              
              
              –
              
              
              
              840,558
              
              
              
              –
              
              
              $
              840,558Net
      investment income
              
              
              1,441
              
              
              
              529
              
              
              
              142,067
              
              
              
              –
              
              
              
              144,037Net
      realized gains (losses) on investments
              
              
              –
              
              
              
              (10
              )
              
              
              (18,343
              )
              
              
              –
              
              
              
              (18,353
              )Other
      income (expense), net
              
              
              1,895
              
              
              
              –
              
              
              
              (7,787
              )
              
              
              –
              
              
              
              (5,892
              )Total
      revenue
              
              
              3,336
              
              
              
              519
              
              
              
              956,495
              
              
              
              –
              
              
              
              960,350Expenses:Net
      losses and loss adjustment expenses
              
              
              –
              
              
              
              –
              
              
              
              524,458
              
              
              
              –
              
              
              
              524,458Net
      acquisition expenses
              
              
              –
              
              
              
              –
              
              
              
              182,999
              
              
              
              –
              
              
              
              182,999Operating
      expenses
              
              
              18,098
              
              
              
              243
              
              
              
              49,602
              
              
              
              –
              
              
              
              67,943Net
      foreign currency exchange gains
              
              
              –
              
              
              
              –
              
              
              
              3,263
              
              
              
              –
              
              
              
              3,263Interest
      expense
              
              
              –
              
              
              
              14,253
              
              
              
              –
              
              
              
              –
              
              
              
              14,253Total
      expenses
              
              
              18,098
              
              
              
              14,496
              
              
              
              760,322
              
              
              
              –
              
              
              
              792,916Income
      (loss) before income taxexpense
      (benefit)
              
              
              (14,762
              )
              
              
              (13,977
              )
              
              
              196,173
              
              
              
              –
              
              
              
              167,434Income
      tax expense (benefit)
              
              
              450
              
              
              
              (4,555
              )
              
              
              9,351
              
              
              
              –
              
              
              
              5,246Income
      (loss) before equity inearnings
      of subsidiaries
              
              
              (15,212
              )
              
              
              (9,422
              )
              
              
              186,822
              
              
              
              –
              
              
              
              162,188Equity
      in earnings of subsidiaries
              
              
              177,400
              
              
              
              21,850
              
              
              
              11,050
              
              
              
              (210,300
              )
              
              
              –Net
      income
              
              
              162,188
              
              
              
              12,428
              
              
              
              197,872
              
              
              
              (210,300
              )
              
              
              162,188Preferred
      dividends
              
              
              7,806
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              7,806Net
      income attributable tocommon
      shareholders
              
              $
              154,382
              
              
              
              12,428
              
              
              
              197,872
              
              
              
              (210,300
              )
              
              $
              154,382
   Consolidating
      Statement of Operations
                For
      the Nine Months EndedSeptember 30,
      2007
              
              Platinum
      Holdings
              
              
              Platinum
      Finance
              
              
              Non-guarantor
      Subsidiaries
              
              
              Consolidating
      Adjustments
              
              
              ConsolidatedRevenue:Net
      premiums earned
              
              $
              –
              
              
              
              –
              
              
              
              871,076
              
              
              
              –
              
              
              $
              871,076Net
      investment income
              
              
              5,181
              
              
              
              1,883
              
              
              
              153,602
              
              
              
              –
              
              
              
              160,666Net
      realized gains (losses) on investments
              
              
              –
              
              
              
              –
              
              
              
              (2,521
              )
              
              
              –
              
              
              
              (2,521
              )Other
      income (expense), net
              
              
              4,478
              
              
              
              –
              
              
              
              (8,123
              )
              
              
              –
              
              
              
              (3,645
              )Total
      revenue
              
              
              9,659
              
              
              
              1,883
              
              
              
              1,014,034
              
              
              
              –
              
              
              
              1,025,576Expenses:Net
      losses and loss adjustment expenses
              
              
              –
              
              
              
              –
              
              
              
              510,267
              
              
              
              –
              
              
              
              510,267Net
      acquisition expenses
              
              
              –
              
              
              
              –
              
              
              
              156,392
              
              
              
              –
              
              
              
              156,392Operating
      expenses
              
              
              20,915
              
              
              
              291
              
              
              
              56,269
              
              
              
              –
              
              
              
              77,475Net
      foreign currency exchange gains
              
              
              –
              
              
              
              –
              
              
              
              (2,887
              )
              
              
              –
              
              
              
              (2,887
              )Interest
      expense
              
              
              –
              
              
              
              16,368
              
              
              
              –
              
              
              
              –
              
              
              
              16,368Total
      expenses
              
              
              20,915
              
              
              
              16,659
              
              
              
              720,041
              
              
              
              –
              
              
              
              757,615Income
      (loss) before income taxexpense
      (benefit)
              
              
              (11,256
              )
              
              
              (14,776
              )
              
              
              293,993
              
              
              
              –
              
              
              
              267,961Income
      tax expense (benefit)
              
              
              –
              
              
              
              (4,996
              )
              
              
              18,171
              
              
              
              –
              
              
              
              13,175Income
      (loss) before equity inearnings
      of subsidiaries
              
              
              (11,256
              )
              
              
              (9,780
              )
              
              
              275,822
              
              
              
              –
              
              
              
              254,786Equity
      in earnings of subsidiaries
              
              
              266,042
              
              
              
              33,887
              
              
              
              37,480
              
              
              
              (337,409
              )
              
              
              –Net
      income
              
              
              254,786
              
              
              
              24,107
              
              
              
              313,302
              
              
              
              (337,409
              )
              
              
              254,786Preferred
      dividends
              
              
              7,806
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              7,806Net
      income attributable tocommon
      shareholders
              
              $
              246,980
              
              
              
              24,107
              
              
              
              313,302
              
              
              
              (337,409
              )
              
              $
              246,980
  - 15
-
  Condensed
      Consolidating Statement of Cash Flows
                For
      the Nine Months EndedSeptember 30,
      2008
              
              Platinum
                Holdings
              
              
              Platinum
      Finance
              
              
              Non-guarantor
                Subsidiaries
              
              
              Consolidating
      Adjustments
              
              
              ConsolidatedNet
      cash provided by (used in)operating
      activities
              
              $
              (9,229
              )
              
              
              (7,856
              )
              
              
              277,291
              
              
              
              –
              
              
              $
              260,206Investing
      Activities:Proceeds
      from sale of fixed maturity available-for-sale securities
              
              
              –
              
              
              
              –
              
              
              
              80,126
              
              
              
              –
              
              
              
              80,126Proceeds
      from maturity or paydown of fixed maturity available-for-sale
      securities
              
              
              –
              
              
              
              2,426
              
              
              
              857,637
              
              
              
              –
              
              
              
              860,063Acquisition
      of fixed maturity available-for-sale securities
              
              
              –
              
              
              
              –
              
              
              
              (1,341,153
              )
              
              
              –
              
              
              
              (1,341,153
              )Proceeds
      from sale of other invested asset
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –Increase
      in short-term investments
              
              
              –
              
              
              
              –
              
              
              
              (80,559
              )
              
              
              –
              
              
              
              (80,559
              )Dividends
      from subsidiaries
              
              
              305,000
              
              
              
              –
              
              
              
              –
              
              
              
              (305,000
              )
              
              
              –Net
      cash provided by (used in)investing
      activities
              
              
              305,000
              
              
              
              2,426
              
              
              
              (483,949
              )
              
              
              (305,000
              )
              
              
              (481,523
              )Financing
      Activities:Dividends
      paid to preferred shareholders
              
              
              (7,806
              )
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              (7,806
              )Dividends
      paid to common shareholders
              
              
              (11,972
              )
              
              
              –
              
              
              
              (305,000
              )
              
              
              305,000
              
              
              
              (11,972
              )Proceeds
      from exercise of share options
              
              
              25,896
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              25,896Purchase
      of common shares
              
              
              (260,399
              )
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              (260,399
              )Net
      cash used in financing activities
              
              
              (254,281
              )
              
              
              –
              
              
              
              (305,000
              )
              
              
              305,000
              
              
              
              (254,281
              )Net
      decrease in cash and cash equivalents
              
              
              41,490
              
              
              
              (5,430
              )
              
              
              (511,658
              )
              
              
              –
              
              
              
              (475,598
              )Cash
      and cash equivalents at beginning of period
              
              
              39,592
              
              
              
              18,349
              
              
              
              1,018,338
              
              
              
              –
              
              
              
              1,076,279Cash
      and cash equivalents at end of period
              
              $
              81,082
              
              
              
              12,919
              
              
              
              506,680
              
              
              
              –
              
              
              $
              600,681
   Condensed
      Consolidating Statement of Cash Flows
                For
      the Nine Months EndedSeptember 30,
      2007
              
              Platinum
                Holdings
              
              
              Platinum
      Finance
              
              
              Non-guarantor
                Subsidiaries
              
              
              Consolidating
      Adjustments
              
              
              ConsolidatedNet
      cash provided by (used in)operating
      activities
              
              $
              (8,398
              )
              
              
              (9,319
              )
              
              
              361,532
              
              
              
              –
              
              
              $
              343,815Investing
      Activities:Proceeds
      from sale of fixed maturity available-for-sale securities
              
              
              –
              
              
              
              76
              
              
              
              84,740
              
              
              
              –
              
              
              
              84,816Proceeds
      from maturity or paydown of fixed maturity available-for-sale
      securities
              
              
              –
              
              
              
              2,176
              
              
              
              838,053
              
              
              
              –
              
              
              
              840,229Acquisition
      of fixed maturity available-for-sale securities
              
              
              –
              
              
              
              –
              
              
              
              (1,231,479
              )
              
              
              –
              
              
              
              (1,231,479
              )Proceeds
      from sale of other invested asset
              
              
              –
              
              
              
              –
              
              
              
              4,745
              
              
              
              –
              
              
              
              4,745Increase
      in short-term investments
              
              
              –
              
              
              
              –
              
              
              
              (5,859
              )
              
              
              –
              
              
              
              (5,859
              )Dividends
      from subsidiaries
              
              
              157,500
              
              
              
              10,000
              
              
              
              –
              
              
              
              (167,500
              )
              
              
              –Net
      cash provided by (used in)investing
      activities
              
              
              157,500
              
              
              
              12,252
              
              
              
              (309,800
              )
              
              
              (167,500
              )
              
              
              (307,548
              )Financing
      Activities:Dividends
      paid to preferred shareholders
              
              
              (7,806
              )
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              (7,806
              )Dividends
      paid to common shareholders
              
              
              (14,250
              )
              
              
              –
              
              
              
              (167,500
              )
              
              
              167,500
              
              
              
              (14,250
              )Proceeds
      from exercise of share options
              
              
              22,640
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              22,640Purchase
      of common shares
              
              
              (116,973
              )
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              (116,973
              )Net
      cash used in financing activities
              
              
              (116,389
              )
              
              
              –
              
              
              
              (167,500
              )
              
              
              167,500
              
              
              
              (116,389
              )Net
      increase (decrease) in cash andcash
      equivalents
              
              
              32,713
              
              
              
              2,933
              
              
              
              (115,768
              )
              
              
              –
              
              
              
              (80,122
              )Cash
      and cash equivalents at beginning of period
              
              
              106,039
              
              
              
              39,294
              
              
              
              706,319
              
              
              
              –
              
              
              
              851,652Cash
      and cash equivalents at end of period
              
              $
              138,752
              
              
              
              42,227
              
              
              
              590,551
              
              
              
              –
              
              
              $
              771,530
 
 - 16
-
  9.
      Company Share
      Repurchase
  On
August 4, 2004, our Board of Directors established a program to repurchase
our common shares.  On July 26, 2007, our Board of Directors approved
an increase in the then existing repurchase program to result in authority as of
such date to repurchase up to a total of $250,000,000 of our common
shares.  After repurchases of our common shares, on each of
October 25, 2007, February 21, 2008, April 23, 2008, July 24,
2008 and October 22, 2008, our Board of Directors approved additional
increases in the repurchase program to result in authority as of such dates to
repurchase up to a total of $250,000,000 of our common shares.  During
the three months ended September 30, 2008, the Company repurchased
1,294,100 of its common shares in the open market at an aggregate cost including
commissions of $46,459,000 and a weighted average cost including commissions of
$35.90 per share.  During the nine months ended September 30,
2008, the Company repurchased 7,536,092 of its common shares in the open market
at an aggregate cost including commissions of $260,399,000 and a weighted
average cost including commissions of $34.55 per share.  All of the
common shares we repurchased were canceled.
   ITEM
      2.
              MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
      AND RESULTS OF OPERATIONS
  
