##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-Q þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2005
 or o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
 Commission File Number 001-31341 Platinum Underwriters Holdings, Ltd.  Bermuda
    
    98-0416483(State or other jurisdiction of
incorporation or organization)
    
    (IRS Employer Identification No.)
 The Belvedere Building69 Pitts Bay RoadPembroke, Bermuda
    
    HM 08(Address of principal executive offices)
    
    (Zip Code)
 (441) 295-7195   Not Applicable   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. Yes þ       No o Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act). Yes þ       No o As of April 15, 2005, there were outstanding 43,254,457 common shares, par value $0.01 per
share, of the registrant.




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PLATINUM UNDERWRITERS HOLDINGS, LTD.  TABLE OF CONTENTS PagePART I    FINANCIAL INFORMATIONItem 1. Condensed Consolidated Financial StatementsConsolidated Balance Sheets as of March 31, 2005 (Unaudited) and
December 31, 2004
    
    
    1Consolidated Statements of Income and Comprehensive Income for the
Three Months Ended March 31, 2005 and 2004 (Unaudited)
    
    
    2Consolidated Statements of Changes in Shareholders Equity for the
Three Months
Ended March 31, 2005 and 2004 (Unaudited)
    
    
    3Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2005 and 2004 (Unaudited)
    
    
    4Notes to Condensed Consolidated Financial Statements (Unaudited) for the
Three Months Ended March 31, 2005 and 2004
    
    
    5Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations for the Three Months Ended March 31, 2005 and 2004
    
    
    12Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    28Item 4. Controls and Procedures
    
    
    30PART II    OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    31Item 6. Exhibits
    
    
    31SIGNATURES
    
    
    32Ex-31.1: CertificationEx-31.2: CertificationEx-32.1: CertificationEx-32.2: Certification




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##### Table of Contents



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)March 31,
    
    
    December 31,2005
    
    
    2004ASSETSInvestments:Fixed maturities available-for-sale, at fair value
(amortized cost  $2,229,853 and $2,144,290, respectively)
    
    $
    2,201,935
    
    
    $
    2,157,529Fixed maturities  trading, at fair value
(amortized cost  $76,798 and $82,931, respectively)
    
    
    76,207
    
    
    
    82,673Other invested asset
    
    
    6,769
    
    
    
    6,769Total investments
    
    
    2,284,911
    
    
    
    2,246,971Cash and cash equivalents
    
    
    300,017
    
    
    
    209,897Accrued investment income
    
    
    27,127
    
    
    
    23,663Reinsurance premiums receivable
    
    
    638,283
    
    
    
    580,048Reinsurance recoverable on ceded losses and loss adjustment
expenses
    
    
    8,010
    
    
    
    2,005Prepaid reinsurance premiums
    
    
    7,773
    
    
    
    2,887Funds held by ceding companies
    
    
    222,791
    
    
    
    198,048Deferred acquisition costs
    
    
    149,555
    
    
    
    136,038Income tax recoverable
    
    
    
    
    
    
    1,325Deferred tax assets
    
    
    16,525
    
    
    
    8,931Other assets
    
    
    9,524
    
    
    
    12,182Total assets
    
    $
    3,664,516
    
    
    $
    3,421,995LIABILITIES AND SHAREHOLDERS EQUITYLiabilities:Unpaid losses and loss adjustment expenses
    
    $
    1,507,158
    
    
    $
    1,380,955Unearned premiums
    
    
    589,795
    
    
    
    502,423Reinsurance deposit liabilities
    
    
    5,705
    
    
    
    20,189Debt obligations
    
    
    137,500
    
    
    
    137,500Ceded premiums payable
    
    
    18,745
    
    
    
    2,384Commissions payable
    
    
    172,224
    
    
    
    181,925Funds withheld
    
    
    13,081
    
    
    
    11,999Deferred taxes
    
    
    10,881
    
    
    
    10,404Other liabilities
    
    
    36,351
    
    
    
    41,213Total liabilities
    
    
    2,491,440
    
    
    
    2,288,992Shareholders Equity:Preferred shares, $.01 par value, 25,000,000 shares
authorized, no shares issued or outstanding
    
    
    
    
    
    
    Common shares, $.01 par value, 200,000,000 shares
authorized, 43,254,457 and 43,087,407 shares issued and
outstanding, respectively
    
    
    432
    
    
    
    430Additional paid-in capital
    
    
    916,903
    
    
    
    911,851Accumulated other comprehensive income (loss)
    
    
    (22,368
    )
    
    
    12,252Retained earnings
    
    
    278,109
    
    
    
    208,470Total shareholders equity
    
    
    1,173,076
    
    
    
    1,133,003Total liabilities and shareholders equity
    
    $
    3,664,516
    
    
    $
    3,421,995
 See accompanying notes to condensed consolidated financial statements. -1-




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Platinum Underwriters Holdings, Ltd. and Subsidiaries
Consolidated Statements of Income and Comprehensive Income (Unaudited)
For the Three Months Ended March 31, 2005 and 2004
($ in thousands, except per share data) 2005
    
    
    2004Revenue:Net premiums earned
    
    $
    411,040
    
    
    $
    321,042Net investment income
    
    
    26,905
    
    
    
    17,484Net realized gains on investments
    
    
    372
    
    
    
    452Other income (expense)
    
    
    (356
    )
    
    
    511Total revenue
    
    
    437,961
    
    
    
    339,489Expenses:Losses and loss adjustment expenses
    
    
    237,698
    
    
    
    161,969Acquisition expenses
    
    
    93,249
    
    
    
    88,921Operating expenses
    
    
    20,008
    
    
    
    18,774Net foreign currency exchange (gains) losses
    
    
    1,798
    
    
    
    (866
    )Interest expense
    
    
    2,173
    
    
    
    2,306Total expenses
    
    
    354,926
    
    
    
    271,104Income before income tax expense
    
    
    83,035
    
    
    
    68,385Income tax expense
    
    
    9,947
    
    
    
    13,571Net income
    
    $
    73,088
    
    
    $
    54,814Earnings per share:Basic earnings per share
    
    $
    1.69
    
    
    $
    1.27Diluted earnings per share
    
    $
    1.49
    
    
    $
    1.10Comprehensive income:Net income
    
    $
    73,088
    
    
    $
    54,814Other comprehensive income:Net change in unrealized gains and losses on
available-for-sale securities, net of deferred taxes
    
    
    (34,629
    )
    
    
    19,173Cumulative translation adjustments, net of deferred taxes
    
    
    9
    
    
    
    (29
    )Comprehensive income
    
    $
    38,468
    
    
    $
    73,958Shareholder dividends:Dividends declared
    
    $
    3,449
    
    
    $
    3,461Dividends declared per share
    
    $
    0.08
    
    
    $
    0.08
 See accompanying notes to condensed consolidated financial statements. -2-




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Platinum
Underwriters Holdings, Ltd. and Subsidiaries
Consolidated Statements of Changes in Shareholders Equity (Unaudited)
For the Three Months Ended March 31, 2005 and 2004
($ in thousands) 2005
    
    
    2004Preferred shares:Balances at beginning and end of period
    
    $
    
    
    
    $
    Common shares:Balances at beginning of period
    
    
    430
    
    
    
    430Exercise of share options
    
    
    2
    
    
    
    3Balances at end of period
    
    
    432
    
    
    
    433Additional paid-in-capital:Balances at beginning of period
    
    
    911,851
    
    
    
    910,505Exercise of share options
    
    
    3,757
    
    
    
    4,810Share-based compensation
    
    
    1,295
    
    
    
    504Balances at end of period
    
    
    916,903
    
    
    
    915,819Accumulated other comprehensive income:Balances at beginning of period
    
    
    12,252
    
    
    
    18,774Net change in unrealized gains and
losses on available-for-sale
securities, net of deferred taxes
    
    
    (34,629
    )
    
    
    19,173Net change in cumulative translation
adjustments, net of deferred tax
    
    
    9
    
    
    
    (29
    )Balances at end of period
    
    
    (22,368
    )
    
    
    37,918Retained earnings:Balances at beginning of period
    
    
    208,470
    
    
    
    137,494Net income
    
    
    73,088
    
    
    
    54,814Dividends paid to shareholders
    
    
    (3,449
    )
    
    
    (3,461
    )Balances at end of period
    
    
    278,109
    
    
    
    188,847Total shareholders equity
    
    $
    1,173,076
    
    
    $
    1,143,017
 See accompanying notes to condensed consolidated financial statements. -3-




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Platinum Underwriters Holdings, Ltd. and Subsidiaries
Consolidated Statement of Cash Flows (Unaudited)
For the Three Months Ended March 31, 2005 and 2004
($ in thousands) 2005
    
    
    2004Operating Activities:Net income
    
    $
    73,088
    
    
    $
    54,814Adjustments to reconcile net income to cash used in operations:Depreciation and amortization
    
    
    4,931
    
    
    
    5,679Net realized gains on investments
    
    
    (372
    )
    
    
    (452
    )Net foreign currency exchange (gains) losses
    
    
    1,798
    
    
    
    (866
    )Share-based compensation
    
    
    1,295
    
    
    
    504Trading securities activities
    
    
    4,860
    
    
    
    17,520Changes in assets and liabilities:Increase in accrued investment income
    
    
    (3,464
    )
    
    
    (5,313
    )Increase in reinsurance premiums receivable
    
    
    (58,235
    )
    
    
    (156,529
    )Increase in funds held by ceding companies
    
    
    (24,743
    )
    
    
    (6,203
    )Increase in deferred acquisition costs
    
    
    (13,517
    )
    
    
    (36,617
    )Increase in net unpaid losses and loss adjustment expenses
    
    
    119,840
    
    
    
    98,634Increase in net unearned premiums
    
    
    82,486
    
    
    
    159,341Increase (decrease) in reinsurance deposit liabilities
    
    
    (14,484
    )
    
    
    14,155Increase in ceded premiums payable
    
    
    16,361
    
    
    
    4,565Increase in commissions payable
    
    
    (9,701
    )
    
    
    52,654Increase in funds withheld
    
    
    1,082
    
    
    
    Changes in other assets and liabilities
    
    
    (1,731
    )
    
    
    18,694Other net
    
    
    154
    
    
    
    135Net cash provided by operating activities
    
    
    179,648
    
    
    
    220,715Investing Activities:Proceeds from sale of available-for-sale fixed maturities
    
    
    72,716
    
    
    
    58,006Proceeds from maturity or paydown of available-for-sale fixed
maturities
    
    
    21,155
    
    
    
    16,164Acquisition of available-for-sale fixed maturities
    
    
    (183,709
    )
    
    
    (202,175
    )Net cash used in investing activities
    
    
    (89,838
    )
    
    
    (128,005
    )Financing Activities:Dividends paid to shareholders
    
    
    (3,449
    )
    
    
    (3,461
    )Proceeds from exercise of share options
    
    
    3,759
    
    
    
    4,813Net cash used in financing activities
    
    
    310
    
    
    
