##### Table of Contents









UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K


|                                               |  |                                                                                             
|---------------------------------------------- |  | --------------------------------------------------------------------------------------------
|þ                                              |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934    
|For the fiscal year ended December 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 001-31468


Montpelier Re Holdings Ltd.


(Exact Name of Registrant as Specified in Its Charter)


|                                                                                                                |  |                                         
|--------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------
|Bermuda                                                                                                         |  | 98-0428969                              
|(State or Other Jurisdiction of
     Incorporation or Organization)                                             |  | (I.R.S. Employer
    Identification No.)
|Mintflower Place
    8 Par-La-Ville Road
    Hamilton HM 08
    Bermuda(Address of Principal Executive Offices)

Registrants telephone number, including area code:


(441) 296-5550


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


Common Shares, par value
1/6
cent per share


Name of exchange on which registered:


New York Stock Exchange


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


þ o


o þ


þ o


S-K 10-K 10-K. o


12b-2


þ o o


12b-2 o þ


1 6




Documents Incorporated by Reference


10-K. 10-K.










---



##### 










MONTPELIER RE HOLDINGS LTD.


INDEX TO
FORM 10-K


|                                                                              |  |                                                                                                                      |  |      |    | 
|----------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                              |  |                                                                                                                      |  | Page |   
|                                                                              |  |                                                                                                                      |  |      |   
|PART I                                                                       
|Item 1.                                                                       |  | Business                                                                                                             |  |      | 1  | 
|Item 1A.                                                                      |  | Risk Factors                                                                                                         |  |      | 16 | 
|Item 1B.                                                                      |  | Unresolved Staff Comments                                                                                            |  |      | 32 | 
|Item 2.                                                                       |  | Properties                                                                                                           |  |      | 32 | 
|Item 3.                                                                       |  | Legal Proceedings                                                                                                    |  |      | 32 | 
|Item 4.                                                                       |  | Submission of Matters to a Vote of Security
    Holders                                                              |  |      | 32 | 
|                                                                             
|PART II                                                                      
|Item 5.                                                                       |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |  |      | 33 | 
|Item 6.                                                                       |  | Selected Financial Data                                                                                              |  |      | 37 | 
|Item 7.                                                                       |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |  |      | 38 | 
|Item 7A.                                                                      |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                       |  |      | 65 | 
|Item 8.                                                                       |  | Financial Statements and Supplementary
    Data                                                                      |  |      | 66 | 
|Item 9.                                                                       |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                             |  |      | 66 | 
|Item 9A.                                                                      |  | Controls and Procedures                                                                                              |  |      | 66 | 
|Item 9B.                                                                      |  | Other Information                                                                                                    |  |      | 67 | 
|                                                                             
|PART III                                                                     
|Item 10.                                                                      |  | Directors and Executive Officers of the
    Registrant                                                               |  |      | 67 | 
|Item 11.                                                                      |  | Executive Compensation                                                                                               |  |      | 67 | 
|Item 12.                                                                      |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                   |  |      | 68 | 
|Item 13.                                                                      |  | Certain Relationships and Related
    Transactions                                                                   |  |      | 68 | 
|Item 14.                                                                      |  | Principal Accounting Fees and Services                                                                               |  |      | 68 | 
|                                                                             
|PART IV                                                                      
|Item 15.                                                                      |  | Exhibits, Financial Statement Schedules                                                                              |  |      | 69 | 
|EX-10.28: FORM OF PERFORMANCE SHARE AND RESTRICTED SHARE UNIT AWARD AGREEMENT
|EX-21.1: SUBSIDIARIES OF THE REGISTRANT                                      
|EX-23.1: CONSENT OF PRICEWATERHOUSECOOPERS                                   
|EX-31.1: CERTIFICATIONS                                                      
|EX-32.1: CERTIFICATIONS                                                      





---



##### Table of Contents






PART I


Cautionary Statement under Safe Harbor Provision
of the Private Securities Litigation Reform Act of 1995.


10-K











|        |         
|------- | --------
|Item 1. | Business

General




1



---



##### Table of Contents











| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The property specialty category includes risk excess of loss,
    property pro-rata and direct insurance and facultative
    reinsurance business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | Property catastrophe reinsurance contracts are typically
    all risk in nature and provide protection against
    losses from earthquakes and hurricanes, as well as other natural
    or man-made catastrophes such as floods, tornadoes, fires and
    storms. The property catastrophe category also includes property
    catastrophe retrocessional contracts, which are reinsurance
    protections of other reinsurers, also called retrocedants.
    Coverage generally provides catastrophe protection for the
    property portfolios of other reinsurers. Commencing in 2006 Blue
    Ocean is intended to be the vehicle in which property
    catastrophe retrocessional business is written. Under the
    underwriting agreement Blue Ocean Re has entered into with MAL,
    we have agreed that we will not write certain subject property
    catastrophe retrocessional business.
|
| |  | Our other specialty category includes aviation, marine, personal
    accident catastrophe, workers compensation catastrophe,
    terrorism, other casualty and other reinsurance business.
    Commencing in 2006, we plan on exiting or significantly reducing
    our catastrophe-exposed offshore marine class of business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         





2



---



##### Table of Contents



Segment Information






|                                                          |  |                  |           | 
|--------------------------------------------------------- |  | ---------------- | --------- | 
|                                                          |  | (In thousands of |          
|                                                          |  | U.S dollars)     |          
|Rated Reinsurance and Insurance business                  |  | $                | 3,759,653 | 
|Collateralized Property Catastrophe Retrocession business |  |                  | 300,053   | 
|                                                          |  |                  |          
|Total                                                     |  | $                | 4,059,706 | 
|                                                          |  |                  |          

Corporate Strategy




Maintain a Strong Balance Sheet.