 Business
Overview
  Platinum
Underwriters Holdings, Ltd. ("Platinum Holdings") is a Bermuda holding company
organized in 2002.  Platinum Holdings and its consolidated
subsidiaries (collectively, the "Company") operate through two licensed
reinsurance subsidiaries:  Platinum Underwriters Bermuda, Ltd.
("Platinum Bermuda") and Platinum
Underwriters Reinsurance, Inc. ("Platinum US").  The terms "we," "us,"
and "our" also refer to Platinum Holdings and its consolidated subsidiaries,
unless the context otherwise indicates.  We provide property and
marine, casualty and finite risk reinsurance coverages, through reinsurance
intermediaries, to a diverse clientele of insurers and select reinsurers on a
worldwide basis.  Through December 31, 2006, we also underwrote
business through Platinum Re (UK) Limited ("PlatinumUK").  In
2007 Platinum UK ceased underwriting reinsurance business.
  The
following discussion and analysis should be read in conjunction with the
consolidated financial statements and related notes thereto and management's
discussion and analysis of financial condition and results of operations
included in our Annual Report on Form 10-K for the year ended December 31,
2007.  Our condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States ("U.S. GAAP").
  We write
property and casualty reinsurance.  Property reinsurance protects a
ceding company against financial loss arising out of damage to the insured’s
property or loss of its use caused by an insured peril.  Property
reinsurance covers damage principally to buildings and their contents and may be
in the form of catastrophe coverage or per-risk coverage.  Catastrophe
reinsurance coverage protects a ceding company against losses arising out of
multiple claims for a single event, while per-risk reinsurance coverage protects
a ceding company against loss arising out of a single claim for a single risk or
policy.  We also write marine reinsurance which protects a ceding
company against financial losses arising out of damage to ships and cargo or
damage caused by ships.  Also included in marine are reinsurance
contracts covering off-shore energy.  Casualty reinsurance protects a
ceding company against financial loss arising out of the insured’s obligation to
others for loss or damage to their persons or property.  Examples of
casualty coverages are umbrella liability, general and product liability,
professional liability, workers' compensation, casualty clash, automobile
liability, surety, trade credit, political risk and accident and
health.  Casualty reinsurance may also be in the form of catastrophe
and per-risk contracts.
  The
property and casualty reinsurance industry is highly competitive.  We
compete with reinsurers worldwide, many of which have greater financial,
marketing and management resources than we do.  Our competitors vary
by type of business.  Large multi-national and multi-line reinsurers
represent some of our competitors in all lines and classes, while specialty
reinsurance companies in the U.S. compete with us in selective
lines.  Bermuda-based reinsurers tend to be significant competitors on
property catastrophe business.  Lloyd’s of London syndicates are our
significant competitors on marine business.  For casualty and other
international classes of business, the large U.S. and European reinsurers are
our significant competitors.
  The
reinsurance industry historically has been cyclical, characterized by periods of
price competition due to excessive underwriting capacity as well as periods of
favorable pricing due to shortages of underwriting capacity.  Cyclical
trends in the industry and the industry's profitability can also be
significantly affected by volatile developments, including natural and other
catastrophes, such as hurricanes, windstorms, earthquakes, floods, fires,
explosions and terrorist attacks, the frequency and severity of which are
inherently difficult to predict.  Property and casualty reinsurance
rates often rise in the aftermath of significant catastrophe
losses.  To the extent that actual claim liabilities are higher than
anticipated, the industry's capacity to write new business
diminishes.  The industry is also affected by changes in the
propensity of courts to expand insurance coverage and grant large liability
awards, as well as fluctuations in interest rates, inflation and other changes
in the economic environment that affect market prices of
investments.
  - 17
-
  Results of
Operations
  Three Months Ended
September 30, 2008 as Compared with the Three Months Ended
September 30, 2007
  Net
income for the three months ended September 30, 2008 and 2007 was as
follows ($ in thousands):
  2008
              
              
              2007
              
              
              DecreaseNet
      income (loss)
              
              $
              (45,340
              )
              
              
              91,303
              
              
              $
              136,643
 
 The
decrease in net income in 2008 as compared with 2007 was due primarily to a
decrease in net underwriting income of $117,420,000 and an increase in net
realized investment losses of $17,350,000.  Net underwriting income
consists of net premiums earned less net losses and loss adjustment expenses
("LAE"), net acquisition expenses and operating costs related to underwriting
operations.  The decrease in net underwriting income was primarily due
to an increase in major catastrophes in 2008 as compared with
2007.  We define a major catastrophe as an event resulting in property
losses to the industry in excess of $1 billion or property losses to us in
excess of $10,000,000.  The most significant of the major catastrophes
in 2008 were Hurricanes Gustav and Ike.  The net after tax adverse
impact of Hurricanes Gustav and Ike in 2008 was $124,287,000 and was consistent
with ultimate net after tax estimated losses of approximately $120,000,000; the
difference was primarily attributable to reinstatement premiums that will be
earned subsequent to September 30, 2008.  The net adverse impact
of major catastrophes in 2007 was insignificant.  Net favorable
development, which includes the development of prior years’ unpaid losses and
LAE and the related impact on premiums and commissions, also affected net
underwriting income.  Net favorable development was $32,031,000 and
$13,417,000 in 2008 and 2007, respectively.
  Gross,
ceded and net premiums written and earned for the three months ended
September 30, 2008 and 2007 were as follows ($ in
thousands):
  2008
              
              
              2007
              
              
              Increase
                (decrease)Gross
      premiums written
              
              $
              288,683
              
              
              
              296,530
              
              
              $
              (7,847
              )Ceded
      premiums written
              
              
              9,541
              
              
              
              4,398
              
              
              
              5,143Net
      premiums written
              
              
              279,142
              
              
              
              292,132
              
              
              
              (12,990
              )Gross
      premiums earned
              
              
              287,799
              
              
              
              293,833
              
              
              
              (6,034
              )Ceded
      premiums earned
              
              
              7,074
              
              
              
              3,523
              
              
              
              3,551Net
      premiums earned
              
              $
              280,725
              
              
              
              290,310
              
              
              $
              (9,585
              )
 
 The
decrease in gross premiums written in 2008 as compared with 2007 was primarily
attributable to decreases in gross premiums written across most classes in the
Casualty segment, partially offset by an increase in gross premiums written in
the Property and Marine segment.  Net premiums written and net
premiums earned in 2008 also included additional premiums of approximately
$20,336,000 and $13,306,000, respectively, relating to reinsurance contracts
that incurred losses arising from the major catastrophes, as compared with
$766,000 and $623,000, respectively, in 2007.  Ceded premiums written
increased as we purchased additional retrocession protection for our North
American property catastrophe business.  The decrease in net premiums
earned was due to a decrease in net premiums written.
  Net
investment income for the three months ended September 30, 2008 and 2007
was $48,043,000 and $54,283,000, respectively.  Net investment income
decreased in 2008 as compared with 2007 primarily due to a decrease in yields on
invested assets.  Net investment income includes interest earned on
funds held of $933,000 and $1,027,000 in 2008 and 2007,
respectively.
  Net
realized losses on investments for the three months ended September 30,
2008 and 2007 were $18,214,000 and $864,000, respectively.  The net
realized losses on investments recorded in 2008 included $13,096,000 of
other-than-temporary impairments and $5,118,000 resulting from the sale of
securities.  During the three months ended September 30, 2008,
the financial markets experienced a loss of liquidity and significant adverse
credit events that in turn led to widespread declines in the value of financial
instruments.  In order to reduce our exposure to holdings in financial
institutions, we sold approximately $207,305,000 of corporate bonds and cash
equivalents issued by financial institutions, resulting in a realized loss of
$4,225,000.  The Federal National Mortgage Association ("FNMA")
was placed into conservatorship on September 7, 2008 by the U.S.
government.  We sold our perpetual preferred stock held in FNMA and
realized a loss of $880,000.
  We
routinely review our available-for-sale investments to determine whether
unrealized losses represent temporary changes in fair value or were the result
of "other-than-temporary impairments."  The process of determining
whether a security is other-than-temporarily impaired requires judgment and
involves analyzing many factors.  The securities in our portfolio that
we identified to be other-than-temporarily impaired were securities issued by
financial institutions.  The impairments we recorded as
other-than-temporary during the third quarter of 2008 included $5,647,000 of
perpetual preferred stocks and $5,048,000 of senior debt issued by Lehman
Brothers Holdings Inc.
  Other
expense for the three months ended September 30, 2008 and 2007 was
$1,686,000 and $659,000, respectively.  Other expense in 2008 included
an expense of $6,645,000 for the change in fair value of our insurance linked
derivative contracts and $127,000 of net expense on reinsurance contracts
accounted for as deposits.  Offsetting these expenses in 2008 was
$5,047,000 of net unrealized gains relating to changes in the fair value of
fixed maturity securities classified as trading.  Our trading
portfolio consists of non-U.S. dollar denominated securities, primarily European
government and U.K. Government issued bonds, and during the quarter yields on
those securities decreased resulting in an increase in fair
value.  Other expense in 2007 included $2,357,000 of net unrealized
gains relating to changes in the fair value of fixed maturity securities
classified as trading, an expense of $2,955,000 for the change in fair value of
our insurance linked derivative contracts, and $119,000 of net expense on
reinsurance contracts accounted for as deposits.  We entered into the
above-mentioned insurance linked derivative contracts to mitigate our
catastrophe loss exposure and manage our capital.  These contracts are
discussed in more detail below in “Financial Condition, Liquidity and Capital
Resources.”
  - 18
-
  Net
losses and LAE and the resulting net loss and LAE ratios for the three months
ended September 30, 2008 and 2007 were as follows ($ in
thousands):
  2008
              
              
              2007
              
              
              IncreaseNet
      losses and LAE
              
              $
              270,863
              
              
              
              163,923
              
              
              $
              106,940Net
      loss and LAE ratios
              
              
              96.5
              %
              
              
              56.5
              %
              
              40.0
      points
 
 The
increases in net losses and LAE and the related ratios in 2008 as compared with
2007 were due to an increase in net losses from major catastrophes, partially
offset by an increase in net favorable loss development.  We had
$148,794,000 of losses in 2008 from major catastrophes occurring in 2008,
including Hurricanes Gustav and Ike, which, with related premium adjustments,
increased the net loss and LAE ratio in 2008 by 50.6 points.  This
compared with $4,882,000 of losses in 2007 from major catastrophes which, with
related premium adjustments, increased the net loss and LAE ratio in 2007 by 1.7
points.  Net favorable loss development was $35,879,000 in 2008 as
compared with $10,480,000 in 2007.  Net favorable loss development and
premium adjustments related to prior years’ losses decreased the net loss and
LAE ratios in 2008 and 2007 by 12.7 and 3.6 points, respectively.  Net
favorable development in 2008 and 2007 emerged as actual reported losses were
significantly less than expected and gained sufficient credibility in the
current period to reduce estimated ultimate losses.  Rates across most
of our classes of business have declined, resulting in higher net loss and LAE
ratios in 2008.  However, net premiums earned increased in the
Property and Marine segment and decreased in the Casualty
segment.  This change in the mix of business offset the effect of the
overall decline in rates as net loss ratios are generally lower in the Property
and Marine segment than in the Casualty segment, excluding major catastrophe
losses.
  Net
acquisition expenses and resulting net acquisition expense ratios for the three
months ended September 30, 2008 and 2007 were as follows ($ in
thousands):
  2008
              
              
              2007
              
              
              IncreaseNet
      acquisition expenses
              
              $
              56,320
              
              
              
              51,445
              
              
              $
              4,875Net
      acquisition expense ratios
              
              
              20.1
              %
              
              
              17.7
              %
              
              2.4
      points
 
 The
increases in net acquisition expenses and the related net acquisition expense
ratio in 2008 as compared with 2007 were due to higher commission rates in the
2008 underwriting year as compared with 2007.  Net acquisition
expenses in 2008 and 2007 include adjustments to commissions related to prior
years of $3,611,000 and $2,482,000 in 2008 and 2007,
respectively.  The net adjustments to commissions and premiums related
to prior years’ losses increased the net acquisition expense ratios by 1.3 and
0.8 points in 2008 and 2007, respectively.  The increase in the net
acquisition expense ratio was also impacted by changes in the mix of business
within both the Property and Marine and Casualty segments.
  Operating
expenses were $21,153,000 and $28,161,000 for the three months ended
September 30, 2008 and 2007, respectively.  Operating expenses
include costs such as salaries, rent and like items related to reinsurance
operations as well as costs associated with Platinum Holdings and its
non-operating intermediate holding company subsidiaries.  The decrease
in expenses in 2008 as compared with 2007 was primarily due to a decrease in
performance based compensation accruals of $6,381,000 in 2008 as compared with
2007.  Also contributing to the decrease was the expiration on
September 30, 2007 of the Services and Capacity Reservation Agreement with
RenaissanceRe Holdings Ltd. ("RenaissanceRe") effective October 1,
2002 (the "RenRe Agreement") pursuant to which RenaissanceRe provided consulting
services to us in connection with our property catastrophe book of
business.  In 2007, we incurred fees of $2,724,000 pursuant to the
RenRe Agreement.  Offsetting these decreases were one-time fees and
expenses of $4,339,000 related to the agreement with Topiary Capital Limited
("Topiary"), which is discussed in more detail in “Financial Condition,
Liquidity and Capital Resources.”
  Net
foreign currency exchange losses for the three months ended September 30,
2008 were $6,134,000 compared with net foreign currency exchange gains of
$1,429,000 for the three months ended September 30, 2007.  We
routinely transact business in currencies other than the U.S.
dollar.  Foreign currency exchange gains and losses result from the
re-valuation into U.S. dollars of assets and liabilities denominated in
currencies other than the U.S. dollar.  Net foreign currency exchange
gains and losses arise as a result of fluctuations in the amounts of assets and
liabilities denominated in foreign currencies as well as fluctuations in the
currency exchange rates.  We periodically monitor our foreign currency
exposures and may purchase or sell foreign currency denominated assets based on
these exposures.  The net foreign currency exchange losses in 2008
were the result of us holding more non-U.S. dollar denominated assets than
non-U.S. dollar denominated liabilities, primarily the Euro and the Pound
Sterling, as the U.S. dollar strengthened against these currencies.
  Interest
expense for the three months ended September 30, 2008 and 2007 was
$4,752,000 and $5,457,000, respectively.  The decrease in interest
expense in 2008 as compared with 2007 was the result of a reduction in our debt
obligations outstanding in 2008 as compared with 2007.
  Income
tax expense (benefit) and the effective tax rates for the three months ended
September 30, 2008 and 2007 were as follows ($ in
thousands):
  2008
              