    1,352Net increase in cash and cash equivalents
    
    
    90,120
    
    
    
    94,062Cash and cash equivalents at beginning of period
    
    
    209,897
    
    
    
    105,461Cash and cash equivalents at end of period
    
    $
    300,017
    
    
    $
    199,523Supplemental disclosures of cash flow information:Income taxes paid
    
    $
    10,200
    
    
    $
    Interest paid
    
    $
    1,840
    
    
    $
    1,873
 See accompanying notes to condensed consolidated financial statements. -4-




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Platinum Underwriters Holdings, Ltd. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
For the Three Months Ended March 31, 2005 and 2004 (1)Basis of Presentation The condensed consolidated financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America (U.S. GAAP) and include
the accounts of Platinum Underwriters Holdings, Ltd. (Platinum Holdings) and its subsidiaries
(collectively, the Company), including Platinum Underwriters Bermuda, Ltd. (Platinum Bermuda),
Platinum Underwriters Reinsurance, Inc. (Platinum US), Platinum Re (UK) Limited (Platinum UK),
Platinum Underwriters Finance, Inc., Platinum Regency Holdings, and Platinum Administrative
Services, Inc. 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 months ended March 31, 2005 and 2004 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 the
Companys Annual Report on Form 10-K for the year ended December 31, 2004. The preparation of financial statements requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could materially differ from these estimates.
The results of operations for any interim period are not necessarily indicative of results for the
full year. In November 2002, Platinum Holdings completed an initial public offering of 33,044,000 common
shares (the Initial Public Offering). Concurrent with the Initial Public Offering, Platinum
Holdings sold 6,000,000 common shares to The St. Paul Travelers Companies, Inc., formerly The St.
Paul Companies, Inc., (St. Paul), and 3,960,000 common shares to RenaissanceRe Holdings Ltd.
(RenaissanceRe) in private placements. As part of the Initial Public Offering, St. Paul and
RenaissanceRe received options to purchase up to 6,000,000 and 2,500,000 of additional common
shares, respectively, at any time during the ten years following the Initial Public Offering at a
price of $27.00 per share. St. Paul subsequently sold its 6,000,000 common shares in June 2004.
Also, concurrent with the transactions in November 2002, the Company and St. Paul entered into
several agreements for the transfer of continuing reinsurance business and certain related assets
of St. Paul. Among these agreements were quota share retrocession agreements effective November 2,
2002 under which the Company assumed from St. Paul unpaid losses and loss adjustment expenses
(LAE), unearned premiums and certain other liabilities on reinsurance contracts becoming
effective in 2002 (the Quota Share Retrocession Agreements). In addition to these transactions,
the Company issued Equity Security Units (ESUs), each consisting of a contract to purchase
common shares in 2005 and an ownership interest in a senior note due 2007. Share-Based Compensation The Company adopted Statement of Financial Accounting Standards No. 123 Accounting for Awards
of Stock Based Compensation to Employees (SFAS 123) and Statement of Financial Accounting
Standards No. 148 Accounting for Stock-Based Compensation-Transition and Disclosure (SFAS 148)
effective January 1, 2003. SFAS 123 requires that the fair value of share options granted
under the Companys share option plan subsequent to the adoption of SFAS 148 be amortized in
earnings over the vesting periods. The fair value of the share options granted is determined
through the use of an -5-




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Platinum Underwriters Holdings, Ltd. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited), continued
For the Three Months Ended March 31, 2005 and 2004 option-pricing model. SFAS 148 provides transition guidance for a voluntary
adoption of SFAS 123 and amends the disclosure requirements of SFAS 123. Prior to the adoption of
SFAS 123, the Company elected to use the intrinsic value method of accounting for its share-based
awards granted to employees established by Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees (APB 25) and continues to use the intrinsic method for share
options granted in 2002. Under APB 25, if the exercise price of the Companys employee share
options is equal to or greater than the fair market value of the underlying shares on the date of
the grant, no compensation expense is recorded. In December 2004, the Financial Accounting Standards Board issued the Statement of Financial
Accounting Standards No. 123R Share-Based Payment (SFAS 123R). SFAS 123R establishes standards
for the accounting for transactions in which an entity exchanges its equity instruments for goods
or services and for transactions in which an entity obtains employee services in share-based
payment transactions. SFAS 123R requires that, prospectively, compensation costs be recognized for
the fair value of all share options over the remaining vesting period, including the cost related
to the unvested portion of all outstanding share options as of December 31, 2004. The share-based
compensation expense for share options currently outstanding are to be based on the same cost model
used to calculate the pro forma disclosures under SFAS 123. Consequently, the pro forma
share-based compensation expense and pro forma income below approximates the expense under SFAS
123R. The following table illustrates the effect on the Companys net income and earnings per share
for the three months ended March 31, 2005 and 2004 of applying the fair value method to all share
option grants ($ in thousands, except per share data): Three Months EndedMarch 31,2005
    
    
    2004Share-based compensation expense:As reported
    
    $
    1,295
    
    
    $
    504Pro forma
    
    
    2,521
    
    
    
    1,758Net income:As reported
    
    
    73,088
    
    
    
    54,814Pro forma
    
    
    71,862
    
    
    
    53,560Basic earnings per share:As reported
    
    
    1.69
    
    
    
    1.27Pro forma
    
    
    1.66
    
    
    
    1.24Diluted earnings per share:As reported
    
    
    1.49
    
    
    
    1.10Pro forma
    
    $
    1.46
    
    
    $
    1.08
 On April 14, 2005, the Securities and Exchange Commission (SEC) adopted a new rule that
allows SEC registrants to implement SFAS 123R as of January 1, 2006. The SECs new rule does not
change the accounting required by SFAS 123R; it delays the date for compliance with the standard.
Previously under SFAS 123R, the Company would have been required to implement the standard as of
July 1, 2005. Consequently, the Companys consolidated financial statements filed with the
SEC do not need to comply with SFAS 123R until January 1, 2006. The Company is evaluating the
timing of its adoption of SFAS 123R. -6-




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Platinum Underwriters Holdings, Ltd. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited), continued
For the Three Months Ended March 31, 2005 and 2004 Reclassifications Certain reclassifications have been made to the 2004 financial statements in order to conform
to the 2005 presentation. (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 for the three months ended March 31,
2005 and 2004 were as follows ($ in thousands): 2005
    
    
    2004Fixed maturities
    
    $
    (41,158
    )
    
    $
    23,234Less  deferred taxes
    
    
    6,529
    
    
    
    (4,061
    )Net changes in unrealized gains and losses
    
    $
    (34,629
    )
    
    $
    19,173
 Gross unrealized gains and losses on available-for-sale fixed maturities as of March 31, 2005
were $5,566,000 and $33,484,000, respectively. The unrealized losses of fixed maturities available-for-sale aggregated by investment category
and length of time that individual securities have been in a continuous unrealized loss position as
of March 31, 2005 were as follows ($ in thousands): Fair
    
    
    UnrealizedValue
    
    
    LossLess than twelve months:U.S. Government and U.S. Government agencies
    
    $
    6,476
    
    
    $
    104Corporate bonds
    
    
    1,090,825
    
    
    
    20,101Mortgage and asset backed securities
    
    
    364,856
    
    
    
    4,648Municipal bonds
    
    
    156,090
    
    
    
    1,877Foreign governments and states
    
    
    59,935
    
    
    
    1,535Redeemable preferred stocks
    
    
    8,860
    
    
    
    500Total
    
    
    1,687,042
    
    
    
    28,765Twelve months or more:Corporate bonds
    
    
    46,953
    
    
    
    2,361Mortgage and asset backed securities
    
    
    37,143
    
    
    
    1,392Municipal bonds
    
    
    30,458
    
    
    
    966Total
    
    
    114,554
    
    
    
    4,719
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Platinum Underwriters Holdings, Ltd. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited), continued
For the Three Months Ended March 31, 2005 and 2004 Fair
    
    
    UnrealizedValue
    
    
    LossTotal of securities with unrealized losses:U.S. Government and U.S. Government agencies
    
    
    6,476
    
    
    
    104Corporate bonds
    
    
    1,137,778
    
    
    
    22,462Mortgage and asset backed securities
    
    
    401,999
    
    
    
    6,040Municipal bonds
    
    
    186,548
    
    
    
    2,843Foreign governments and states
    
    
    59,935
    
    
    
    1,535Redeemable preferred stocks
    
    
    8,860
    
    
    
    500Total
    
    $
    1,801,596
    
    
    $
    33,484
 The Company routinely reviews its available-for-sale investments to determine whether
unrealized losses represent temporary changes in fair value or are the result of
other-than-temporary impairments. The process of determining whether a security is other than
temporarily impaired is subjective and involves analyzing many factors. These factors include but
are not limited to: the length and magnitude of an unrealized loss, specific credit events, overall
financial condition of the issuer; and the Companys ability to hold a security for a sufficient
period of time for the value to recover the unrealized loss. The Companys ability to hold a
security is based on current and anticipated future positive cash flow from operations that
generates sufficient liquidity in order to meet its obligations. If the Company has determined
that an unrealized loss on a security is other than temporary, the Company writes down the carrying
value of the security and records a realized loss in the statement of income. As of March 31, 2005
management believes that the Companys investment portfolio does not contain any securities that
have other-than-temporary impairments. (3)Earnings Per Share Following is a reconciliation of the basic and diluted earnings per share computations for the
three months ended March 31, 2005 and 2004 ($ in thousands, except per share data): WeightedAverageNet
    
    
    Shares
    
    
    EarningsIncome
    
    
    Outstanding
    
    
    Per ShareThree Months Ended March 31, 2005:Basic earnings per share:Net income
    
    $
    73,088
    
    
    
    43,163
    
    
    $
    1.69Effect of dilutive securities:Share options and restricted share units
    
    
    
    
    
    
    1,860Interest expense related to ESUs, net of
related income tax benefit
    
    
    1,423Common share conversion of ESUs
    
    
    
    
    
    
    5,009Diluted earnings per share:Net income available to common shareholders
    
    $
    74,511
    
    
    
    50,032
    
    
    $
    1.49
 -8-




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Platinum Underwriters Holdings, Ltd. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited), continued
For the Three Months Ended March 31, 2005 and 2004 WeightedAverageNet
    
    
    Shares
    
    
    EarningsIncome
    
    
    Outstanding
    
    
    Per ShareThree Months Ended March 31, 2004:Basic earnings per share:Income available to common shareholders
    
    $
    54,814
    
    
    
    43,143
    
    
    $
    1.27Effect of dilutive securities:Share options and restricted share units
    
    
    
    
    
    
    2,832Interest expense related to ESUs, net of
related income tax benefit
    
    
    1,522
    
    
    
    Common share conversion of ESUs
    
    
    
    
    
    
    5,009Diluted earnings per share:Net income available to common shareholders
    
    $
    56,336
    
    
    
    50,984
    
    
    $
    1.10
 (4)Operating Segment Information The Company conducts its worldwide reinsurance business through three operating segments:
Property and Marine, Casualty and Finite Risk. The Property and Marine operating segment includes
principally property (including crop) and marine reinsurance coverages that are written in the
United States and international markets. This business includes property catastrophe
excess-of-loss treaties, property per-risk excess-of-loss treaties and property proportional
treaties. The Casualty operating segment includes reinsurance treaties that principally cover
umbrella liability, general and product liability, professional liability, workers compensation,
casualty clash, automobile liability, surety and trade credit. This operating segment also
includes accident and health treaties, which are predominantly reinsurance of health insurance
products. The Finite Risk operating segment includes principally structured reinsurance contracts
with ceding companies whose needs may not be met efficiently through traditional reinsurance
products. The classes of risks underwritten through finite risk contracts are generally consistent
with the classes covered by traditional products. Typically, the amount of claims we
might pay is finite or capped. In return for this limit on claims, we often accept a cap on
the potential profit margin specified in the treaty and return profits above this margin to the
ceding company. The three main categories of finite risk contracts are quota share, multi-year
excess-of-loss and whole account aggregate stop loss. In managing the Companys operating segments, management uses measures such as underwriting
income and underwriting ratios to evaluate segment performance. Management does not allocate by
segment its assets or certain income and expenses such as investment income, interest expense and
certain corporate expenses. The measures used by management in evaluating the Companys 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 underwriting income to income before income tax expense for the three months
ended March 31, 2005 and 2004 ($ in thousands): -9-




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##### Table of Contents



Platinum Underwriters Holdings, Ltd. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited), continued
For the Three Months Ended March 31, 2005 and 2004 Propertyand Marine
    
    
    Casualty
    
    
    Finite Risk
    
    
    TotalThree months ended March 31, 2005:Net premiums written
    
    $
    185,049
    
    
    
    215,669
    
    
    
    93,081
    
    
    $
    493,799Net premiums earned
    
    
    128,197
    
    
    
    184,768
    
    
    
    98,075
    
    
    
    411,040Losses and LAE
    
    
    60,040
    
    
    
    118,438
    
    
    
    59,220
    
    
    
    237,698Acquisition expenses
    
    
    21,989
    
    
    
    45,202
    
    
    
    26,058
    
    
    
    93,249Other underwriting expenses
    
    
    7,723
    
    
    
    7,313
    
    
    
    1,571
    
    
    
    16,607Segment underwriting income
    
    $
    38,445
    
    
    
    13,815
    
    
    
    11,226
    
    
    $
    63,486Corporate expenses not allocated to segments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,401
    )Net foreign currency exchange losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,798
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,173
    )Other expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (356
    )Net investment income and net realized gains on investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,277Income before income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    83,035Ratios:Loss and LAE
    
    
    46.8
    %
    
    
    64.1
    %
    
    
    60.4
    %
    
    
    57.8
    %Acquisition expense
    
    
    17.2
    %
    
    
    24.5
    %
    
    
    26.6
    %
    
    
    22.7
    %Other underwriting expense
    
    
    6.0
    %
    
    
    4.0
    %
    
    
    1.6
    %
    
    
    4.0
    %Combined
    
    
    70.0
    %
    
    
    92.6
    %
    
    
    88.6
    %
    
    
    84.5
    %Three months ended March 31, 2004:Net premiums written
    
    $
    171,294
    
    
    
    223,965
    
    
    
    84,847
    
    
    $
    480,106Net premiums earned
    
    
    118,065
    
    
    
    136,222
    
    
    
    66,755
    
    
    
    321,042Losses and LAE
    
    
    48,578
    
    
    
    94,784
    
    
    
    18,607
    
    
    
    161,969Acquisition expenses
    
    
    21,752
    
    
    
    34,836
    
    
    
    32,333
    
    
    
    88,921Other underwriting expenses
    
    
    8,150
    
    
    
    5,057
    
    
    
    2,597
    
    
    
    15,804Segment underwriting income
    
    $
    39,585
    
    
    
    1,545
    
    
    
    13,218
    
    
    $
    54,348Corporate expenses not allocated to segments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,970
    )Net foreign currency exchange gains
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    866Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,306
    )Other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    511Net investment income and net realized gains on investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,936Income before income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    68,385Ratios:Loss and LAE
    
    
    41.1
    %
    
    
    69.6
    %
    
    
    27.9
    %
    
    
    50.5
    %Acquisition expense
    
    
    18.4
    %
    
    
    25.6
    %
    
    
    48.4
    %
    
    
    27.7
    %Other underwriting expense
    
    
    6.9
    %
    
    
    3.7
    %
    
    
    3.9
    %
    
    
    4.9
    %Combined
    
    
    66.4
    %
    
    
    98.9
    %
    
    
    80.2
    %
    
    
    83.1
    %
 -10-




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##### Table of Contents



Platinum Underwriters Holdings, Ltd. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited), continued
For the Three Months Ended March 31, 2005 and 2004 (5) Income Taxes The Company provides for income taxes based upon amounts reported in the financial statements
and the provisions of currently enacted tax laws. Platinum Holdings and Platinum Bermuda are
incorporated under the laws of Bermuda and are subject to Bermuda law with respect to taxation.
Under current Bermuda law, they are not taxed on any Bermuda income or capital gains and they have
received an undertaking from the Bermuda Minister of Finance that, in the event of any Bermuda
income or capital gains taxes being imposed, they will be exempt from those taxes until 2016.
Platinum Holdings has subsidiaries based in the United States, the United Kingdom and Ireland that
are subject to the tax laws thereof. A reconciliation of expected income tax expense, computed by applying a 35 percent income tax
rate to income before income taxes, to actual income tax expense for the three months ended March
31, 2005 and 2004 is as follows ($ in thousands): 2005
    
    
    2004Expected income tax expense at 35%
    
    $
    29,062
    
    
    $
    23,935Effect of foreign income or loss subject to tax
at rates other than 35%
    
    
    (18,623
    )
    
    
    (10,108
    )Tax exempt investment income
    
    
    (526
    )
    
    
    (394
    )Other, net
    
    
    34
    
    
    
    138Income tax expense
    
    $
    9,947
    
    
    
    13,571
 (6)A.M. Best Company Rating On March 31, 2005, A.M. Best Company (A. M. Best) issued a press release announcing that it
has placed under review with negative implications the financial strength ratings of A
(Excellent) of Platinum Bermuda, Platinum US and Platinum UK, that it has downgraded and placed
under review with negative implications the debt rating of the equity security units issued by
Platinum Finance to bbb from bbb+ and that it has downgraded and placed under review with
negative implications the indicative ratings assigned to securities available under our shelf
registration statement to bbb from bbb+ on senior unsecured debt, to bbb- from bbb on
subordinated debt and to bb+ from bbb- on preferred shares. A.M. Best stated in its press
release that these rating actions follow A.M. Bests determination that the Companys risk-adjusted
capital position has declined more than originally estimated from prior year levels due to the
losses incurred as a result of hurricanes in the southeastern U.S. in 2004 and the resulting
increase to the Companys operating leverage. A.M. Best further stated in the press release that
Platinum Bermuda, which assumes a significant amount of business from the other operating
companies, has realized a disproportionate reduction in its risk-adjusted capital position. A.M.
Best acknowledged in the press release that the Company has provided A.M. Best with a plan to
strengthen in the near term the Companys financial position, including that of Platinum Bermuda,
and stated that if the plan is executed successfully, A.M. Best expects that the Companys A
(Excellent) financial strength rating will be affirmed with a stable outlook. The plan reflects
the Companys strong first quarter earnings, rebalancing its catastrophe exposures through its
internal retrocessional program and certain financing activities, subject to market conditions.
The Company intends to complete the remaining elements of its plan in the near term. If the
Company is unable to successfully complete this plan in the near term, the A (Excellent) rating
of Platinum Bermuda will likely be downgraded and all other ratings and rating outlooks will be
reevaluated. (7)Regulatory Examination In connection with its examination of the statutory financial
statements of Platinum US as of December 31, 2003, the Maryland
Insurance Administration (the Administration) has questioned the accounting for one health reinsurance contract written by Platinum US, which was effective from January 1 to December 31, 2003. Platinum US accounted for this contract as reinsurance under statutory accounting principles and U.S. GAAP. While the
examination is not complete and the Administration has not yet provided its report on examination to Platinum US, the Administration has advised Platinum US that it would not be required to amend or restate its previously filed statutory financial statements for any potential difference in accounting for this contract.   -11-




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##### Table of Contents



ITEM 2.
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004 Business Overview Platinum Underwriters Holdings, Ltd. (Platinum Holdings) is a Bermuda holding company
organized in 2002. Platinum Holdings and its subsidiaries (the Company) operate through three
licensed reinsurance subsidiaries: Platinum Underwriters Bermuda, Ltd. (Platinum Bermuda),
Platinum Underwriters Reinsurance, Inc. (Platinum US), Platinum Re (UK) Limited (Platinum UK).
The Company provides 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 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 the Companys Annual Report on Form 10-K
for the year ended December 31, 2004. The Companys consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the United States of
America (U.S. GAAP). In November 2002, Platinum Holdings completed an initial public offering of 33,044,000 common
shares (the Initial Public Offering). Concurrent with the Initial Public Offering, Platinum
Holdings sold 6,000,000 common shares to The St. Paul Travelers Companies, Inc., formerly The St.
Paul Companies, Inc., (St. Paul), and 3,960,000 common shares to RenaissanceRe Holdings Ltd.
(RenaissanceRe) in private placements. As part of the Initial Public Offering, St. Paul and
RenaissanceRe received options to purchase up to 6,000,000 and 2,500,000 of additional common
shares, respectively, at any time during the ten years following the Initial Public Offering at a
price of $27.00 per share. St. Paul subsequently sold its 6,000,000 common shares in June 2004.
Also, concurrent with the transactions in November 2002, the Company and St. Paul entered into
several agreements for the transfer of continuing reinsurance business and certain related assets
of St. Paul. Among these agreements were quota share retrocession agreements effective November 2,
2002 under which the Company assumed from St. Paul unpaid losses and loss adjustment expenses
(LAE), unearned premiums and certain other liabilities on reinsurance contracts becoming
effective in 2002 (the Quota Share Retrocession Agreements). In addition to these transactions,
the Company issued Equity Security Units (ESUs), consisting of a contract to purchase common
shares in 2005 and an ownership interest in a senior note due 2007. The Company writes property and casualty reinsurance. Property reinsurance protects a ceding
company against financial loss arising out of damage to property or loss of its use caused by an
insured peril. Examples of property reinsurance are property catastrophe and property per-risk
coverages. Property catastrophe reinsurance protects a ceding company against losses arising out
of multiple claims for a single event while property per-risk reinsurance protects a ceding company
against loss arising out of a single claim for a single event. Casualty reinsurance protects a
ceding company against financial loss arising out of the obligation to others for loss or damage to
persons or property. Examples of casualty reinsurance are reinsurance treaties that cover umbrella
liability, general and product liability, professional liability, directors and officers liability,
workers compensation, casualty clash, automobile liability, surety and trade credit. Casualty
also includes accident and health reinsurance treaties, which are predominantly reinsurance of
health insurance products. -12-