              
              2007
              
              
              Increase
                (decrease)Income
      tax expense (benefit)
              
              $
              (5,014
              )
              
              
              4,210
              
              
              $
              (9,224
              )Effective
      tax rates
              
              
              10.0
              %
              
              
              4.4
              %
              
              5.6
      points
 
 - 19
-
  The
income tax benefit for 2008 as compared with the income tax expense for 2007 was
due to the losses before income tax expense in 2008 as compared with income
before income tax expense in 2007.  The effective tax rate in any
given year is based on income (loss) before income tax expense (benefit) of our
subsidiaries that operate in various jurisdictions, each of which has its own
corporate income tax rate.  Platinum Holdings and Platinum Bermuda are
not subject to corporate income tax.  The increase in the effective
tax rate was primarily due to a change in the distribution of losses before
income tax benefit among subsidiaries operating in different tax
jurisdictions.  In 2008, the percentage of the combined loss before
income tax benefit derived from Platinum Holdings and Platinum Bermuda was 75.2%
as compared with 81.8% of income before income tax expense in 2007.
  Nine Months Ended
September 30, 2008 as Compared with the Nine Months Ended
September 30, 2007
  Net
income for the nine months ended September 30, 2008 and 2007 was as follows
($ in thousands):
  2008
              
              
              2007
              
              
              DecreaseNet
      income
              
              $
              162,188
              
              
              
              254,786
              
              
              $
              92,598
 
 The
decrease in net income in 2008 as compared with 2007 was primarily due to a
decrease in underwriting income of $64,632,000, a decrease in net investment
income of $16,629,000 and an increase in net realized investment losses of
$15,832,000.  The decrease in underwriting income was due to an
increase in major catastrophe losses, partially offset by an increase in net
favorable development in 2008 as compared with 2007.  The estimated
net adverse impact in 2008 from major catastrophes, including Hurricanes Gustav
and Ike and European storm Emma, was approximately $140,400,000 before
taxes.  This compared to the estimated total net adverse impact in
2007 of $37,766,000 from major catastrophes, including European storm Kyrill and
floods in the United Kingdom.  Net favorable development was
$98,312,000 and $49,501,000 in 2008 and 2007, respectively.
  Gross,
ceded and net premiums written and earned for the nine months ended
September 30, 2008 and 2007 were as follows ($ in
thousands):
  2008
              
              
              2007
              
              
              Increase
                (decrease)Gross
      premiums written
              
              $
              823,298
              
              
              
              894,127
              
              
              $
              (70,829
              )Ceded
      premiums written
              
              
              23,025
              
              
              
              15,355
              
              
              
              7,670Net
      premiums written
              
              
              800,273
              
              
              
              878,772
              
              
              
              (78,499
              )Gross
      premiums earned
              
              
              858,239
              
              
              
              887,015
              
              
              
              (28,776
              )Ceded
      premiums earned
              
              
              17,681
              
              
              
              15,939
              
              
              
              1,742Net
      premiums earned
              
              $
              840,558
              
              
              
              871,076
              
              
              $
              (30,518
              )
 
 The
decrease in gross premiums written in 2008 as compared with 2007 was primarily
attributable to decreases in gross premiums written across most classes in the
Casualty segment, partially offset by an increase in gross written premiums in
the Property and Marine segment.  Net premiums written and net
premiums earned in 2008 also included additional premiums of approximately
$21,977,000 and $14,947,000, respectively, relating to reinsurance contracts
that incurred losses arising from the major catastrophes, compared to $6,383,000
and $6,075,000, respectively, in 2007.  Ceded premiums written
increased as we purchased additional retrocession protection for our North
American property catastrophe business.  The decrease in net premiums
earned was due to a decrease in net premiums written.
  Net
investment income for the nine months ended September 30, 2008 and 2007 was
$144,037,000 and $160,666,000, respectively.  Net investment income
decreased in 2008 as compared with 2007 due to a decrease in yields on invested
assets.  Net investment income included interest earned on funds held
of $2,573,000 and $4,417,000 in 2008 and 2007,
respectively.
  Net
realized losses on investments for the nine months ended September 30, 2008
and 2007 were $18,353,000 and $2,521,000, respectively.  The increase
in net realized losses on investments in 2008 as compared with 2007 was the
result of $13,096,000 of other-than-temporary impairments and $5,257,000
resulting from the sale of securities.
  Other
expense for the nine months ended September 30, 2008 and 2007 was
$5,892,000 and $3,645,000, respectively.  Other expense in 2008
included an expense of $8,415,000 for the change in net fair value of our
insurance linked derivative contracts, and $376,000 of net expense on
reinsurance contracts accounted for as deposits.  Partially offsetting
these expenses was $1,990,000 of net unrealized gains relating to changes in
fair value of fixed maturity securities classified as trading.  Other
expense in 2007 includes $357,000 of net unrealized losses relating to changes
in fair value of fixed maturity securities classified as trading, $347,000 of
net expense on reinsurance contracts accounted for as deposits, and an expense
of $3,000,000 for the change in the net fair value of our insurance linked
derivative contracts.
  Net
losses and LAE and the resulting net loss and LAE ratios for the nine months
ended September 30, 2008 and 2007 were as follows ($ in
thousands):
  2008
              
              
              2007
              
              
              IncreaseNet
      losses and LAE
              
              $
              524,458
              
              
              
              510,267
              
              
              $
              14,191Net
      loss and LAE ratios
              
              
              62.4
              %
              
              
              58.6
              %
              
              3.8
      points
  - 20
-
  The
increases in net losses and LAE and the related ratios in 2008 as compared with
2007 were due to an increase in major catastrophe losses, partially offset by an
increase in net favorable loss development.  Losses from major
catastrophes occurring in 2008 resulted in $156,113,000 of losses in 2008,
which, with related premium adjustments, increased the net loss and LAE ratio by
17.7 points.  Major catastrophe losses were $44,073,000 in 2007 which,
with related premium adjustments, increased the net loss and LAE ratio by 4.8
points.  Net losses and LAE and the resulting net loss and LAE ratios
were also impacted by net favorable loss development of $112,320,000 in 2008 and
$47,671,000 in 2007.  Net favorable loss development and premium
adjustments related to prior years’ losses decreased the net loss and LAE ratios
in 2008 and 2007 by 14.1 and 5.4 points, respectively.  Exclusive of
major catastrophes and favorable loss development, the net loss and LAE ratio
decreased by approximately 0.4 points.  While rates across most of our
classes of business have declined resulting in higher expected net loss and LAE
ratios, net premiums earned increased in the Property and Marine segment and
decreased in the Casualty segment.  This change in the mix of business
offset the effect of the overall decline in rates as net loss ratios are
generally lower in the Property and Marine segment than in the Casualty segment,
excluding major catastrophe losses.
  Net
acquisition expenses and resulting net acquisition expense ratios for the nine
months ended September 30, 2008 and 2007 were as follows ($ in
thousands):
  2008
              
              
              2007
              
              
              IncreaseNet
      acquisition expenses
              
              $
              182,999
              
              
              
              156,392
              
              
              $
              26,607Net
      acquisition expense ratios
              
              
              21.8
              %
              
              
              18.0
              %
              
              3.8
      points
 
 The
increases in net acquisition expenses and the related net acquisition expense
ratio in 2008 as compared with 2007 were primarily due to increases in estimated
commissions related to prior underwriting years.  Net increases in
commissions in 2008 relating to prior years were $22,566,000 in 2008, as
compared with decreases of $2,228,000 in 2007.  Net adjustments to
commissions and premiums related to prior years’ losses increased the net
acquisition expense ratio by 2.5 points in 2008 and decreased the net
acquisition expense ratio by 0.2 points in 2007.  Changes in the mix
of business within both the Property and Marine and Casualty segments also
contributed to the increase in the net acquisition expense ratio.
  Operating
expenses for the nine months ended September 30, 2008 and 2007 were
$67,943,000 and $77,475,000, respectively.  The decrease in 2008 as
compared with 2007 was primarily due to the expiration on September 30,
2007 of the RenRe Agreement.  In 2007, we incurred fees of $7,776,000
pursuant to the RenRe Agreement.  Also contributing to this decrease
was a decrease in performance based compensation in 2008 of $4,866,000 as
compared with 2007.  Offsetting these decreases were one-time fees and
expenses of $4,339,000 related to the agreement with Topiary.
  Net
foreign currency exchange losses for the nine months ended September 30,
2008 were $3,263,000 compared to net foreign currency exchange gains of
$2,887,000 for the nine months ended September 30, 2007.  The net
foreign currency exchange losses in 2008 were the result of us holding more
non-U.S. dollar denominated assets than non-U.S. dollar denominated liabilities,
primarily the Euro and the Pound Sterling, as the U.S. dollar strengthened
against these currencies.
  Interest
expense for the nine months ended September 30, 2008 and 2007 was
$14,253,000 and $16,368,000, respectively.  The decrease in interest
expense was the result of a reduction in our debt obligations outstanding in
2008 as compared with 2007.
  Income
tax expense and the effective tax rates for the nine months ended
September 30, 2008 and 2007 were as follows ($ in
thousands):
  2008
              
              
              2007
              
              
              DecreaseIncome
      tax expense
              
              $
              5,246
              
              
              
              13,175
              
              
              $
              7,929Effective
      tax rates
              
              
              3.1
              %
              
              
              4.9
              %
              
              1.8
      points
 
 The
decrease in income tax expense in 2008 as compared with 2007 was due to the
decrease in taxable income generated by our subsidiaries that operate in taxable
jurisdictions.  The decrease in the effective tax rate was the result
of a greater portion of income before income tax expense being generated by
Platinum Holdings and Platinum Bermuda, which are not subject to corporate
income tax, in 2008 as compared with 2007.  In 2008, the percentage of
the income before income tax expense derived from Platinum Holdings and Platinum
Bermuda was 88.6% as compared with 80.0% in 2007.  The effective tax
rate in any given period is based on income before income tax expense of our
subsidiaries that operate in various taxable jurisdictions, each of which has
its own corporate income tax rate.
  Segment
Information
  We
conduct our worldwide reinsurance business through three operating segments:
Property and Marine, Casualty and Finite Risk.  In managing our
operating segments, we use measures such as underwriting income and underwriting
ratios to evaluate segment performance.  We do not allocate by segment
our assets or certain income and expenses such as investment income, interest
expense and certain corporate expenses.  Total underwriting income is
reconciled to income before income tax expense.  The measures we use
in evaluating our operating segments should not be used as a substitute for
measures determined under U.S. GAAP.  The following table summarizes
underwriting activity and ratios for the three operating segments for the three
and nine months ended September 30, 2008 and 2007 ($ in
thousands):
  - 21
-
  Property
                and
      Marine
              
              
              Casualty
              
              
              Finite
      Risk
              
              
              TotalThree months ended
      September 30, 2008:Net
      premiums written
              
              $
              167,136
              
              
              
              106,826
              
              
              
              5,180
              
              
              $
              279,142Net
      premiums earned
              
              
              151,763
              
              
              
              124,319
              
              
              
              4,643
              
              
              
              280,725Net
      losses and LAE
              
              
              183,759
              
              
              
              86,057
              
              
              
              1,047
              
              
              
              270,863Net
      acquisition expenses
              
              
              23,691
              
              
              
              29,191
              
              
              
              3,438
              
              
              
              56,320Other
      underwriting expenses
              
              
              11,543
              
              
              
              4,948
              
              
              
              286
              
              
              
              16,777Segment
      underwriting income (loss)
              
              $
              (67,230
              )
              
              
              4,123
              
              
              
              (128
              )
              
              
              (63,235
              )Net
      investment income
              
              
              
              48,043Net
      realized losses on investments
              
              
              
              (18,214
              )Net
      foreign currency exchange losses
              
              
              
              (6,134
              )Other
      expense
              
              
              
              (1,686
              )Corporate
      expenses not allocated to segments
              
              
              
              (4,376
              )Interest
      expense
              
              
              
              (4,752
              )Loss
      before income tax benefit
              
              
              $
              (50,354
              )Ratios:Net
      loss and LAE
              
              
              121.1
              %
              
              
              69.2
              %
              
              
              22.6
              %
              
              
              96.5
              %Net
      acquisition expense
              
              
              15.6
              %
              
              
              23.5
              %
              
              
              74.0
              %
              
              
              20.1
              %Other
      underwriting expense
              
              
              7.6
              %
              
              
              4.0
              %
              
              
              6.2
              %
              
              
              6.0
              %Combined
              
              
              144.3
              %
              
              
              96.7
              %
              
              
              102.8
              %
              
              
              122.6
              %Three months ended
      September 30, 2007:Net
      premiums written
              