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##### Table of Contents



The property and casualty reinsurance industry is highly competitive. The Company competes
with reinsurers worldwide, many of which have greater financial, marketing and management
resources. Large financial institutions represent some of the Companys competitors, while others
are specialty reinsurance companies. Financial institutions have also created alternative capital
market products that compete with reinsurance products, such as reinsurance securitization. The
Companys principal competitors vary by type of business. Bermuda-based reinsurers are significant
competitors on property catastrophe business. Lloyds of London syndicates are significant
competitors on marine business. On international business, the large European reinsurers are
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 affected significantly by volatile developments, including natural and
other disasters, such as hurricanes, windstorms, earthquakes, floods, fires, explosions and other
catastrophic events, including 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. As liabilities are established to cover expected
claims, 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. Results of Operations Three Months Ended March 31, 2005 as Compared with the Three Months Ended March 31, 2004 Net income for the three months ended March 31, 2005 and 2004 was as follows ($ in thousands): 2005
    
    
    2004
    
    
    IncreaseNet income
    
    $
    73,088
    
    
    
    54,814
    
    
    $
    18,274
 The increase in net income in 2005 as compared with net income in 2004 is attributable to an
increase in investment income of $9,421,000 and an increase in underwriting income of $9,138,000,
due primarily to growth of profitable business. Net underwriting income includes net favorable
development of $20,477,000 in 2005 and $25,255,000 in 2004 partially offset by $10,600,000 of
higher commissions in 2004. Net income in 2005 was also impacted by an increase in operating
expenses of $1,234,000 and a decline in income tax expense of $3,624,000. Net premiums written and net premiums earned for the three months ended March 31, 2005 and
2004 were as follows ($ in thousands): 2005
    
    
    2004
    
    
    IncreaseNet premiums written
    
    $
    493,799
    
    
    
    480,106
    
    
    $
    13,693Net premiums earned
    
    $
    411,040
    
    
    
    321,042
    
    
    $
    89,998
 The increase in net premiums written in 2005 is primarily attributable to growth in the
Property and Marine segment. The increase in net premiums earned is the result of growth in
Property and Marine net premiums written in 2005 and the growth in previous years of net premiums written
in all segments. Net investment income for the three months ended March 31, 2005 and 2004 was $26,905,000 and
$17,484,000 respectively. Net investment income increased in 2005 due to increased invested assets
attributable to positive cash flow from operations. Net realized gains on investments of $372,000
and -13-




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##### Table of Contents



$452,000 for the three months ended March 31, 2005 and 2004, respectively, were the result of
investment sale activity to manage the quality, diversity, currency exposure, duration and tax
profile of the investment portfolio. Other income (expense) for the three months ended March 31, 2005 and 2004 was ($356,000) and
$511,000, respectively. Other income includes changes in fair value of fixed maturities classified
as trading and net earnings on several reinsurance contracts in the Finite Risk segment that are
accounted for as deposits. Other expense for the three months ended March 31, 2005 includes
$333,000 of net unrealized losses relating to fixed maturities classified as trading and $23,000 of
net expense on reinsurance contracts accounted for as deposits. Other income in 2004 primarily
includes $318,000 of net unrealized gains relating to fixed maturities classified as trading and
$97,000 of profit on reinsurance contracts accounted for as deposits. Earnings on reinsurance
contracts accounted for as deposits decreased in 2005 from 2004 due to a decline in the number of
such contracts. Net foreign currency exchange gains (losses) for the three months ended March 31, 2005 and
2004 were ($1,798,000) and $866,000, respectively. The Company routinely does business in various
foreign currencies. Foreign currency exchange gains and losses result from the re-valuation into
U.S. dollars of assets and liabilities denominated in foreign currencies. The Company periodically
monitors its largest foreign currency exposures and purchases or sells foreign currency denominated
invested assets to match these exposures. Net foreign currency exchange gains and losses arise as
a result of fluctuations in the amounts of assets and liabilities denominated in foreign currencies
as well as fluctuations in the currency exchange rates. Losses and LAE and the resulting loss and LAE ratios for the three months ended March 31, 2005
and 2004 were as follows ($ in thousands): 2005
    
    
    2004
    
    
    IncreaseLosses and LAE
    
    $
    237,698
    
    
    
    161,969
    
    
    $
    75,729Loss and LAE ratios
    
    
    57.8
    %
    
    
    50.5
    %
    
    7.3 points
 The increase in losses and LAE in 2005 as compared with 2004 is due, in part, to the increased
net premiums earned in all segments and less favorable loss development in 2005 as compared with
2004. Favorable loss development was $18,977,000 and $25,255,000 in 2005 and 2004, respectively.
The loss and LAE ratio increased in 2005 as compared with 2004 primarily as a result of less
favorable loss development in 2005 as well as a shift in the mix of business in the Finite Risk
segment from finite property to finite casualty contracts that generally have higher loss ratios. Acquisition expenses and the resulting acquisition expense ratios for the three months ended
March 31, 2005 and 2004 were as follows ($ in thousands): Increase2005
    
    
    2004
    
    
    (decrease)Acquisition expenses
    
    $
    93,249
    
    
    
    88,921
    
    
    $
    4,328Acquisition expense ratios
    
    
    22.7
    %
    
    
    27.7
    %
    
    (5.0) points
 The increase in acquisition expenses is due primarily to the increase in net premiums earned
in 2005 as compared with 2004. The decrease in the ratio in 2005 over 2004 is due, in part, to
higher profit commissions in 2004, including approximately $10,600,000 relating to favorable loss
development primarily in the Finite Risk segment. Also impacting the acquisition expense ratio is
the shift in the mix of business. -14-




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##### Table of Contents



Operating expenses for the three months ended March 31, 2005 and 2004 were $20,008,000 and
$18,774,000, respectively. Operating expenses include costs such as salaries, rent and like items
related to reinsurance operations as well as costs associated with Platinum Holdings. Operating
expenses in 2005 increased as compared with 2004 primarily due to increased salaries and benefits
and increased regulatory compliance costs. Interest expense for the three months ended March 31, 2005 and 2004 was $2,173,000 and
$2,306,000, respectively, and relates to the Companys ESUs, which are classified as debt
obligations on the Companys consolidated balance sheet. Income tax expense and the effective income tax rate for the three months ended March 31, 2005
and 2004 were as follows ($ in thousands): 2005
    
    
    2004
    
    
    DecreaseIncome tax expense
    
    $
    9,947
    
    
    
    13,571
    
    
    $
    (3,624
    )Effective income tax rates
    
    
    12.0
    %
    
    
    19.8
    %
    
    (7.8) points
 The decrease in income tax expense and the effective income tax rate in 2005 as compared with
2004 is due to the increase in the contribution to the Companys income before income taxes by
Platinum Bermuda which is not subject to corporate income tax. Segment Information The Company conducts its worldwide reinsurance business through three operating segments:
Property and Marine, Casualty and Finite Risk. In managing the Companys operating segments,
management uses measures such as underwriting income and underwriting ratios to evaluate segment
performance. Management does not allocate by segment its 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 used by management in
evaluating the Companys 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 months ended March 31, 2005 and 2004 ($ in thousands): Propertyand Marine
    
    
    Casualty
    
    
    Finite Risk
    
    
    TotalThree months ended March 31, 2005:Net premiums written
    
    $
    185,049
    
    
    
    215,669
    
    
    
    93,081
    
    
    $
    493,799Net premiums earned
    
    
    128,197
    
    
    
    184,768
    
    
    
    98,075
    
    
    
    411,040Losses and LAE
    
    
    60,040
    
    
    
    118,438
    
    
    
    59,220
    
    
    
    237,698Acquisition expenses
    
    
    21,989
    
    
    
    45,202
    
    
    
    26,058
    
    
    
    93,249Other underwriting expenses
    
    
    7,723
    
    
    
    7,313
    
    
    
    1,571
    
    
    
    16,607Segment underwriting income
    
    $
    38,445
    
    
    
    13,815
    
    
    
    11,226
    
    
    $
    63,486Corporate expenses not allocated to segments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,401
    )Net foreign currency exchange losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,798
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,173
    )Other expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (356
    )Net investment income and net realized gains on investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,277Income before income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    83,035
 -15-




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##### Table of Contents



Propertyand Marine
    
    
    Casualty
    
    
    Finite Risk
    
    
    TotalRatios:Loss and LAE
    
    
    46.8
    %
    
    
    64.1
    %
    
    
    60.4
    %
    
    
    57.8
    %Acquisition expense
    
    
    17.2
    %
    
    
    24.5
    %
    
    
    26.6
    %
    
    
    22.7
    %Other underwriting expense
    
    
    6.0
    %
    
    
    4.0
    %
    
    
    1.6
    %
    
    
    4.0
    %Combined
    
    
    70.0
    %
    
    
    92.6
    %
    
    
    88.6
    %
    
    
    84.5
    %Three months ended March 31, 2004:Net premiums written
    
    $
    171,294
    
    
    
    223,965
    
    
    
    84,847
    
    
    $
    480,106Net premiums earned
    
    
    118,065
    
    
    
    136,222
    
    
    
    66,755
    
    
    
    321,042Losses and LAE
    
    
    48,578
    
    
    
    94,784
    
    
    
    18,607
    
    
    
    161,969Acquisition expenses
    
    
    21,752
    
    
    
    34,836
    
    
    
    32,333
    
    
    
    88,921Other underwriting expenses
    
    
    8,150
    
    
    
    5,057
    
    
    
    2,597
    
    
    
    15,804Segment underwriting income
    
    $
    39,585
    
    
    
    1,545
    
    
    
    13,218
    
    
    $
    54,348Corporate expenses not allocated to segments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,970
    )Net foreign currency exchange gains
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    866Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,306
    )Other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    511Net investment income and net realized gains on investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,936Income before income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    68,385Ratios:Loss and LAE
    
    
    41.1
    %
    
    
    69.6
    %
    
    
    27.9
    %
    
    
    50.5
    %Acquisition expense
    
    
    18.4
    %
    
    
    25.6
    %
    
    
    48.4
    %
    
    
    27.7
    %Other underwriting expense
    
    
    6.9
    %
    
    
    3.7
    %
    
    
    3.9
    %
    
    
    4.9
    %Combined
    
    
    66.4
    %
    
    
    98.9
    %
    
    
    80.2
    %
    
    
    83.1
    %
 Property and Marine The Property and Marine operating segment includes principally property (including crop) and
marine reinsurance coverages that are written in the United States and international markets. This
business includes catastrophe excess-of-loss treaties, property per-risk excess-of-loss treaties
and property proportional treaties. This operating segment generated 37.5% and 35.7% of the
Companys net premiums written for the three months ended March 31, 2005 and 2004, respectively. Three Months Ended March 31, 2005 as Compared with the Three Months Ended March 31, 2004 Net premiums written and net premiums earned for the three months ended March 31, 2005 and
2004 were as follows ($ in thousands): 2005
    