              $
              142,549
              
              
              
              141,214
              
              
              
              8,369
              
              
              $
              292,132Net
      premiums earned
              
              
              128,380
              
              
              
              153,938
              
              
              
              7,992
              
              
              
              290,310Net
      losses and LAE
              
              
              43,396
              
              
              
              110,365
              
              
              
              10,162
              
              
              
              163,923Net
      acquisition expenses
              
              
              18,549
              
              
              
              33,403
              
              
              
              (507
              )
              
              
              51,445Other
      underwriting expenses
              
              
              12,086
              
              
              
              8,304
              
              
              
              367
              
              
              
              20,757Segment
      underwriting income (loss)
              
              $
              54,349
              
              
              
              1,866
              
              
              
              (2,030
              )
              
              
              54,185Net
      investment income
              
              
              
              54,283Net
      realized losses on investments
              
              
              
              (864
              )Net
      foreign currency exchange gains
              
              
              
              1,429Other
      expense
              
              
              
              (659
              )Corporate
      expenses not allocated to segments
              
              
              
              (7,404
              )Interest
      expense
              
              
              
              (5,457
              )Income
      before income tax expense
              
              
              $
              95,513Ratios:Net
      loss and LAE
              
              
              33.8
              %
              
              
              71.7
              %
              
              
              127.2
              %
              
              
              56.5
              %Acquisition
      expense
              
              
              14.4
              %
              
              
              21.7
              %
              
              
              (6.3
              %)
              
              
              17.7
              %Other
      underwriting expense
              
              
              9.4
              %
              
              
              5.4
              %
              
              
              4.6
              %
              
              
              7.1
              %Combined
              
              
              57.6
              %
              
              
              98.8
              %
              
              
              125.5
              %
              
              
              81.3
              %
  - 22
-
  Property
      and Marine
              
              
              
              Casualty
              
              
              
              Finite
      Risk
              
              
              
              TotalNine Months Ended
      September 30, 2008:Net
      premiums written
              
              $
              454,541
              
              
              
              335,295
              
              
              
              10,437
              
              
              $
              800,273Net
      premiums earned
              
              
              446,869
              
              
              
              385,059
              
              
              
              8,630
              
              
              
              840,558Net
      losses and LAE
              
              
              279,165
              
              
              
              252,233
              
              
              
              (6,940
              )
              
              
              524,458Net
      acquisition expenses
              
              
              69,119
              
              
              
              98,893
              
              
              
              14,987
              
              
              
              182,999Other
      underwriting expenses
              
              
              29,774
              
              
              
              18,734
              
              
              
              961
              
              
              
              49,469Segment
      underwriting income (loss)
              
              $
              68,811
              
              
              
              15,199
              
              
              
              (378
              )
              
              
              83,632Net
      investment income
              
              
              
              144,037Net
      realized losses on investments
              
              
              
              (18,353
              )Net
      foreign currency exchange losses
              
              
              
              (3,263
              )Other
      expense
              
              
              
              (5,892
              )Corporate
      expenses not allocated to segments
              
              
              
              (18,474
              )Interest
      expense
              
              
              
              (14,253
              )Income
      before income tax expense
              
              
              $
              167,434Ratios:Net
      loss and LAE
              
              
              62.5
              %
              
              
              65.5
              %
              
              
              (80.4
              %)
              
              
              62.4
              %Net
      acquisition expense
              
              
              15.5
              %
              
              
              25.7
              %
              
              
              173.7
              %
              
              
              21.8
              %Other
      underwriting expense
              
              
              6.7
              %
              
              
              4.9
              %
              
              
              11.1
              %
              
              
              5.9
              %Combined
              
              
              84.7
              %
              
              
              96.1
              %
              
              
              104.4
              %
              
              
              90.1
              %Nine Months Ended
      September 30, 2007:Net
      premiums written
              
              $
              399,429
              
              
              
              455,945
              
              
              
              23,398
              
              
              $
              878,772Net
      premiums earned
              
              
              373,226
              
              
              
              471,802
              
              
              
              26,048
              
              
              
              871,076Net
      losses and LAE
              
              
              149,265
              
              
              
              340,740
              
              
              
              20,262
              
              
              
              510,267Net
      acquisition expenses
              
              
              50,748
              
              
              
              105,499
              
              
              
              145
              
              
              
              156,392Other
      underwriting expenses
              
              
              32,696
              
              
              
              21,463
              
              
              
              1,994
              
              
              
              56,153Segment
      underwriting income
              
              $
              140,517
              
              
              
              4,100
              
              
              
              3,647
              
              
              
              148,264Net
      investment income
              
              
              
              160,666Net
      realized losses on investments
              
              
              
              (2,521
              )Net
      foreign currency exchange gains
              
              
              
              2,887Other
      expense
              
              
              
              (3,645
              )Corporate
      expenses not allocated to segments
              
              
              
              (21,322
              )Interest
      expense
              
              
              
              (16,368
              )Income
      before income tax expense
              
              
              $
              267,961Ratios:Net
      loss and LAE
              
              
              40.0
              %
              
              
              72.2
              %
              
              
              77.8
              %
              
              
              58.6
              %Net
      acquisition expense
              
              
              13.6
              %
              
              
              22.4
              %
              
              
              0.6
              %
              
              
              18.0
              %Other
      underwriting expense
              
              
              8.8
              %
              
              
              4.5
              %
              
              
              7.7
              %
              
              
              6.4
              %Combined
              
              
              62.4
              %
              
              
              99.1
              %
              
              
              86.1
              %
              
              
              83.0
              %
 
 - 23
-
  Property and Marine
  The
Property and Marine operating segment includes principally property, including
crop, and marine reinsurance coverages that are written in the U.S. and
international markets.  This business includes property catastrophe
excess-of-loss contracts, property per-risk excess-of-loss contracts and
property proportional contracts.  This operating segment represented
59.9% and 48.8% of our net premiums written during the three months ended
September 30, 2008 and 2007, respectively, and 56.8% and 45.4% of our net
premiums written during the nine months ended September 30, 2008 and 2007,
respectively.
  Three Months Ended
September 30, 2008 as Compared with the Three Months Ended
September 30, 2007
  Gross,
ceded and net premiums written and earned for the three months ended
September 30, 2008 and 2007 were as follows ($ in
thousands):
  2008
              
              
              2007
              
              
              IncreaseGross
      premiums written
              
              $
              176,677
              
              
              
              146,948
              
              
              $
              29,729Ceded
      premiums written
              
              
              9,541
              
              
              
              4,399
              
              
              
              5,142Net
      premiums written
              
              
              167,136
              
              
              
              142,549
              
              
              
              24,587Gross
      premiums earned
              
              
              158,837
              
              
              
              131,884
              
              
              
              26,953Ceded
      premiums earned
              
              
              7,074
              
              
              
              3,504
              
              
              
              3,570Net
      premiums earned
              
              $
              151,763
              
              
              
              128,380
              
              
              $
              23,383
 
 The
increase in gross premiums written in 2008 as compared with 2007 was primarily
due to an increase in North American crop and excess catastrophe
business.  Net premiums written and net premiums earned in 2008 also
included additional premiums of approximately $20,336,000 and $13,306,000,
respectively, relating to reinsurance contracts that incurred losses arising
from the major catastrophes, compared to $766,000 and $623,000, respectively, in
2007.  The increase in ceded premiums written was attributable to the
purchase of additional retrocession protection for our North American property
catastrophe business.  Net premiums earned in 2008 increased primarily
as a result of increases in net premiums written in prior quarters.
  Net
losses and LAE and the resulting net loss and LAE ratios for the three months
ended September 30, 2008 and 2007 were as follows ($ in
thousands):
  2008
              
              
              2007
              
              
              IncreaseNet
      losses and LAE
              
              $
              183,759
              
              
              
              43,396
              
              
              $
              140,363Net
      loss and LAE ratios
              
              
              121.1
              %
              
              
              33.8
              %
              
              87.3
      points
 
 The
increases in net losses and LAE and the related ratios in 2008 as compared with
2007 were due to an increase in major catastrophe losses, partially offset by an
increase in net favorable loss development.  We had $148,794,000 of
net losses from major catastrophes in 2008, which with related premium
adjustments increased the net loss and LAE ratio by 95.6 points.  In
comparison, we had net losses from major catastrophes of $4,882,000 in
2007 which, with related premium adjustments, increased the net loss and
LAE ratio by 3.8 points.  Net favorable loss development was
$22,150,000 and $13,898,000 in 2008 and 2007, respectively.  Net
favorable loss development and premium adjustments related to prior years’
losses decreased the net loss and LAE ratios in 2008 and 2007 by 13.9 and 10.9
points, respectively.  Exclusive of the catastrophe losses and net
favorable loss development, the net loss and LAE ratios in 2008 and 2007 were
comparable.  The net loss and LAE ratios were also affected by changes
in the mix of business.
  Net
acquisition expenses and resulting net acquisition expense ratios for the three
months ended September 30, 2008 and 2007 were as follows ($ in
thousands):
  2008
              
              
              2007
              
              
              IncreaseNet
      acquisition expenses
              
              $
              23,691
              
              
              
              18,549
              
              
              $
              5,142Net
      acquisition expense ratios
              
              
              15.6
              %
              
              
              14.4
              %
              
              1.2
      points
 
 The
increase in net acquisition expenses in 2008 as compared with 2007 was primarily
due to an increase in net premiums earned.  The increase in the net
acquisition expense ratio was due in part to higher commission rates in the 2008
underwriting year as compared with 2007, as well as changes in the mix of
business.
  Other
underwriting expenses in 2008 and 2007 were $11,543,000 and $12,086,000,
respectively.  The decrease in 2008 as compared with 2007 was due to a
decrease in performance based compensation accruals allocated to the segment in
2008 and the expiration of the RenRe Agreement on September 30,
2007.  Other underwriting expenses in 2007 included fees of $2,724,000
relating to the RenRe Agreement.  Offsetting the decreases in 2008
were one-time fees and expenses of $4,339,000 related to the agreement with
Topiary.
  - 24
-
  Nine Months Ended
September 30, 2008 as Compared with the Nine Months Ended
September 30, 2007
  Gross,
ceded and net premiums written and earned for the nine months ended
September 30, 2008 and 2007 were as follows ($ in
thousands):
  2008
              
              
              2007
              
              
              Increase
                (decrease)Gross
      premiums written
              
              $
              477,599
              
              
              
              416,676
              
              
              $
              60,923Ceded
      premiums written
              
              
              23,058
              
              
              
              17,247
              
              
              
              5,811Net
      premiums written
              
              
              454,541
              
              
              
              399,429
              
              
              
              55,112Gross
      premiums earned
              
              
              464,583
              
              
              
              391,064
              
              
              
              73,519Ceded
      premiums earned
              
              
              17,714
              
              
              
              17,838
              
              
              
              (124
              )Net
      premiums earned
              
              $
              446,869
              
              
              
              373,226
              
              
              $
              73,643
 
 The
increase in gross premiums written in 2008 as compared with 2007 was primarily
due to an increase in North American crop and excess catastrophe
business.  Net premiums written and net premiums earned in 2008 also
included additional premiums of approximately $21,977,000 and $14,947,000,
respectively, relating to reinsurance contracts that incurred losses arising
from the major catastrophes, compared to $6,181,000 and $5,873,000,
respectively, in 2007.  The increase in ceded premiums written was
attributable to the purchase of additional retrocession protection for our North
American property catastrophe business.  This increase was partially
offset by a decrease that resulted from the non-renewal in 2007 of a quota share
retrocessional agreement under which we ceded 30% of our property catastrophe
business.  Net premiums earned in 2008 increased primarily as a result
of the increase in net premiums written.
  Net
losses and LAE and the resulting net loss and LAE ratios for the nine months
ended September 30, 2008 and 2007 were as follows ($ in
thousands):
  2008
              
              
              2007
              
              
              IncreaseNet
      losses and LAE
              
              $
              279,165
              
              
              
              149,265
              
              
              $
              129,900Net
      loss and LAE ratios
              
              
              62.5
              %
              
              
              40.0
              %
              
              22.5
      points
 
 The
increases in net losses and LAE and the related ratios in 2008 as compared with
2007 were due to an increase in major catastrophe losses, partially offset by an
increase in net favorable loss development.  We had net losses of
$156,113,000 from major catastrophes in 2008 which, with related premium
adjustments, increased the net loss and LAE ratio by 33.9 points, as compared
with of net losses of $44,073,000 from major catastrophes in 2007 which, with
related premium adjustments, increased the net loss and LAE ratio by 11.4
points.  Net losses and LAE and the resulting net loss and LAE ratios
were also impacted by net favorable loss development of $60,238,000 in 2008 as
compared with $40,848,000 in 2007.  Net favorable loss development and
premium adjustments related to prior years’ losses decreased the net loss and
LAE ratios in 2008 and 2007 by 14.8 and 10.9 points,
respectively.  Exclusive of losses related to major catastrophes and
net favorable loss development, the net loss and LAE ratio increased by
approximately 3.6 points in 2008 primarily due to an increase in crop quota
share business that has a higher expected loss ratio than the remainder of the
segment.  The net loss and LAE ratios were also affected by other
changes in the mix of business.
  Net
acquisition expenses and the resulting net acquisition expense ratios for the
nine months ended September 30, 2008 and 2007 were as follows ($ in
thousands):
  2008
              
              
              2007
              
              
              IncreaseNet
      acquisition expenses
              
              $
              69,119
              
              
              
              50,748
              
              
              $
              18,371Net
      acquisition expense ratios
              
              
              15.5
              %
              
              
              13.6
              %
              
              1.9
      points
 
 The
increase in net acquisition expenses in 2008 as compared with 2007 was primarily
due to an increase in net premiums earned.  The increase in the net
acquisition expense ratio in 2008 as compared with 2007 was due to higher
commission rates in the 2008 underwriting year as compared with 2007 as well as
changes in the mix of business.  Net acquisition expenses and the
related net acquisition expense ratio were also affected by commissions related
to prior years.  Net increases in commissions related to prior years
were $5,100,000 and $1,075,000 in 2008 and 2007, respectively.
  Other
underwriting expenses in 2008 and 2007 were $29,774,000 and $32,696,000,
respectively.  The decrease in 2008 as compared with 2007 was
primarily due to a decrease in performance based compensation accruals in 2008
and the expiration of the RenRe Agreement on September 30,
2007.  Other underwriting expenses in 2007 included fees of $5,052,000
relating to the RenRe Agreement.  Offsetting the decreases in 2008
were $4,339,000 of fees and expenses in 2008 related to the agreement
with Topiary.
  - 25
-
 
 Casualty
  The
Casualty operating segment principally includes reinsurance contracts that cover
umbrella liability, general and product liability, professional liability,
workers' compensation, casualty clash, automobile liability, surety, trade
credit, political risk and accident and health.  This operating
segment represented 38.3% and 48.3% of our net premiums written during the three
months ended September 30, 2008 and 2007, respectively, and 41.9% and
51.9% of our net premiums written during the nine months ended
September 30, 2008 and 2007, respectively.
  Three Months Ended
September 30, 2008 as Compared with the Three Months Ended
September 30, 2007
  Gross,
ceded and net premiums written and earned for the three months ended
September 30, 2008 and 2007 were as follows ($ in
thousands):
  2008
              
              
              2007
              
              DecreaseGross
      premiums written
              
              $
              106,826
              
              
              
              141,214
              
              
              $
              34,388Ceded
      premiums written
              
              
              –
              
              
              
              –
              
              
              
              –Net
      premiums written
              
              
              106,826
              
              
              
              141,214
              
              
              
              34,388Gross
      premiums earned
              
              
              124,319
              
              
              
              153,957
              
              
              
              29,638Ceded
      premiums earned
              
              
              –
              
              
              
              19
              
              
              
              19Net
      premiums earned
              
              $
              124,319
              
              
              
              153,938
              
              
              $
              29,619
 
 The
decrease in net premiums written in 2008 as compared with 2007 was primarily due
to decreases in business underwritten in 2008 and 2007 across most North
American casualty classes, with the most significant decreases in the North
American excess classes.  The decrease was the result of fewer
opportunities that met our underwriting standards.  The decrease in
net premiums earned was the result of the decrease in net premiums
written.  Net premiums written and earned were also affected by
changes in the mix of business and the structure of the underlying reinsurance
contracts.
  Net
losses and LAE and the resulting net loss and LAE ratios for the three months
ended September 30, 2008 and 2007 were as follows ($ in
thousands):
  2008
              
              
              2007
              
              
              DecreaseNet
      losses and LAE
              
              $
              86,057
              
              
              
              110,365
              
              
              $
              24,308Net
      loss and LAE ratios
              
              
              69.2
              %
              
              
              71.7
              %
              
              2.5
      points
 
 The
decrease in net losses and LAE in 2008 as compared with 2007 was primarily due
to the decrease in net premiums earned and an increase in net favorable loss
development.  Net favorable loss development was $12,469,000 in 2008
as compared with net unfavorable loss development of $954,000 in
2007.  Net favorable loss development and premium adjustments related
to prior years’ losses decreased the net loss and LAE ratios in 2008 and 2007 by
10.3 points in 2008 and increased the net loss and LAE ratios by 0.6 points in
2007.  Exclusive of net loss development, the net loss and LAE ratio
increased by approximately 7.8 points in 2008 as compared with
2007.  The increase is primarily attributable to losses related to a
reinsurance contract covering leased private passenger automobile residual
values.  Losses related to this contract were $11,008,000 in
2008.  Also impacting the loss ratio were higher initial expected loss
ratios in certain significant classes reflecting a decline in price adequacy
offset by a reduction in medical malpractice loss ratios due to better than
expected experience and trends.  The loss ratio was also impacted by
changes in the mix of business.
  Net
acquisition expenses and resulting net acquisition expense ratios for the three
months ended September 30, 2008 and 2007 were as follows ($ in
thousands):
  2008
              
              
              2007
              
              
              Increase
                (decrease)Net
      acquisition expenses
              
              $
              29,191
              
              
              
              33,403
              
              
              $
              (4,212
              )Net
      acquisition expense ratios
              
              
              23.5
              %
              
              
              21.7
              %
              
              1.8
      points
 
 The
decrease in net acquisition expenses in 2008 as compared with 2007 was due to
the decrease in net premiums earned.  The increase in the net
acquisition expense ratio was due, in part, to lesser adjustments to decrease
commissions in 2008 relating to prior years and to deteriorating terms and
conditions that have generally resulted in higher commission and brokerage
rates.  Net decreases in commissions relating to prior years were
$670,000 in 2008, representing 0.6% of net premiums earned, and $2,968,000 in
2007, representing 1.9% of net premiums earned.  Net acquisition
expense ratios were also impacted by changes in the mix of
business.
  Other
underwriting expenses for the three months ended September 30, 2008 and
2007 were $4,948,000 and $8,304,000, respectively.  This decrease was
primarily due to a decrease in performance based compensation accruals allocated
to the segment.
  - 26
-
  Nine Months Ended
September 30, 2008 as Compared with the Nine Months Ended
September 30, 2007
  Gross,
ceded and net premiums written and earned for the nine months ended
September 30, 2008 and 2007 were as follows ($ in
thousands):
  2008
              
              
              2007
              
              
              DecreaseGross
      premiums written
              
              $
              335,262
              
              
              
              455,996
              
              
              $
              120,734Ceded
      premiums written
              
              
              (33
              )
              
              
              51
              
              
              
              84Net
      premiums written
              
              
              335,295
              
              
              
              455,945
              
              
              
              120,650Gross
      premiums earned
              
              
              385,026
              
              
              
              471,845
              
              
              
              86,819Ceded
      premiums earned
              
              
              (33
              )
              
              
              43
              
              
              
              76Net
      premiums earned
              
              $
              385,059
              
              
              
              471,802
              
              
              $
              86,743
 
 The
decrease in net premiums written in 2008 as compared with 2007 was primarily due
to decreases in business underwritten in 2008 and 2007 across most North
American casualty classes, with the most significant decreases in the umbrella
class.  The decrease was the result of fewer opportunities that met
our underwriting standards.  The decrease in net premiums earned was
the result of the decrease in net premiums written.  Net premiums
written and earned were also affected by changes in the mix of business and the
structure of the underlying reinsurance contracts.
  Net
losses and LAE and the resulting net loss and LAE ratios for the nine months
ended September 30, 2008 and 2007 were as follows ($ in
thousands):
  2008
              
              
              2007
              
              
              DecreaseNet
      losses and LAE
              
              $
              252,233
              
              
              
              340,740
              
              
              $
              88,507Net
      loss and LAE ratios
              
              
              65.5
              %
              
              
              72.2
              %
              
              6.7
      points
 
 The
decreases in net losses and LAE and the related ratios in 2008 as compared with
2007 were primarily due to a decrease in net premiums earned and an increase in
net favorable loss development.  Net favorable loss development was
$40,124,000 in 2008 and $2,476,000 in 2007.  Net favorable loss
development and premium adjustments related to prior years’ losses decreased the
net loss and LAE ratios in 2008 and 2007 by 10.6 and 0.5 points,
respectively.  Exclusive of net favorable loss development, the net
loss and LAE ratio increased in 2008 as compared with 2007 due to $11,008,000 of
losses in 2008 related to a reinsurance contract covering leased private
passenger automobile residual values and higher initial expected loss ratios in
certain significant classes reflecting a decline in price
adequacy.  The net loss and LAE ratios were also affected by changes
in the mix of business.
  Net
acquisition expenses and resulting net acquisition expense ratios for the nine
months ended September 30, 2008 and 2007 were as follows ($ in
thousands):
  2008
              
              
              2007
              
              
              Increase
      (decrease)Net
      acquisition expenses
              
              $
              98,893
              
              
              
              105,499
              
              
              $
              (6,606
              )Net
      acquisition expense ratios
              
              
              25.7
              %
              
              
              22.4
              %
              
              3.3
      points
 
 The
decrease in net acquisition expenses in 2008 as compared with 2007 was due to
the decrease in net premiums earned.  The increase in the net
acquisition expense ratio in 2008 as compared with 2007 was due, in part, to
differences in commissions relating to prior years and to deteriorating terms
and conditions that have generally resulted in higher commission and brokerage
rates.  Net acquisition expenses in 2008 included an increase in
commissions relating to prior years of $4,742,000, representing 1.2% of net
premiums earned as compared with a decrease of $4,551,000 in 2007, representing
0.9% of net premiums earned.  Net acquisition expense ratios were also
impacted by changes in the mix of business.
  Other
underwriting expenses for the nine months ended September 30, 2008 and
2007, were $18,734,000 and $21,463,000, respectively.  This decrease
was primarily due to a decrease in performance based compensation accruals
allocated to the segment.
  Finite Risk
  The
Finite Risk operating segment includes principally structured reinsurance
contracts with ceding companies whose needs may not be met efficiently through
traditional reinsurance products.  In exchange for contractual
features that limit our downside risk, reinsurance contracts that we classify as
finite risk provide the potential for significant profit commission to the
ceding company.  The classes of risks underwritten through finite risk
contracts are generally consistent with the classes covered by traditional
products.  The finite risk contracts that we underwrite generally
provide prospective protection, meaning coverage is provided for losses that are
incurred after inception of the contract, as contrasted with retrospective
coverage, which covers losses that are incurred prior to inception of the
contract.  The three main categories of our finite risk contracts are
quota share, multi-year excess-of-loss and whole account aggregate stop
loss.  Due to the often significant inverse relationship between
losses and commissions for this segment, we believe it is important to evaluate
the overall combined ratio, rather than its component parts of net loss and LAE
ratio and net acquisition expense ratio.  The ongoing industry-wide
investigations by legal and regulatory authorities into potential misuse of
finite products have curtailed demand for these products beginning in
2005.  This diminished demand continues in 2008.  This
operating segment represented 1.8% and 2.9% of our net premiums written during
the three months ended September 30, 2008 and 2007, respectively, and 1.3%
and 2.7% of our net premiums written during the nine months ended
September 30, 2008 and 2007, respectively.
  - 27
-
  Three Months Ended
September 30, 2008 as Compared with the Three Months Ended
September 30, 2007
  Net
premiums written and earned for the three months ended September 30, 2008
and 2007 were as follows ($ in thousands):
  2008
              
              
              2007
              
              
              DecreaseNet
      premiums written
              
              $
              5,180
              
              
              
              8,369
              
              
              $
              3,189Net
      premiums earned
              
              $
              4,643
              
              
              
              7,992
              
              
              $
              3,349
 
 The
decreases in net premiums written and earned in 2008 as compared with 2007
reflect the continuing reduction in the demand for finite business.
  Net
losses and LAE, net acquisition expenses and the resulting net loss, LAE and
acquisition expense ratios for the three months ended September 30, 2008
and 2007 were as follows ($ in thousands):
  2008
              
              
              2007
              
              
              Increase
                (decrease)Net
      losses and LAE
              
              $
              1,047
              
              
              
              10,162
              
              
              $
              (9,115
              )Net
      acquisition expenses
              
              
              3,438
              
              
              
              (507
              )
              
              
              3,945Net
      losses, LAE and acquisition expenses
              
              $
              4,485
              
              
              
              9,655
              
              
              $
              (5,170
              )Net
      loss, LAE and acquisition expense ratios
              
              
              96.6
              %
              
              
              120.9
              %
              
              (24.3)
      points
 
 The
decrease in net losses, LAE and acquisition expenses in 2008 as compared with
2007 was primarily due to the decrease in net premiums earned.  The
decrease in the net loss, LAE and acquisition expense ratio was due to less
net unfavorable development in 2008 as compared with 2007.  Net
unfavorable development was $966,000 in 2008 as compared with $1,410,000 in
2007.  Net unfavorable development and premium adjustments related to
prior years’ losses increased the net loss, LAE and acquisition expense ratios
in 2008 and 2007 by 20.8 and 17.7 points, respectively.  Exclusive of
net unfavorable development, the decrease in the net loss, LAE and acquisition
expense ratio is the result of the expiration of a contract that experienced
greater than expected loss activity in 2007 and the recognition of additional
premium relating to prior years for which there were no related
losses.
  Other
underwriting expenses for the three months ended September 30, 2008 and
2007 were $286,000 and $367,000, respectively.  The decrease in 2008
as compared with 2007 is the result of less expense incurred by the Finite Risk
segment as the demand for finite risk products decreases.
  Nine Months Ended
September 30, 2008 as Compared with the Nine Months Ended
September 30, 2007
  Gross,
ceded and net premiums written and earned for the nine months ended
September 30, 2008 and 2007 were as follows ($ in
thousands):
  2008
              