    
    2004
    
    
    IncreaseNet premiums written
    
    $
    185,049
    
    
    
    171,294
    
    
    $
    13,755Net premiums earned
    
    $
    128,197
    
    
    
    118,065
    
    
    $
    10,132
 Net premiums written and earned increased in 2005 as compared with 2004 due to growth across
most property classes, most significantly the property catastrophe and crop classes. -16-




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Losses and LAE and the resulting loss and LAE ratios for the three months ended March 31, 2005
and 2004 were as follows ($ in thousands): 2005
    
    
    2004
    
    
    IncreaseLosses and LAE
    
    $
    60,040
    
    
    
    48,578
    
    
    $
    11,462Loss and LAE ratios
    
    
    46.8
    %
    
    
    41.1
    %
    
    5.7 points
 The increase in losses and LAE and the related loss and LAE ratio in 2005 as compared to 2004
is due primarily to less favorable loss development in 2005 than in 2004. Losses and LAE in 2005
included approximately $11,285,000 of net favorable non-catastrophe loss development, reduced by
approximately $7,400,000 of unfavorable catastrophe loss development. Losses and LAE in 2004
included approximately $14,200,000 of net favorable loss development. Losses and LAE also
increased as a result of the increase in net premiums earned. Acquisition expenses and the resulting acquisition expense ratios for the three months ended
March 31, 2005 and 2004 were as follows ($ in thousands): Increase2005
    
    
    2004
    
    
    (decrease)Acquisition expenses
    
    $
    21,989
    
    
    
    21,752
    
    
    $
    237Acquisition expense ratios
    
    
    17.2
    %
    
    
    18.4
    %
    
    (1.2) points
 Acquisition expenses are comparable despite the growth in net premiums earned primarily due to
higher adjustable commissions in 2004 relating to favorable loss development of proportional
business in 2004. The higher adjustable commissions in 2004 also contributed to the decrease in
the acquisition expense ratio in 2005. Additionally, the acquisition expense ratio is affected by
changes in the mix of business. Other underwriting expenses for the three months ended March 31, 2005 and 2004 were $7,723,000
and $8,150,000, respectively, and represent costs such as salaries, rent and like items. The
decrease in other underwriting expenses is due to cost reductions in the Property and Marine
segment. The resulting other underwriting expense ratios for 2005 and 2004 were 6.0% and 6.9%,
respectively. Other underwriting expenses in 2005 and 2004 include fees of $2,787,000 and
$2,406,000, respectively, relating to the Services and Capacity Reservation Agreement dated
November 1, 2002 with RenaissanceRe that provides for, among other things, a periodic review of
aggregate property catastrophe exposures by RenaissanceRe. Casualty The Casualty operating segment includes reinsurance treaties that principally cover umbrella
liability, general and product liability, professional liability, workers compensation, casualty
clash, automobile liability, surety and trade credit. This operating segment also includes
accident and health treaties, which are predominantly reinsurance of health insurance products.
This operating segment generated 43.7% and 46.6% of the Companys net premiums written for the
three months ended March 31, 2005 and 2004, respectively. Three Months Ended March 31, 2005 as Compared with the Three Months Ended March 31, 2004 Net premiums written and net premiums earned for the three months ended March 31, 2005 and
2004 were as follows ($ in thousands): -17-




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Increase2005
    
    
    2004
    
    
    (decrease)Net premiums written
    
    $
    215,669
    
    
    
    223,965
    
    
    $
    (8,296
    )Net premiums earned
    
    $
    184,768
    
    
    
    136,222
    
    
    $
    48,546
 The decrease in net premiums written is due primarily to the classification in 2004 of
premiums written relating to a quota share reinsurance contract. During the three months ended
March 31, 2004, approximately $17,000,000 of premiums written related to this contract was included
in the Casualty segment based on the expected terms and conditions of the contract. After the
final terms and conditions were established, the contract was subsequently reclassified as a Finite
Risk contract. Exclusive of this quota share reinsurance contract, net premiums written in the
Casualty segment increased by approximately $8,700,000, consistent with the growth in the Casualty
segment. Losses and LAE and the resulting loss ratios for the three months ended March 31, 2005 and
2004 were as follows ($ in thousands): Increase2005
    
    
    2004
    
    
    (decrease)Losses and LAE
    
    $
    118,438
    
    
    
    94,784
    
    
    $
    23,654Loss and LAE ratios
    
    
    64.1
    %
    
    
    69.6
    %
    
    (5.5) points
 The increase in losses and LAE in 2005 as compared with 2004 is consistent with the increase
in net premiums earned. The decrease in the loss and LAE ratio in 2005 is due to favorable loss
development in 2005 of approximately $6,874,000 relating to 2002 and 2003 underwriting year
experience as compared with $5,445,000 of unfavorable loss development in 2004. Acquisition expenses and the resulting acquisition expense ratios for the three months ended
March 31, 2005 and 2004 were as follows ($ in thousands): Increase2005
    
    
    2004
    
    
    (decrease)Acquisition expenses
    
    $
    45,202
    
    
    
    34,836
    
    
    $
    10,366Acquisition expense ratios
    
    
    24.5
    %
    
    
    25.6
    %
    
    (1.1) points
 The increase in acquisition expenses is due primarily to the increase in net premiums earned
in 2005 as compared with 2004. The decrease in the acquisition expense ratio in 2005 is due to
changes in the mix of business toward lines with higher loss ratios and lower acquisition expense
ratios. Other underwriting expenses for the three months ended March 31, 2005 and 2004 were $7,313,000
and $5,057,000, respectively, and represent costs such as salaries, rent and like items. The
resulting other underwriting expense ratios for 2005 and 2004 were 4.0% and 3.7%, respectively.
The increase in the other underwriting expenses and the resulting ratio in 2005 as compared with
2004 is due primarily to increased costs associated with the increase in business. 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.
The classes of risks underwritten through finite risk contracts are fundamentally the same as the
classes covered by traditional products. Typically, the potential amount of losses paid is finite
or capped. In return for this limit on losses, there is typically a cap on the potential profit
margin specified in the treaty. -18-




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Profits above this margin are returned to the ceding company. The three main categories of
finite risk contracts are quota share, multi-year excess-of-loss and whole account aggregate stop
loss. This operating segment generated 18.8% and 17.7% of the Companys net premiums written for
the three months ended March 31, 2005 and 2004, respectively. For this segment, because of the
inter-relationship between losses and expenses, the Company believes it is important to evaluate
the overall combined ratio, rather than its component parts of loss and expense ratios. Three Months Ended March 31, 2005 as Compared with the Three Months Ended March 31, 2004 Net premiums written and net premiums earned for the three months ended March 31, 2005 and
2004 were as follows ($ in thousands): 2005
    
    
    2004
    
    
    IncreaseNet premiums written
    
    $
    93,081
    
    
    
    84,847
    
    
    $
    8,234Net premiums earned
    
    $
    98,075
    
    
    
    66,755
    
    
    $
    31,320
 The Finite Risk portfolio consists of a small number of contracts that can be large in premium
size and, consequently, overall premium volume may vary significantly from year to year. While net
premiums written in 2005 increased as compared with 2004, net premiums written were impacted by the
classification of premiums written relating to the quota share reinsurance contract referred to in
the discussion of the results of the Casualty segment. During the three months ended March 31,
2004, approximately $17,000,000 of premiums written related to this contract was included in the
Casualty segment based on the expected terms and conditions of the contract. After the final terms
and conditions were established, the contract was subsequently reclassified as a Finite Risk
contract. Exclusive of this quota share reinsurance contract, net premiums written in the Finite
Risk segment decreased by approximately $8,800,000. The decrease in net premiums written was due
to reductions in the finite property and finite accident and health classes, partially offset by
increases in the finite casualty class. The increase in net premiums earned in 2005 as compared
with 2004 is due primarily to the impact of several casualty capped quota share contracts
underwritten in 2004. Net premiums earned are related to current and prior years net premiums
written and are affected by changes in the mix of business and the structure of the underlying
reinsurance contracts. Losses and LAE, acquisition expenses and the resulting ratios for the three months ended March
31, 2005 and 2004 were as follows ($ in thousands): Increase2005
    
    
    2004
    
    
    (decrease)Losses and LAE
    
    $
    59,220
    
    
    
    18,607
    
    
    $
    40,613Loss and LAE ratios
    
    
    60.4
    %
    
    
    27.9
    %
    
    32.5 pointsAcquisition expenses
    
    $
    26,058
    
    
    
    32,333
    
    
    $
    (6,275
    )Acquisition expense ratios
    
    
    26.6
    %
    
    
    48.4
    %
    
    (21.8) pointsLosses, LAE and acquisition expenses
    
    $
    85,278
    
    
    
    50,940
    
    
    $
    34,338Loss, LAE and acquisition expense
ratios
    
    
    87.0
    %
    
    
    76.3
    %
    
    10.7 points
 The increase in losses, LAE and acquisition expenses and the loss, LAE and acquisition expense
ratio in 2005 as compared with 2004 is due primarily to the shift of business to finite casualty,
which generally has a higher loss, LAE and acquisition expense ratio than finite property. Net
favorable development was $8,217,000 or 8.4% of net premiums earned in 2005 as compared to net
favorable development of $5,900,000 or 8.8% of net premiums earned in 2004. -19-




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Other underwriting expenses for the three months ended March 31, 2005 and 2004 were $1,571,000
and $2,597,000, respectively, and represent costs such as salaries, rent and like items. The
resulting other underwriting expense ratios for 2005 and 2004 were 1.6% and 3.9%, respectively.
The decrease in other underwriting expenses is due to cost reductions in the Finite Risk segment.
The decrease in the other underwriting expense ratio is the result of increased net premiums earned
and reduced costs in the Finite Risk segment. Financial Condition, Liquidity and Capital Resources Financial Condition Cash and cash equivalents were $300,017,000 and $209,897,000 as of March 31, 2005 and December
31, 2004, respectively. Fixed maturities were $2,278,142,000 and $2,240,202,000 as of March 31,
2005 and December 31, 2004, respectively. Cash and cash equivalents and the investment portfolio
increased due to positive cash flow from operations, excluding trading securities activities. The
Companys fixed maturity available-for-sale and trading portfolios are comprised entirely of
publicly traded fixed maturity investments. The investment portfolio, including cash and cash
equivalents, had a weighted average duration of 3.6 years as of March 31, 2005. Management
monitors the composition of the investment portfolio and cash flows from the portfolio to maintain
the liquidity necessary to meet the Companys obligations. The Company believes it has sufficient
cash on hand to meet its short-term obligations and to maintain the liquidity necessary for
portfolio management. Certain assets and liabilities associated with underwriting have increased significantly, some
of which include significant estimates. Premiums receivable as of March 31, 2005 of $638,283,000
include $584,336,000 that is based upon estimates. Premiums receivable as of December 31, 2004 of
$580,048,000 include $530,066,000 that is based upon estimates. Unpaid losses and LAE as of March
31, 2005 of $1,507,158,000 includes $1,258,183,000 of IBNR. Unpaid losses and LAE as of December
31, 2004 of $1,380,955,000 includes $1,151,500,000 of IBNR. Commissions payable as of March 31,
2005 of $172,224,000 include $164,248,000 that is based upon estimates. Commissions payable as of
December 31, 2004 of $181,925,000 include $165,050,000 that is based upon estimates. Deferred
acquisition costs and unearned premiums are also based upon estimates. Sources of Liquidity The sources of funds of the Company consist primarily of premiums written, investment income,
proceeds from sales and redemption of investments, losses recovered from retrocessionaires, and
actual cash and cash equivalents held by the Company. Net cash flows provided by operations,
excluding trading securities activities, were $174,788,000 and $203,195,000 for the three months
ended March 31, 2005 and 2004, respectively, and were used primarily to acquire additional
investments. Platinum Holdings is a holding company that conducts no reinsurance operations of its own.
All of its reinsurance operations are conducted through its wholly owned operating subsidiaries,
Platinum Bermuda, Platinum US and Platinum UK. As a holding company, the cash flow of Platinum
Holdings consists primarily of dividends, interest and other permissible payments from its
subsidiaries. Platinum Holdings depends on such payments for general corporate purposes and to
meet its obligations, including the contract adjustment payments related to the ESUs and the
payment of any dividends to its shareholders. The Company has filed an allocated universal shelf registration statement with the Securities
and Exchange Commission (SEC), which the SEC declared effective on April 5, 2004. The securities
registered under the shelf registration statement for possible future sales include up to
$750,000,000 of common shares, preferred shares and various types of debt securities. Common
shares held by St. Paul -20-




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##### Table of Contents



and RenaissanceRe and common shares issuable upon exercise of options owned by St. Paul and
RenaissanceRe accounts for $586,381,900 of the $750,000,000 of securities registered under the
registration statement with the remaining $163,618,100 available for securities offerings by the
Company. On June 25, 2004, the Company announced St. Pauls intent to sell 6,000,000 of the
Companys common shares in an underwritten public offering, which was effected pursuant to a
prospectus supplement to the shelf registration statement dated June 28, 2004 and completed on June
30, 2004. The 6,000,000 common shares sold by St. Paul amounted to $177,330,000 of the
$750,000,000 securities registered under the shelf registration statement. The Company did not
sell any common shares in the offering and did not receive any proceeds from the sale of the common
shares by St Paul. The Company issued the ESUs in November 2002, each of which consists of a contract to
purchase common shares from the Company in 2005 (collectively, the Purchase Contracts) and an
ownership interest in a senior note due 2007 issued by Platinum Finance (collectively, the Senior
Notes). During 2005, the Company expects to issue common shares in accordance with the Purchase
Contracts and remarket the Senior Notes which the Company expects to generate cash of approximately
$137,500,000, less fees and expenses associated with the remarketing. The Company intends to establish a committed credit facility with a group of banks that will
provide up to $200 million of aggregate borrowing capacity to
provide for the letter of credit needs of the Company's reinsurance
subsidiaries. Liquidity Requirements The principal cash requirements of the Company are the payment of losses and LAE, commissions,
brokerages, operating expenses, dividends to its shareholders, the servicing of debt (including
interest payments on the Senior Notes and contract adjustment payments on the Purchase Contracts
included in the Companys ESUs), the acquisition of and investment in businesses, capital
expenditures, premiums retroceded and taxes. The contract adjustment payments will cease upon
issuance of the common shares in accordance with the Purchase Contracts. Platinum
Bermuda and Platinum UK are not licensed, approved or accredited as
reinsurers anywhere in the United States and therefore, under the
terms of most of their contracts with United States ceding companies,
they are required to provide collateral to these ceding companies for
unpaid ceded liabilities in a form acceptable to state insurance
commissioners. Typically, this type of collateral takes the form of a
letter of credit issued by an acceptable bank, the establishment of a
trust, or a cash advance. Platinum Bermuda and Platinum UK expect to
obtain letters of credit through commercial banks and may be required
to provide the banks with a security interest in certain of Platinum
Bermudas and Platinum UKs investments. It is increasingly common for our reinsurance contracts to contain terms that would allow the
ceding companies to cancel the contract or require collateral to be posted for a portion of our
obligations if we are downgraded below a certain rating level. Whether a client would exercise
this cancellation right would depend, among other factors, on the reason for such downgrade, the
extent of the downgrade, the prevailing market conditions and the pricing and availability of
replacement reinsurance coverage. Therefore, we cannot predict in advance the extent to which this
cancellation right would be exercised, if at all, or what effect such cancellations would have on
our financial condition or future operations, but such effect potentially could be material. A.M. Best is generally considered to be a significant rating agency with respect to the
evaluation of insurance and reinsurance companies. Ratings are used by ceding companies and
reinsurance intermediaries as an important means of assessing the financial strength and quality of
reinsurers. In addition, a ceding companys own rating may be adversely affected by a downgrade in
the rating of its reinsurer. Therefore, a downgrade of our rating may dissuade a ceding company
from reinsuring with us and may influence a ceding company to reinsure with a competitor of ours
that has a higher insurance rating. On March 31, 2005 A.M. Best issued a press release announcing that it has placed under review
with negative implications the financial strength ratings of A (Excellent) of Platinum Bermuda,
Platinum US and Platinum UK, that it has downgraded and placed under review with negative
implications the debt rating of the equity security units issued by Platinum Finance to bbb from
bbb+ and that it has downgraded and placed under review with negative implications the indicative
ratings -21-




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##### Table of Contents



assigned to securities available under our shelf registration statement to bbb from bbb+
on senior unsecured debt, to bbb- from bbb on subordinated debt and to bb+ from bbb- on
preferred shares. A.M. Best stated in its press release that these rating actions follow A.M.
Bests determination that the Companys risk-adjusted capital position has declined more than
originally estimated from prior year levels due to the losses incurred as a result of hurricanes in
the southeastern U.S. in 2004 and the resulting increase to the Companys operating leverage. A.M.
Best further stated in the press release that Platinum Bermuda, which assumes a significant amount
of business from the other operating companies, has realized a disproportionate reduction in its
risk-adjusted capital position. A.M. Best acknowledged in the press release that the Company has
provided A.M. Best with a plan to strengthen in the near term the Companys financial position,
including that of Platinum Bermuda, and stated that if the plan is executed successfully, A.M. Best
expects that the Companys A (Excellent) financial strength rating will be affirmed with a stable
outlook. The plan reflects the Companys strong first quarter earnings, rebalancing its
catastrophe exposures through its internal retrocessional program and certain financing activities,
subject to market conditions. The Company intends to complete the remaining elements of its plan
in the near term. If the Company is unable to successfully complete this plan in the near term,
the A (Excellent) rating of Platinum Bermuda will likely be downgraded and all other ratings and
rating outlooks will be reevaluated. We may from time to time secure our obligations under our various reinsurance contracts using
trusts and letters of credit. We have entered into agreements with several ceding companies that
require us to provide collateral for our obligations under certain reinsurance contracts with these
ceding companies under various circumstances, including where our obligations to these ceding
companies exceed negotiated thresholds. These thresholds may vary depending on our rating from
A.M. Best or other rating agencies and a downgrade of our ratings or a failure to achieve a certain
rating may increase the amount of collateral we are required to provide. We may provide the
collateral by delivering letters of credit to the ceding company, depositing assets into trust for
the benefit of the ceding company or permitting the ceding company to withhold funds that would
otherwise be delivered to us under the reinsurance contract. The amount of collateral we are
required to provide typically represents a portion of the obligations we may owe the ceding
company, often including estimates made by the ceding company of claims that were incurred but not
reported (IBNR). Since we may be required to provide collateral based on the ceding companys
estimate, we may be obligated to provide collateral that exceeds our estimates of the ultimate
liability to the ceding company. We are not currently rated by any rating agencies other than A.M. Best. In the future we may
obtain ratings from other rating agencies, though we are unable to predict the impact of any such
ratings at this time. The payment of dividends and other distributions from the Companys regulated reinsurance
subsidiaries is limited by applicable laws and statutory requirements of the jurisdictions in which
the subsidiaries operate, including Bermuda, the United States and the United Kingdom. Based on
the regulatory restrictions of the applicable jurisdictions, the maximum amount available for
payment of dividends or other distributions by the reinsurance subsidiaries of the Company in 2005
without prior regulatory approval is estimated to be $139,620,000. On August 4, 2004, the board of directors of the Company approved a plan to purchase up to
$50,000,000 of its common shares. During the year ended December 31, 2004 the Company purchased
349,700 of its common shares in the open market for approximately $9,985,000, at an average price
of $28.55 per share. The common shares purchased by the Company were canceled. There were no
purchases of the Companys common shares in the first quarter of 2005. -22-




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Management believes that the cash flow generated by the operating activities of the Companys
subsidiaries will provide sufficient funds for the Company to meet its expected liquidity needs
over the next twelve months. Beyond the next twelve months, cash flow available to the Company 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 presence or absence of large catastrophic events. If the
Companys liquidity needs accelerate beyond our ability to fund such obligations from current
operating cash flows, the Company may need to liquidate a portion of its investment portfolio. The
Companys ability to meet its liquidity needs by selling investments is subject to the timing and
pricing risks inherent in the capital markets. Economic Conditions Periods of moderate economic recession or inflation tend not to have a significant direct
effect on the Companys underwriting operations. Significant unexpected inflationary or
recessionary periods can, however, impact the Companys underwriting operations and investment
portfolio. Management considers the potential impact of economic trends in the estimation process
for establishing unpaid losses and LAE. Current Outlook We expect that terms and conditions on most reinsurance treaties will remain acceptable to
reinsurers, while rate level adequacy will decline thereby reducing expected profitability. Given
our strategy of underwriting for profitability, not market share, a decline in expected treaty
profitability may eventually result in lower net premiums written. We anticipate that our total
net premiums written in 2005 will be approximately the same as for 2004. If rates deteriorate more
quickly than we anticipate, then our 2005 net premium written will likely be lower than the 2004
level. For the Property and Marine segment underlying primary rates are declining at a rapid pace for
large commercial properties in the U.S. and abroad, rendering some proportional business
unattractive in light of the catastrophe risks assumed. The level of rate increases in Florida
that will be allowed by regulators for residential properties is not currently known and may not be
sufficient to compensate for the perceived riskiness of the business. Consequently, our level of
business written on a proportional basis may decline. To the extent that excess-of-loss
reinsurance rates adjust to partially mitigate the negative impact of underlying rate decreases we
are more likely to renew this business and therefore anticipate premium volume for 2005 that is
substantially similar to 2004. With selective and disciplined underwriting, we believe that the
business we accept will generate acceptable profitability. For the Casualty segment, we believe that differences of opinion between primary insurers and
reinsurers regarding the profitability of the casualty business will persist. Accordingly, we
anticipate that well capitalized primary carriers will retain more of their business. Although the
overall quantity of casualty reinsurance ceded may decrease in 2005 versus 2004, we believe that
our capitalization and reputation as a lead casualty reinsurer will allow us to write approximately
the same level of premium for 2005 as for 2004 at good levels of expected profitability provided
that rate levels do not deteriorate more rapidly than we anticipate. In the Finite Risk segment, we expect that the ongoing investigations by the SEC and the
office of the Attorney General for the State of New York and non-U.S. regulatory authorities such
as the Bermuda Monetary Authority and the U.K. Financial Services Authority will significantly
diminish demand for limited risk transfer products in the short term. Although we cannot predict
the outcome of these investigations, we believe that if the buyers and sellers of these products
perceive that the accounting, headline and regulatory risk has receded, demand will return.
Accordingly, the likelihood of writing a -23-