              
              2007
              
              
              Increase
                (decrease)Gross
      premiums written
              
              $
              10,437
              
              
              
              21,455
              
              
              $
              (11,018
              )Ceded
      premiums written
              
              
              –
              
              
              
              (1,943
              )
              
              
              1,943Net
      premiums written
              
              
              10,437
              
              
              
              23,398
              
              
              
              (12,961
              )Gross
      premiums earned
              
              
              8,630
              
              
              
              24,106
              
              
              
              (15,476
              )Ceded
      premiums earned
              
              
              –
              
              
              
              (1,942
              )
              
              
              1,942Net
      premiums earned
              
              $
              8,630
              
              
              
              26,048
              
              
              $
              (17,418
              )
 
 The
decreases in net premiums written and net premiums earned in 2008 as compared
with 2007 reflect the continuing reduction in the demand for finite
business.
  Net
losses and LAE, net acquisition expenses and the resulting net loss, LAE and
acquisition expense ratios for the nine months ended September 30, 2008 and
2007 were as follows ($ in thousands):
  2008
              
              
              2007
              
              
              Increase
                (decrease)Net
      losses and LAE
              
              $
              (6,940
              )
              
              
              20,262
              
              
              $
              (27,202
              )Net
      acquisition expenses
              
              
              14,987
              
              
              
              145
              
              
              
              14,842Net
      losses, LAE and acquisition expenses
              
              $
              8,047
              
              
              
              20,407
              
              
              $
              (12,360
              )Net
      loss, LAE and acquisition expense ratios
              
              
              93.2
              %
              
              
              78.4
              %
              
              14.8
      points
 
 The
decrease in net losses, LAE and acquisition expenses in 2008 as compared with
2007 was primarily due to the decrease in net premiums earned.  The
increase in the net loss, LAE and acquisition expense ratio was primarily due to
net unfavorable development in 2008 as compared with net favorable development
in 2007.  Net unfavorable development was $767,000 in 2008 as compared
with net favorable development of $3,099,000 in 2007.  Net unfavorable
development and premium adjustments related to prior years’ losses increased the
net loss, LAE and acquisition expense ratios in 2008 by 8.8 points, while net
favorable development decreased the net loss, LAE and acquisition expense ratios
in 2007 by 12.2 points.  Exclusive of net favorable development, the
decrease in the net loss, LAE and acquisition expense ratio is the result of the
expiration of a contract that experienced greater than expected loss activity in
2007 and the recognition of additional premium relating to prior years for which
there were no related losses.
  - 28
-
  Other
underwriting expenses for the nine months ended September 30, 2008 and 2007
were $961,000 and $1,994,000, respectively.  The decrease in 2008 as
compared with 2007 was due to a decline in underwriting activity in the segment
and a lower percentage of underwriting expenses allocated to the
segment.
  Financial Condition,
Liquidity and Capital Resources
  Financial Condition
  We
maintain investment guidelines for the management of our investment
portfolio.  The primary objective of the investment portfolio is to
maximize investment returns consistent with appropriate safety, diversification,
tax and regulatory considerations and to provide sufficient liquidity to enable
us to meet our obligations on a timely basis.  Within our fixed
maturity portfolio, we invest in investment grade securities.  Our
investment guidelines generally contain restrictions on the portion of the
portfolio that may be invested in the securities of any single issue or issuer,
with the exception of U.S. government securities, and provide that financial
futures and options and foreign exchange contracts may not be used in a
speculative manner but may be used only as part of a defensive hedging
strategy.  We do not invest in instruments such as credit default
swaps or collateralized debt obligations.  As of September 30, 2008,
we did not hold any common equities in our investment portfolio.  Any
changes to our investment guidelines are subject to the ongoing oversight and
approval of our board of directors.  In October 2008 our board of
directors authorized investments in common equities up to a maximum of 10% of
the investment portfolio.
  Our
available-for-sale and trading portfolios are primarily composed of well
diversified, high quality, predominantly publicly-traded fixed maturity
securities.  The investment portfolio, excluding cash and cash
equivalents, had a duration of 3.5 years as of September 30,
2008.  We routinely monitor the composition of our investment
portfolio and cash flows in order to maintain the liquidity necessary to meet
our obligations.
  As of
September 30, 2008, we had $696,660,000 of cash, cash equivalents and short
term investments and the fair value of our fixed maturity securities was
$3,562,033,000 with a net unrealized loss of $182,989,000.  The
following is a breakdown of our fixed maturity securities as of
September 30, 2008 ($ in thousands):
  Fair
      Value
              
              
              Unrealized
                Gain
      (Loss)
              
              
              Average
      Credit QualityU.S.
      Government
              
              $
              483,855
              
              
              $
              (5,389
              )
              
              AaaU.S.
      Government agencies
              
              
              355,781
              
              
              
              (1,279
              )
              
              AaaCorporate
      bonds:Industrial
              
              
              385,315
              
              
              
              (11,069
              )
              
              
              A2Finance
              
              
              162,761
              
              
              
              (28,879
              )
              
              Aa3Utilities
              
              
              48,614
              
              
              
              (1,731
              )
              
              
              A2Insurance
              
              
              53,113
              
              
              
              (2,506
              )
              
              Aa3Preferreds
      with maturity date
              
              
              25,008
              
              
              
              (7,837
              )
              
              
              A1Hybrid
      trust preferreds
              
              
              14,402
              
              
              
              (2,114
              )
              
              
              A1Mortgage-backed
      and asset-backed securities:U.S.
      Government agency residential mortgage-backed securities
              
              
              721,800
              
              
              
              (886
              )
              
              AaaCommercial
      mortgage-backed securities
              
              
              420,910
              
              
              
              (49,826
              )
              
              AaaAsset-backed
      securities
              
              
              153,954
              
              
              
              (2,523
              )
              
              AaaNon-agency
      residential mortgage-backed securities
              
              
              125,730
              
              
              
              (36,774
              )
              
              AaaSub-prime
      asset-backed securities
              
              
              23,394
              
              
              
              (18,729
              )
              
              Aa3Alt-A
      residential mortgage-backed securities
              
              
              12,355
              
              
              
              (8,785
              )
              
              Aa3Municipal
      bonds
              
              
              356,428
              
              
              
              (5,039
              )
              
              Aa2Foreign
      governments and states
              
              
              215,526
              
              
              
              377
              
              
              Aa1Total
      fixed maturities
              
              
              3,558,946
              
              
              
              (182,989
              )
              
              Aa1Preferred
      stocks
              
              
              3,087
              
              
              
              –
              
              
              
              A1Total
              
              $
              3,562,033
              
              
              $
              (182,989
              )
              
              Aa1
 
 During
the three months ended September 30, 2008, the financial markets
experienced a loss of liquidity and significant adverse credit events that in
turn led to widespread declines in the value of financial
instruments.  Market events included but were not limited to: FNMA and
the Federal Home Loan Mortgage Corporation ("FHLMC") being placed into
conservatorship by the U.S. government; several bank mergers and insolvencies; a
temporary ban on short selling of financial stocks; major independent investment
banks converting into bank holding companies; the U.S. government making a
significant loan to a large multinational insurance company in exchange for a
majority equity position in the company; and the nationalization of several
non-U.S. financial institutions by their respective governments.
  Although
interest rates decreased during the quarter, spreads widened relative to
treasuries across all asset classes in our investment portfolio resulting in the
increase in our unrealized loss position.  In particular, spreads for
debt securities issued by financial institutions increased
significantly.  During the three months ended September 30, 2008,
in order to reduce our exposure to holdings in financial institutions, we sold
approximately $207,305,000 of corporate bonds and cash equivalents issued by
financial institutions.  We also recorded other-than-temporary
impairments during the three months ended September 30, 2008 on perpetual
preferred stocks and senior debt issued by financial institutions.
  - 29
-
  As of
September 30, 2008, we held corporate bonds issued by financial institutions
with a book value of approximately $191,640,000 and an unrealized loss of
$28,879,000.  Our holdings of perpetual preferred stocks, preferred
stocks with maturity dates and hybrid trust preferred stocks issued by financial
institutions had a book value of approximately $47,287,000 and an ending
unrealized loss of $9,749,000 as of September 30, 2008.  Although
there are uncertainties in the current financial markets associated with
financial institutions, we believe the coordinated actions by major governments
and central banks to provide capital support to financial institutions and
reduce interest rates coupled with our ability to hold these securities until
recovery will allow us to recover the book value on these
securities.
  Our
mortgage-backed and asset-backed securities represent our largest unrealized
loss position of $117,523,000 or 64% of the unrealized loss position as of
September 30, 2008.  Approximately 49% of the mortgage-backed and
asset-backed securities in our investment portfolio were issued or guaranteed by
the Government National Mortgage Association, FNMA, or FHLMC and are referred to
as U.S. Government agency mortgage-backed securities.
  The
unrealized loss position of our commercial mortgage-backed securities portfolio
was $49,826,000 as of September 30, 2008.  These securities have
strong subordination, low loan-to-value ratios, and a weighted average credit
rating of Aaa as of September 30, 2008.
  The U.S.
sub-prime residential mortgage market continues to experience higher than
expected delinquencies.  The securities in our investment portfolio
with underlying sub-prime mortgage exposure were investment grade as of
September 30, 2008.  The following table summarizes the nine
asset-backed securities within our fixed income portfolio exposed to the
sub-prime residential mortgage market as of September 30, 2008 ($ in
thousands):
  Amortized
                Cost
              
              
              Fair
      ValueVintage
      year 2005 and ratings of Aa or A
              
              $
              38,131
              
              
              $
              21,373Vintage
      year 2006 and ratings of Aaa or Aa
              
              
              3,993
              
              
              