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significant volume of new finite business is materially lower for 2005 than for 2004.
However, our existing portfolio of finite risk contracts is expected to generate premium volume for
2005 that is substantially the same as for 2004. Critical Accounting Policies, Estimates And Judgments It is important to understand the Companys accounting policies in order to understand its
financial position and results of operations. Management considers certain of these policies to be
critical to the presentation of the financial results since they require management to make
estimates and assumptions. These estimates and assumptions affect the reported amounts of assets,
liabilities, revenues, expenses, and related disclosures at the financial reporting date and
throughout the relevant periods. Certain of the estimates and assumptions result from judgments
that can be subjective and complex, and consequently actual results may differ from these
estimates. The Companys most critical accounting policies involve written and unearned premium,
unpaid losses and LAE, reinsurance, investments, income tax expense and share-based compensation.
The critical accounting policies presented herein are discussed in more detail in the notes to the
consolidated financial statements included in the Companys Annual Report on Form 10-K for the year
ended December 31, 2004. Premiums Assumed reinsurance premiums are recognized as revenues when premiums become earned
proportionately over the coverage period. Net premiums earned are recorded in the statement of
income, net of the cost of retrocession. Net premiums written not yet recognized as revenue are
recorded on the balance sheet as unearned premiums, gross of any ceded unearned premiums. Due to the nature of reinsurance, ceding companies routinely report and remit premiums
subsequent to the contract coverage period. Consequently, reinsurance premiums written include
amounts reported by the ceding companies, supplemented by estimates of premiums that are written
but not reported (WBNR). In addition to estimating WBNR, the Company estimates the portion of
premium earned but not reported (EBNR). The Company also estimates the expenses associated with
these premiums in the form of losses, LAE and commissions. As actual premiums are reported by the
ceding companies, management evaluates the appropriateness of the premium estimates and any
adjustments to these estimates are accounted for as changes in estimates and are reflected in
results of operations in the period in which they are made. Adjustments to original premium
estimates could be material and could significantly impact earnings in the period they are
recorded. Due to the time lag inherent in the reporting of premiums by ceding companies, a
significant portion of amounts included as premiums written and premiums receivable represents
estimated premiums, net of commissions, and are not currently due based on the terms of the
underlying contracts. Certain of our reinsurance contracts include provisions that adjust premiums or acquisition
expenses based upon the loss experience under the contracts. Reinstatement premiums and additional
premiums are recognized in accordance with the provisions of assumed reinsurance contracts, based
on loss experience under such contracts. Reinstatement premiums are the premiums charged for the
restoration of the reinsurance limit of a reinsurance contract to its full amount, generally
coinciding with the payment by the reinsurer of losses. These premiums relate to the future
coverage obtained for the remainder of the initial policy term and are earned over the remaining
policy term. Additional premiums are those premiums triggered by losses and not related to
reinstatement of limits and are earned immediately. An allowance for uncollectible premiums is
established for possible non-payment of such amounts due, as deemed necessary. -24-




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Unpaid Losses and LAE The most significant judgment made by management in the preparation of financial statements is
the estimation of unpaid losses and LAE, also referred to as loss reserves. These liabilities
are balance sheet estimates of future amounts required to pay losses and LAE for reinsured claims
which have occurred at or before the balance sheet date. Every quarter, the Companys actuaries
prepare estimates of the loss reserves based on established actuarial techniques. Because the
ultimate amount of unpaid losses and LAE is uncertain, we believe that quantitative techniques to
estimate these amounts are enhanced by professional and managerial judgment. Company management
reviews these estimates and determines its best estimate of the liabilities to record in the
Companys financial statements. Unpaid losses and LAE include estimates of the cost of claims that were reported but not yet
paid (case reserves) and the cost of claims that were incurred but not reported (IBNR). Case
reserves are usually based upon claim reports received from ceding companies, and may be increased
or reduced by the Companys claims personnel. IBNR is based on actuarial methods including the
loss ratio method, the Bornhuetter-Ferguson method and the chain ladder method. IBNR related to a
specific event may be based on the Companys estimated exposure to an industry loss and may include
the use of catastrophe modeling software. Generally, initial actuarial estimates of IBNR not related to a specific event are based on
the loss ratio method applied to each underwriting year for each class of business. Actual paid
losses and case reserves (reported losses) are subtracted from expected ultimate losses to
determine IBNR. The initial expected ultimate losses involve management judgment and are based on:
(i) contract by contract expected loss ratios derived from the Companys pricing process, and (ii)
historical loss ratios of the Company and of the reinsurance underwriting segment of St. Paul (St.
Paul Re) prior to the Initial Public Offering adjusted for rate changes and trends. These
judgments will take into account managements view of past, current and future: (i) market
conditions, (ii) changes in the business underwritten, (iii) changes in timing of the emergence of
claims and (iv) other factors that may influence expected ultimate losses. Over time, as a greater number of claims are reported, actuarial estimates of IBNR are based
on the Bornhuetter-Ferguson and the chain ladder techniques. The Bornhuetter-Ferguson technique
utilizes actual reported losses and expected patterns of reported losses, taking the initial
expected ultimate losses into account to determine a new estimate of expected ultimate losses.
This technique is most appropriate when there are few reported claims and a relatively less stable
pattern of reported losses. The chain ladder technique utilizes actual reported losses and
expected patterns of reported losses to determine a new estimate of expected ultimate losses that
is independent of the initial expected ultimate losses. This technique is most appropriate when
there are a large number of reported losses with significant statistical credibility and a
relatively stable pattern of reported losses. The pattern of reported losses is determined
utilizing actuarial analysis, including managements judgment, and is based on historical patterns
of the recording of paid losses and case reserves to the Company, as well as industry patterns.
Information that may cause historical patterns to differ from future patterns is considered and
reflected in expected patterns as appropriate. For property and health coverages these patterns
indicate that a substantial portion of the ultimate losses are reported within 2 to 3 years after
the contract is effective. Casualty patterns can vary from 3 years to over 20 years depending on
the type of business. While the Company commenced operations in 2002, the business written is sufficiently similar
to the historical business of St. Paul Re that the Company uses the historical loss experience of
this business to estimate its initial expected ultimate losses and its expected patterns of
reported losses. These patterns can span more than a decade and, given its own limited history,
the availability of the St. Paul Re data is a valuable asset to the Company. -25-




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We do not establish liabilities until the occurrence of an event that may give rise to a loss.
When an event of sufficient magnitude occurs, we may establish a specific IBNR reserve.
Generally, this involves a catastrophe occurrence that affects many ceding companies. Ultimate
losses and LAE are based on managements judgment that reflects estimates gathered from ceding
companies, estimates of insurance industry losses gathered from public sources and estimates from
catastrophe modeling software. Estimated amounts recoverable from retrocessionaires on unpaid losses and LAE are determined
based on the Companys estimate of ultimate losses and LAE and the terms and conditions of its
retrocessional contracts. These amounts are reflected as assets. Unpaid losses and LAE represent managements best estimates, at a given point in time, of the
ultimate settlement and administration costs of claims incurred, and it is possible that the
ultimate liability may materially differ from such estimates. Such estimates are not precise
because, among other things, they are based on predictions of future developments and estimates of
future trends in claim severity and frequency and other factors. The uncertainty inherent in loss estimation is particularly pronounced for casualty coverages,
such as umbrella liability, general and product liability, professional liability, directors and
officers liability and automobile liability, where information, such as required medical treatment
and costs for bodily injury claims, only emerges over time. In the overall loss reserving process,
provisions for economic inflation and changes in the social and legal environment are considered.
The uncertainty inherent in the reserving process for primary insurers is even greater for the
reinsurer. This is due, in part, to the time lag inherent in reporting information from the
primary insurer to the reinsurer and differing reserving practices among ceding companies. Estimates of unpaid losses and LAE are periodically re-estimated and adjusted as new
information becomes available. Any such adjustments are accounted for as changes in estimates and
are reflected in results of operations in the period in which they are made. Reinsurance Premiums written, premiums earned and losses and LAE reflect the net effects of assumed and
ceded reinsurance transactions. Reinsurance accounting is followed for assumed and ceded
transactions when risk transfer requirements have been met. Evaluating risk transfer involves
significant assumptions relating to the amount and timing of expected cash flows, as well as the
interpretation of underlying contract terms. Reinsurance contracts that do not transfer
significant insurance risk are generally accounted for as reinsurance deposit liabilities with
interest expense charged to other income and credited to the liability. Investments In accordance with our investment guidelines, our investments consist largely of high-grade
marketable fixed income securities. Fixed maturities owned that the Company may not have the
positive intent to hold until maturity are classified as available-for-sale and reported at fair
value, with unrealized gains and losses excluded from net income and reported in other
comprehensive income as a separate component of shareholders equity, net of deferred taxes. Fixed
maturities owned that the Company has the intent to sell prior to maturity are classified as
trading securities and reported at fair value, with unrealized gains and losses included in other
income. Securities classified as trading securities are generally denominated in foreign
currencies and intended to match foreign net liabilities denominated in foreign currencies in order
to minimize net exposures arising from fluctuations in foreign currency exchange rates. Realized
gains and losses on sales of investments are determined on a specific -26-




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identification basis. Investment income is recorded when earned and includes the amortization
of premiums and discounts on investments. The Company believes it has the ability to hold any specific security to maturity. This is
based on current and anticipated future positive cash flow from operations that generates
sufficient liquidity in order to meet our obligations. However, in the course of managing
investment credit risk, asset liability duration or other aspects of the investment portfolio, the
Company may decide to sell any specific security. The Company routinely reviews its
available-for-sale investments to determine whether unrealized losses represent temporary changes
in fair value or are the result of other than temporary impairments. The process of determining
whether a security is other-than-temporarily impaired is subjective and involves analyzing many
factors. These factors include, but are not limited to, the length and magnitude of an unrealized
loss, specific credit events, the overall financial condition of the issuer, and the Companys
intent to hold a security for a sufficient period of time for the value to recover the unrealized
loss. If the Company has determined that an unrealized loss on a security is other than temporary,
the Company writes down the carrying value of the security to its current fair value and records a
realized loss in the statement of income. Income Tax Expense Platinum Holdings and Platinum Bermuda are domiciled in Bermuda. Under current Bermuda law,
they are not taxed on any Bermuda income or capital gains and they have received an undertaking
from the Bermuda Minister of Finance that, in the event of any Bermuda income or capital gains
taxes being imposed, they will be exempt from those taxes until 2016. The Company also has
subsidiaries in the United States, United Kingdom and Ireland that are subject to the tax laws
thereof. The Company applies the asset and liability method of accounting for income taxes. Under the
asset and liability method, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates applicable to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the period the change is
enacted. A valuation allowance is established for deferred tax assets where it is more likely than
not that future tax benefits will not be realized. Share-Based Compensation Effective January 1, 2003, the Company adopted Statement of Financial Accounting Standards No.
123 Accounting for Awards of Stock Based Compensation to Employees (SFAS 123) and Statement of
Financial Accounting Standards No. 148 Accounting for Stock-Based Compensation-Transition and
Disclosure (SFAS 148). SFAS 123 requires that the fair value of shares granted under the
Companys share option plan subsequent to adoption of SFAS 148 be amortized in earnings over the
vesting periods. The fair value of the share options granted is determined through the use of an
option-pricing model. SFAS 148 provides transition guidance for a voluntary
adoption of FAS 123 and amends the disclosure requirements of SFAS 123. For the period from
November 1, 2002 through December 31, 2002, the Company used the intrinsic value method of
accounting for stock-based awards granted to employees established by Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees (APB 25). Under APB 25, if the
exercise price of the Companys employee share options is equal to or greater than the fair market
value of the underlying shares on the date of the grant, no compensation expense is recorded. For
share options granted in 2002, the Company continues to use APB 25. -27-




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In December 2004, the Financial Accounting Standards Board issued the Statement of Financial
Accounting Standards No. 123R Share-Based Payment (SFAS 123R). SFAS 123R establishes standards
for the accounting for transactions in which an entity exchanges its equity instruments for goods
or services and for transactions in which an entity obtains employee services in share-based
payment transactions. SFAS 123R requires that, prospectively, compensation costs be recognized for
the fair value of all share options over the remaining vesting period, including the cost related
to the unvested portion of all outstanding share options as of December 31, 2004. The share-based
compensation expense for share options currently outstanding are to be based on the same cost model
used to calculate the pro forma disclosures under SFAS 123. On April 14, 2005, the Securities and Exchange Commission (SEC) adopted a new rule that
allows SEC registrants to implement SFAS 123R as of January 1, 2006. The SECs new rule does not
change the accounting required by SFAS 123R; it delays the date for compliance with the standard.
Previously under SFAS 123R, the Company would have been required to implement the standard as of
July 1, 2005. Consequently, the Companys consolidated financial statements filed with the SEC do
not need to comply with SFAS 123R until January 1, 2006. The Company is evaluating the timing of
its adoption of SFAS 123R. 
 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market and Credit Risk The Companys principal invested assets are fixed maturities, which are subject to the risk of
potential losses from adverse changes in market rates and prices and credit risk resulting from
adverse changes in the borrowers ability to meet its debt service obligations. The Companys
strategy to limit this risk is to place its investments in high quality credit issues and to limit
the amount of credit exposure with respect to any one issuer or industry. The Company also selects
investments with characteristics such as duration, yield, currency and liquidity to reflect the
underlying characteristics of related estimated claim liabilities. The Company attempts to
minimize the credit risk by actively monitoring the portfolio and requiring a minimum average
credit rating for its portfolio of A2 as defined by Moodys Investor Service. As of March 31,
2005, the portfolio has a dollar weighted average rating of Aa3. The Company has other receivable amounts subject to credit risk. The most significant of
these are reinsurance premiums receivable from ceding companies. To mitigate credit risk related
to premium receivables, we have established standards for ceding companies and, in most cases, have
a contractual right of offset thereby allowing the Company to settle claims net of any premium
receivable. While management does not consider credit risk related to amounts recoverable from
retrocessionaires to be material as of March 31, 2005, we consider the financial strength of
retrocessionaires when determining whether to purchase coverage from them. Retrocessional coverage
is generally obtained from companies rated A or better by A. M. Best unless the
retrocessionaires obligations are fully collateralized. For exposures where losses become known
and are paid in a relatively short period of time, we may obtain retrocessional coverage from
companies rated A- or better by A. M. Best. The financial performance and rating status of all
material retrocessionaires is routinely monitored. In accordance with industry practice, the Company frequently pays 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, the Company may remain
liable to the ceding company for the payment. Conversely, in certain jurisdictions, when premiums
for such contracts are paid to reinsurance brokers for payment over to the Company, such premiums
will be deemed to have been paid and the ceding company will no longer be liable to the Company for
those amounts whether or not actually received by the Company. Consequently, the Company assumes a
degree of credit risk -28-




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associated with its brokers during the payment process. To mitigate credit risk related to
reinsurance brokers, the Company has established guidelines for brokers and intermediaries. Interest Rate Risk The Company is exposed to fluctuations in interest rates. Movements in rates can result in
changes in the market value of our fixed income portfolio and can cause changes in the actual
timing of receipt of certain principal payments. Rising interest rates result in a decline in the
market value of our fixed income portfolio and can expose our portfolio, in particular our mortgage
backed securities, to extension risk. Conversely, a decline in interest rates will result in a
rise in the market value of our fixed income portfolio and can expose our portfolio, in particular
our mortgage backed securities, to prepayment risk. The aggregate hypothetical impact on our fixed
income portfolio, generated from an immediate parallel shift in the treasury yield curve, as of
March 31, 2005 is approximately as follows ($ in thousands) : Interest Rate Shift in Basis Points- 100 bp
    
    
    - 50 bp
    
    
    Current
    
    
    + 50 bp
    
    
    + 100 bpTotal market value
    
    $
    2,364,999
    
    
    
    2,321,799
    
    
    
    2,278,142
    
    
    
    2,234,462
    
    
    $
    2,191,132Percent change in market value
    
    
    3.8
    %
    
    
    1.9
    %
    
    
    
    
    
    
    (1.9
    %)
    
    
    (3.8
    %)Resulting unrealized
appreciation / (depreciation)
    
    $
    58,348
    
    
    
    15,148
    
    
    
    (28,509
    )
    
    
    (72,189
    )
    
    $
    (115,519
    )
 Foreign Currency Risk The Company writes business on a worldwide basis. Consequently, the Companys principal
exposure to foreign currency risk is its 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. The Company seeks to minimize its
exposure to its largest foreign currency risks by holding invested assets denominated in foreign
currencies to offset liabilities denominated in foreign currencies. Sources of Fair Value The following table presents the carrying amounts and estimated fair values of the Companys
financial instruments as of March 31, 2005 ($ in thousands): CarryingAmount
    
    
    Fair ValueFinancial assets:Fixed maturities
    
    $
    2,278,142
    
    
    $
    2,278,142Other invested asset
    
    
    6,769
    
    
    
    6,769Financial liabilities:Debt obligations
    
    $
    137,500
    
    
    $
    157,575
 The fair value of fixed maturities is based on quoted market prices at the reporting date for
those or similar investments. The fair values of debt obligations are based on quoted market
prices. Other invested asset represents a strategic investment in a non-public reinsurance company
and is carried at estimated fair value. -29-




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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 the design and operation of our disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under 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 March 31, 2005 in our internal control over
financial reporting that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting. 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 Securities Exchange Act of 1934 (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)
    conducting operations in a competitive environment;(2)
    our ability to maintain our A.M. Best Company rating;(3)
    significant weather-related or other natural or man-made disasters over which the
Company has no control;(4)
    the effectiveness of our loss limitation methods and pricing models;(5)
    the adequacy of the Companys liability for unpaid losses and loss adjustment
expenses; -30-




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(6)
    the availability of retrocessional reinsurance on acceptable terms;(7)
    our ability to maintain our business relationships with reinsurance brokers;(8)
    general political and economic conditions, including the effects of civil unrest, war
or a prolonged U.S. or global economic downturn or recession;(9)
    the cyclicality of the property and casualty reinsurance business;(10)
    market volatility and interest rate and currency exchange rate fluctuation;(11)
    tax, regulatory or legal restrictions or limitations applicable to the Company or the
property and casualty reinsurance business generally; and(12)
    changes in the Companys plans, strategies, objectives, expectations or intentions,
which may happen at any time at the Companys 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
the Company. The foregoing factors, which are discussed in more detail in Managements Discussion
and Analysis of Financial Condition and Results of Operations  Risk Factors in the Companys
Annual Report on Form 10-K for the year ended December 31, 2004 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. 
 PART II  OTHER INFORMATION 
 Item 1. LEGAL PROCEEDINGS As previously disclosed, in November and December 2004, the Company received subpoenas from
the SEC and the Office of the Attorney General for the State of New York for documents and
information relating to certain non-traditional, or loss mitigation, insurance products. The
Company is fully cooperating in responding to all such requests. Other reinsurance companies have
reported receiving similar subpoenas and requests. This investigation appears to be at a very
preliminary stage and, accordingly, it is not possible to predict the direction the investigation
will take and the impact, if any, it may have on the Companys business. In view of the ongoing
industry investigations, the Company retained the law firm of Dewey Ballantine LLP to conduct a
review of its finite reinsurance practices. They recently informed the Company that their review
was complete and that they have identified no evidence of improprieties. In the normal course of business, the Company may become involved in various claims and legal
proceedings. The Company is not currently aware of any pending or threatened material litigation. 
 Item 6. EXHIBITS Exhibit Number
    
    Description31.1
    
    Certification of Gregory E.A. Morrison, Chief Executive
Officer of Platinum Holdings, pursuant to Rule 13a-14(a) or
Rule 15d-14(a) of the Securities Exchange Act of 1934, as
amended.
 -31-




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Exhibit Number
    
    Description31.2
    
    Certification of Joseph F. Fisher, Chief Financial Officer
of Platinum Holdings, pursuant to Rule 13a-14(a) or Rule
15d-14(a) of the Securities Exchange Act of 1934, as
amended.32.1
    
    Certification of Gregory E.A. Morrison, 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 Joseph F. Fisher, 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.
 
 SIGNATURES Pursuant to the requirements of the Securities and 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, LtdDate: May 3, 2005
    
    /s/ Gregory E. A. MorrisonBy: Gregory E. A. Morrison
President and Chief Executive OfficerDate: May 3, 2005
    
    /s/Joseph F. FisherBy: Joseph F. Fisher
Executive Vice President and Chief Financial Officer
 -32-