              2,021Total
              
              $
              42,124
              
              
              $
              23,394
 
 Our
investment portfolio included securities with an amortized cost of $21,140,000
and fair value of $12,355,000 where the underlying collateral consists primarily
of “Alt-A” mortgages.  These securities had a weighted average credit
rating of Aa3 at September 30, 2008.
  We
continually monitor market events that impact our portfolio, including our
sub-prime and Alt-A securities, and review our portfolio for potential
other-than-temporary impairments.  We expect to collect the cash flows
from principal repayments and interest payments associated with our
mortgage-backed and asset-backed securities.  We did not consider any
of the mortgage-backed and asset-backed securities we held to be
other-than-temporarily impaired as of September 30, 2008.
  Certain
assets and liabilities associated with underwriting include significant
estimates.  Reinsurance premiums receivable, deferred acquisition
costs, unpaid losses and LAE, unearned premiums and commissions payable all
represent or include significant estimates.  Reinsurance premiums
receivable as of September 30, 2008 of $295,914,000 included $256,018,000 that was based upon
estimates.  Reinsurance premiums receivable as of December 31,
2007 of $244,360,000 included $195,890,000 that was based upon
estimates.  Reinsurance premiums receivable at any point in time is a
function of the amount of premiums written as well as the contractual terms of
settlement included in each reinsurance agreement.  The increase in
reinsurance premiums receivable as of September 30, 2008 as compared with
December 31, 2007 was primarily due to the contractual terms of settlement
included in reinsurance agreements in lines of business such as in the North
American crop business.  An allowance for uncollectible reinsurance
premiums is considered for possible non-payment of such amounts due, as deemed
necessary.  As of September 30, 2008, based on our historical
experience, the general profile of our ceding companies and our ability, in most
cases, to contractually offset reinsurance premiums receivable with losses and
LAE or other amounts payable to the same parties, we did not establish an
allowance for uncollectible reinsurance premiums receivable.
  Gross
unpaid losses and LAE as of September 30, 2008 of $2,460,185,000 included
$1,809,300,000 of estimates of claims that are incurred but not reported
("IBNR").  Gross unpaid losses and LAE as of December 31, 2007 of
$2,361,038,000 included $1,700,454,000 of IBNR.  The increase in
unpaid losses was primarily attributable to the estimated losses incurred
and unpaid related to Hurricanes Gustav and Ike in the Property and Marine
segment.
  Commissions
payable includes estimated commissions that are comprised of estimated profit
commission and commission on premium estimates.  Commissions payable
as of September 30, 2008 of $122,699,000 included $107,193,000 of estimated
commissions.  Commissions payable as of December 31, 2007 of
$100,204,000 included $91,035,000 of estimated commissions.  The
increase in commissions payable as of September 30, 2008 as compared with
December 31, 2007 was consistent with the increase in reinsurance premiums
receivable.
  We
entered into three insurance linked derivative contracts during the nine
months ended September 30, 2008.  We entered into an option
agreement to purchase industry loss warranty retrocessional
protection.  The option period was March 19, 2008 to
August 27, 2008 and the entire option fee of $1,250,000 was
included in other expense in 2008.
  - 30
-
  The
second insurance linked derivative was a contract under which we can recover up
to $120,000,000 from the counterparty if modeled losses from both a first and
second catastrophe event resulting from U.S. wind, California earthquake or
European wind exceed a specified attachment point.  The term of this
contract is from January 1, 2008 to December 31, 2008, at a cost of
$5,510,000.  The estimated net fair value of this derivative was
determined using unobservable inputs through the application of our own
assumptions and internal models based on assumptions that we believe market
participants would use.  The resulting net liability and change in net
fair value of $4,040,000 was included in other liabilities on the consolidated
balance sheets and included in other expense in the consolidated statement of
operations.
  In August
2008, we entered into an agreement with Topiary, a Cayman Islands special
purpose vehicle.  Under the terms of our agreement with Topiary, we
will pay to Topiary $9,500,000 during each of the three annual periods
commencing August 1, 2008.  In return the agreement provides us
with the ability to recover up to $200,000,000 should two catastrophic events
involving U.S. wind, U.S. earthquake, European wind, or Japanese earthquake
occur that meet specified loss criteria during any of the three annual
periods.  Both the initial activation event and the qualifying second
event must occur in the same annual period.  The maximum amount that
we can recover over the three-year period is $200,000,000.  Topiary
collateralized its limit of loss by placing $200,000,000 of high quality
investments in a secured collateral account.  Any recovery we make
under this contract is based on an index using insured property industry loss
estimates that are compiled by Property Claim Services, a division of Insurance
Services Offices, Inc., for certain U.S. perils, and parametric triggers for
certain non-U.S. perils, and is not based on actual losses we may
incur.  Consequently, the transaction was accounted for as a
derivative and was carried at the estimated net fair value.  The
resulting net liability and change in net fair value of $3,125,000 was included
in other liabilities on our consolidated balance sheet and other expense in our
consolidated statement of operations.  One-time fees and expenses of
$4,339,000 related to the agreement with Topiary were included in operating
expenses for the three and nine months ended September 30,
2008.
  Sources of Liquidity
  Our
consolidated sources of funds consist primarily of premiums written, investment
income, proceeds from sales and redemption of investments, losses recovered from
retrocessionaires, issuance of securities and actual cash and cash equivalents
held by us.  Net cash flows provided by operations, excluding trading
security activities, for the nine months ended September 30, 2008 were
$254,567,000.
  Platinum
Holdings is a holding company that conducts no reinsurance operations of its
own.  Our reinsurance operations are conducted primarily through our
wholly owned reinsurance subsidiaries, Platinum Bermuda and Platinum
US.  As a holding company, the cash flows of Platinum Holdings consist
primarily of interest income, dividends and other permissible payments from its
subsidiaries and issuances of securities.  Platinum Holdings depends
on such payments for general corporate purposes and to meet its obligations,
including the payment of preferred dividends, common dividends and repurchases
of common shares.  The maximum amount available for payment of
dividends or other distributions by the reinsurance subsidiaries of Platinum
Holdings in 2008 without prior regulatory approval is approximately
$398,241,000.  During the nine months ended September 30, 2008,
dividends of $300,000,000 were paid by Platinum Bermuda to Platinum
Holdings.
  In
addition to the net cash flows generated from operations, we have an effective
universal shelf registration statement whereby we may issue and sell, in one or
more offerings, up to $750,000,000 of debt, equity and other types of securities
or a combination of such securities, including debt securities of Platinum
Finance that would be unconditionally guaranteed by Platinum
Holdings.  This shelf registration statement had approximately
$440,000,000 of remaining capacity as of September 30, 2008.  We
also have a $400,000,000 credit facility with a syndicate of lenders available
for revolving borrowings and letters of credit expiring on September 13,
2011.  The credit facility is generally available for our working
capital, liquidity, letters of credit and general corporate
requirements.  As of September 30, 2008 this facility had
approximately $318,000,000 of remaining capacity.
  Liquidity
Requirements
  Our
principal consolidated cash requirements are the payment of losses and LAE,
commissions, brokerage, operating expenses, dividends to our preferred and
common shareholders, the servicing of debt, capital expenditures, purchase of
retrocessional contracts and payment of taxes.
  Platinum
Bermuda is not licensed, approved or accredited as a reinsurer anywhere in the
U.S.  Therefore, under the terms of most of its reinsurance contracts
with U.S. ceding companies, it may be required to provide collateral to its
ceding companies for unpaid ceded liabilities in a form acceptable to the ceding
companies and the relevant state insurance commissioners.  Typically,
this type of collateral takes the form of letters of credit issued by a bank,
the establishment of a trust or funds withheld.  Platinum Bermuda
provides letters of credit through commercial banks and may be required to
provide the banks with a security interest in certain investments of Platinum
Bermuda including the credit facility described above.
  Net cash
flows available to us may be influenced by a variety of factors, including
economic conditions in general and in the insurance and reinsurance markets,
legal and regulatory changes as well as fluctuations from year to year in claims
experience and the occurrence or absence of large catastrophic
events.  We believe that the net cash flows generated by the operating
activities of our subsidiaries in combination with cash and cash equivalents on
hand will provide sufficient funds to meet our liquidity needs over the next
twelve months.  Beyond the next twelve months, if our liquidity needs
accelerate beyond our ability to fund such obligations from current operating
cash flows, we may need to liquidate a portion of our investment portfolio,
borrow under the credit facility described above or raise additional capital in
the capital markets.  Our ability to meet our liquidity needs by
selling investments or raising additional capital is subject to the timing and
pricing risks inherent in the capital markets.
  Capital
Resources
  The
Company does not have any material commitments for capital expenditures as of
September 30, 2008.
  Off-Balance Sheet Arrangements
  The
Company does not have any off-balance sheet arrangements and, therefore, there
is no effect on its financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources from these
types of arrangements.
  - 31
-
  Contractual Obligations
  There
have been no material changes to our contractual obligations as disclosed under
Management’s Discussion and Analysis of Financial Condition – Contractual
Obligations in our Annual Report on Form 10-K for the year ended
December 31, 2007.
  Economic
Conditions
  During
the three months ended September 30, 2008, the financial markets
experienced a loss of liquidity and significant adverse credit events that in
turn led to widespread declines in the value of financial
instruments.  These events resulted in intervention by central banks
to inject liquidity into the financial system in an effort to promote
stability.  Unfavorable economic conditions, such as recession, may
follow the current market conditions.  Periods of moderate economic
recession or inflation tend not to have a significant direct effect on our
underwriting operations.  However, significant unexpected inflationary
or recessionary periods can impact our underwriting operations and investment
portfolio.  Management considers the potential impact of economic
trends in the estimation process for establishing unpaid losses and LAE and in
determining our investment strategies.
  Current
Outlook
  We
believe that the combination of recent significant catastrophe losses, declines
in asset values due to the loss of liquidity and adverse events in the credit
and capital markets and share repurchase activity has reduced industry
capacity.  The current adverse conditions in the financial markets
have made both debt and equity capital either unavailable or significantly more
expensive to access than in the recent past.  As reinsurance serves
primary insurers as a replacement of dedicated capital, we believe demand for
reinsurance will increase.  Since reinsurers are also challenged by
the current adverse conditions in the financial markets, they may be reluctant
to deploy their capacity without appropriate rate
increases.  Therefore, we expect that most classes of business will
experience some rate strengthening for the remainder of 2008 and into 2009 with
the Property and Marine business responding first.
  During
the period from January 1, 2008 through October 1, 2008, approximately
97% of our business was up for renewal.  While rate adequacy declined
in most classes, we found relatively more attractive opportunities in our
Property and Marine segment and fewer attractive opportunities in our Casualty
and Finite segments.  Our overall portfolio of business declined
approximately 5%.
  For the
Property and Marine segment, during the period from January 1, 2008 through
October 1, 2008 we experienced average rate decreases of 8% on our U.S.
property catastrophe excess renewal business while rates on our non-U.S.
property catastrophe excess renewal business were down 4%.  On
average, rates for our portfolio of US catastrophe business that renewed after
April 1 were unchanged.  In addition, we experienced average rate
decreases of approximately 12% on our marine renewal business.  Per
risk excess rates decreased by approximately 6% on average for our U.S. business
and by approximately 3% on average for our non-U.S. business.
  During
the period from January 1 through October 1, 2008, we increased our
writings of North American crop business from approximately $48,000,000 to
approximately $130,000,000.  Most of this increase was attributable to
one large quota share contract.  While favorable experience in recent
years has led to some deterioration in terms and conditions in this class of
business, we believe there remains an adequate opportunity for
profit.  As most of the crop reinsurance contracts incept at
January 1 we do not expect to write a significant amount of additional crop
business for the remainder of 2008.
  During
the period from January 1 through October 1, 2008, we wrote
approximately 8% less U.S. catastrophe excess-of-loss premium than we did during
the same period in 2007.  However, due to the rate decreases in this
class of business, our net retained risk has remained at the same level for 2008
while our potential profit has decreased.  In the same period our
non-U.S. catastrophe excess-of-loss premium has increased approximately 6% as
measured in U.S. dollars due to the weakening of the dollar against the Euro in
the first half of 2008.  We believe the profitability remains adequate
for the risk and for 2008 we plan to deploy capacity such that up to
approximately 22.5% of our total capital could be exposed to an event with a
probability of 1 in 250 years.
  For the
Casualty segment, although we believe that the market offers adequate returns on
certain accounts, pricing has been softening.  Ceding companies are
willing to increase retentions and reinsurers are competing for participation on
the best contracts.  During the period from January 1 through
October 1, 2008, rate changes across our casualty business, other than
accident and health, have ranged from approximately +2% to -17%.  The
overall average was a decrease of approximately 7%, against a background of
upward trending loss costs.  As a result, we believe the business
underwritten in 2008 will have a lower level of expected profitability as
compared with the business underwritten in 2007.
  During
the period from January 1 through October 1, 2008, we wrote
approximately 19% less casualty business than we did during the same period in
2007.  We expect the deterioration in market conditions to halt and we
may see improvements in rates through the remainder of 2008.  We
believe this could lead to more attractive opportunities in
casualty.  We believe that financial security is a significant concern
for buyers of long-tailed reinsurance protection who typically seek reinsurers
with strong balance sheets, quality ratings, and a proven claims-paying
record.  We believe that our rating, capitalization and reputation as
a lead casualty reinsurer position us well to write profitable business as
opportunities arise.
  Earlier
in 2008, rising fuel costs reduced demand for less fuel efficient vehicles,
which reduced the market value of such vehicles.  Through September
30, 2008, we incurred losses of $11,008,000 against net premiums earned of
$3,500,000 under a reinsurance contract covering leased private passenger
automobile residual values.  While fuel costs have declined
significantly, it may not revive the demand for less fuel efficient
vehicles.  If demand for the vehicles that are subject to our
reinsurance contract remains low, the resulting residual values may result in
additional losses as vehicles come off lease through the end of
2009.  Our remaining maximum exposure to loss, net of premium and
acquisition cost, is less than $20,000,000.
  In the
Finite Risk segment, we believe that the ongoing investigations by the SEC, the
office of the Attorney General for the State of New York, the U.S. Attorney for
the Southern District of New York as well as various non-U.S. regulatory
authorities continue to limit demand for finite risk products.  We
expect the relatively low level of demand will continue for the foreseeable
future.
  - 32
-
  Critical Accounting
Estimates
  It is
important to understand our accounting estimates in order to understand our
financial position and results of operations.  We consider certain of
these estimates to be critical to the presentation of the financial results
since they require management to make estimates and valuation
assumptions.  These estimates and assumptions affect the reported
amounts of assets, liabilities, revenues, expenses and related
disclosures.  Certain of the estimates and assumptions result from
judgments that are necessarily subjective and, consequently, actual results may
materially differ from these estimates.  Our critical accounting
estimates include premiums written and earned, unpaid losses and LAE, valuation
of investments and evaluation of risk transfer.  For a detailed
discussion of the Company’s critical accounting estimates please refer to
Management’s Discussion and Analysis of Financial Condition and Results of
Operations included in our Annual Report on Form 10-K for the year ended
December 31, 2007.  There have been no material changes in the
application of the Company’s critical accounting estimates subsequent to
December 31, 2007.
   ITEM
      3.
              QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
   Market and Credit
Risk
  Our
principal invested assets are fixed maturity securities, which are subject to
the risk of potential losses from adverse changes in market rates and credit
risk resulting from adverse changes in the borrowers’ ability to meet debt
service obligations.  Our portfolio has experienced significant
volatility during the three months ended September 30, 2008 and increases in
market rates increased the unrealized loss position in our investment
portfolio.
  The U.S.
residential mortgage market has been experiencing higher than expected
delinquencies and foreclosures and large decreases in property
values.  Financial institutions have tightened lending standards and
raised billions of dollars of capital to absorb future losses on their mortgage
portfolios.
  Illiquidity
in the financial markets remains and there are many uncertainties in markets
around the world.  There is a global effort by governments to enhance
and promote market liquidity and ensure financial stability.  In
October 2008, steps were taken in the U.S. and the United Kingdom to enable the
use of public funds to increase the capital of financial institutions and
accumulate mortgage-backed securities in an effort to improve confidence in the
banking system and promote stability.  Furthermore, in a coordinated
effort, target interest rates were reduced by the central banks in the U.S.,
Europe, the United Kingdom, Australia, China, Sweden and
Switzerland.
  Our
strategy to limit risks is to place our investments in high quality credit
issues and to limit the amount of credit exposure with respect to any one issuer
or asset class.  We also select investments with characteristics such
as duration, yield, currency and liquidity to reflect, in the aggregate, the
underlying characteristics of our unpaid losses and LAE.  We attempt
to minimize the credit risk by actively monitoring the portfolio and
establishing a guideline minimum average credit rating for our portfolio of A2
as defined by Moody's Investor Service ("Moody’s").  As of
September 30, 2008, the portfolio, excluding cash, cash equivalents and
short-term investments, had a dollar weighted average credit rating of Aa1 as
defined by Moody’s.
  We have
other receivable amounts subject to credit risk.  The most significant
of these are reinsurance premiums receivable from ceding
companies.  We also have reinsurance recoverable amounts from our
retrocessionaires.  To mitigate credit risk related to premiums
receivable, we have established standards for ceding companies and, in most
cases, have a contractual right of offset which would allow us to settle claims
net of any premiums receivable.  To mitigate credit risk related to
our reinsurance recoverable amounts, we consider the financial strength of our
retrocessionaires when determining whether to purchase coverage from
them.  Retrocessional coverage is obtained from companies rated “A-”
or better by A. M. Best Company, Inc. (“A.M. Best”) or from retrocessionaires
whose obligations are fully collateralized.  The financial performance
and rating status of all material retrocessionaires are routinely
monitored.
  In
accordance with industry practice, we frequently pay amounts in respect of
claims under contracts to reinsurance brokers for payment over to the ceding
companies.  In the event that a broker fails to make such a payment,
depending on the jurisdiction, we may remain liable to the ceding company for
the payment.  Conversely, in certain jurisdictions, when ceding
companies remit premiums to reinsurance brokers, such premiums are deemed to
have been paid to us and the ceding company is no longer liable to us for those
amounts whether or not the funds are actually received by
us.  Consequently, we assume a degree of credit risk associated with
our brokers during the premium and loss settlement process.  To
mitigate credit risk related to reinsurance brokers, we have established
guidelines for brokers and intermediaries.
  Interest Rate
Risk
  We are
exposed to fluctuations in interest rates.  Movements in rates can
result in changes in the market value of our fixed maturity portfolio and can
cause changes in the actual timing of receipt of principal payments of certain
securities.  Rising interest rates result in a decrease in the market
value of our fixed maturity portfolio and can expose our portfolio, in
particular our mortgage-backed securities, to extension
risk.  Conversely, a decrease in interest rates will result in an
increase in the market value of our fixed maturity portfolio and can expose our
portfolio, in particular our mortgage-backed securities, to prepayment
risk.  An aggregate hypothetical impact on the market value of our
fixed maturity portfolio, generated from an immediate parallel shift in the
treasury yield curve, as of September 30, 2008 is as follows ($ in
thousands):
  Interest
      Rate Shift in Basis Points-
      100bp
              
              
              
              -
      50bp
              
              
              Current
              
              
              
              +
      50bp
              
              
              
              +
      100bpTotal
      market value
              
              $
              3,687,976
              
              
              
              3,624,198
              
              
              
              3,558,946
              
              
              
              3,493,130
              
              
              $
              3,426,377Percent
      change in market value
              
              
              3.6
              %
              
              
              1.8
              %
              
              
              
              
              
              
              (1.8
              %)
              
              
              (3.7
              %)Resulting
      unrealized appreciation / (depreciation)
              
              $
              (53,959
              )
              
              
              (117,737
              )
              
              
              (182,989
              )
              
              
              (248,805
              )
              
              $
              (315,558
              )
  - 33
-
  Foreign Currency Exchange
Rate Risk
  We write
business on a worldwide basis.  Consequently, our principal exposure
to foreign currency risk is the transaction of business in foreign
currencies.  Changes in foreign currency exchange rates can impact
revenues, costs, receivables and liabilities, as measured in the U.S. dollar,
our financial reporting currency.  We manage our exposure to large
foreign currency risks by holding invested assets denominated in non-U.S. dollar
currencies in amounts that generally offset liabilities denominated in the same
foreign currencies.  We may from time to time hold more non-U.S.
dollar denominated assets than non-U.S. dollar liabilities.
  Sources of Fair
Value
  The
following table presents the carrying amounts and estimated fair values of our
financial instruments as of September 30, 2008 ($ in
thousands):
  Carrying
                Amount
              
              
              Fair
      ValueFinancial
      assets:Fixed
      maturity securities
              
              $
              3,558,946
              
              
              $
              3,558,946Preferred
      stocks
              
              
              3,087
              
              
              
              3,087Short-term
      investments
              
              
              95,979
              
              
              
              95,979Financial
      liabilities:Debt
      obligations
              
              $
              250,000
              
              
              $
              230,275
 
 The fair
value of our fixed maturity securities, preferred stocks, short-term investments
and debt obligations are based on prices obtained from independent sources for
those or similar investments using quoted prices in active markets and standard
market valuation pricing models.  We valued approximately 60% of our
securities using prices obtained from index providers, 26% using prices obtained
from pricing vendors, and 14% using prices obtained from broker-dealers. 
The inputs used in index pricing may include but are not limited to: benchmark
yields, transactional data, broker-dealer quotes, security cash flows and
structures, credit ratings, prepayment speeds, loss severities, credit risks and
default rates.  Standard inputs used by pricing vendors may include but are
not limited to: benchmark yields, reported trades, broker-dealer quotes, issuer
spreads, bids, offers and industry and economic events.  Broker-dealers
value securities through trading desks primarily based on observable
inputs.  Our derivative instruments, which are included in other
liabilities in the consolidated balance sheet, are priced at fair value
primarily using unobservable inputs through the application of our own
assumptions and internal valuation pricing models.
   ITEM
      4.
              CONTROLS
      AND PROCEDURES
   Disclosure Controls and
Procedures
  Our
management, including the Chief Executive Officer and Chief Financial Officer,
carried out an evaluation of the effectiveness of our disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934 (the "Exchange Act")) as of the end of the
period covered by this report.  Based on that evaluation, our
management, including the Chief Executive Officer and Chief Financial Officer,
concluded that our disclosure controls and procedures are effective to provide
reasonable assurance that information required to be disclosed by us in reports
that we file or submit under the Exchange Act is recorded, processed, summarized
and timely reported as specified in the SEC’s rules and forms.
  Changes in Internal Control
over Financial Reporting
  No
changes occurred during the quarter ended September 30, 2008 in our
internal control over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
  - 34
-
  Forward-Looking
Statements
  This Form
10-Q contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Exchange
Act.  Forward-looking statements are necessarily based on estimates
and assumptions that are inherently subject to significant business, economic
and competitive uncertainties and contingencies, many of which are subject to
change.  These uncertainties and contingencies can affect actual
results and could cause actual results to differ materially from those expressed
in any forward-looking statements made by, or on behalf of, us.
  In
particular, statements using words such as “may,” “should,” “estimate,”
“expect,” “anticipate,” “intend,” “believe,” “predict,” “potential,” or words of
similar import generally involve forward-looking statements.  For
example, we have included certain forward-looking statements in “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” with
regard to trends in results, prices, volumes, operations, investment results,
margins, risk management and exchange rates.  This Form 10-Q also
contains forward-looking statements with respect to our business and industry,
such as those relating to our strategy and management objectives and trends in
market conditions, market standing, product volumes, investment results and
pricing conditions.
  In light
of the risks and uncertainties inherent in all future projections, the inclusion
of forward-looking statements in this Form 10-Q should not be considered as a
representation by us or any other person that our objectives or plans will be
achieved.  Numerous factors could cause our actual results to differ
materially from those in forward-looking statements, including the
following:
  (1)
              significant
      weather-related or other natural or man-made disasters over which we have
      no control;
  (2)
              market
      volatility, interest rate and currency exchange rate fluctuation, and
      credit risk on invested assets;
  (3)
              the
      effectiveness of our loss limitation methods and pricing
      models;
  (4)
              the
      adequacy of our liability for unpaid losses and
  LAE;
  (5)
              our
      ability to maintain our A.M. Best
rating;
  (6)
              the
      cyclicality of the property and casualty reinsurance
    business;
  (7)
              conducting
      operations in a competitive
environment;
  (8)
              our
      ability to maintain our business relationships with reinsurance
      brokers;
  (9)
              the
      availability of retrocessional reinsurance on acceptable
      terms;
  (10)
              tax,
      regulatory or legal restrictions or limitations applicable to us or the
      property and casualty reinsurance business
  generally;
  (11)
              general
      political and economic conditions, including the effects of civil unrest,
      acts of terrorism, war or a prolonged U.S. or global economic downturn or
      recession; and
  (12)
              changes
      in our plans, strategies, objectives, expectations or intentions, which
      may happen at any time at our
discretion.
 
 As a
consequence, current plans, anticipated actions and future financial condition
and results may differ from those expressed in any forward-looking statements
made by or on behalf of us.  The foregoing factors, which are
discussed in more detail in Item 1A – “Risk Factors” in our Annual Report on
Form 10-K for the year ended December 31, 2007, should not be construed as
exhaustive.  Additionally, forward-looking statements speak only as of
the date they are made, and we undertake no obligation to release publicly the
results of any future revisions or updates we may make to forward-looking
statements to reflect new information or circumstances after the date hereof or
to reflect the occurrence of future events.
  - 35
-
  PART
II – OTHER INFORMATION
  ITEM
      2.
              UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
  (c)           Following
is a summary of purchases by us of our common shares during the three month
period ended September 30, 2008:
  Period
              
              (a)
                Total
      Number of Shares Purchased
              
              
              (b)
                Average
      Price paid per Share
              
              
              (c)
                Total
      Number of Shares Purchased as Part of Publicly Announced Plans or
      Programs*
              
              
              (d)
                Maximum
      Dollar Value of Shares that May Yet Be Purchased Under the Plan or
      ProgramsJuly
      1, 2008 – July 31, 2008
              
              
              8,700
              
              
              $
              35.00
              
              
              
              8,700
              
              
              $
              249,695,257August 1,
      2008 – August 31, 2008
              
              
              1,007,200
              
              
              
              35.85
              
              
              
              1,007,200
              
              
              
              213,560,075September
      1, 2008 – September 30, 2008
              
              
              278,200
              
              
              
              35.98
              
              
              
              278,200
              
              
              
              203,541,352Total
              
              
              1,294,100
              
              
              $
              35.87
              
              
              
              1,294,100
              
              
              $
              203,541,352
 
 *
              On
      August 4, 2004, our Board of Directors established a program to
      repurchase our common shares.  On July 26, 2007, our Board of
      Directors approved an increase in the then existing repurchase program to
      result in authority as of such date to repurchase up to a total of
      $250,000,000 of our common shares.  After repurchases of our
      common shares, on each of October 25, 2007, February 21, 2008,
      April 23, 2008, July 24, 2008 and October 22, 2008, our
      Board of Directors approved additional increases in the repurchase program
      to result in authority as of such dates to repurchase up to a total of
      $250,000,000 of our common shares.  During the three months
      ended September 30, 2008, the Company repurchased 1,294,100 of its
      common shares in the open market at an aggregate cost including
      commissions of $46,459,000 and a weighted average cost including
      commissions of $35.90 per share.  During the nine months ended
      September 30, 2008, the Company repurchased 7,536,092 of its common
      shares in the open market at an aggregate cost including commissions of
      $260,399,000 and a weighted average cost including commissions of $34.55
      per share.  The common shares we repurchased were
      canceled.
  
 ITEM
      6.
              EXHIBITS
  Exhibit
      Number
              
              Description4.1
              
              Assignment
      and Assumption Agreement dated October 23, 2008 of the Transfer
      Restrictions, Registration Rights and Standstill Agreement dated
      November 1, 2002 as amended December 5, 2005 between Platinum
      Holdings and RenaissanceRe10.1
              
              Termination
      Addendum effective August 5, 2008 to Excess of Loss Retrocession
      Agreement by and between Platinum Bermuda and Platinum US dated
      January 1, 200810.2
              
              Excess
      of Loss Retrocession Agreement by and between Platinum US and Platinum
      Bermuda dated as of August 5, 200810.3
              
              Amended
      and Restated Option Agreement dated October 23, 2008 between Platinum
      Holdings, RenaissanceRe and Renaissance Other Investments Holdings II
      Ltd.31.1
              
              Certification
      of Michael D. Price, Chief Executive Officer of Platinum Holdings,
      pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange
      Act.31.2
              
              Certification
      of James A. Krantz, Chief Financial Officer of Platinum
      Holdings, pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange
      Act.32.1
              
              Certification
      of Michael D. Price, Chief Executive Officer of Platinum Holdings,
      pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of
      the Sarbanes-Oxley Act of 2002.32.2
              
              Certification
      of James A. Krantz, Chief Financial Officer of Platinum
      Holdings, pursuant to 18 U.S.C. section 1350, as adopted pursuant to
      section 906 of the Sarbanes-Oxley Act of 2002.
 
 - 36
-
 
 SIGNATURES
  Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
 
 Platinum
      Underwriters Holdings, Ltd.
 
 Date:
      October 29, 2008
              /s/  Michael
      D. PriceBy:
      Michael D. PricePresident
      and Chief Executive Officer
                (Principal
      Executive Officer)
 
 Date:
      October 29, 2008
              /s/  James
      A. KrantzBy:
      James A. KrantzExecutive
      Vice President and Chief Financial Officer
                (Principal
      Financial and Accounting Officer)
  - 37
-