Enhance Our Lead Position With Brokers and Cedants.


Combine Subjective Underwriting Methods With Objective
Modeling Tools.


Develop and Maintain a Balanced Portfolio of Reinsurance
Risks.


Deliver Customized, Innovative and Timely Insurance and
Reinsurance Solutions for Our Clients.


3



---



##### Table of Contents





Reinsurance and Insurance Products


General.








Managements Discussion and Analysis of Financial
Condition and Results of Operations.


Property Specialty.




4



---



##### Table of Contents







Property Catastrophe.






Other Specialty.




5



---



##### Table of Contents











Qualifying Quota Share.


Ratings






6



---



##### Table of Contents





|                          |  |                 |      |  |  |                             
|------------------------- |  | --------------- | ---- |  |  | ----------------------------
|                          |  | Financial       |      |  | 
|Rating Agency             |  | Strength Rating |      |  | 
|                          |  |                 |      |  | 
|Standard & Poors          |  |                 | A-   |  |  | Strong (Negative outlook)   
|A.M. Best                 |  |                 | A-   |  |  | Excellent (Negative outlook)
|Moodys Investor Services |  |                 | Baa1 |  |  | Adequate (Outlook stable)   



Geographic Breakdown




Gross Premiums Written by Geographic Area of Risks Insured


|                                                         |  |                          |       |  |      |  |       |      |  |   |       |  |  |  |       |   |  |   |       |  |  |  |       |  
|-------------------------------------------------------- |  | ------------------------ | ----- |  | ---- |  | ----- | ---- |  | - | ----- |  |  |  | ----- | - |  | - | ----- |  |  |  | ----- | -
|                                                         |  | Years Ended December 31, |      
|                                                         |  |                          |      
|                                                         |  | 2005                     |       |  | 2004 |  |       | 2003 | 
|                                                         |  |                          |       |  |      |  |       |      | 
|USA and Canada                                           |  | $                        | 460.5 |  |      |  | 47.0  | %    |  | $ | 375.6 |  |  |  | 44.9  | % |  | $ | 381.8 |  |  |  | 47.1  | %
|Worldwide(1)                                             |  |                          | 332.4 |  |      |  | 34.0  |      |  |   | 249.7 |  |  |  | 29.8  |   |  |   | 227.6 |  |  |  | 28.1  |  
|United Kingdom and Ireland                               |  |                          | 50.8  |  |      |  | 5.2   |      |  |   | 58.9  |  |  |  | 7.0   |   |  |   | 50.4  |  |  |  | 6.2   |  
|Japan                                                    |  |                          | 37.3  |  |      |  | 3.8   |      |  |   | 36.5  |  |  |  | 4.4   |   |  |   | 32.8  |  |  |  | 4.1   |  
|Western Europe, excluding the United Kingdom and Ireland |  |                          | 28.1  |  |      |  | 2.9   |      |  |   | 36.1  |  |  |  | 4.3   |   |  |   | 35.3  |  |  |  | 4.4   |  
|Worldwide, excluding USA and Canada(2)                   |  |                          | 23.4  |  |      |  | 2.4   |      |  |   | 29.9  |  |  |  | 3.6   |   |  |   | 35.8  |  |  |  | 4.4   |  
|Others (1.5% or less)                                    |  |                          | 46.2  |  |      |  | 4.7   |      |  |   | 50.3  |  |  |  | 6.0   |   |  |   | 46.0  |  |  |  | 5.7   |  
|                                                         |  |                          |       |  |      |  |       |      |  |   |       |  |  |  |       |   |  |  
|Total                                                    |  | $                        | 978.7 |  |      |  | 100.0 | %    |  | $ | 837.0 |  |  |  | 100.0 | % |  | $ | 809.7 |  |  |  | 100.0 | %
|                                                         |  |                          |       |  |      |  |       |      |  |   |       |  |  |  |       |   |  |  






|    |                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Worldwide comprises insurance and reinsurance
    contracts that insure or reinsure risks in more than one
    geographic area.                                                                          
|   
|(2) | Worldwide, excluding USA and Canada comprises
    insurance and reinsurance contracts that insure or reinsure
    risks in more than one geographic area but specifically exclude
    the USA and Canada.

Retrocessions






7



---



##### Table of Contents





Underwriting Risk Management








| |   |                                                                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Only accept risks with an acceptable return on allocated capital;                                                                                                                                                                                                                                                          
|
| |  | On excess of loss contracts, generally assume business with an
    attachment point above the expected level of attritional losses,
    thereby covering infrequent large losses;                                                                                                                                          
|
| |  | Limit the scope of coverage on regular property classes to
    traditional perils and generally exclude perils or
    causes of loss that are difficult to measure such as cyber
    risks, pollution and nuclear, biological and chemical acts of
    terrorism;                                                        
|
| |  | Entertain difficult risks such as terrorism but only on a
    specific basis whereby exposures are carefully controlled
    through limits, terms and conditions and are appropriately
    priced;                                                                                                                         
|
| |  | Generally exclude single risk exposure from
    catastrophe and retrocessional business; and                                                                                                                                                                                                                             
|
| |  | Use risk assessment models from providers such as AIR Worldwide
    Corporation (AIR), EQECAT, Inc. (EQE)
    and Risk Management Solutions, Inc. (RMS) as well as
    our proprietary technology, CATM, to assist in the underwriting
    process and the quantification of our catastrophe aggregate
    exposures.





| |   |                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The reputation of the proposed cedant and the likelihood of
    establishing a long-term relationship with the cedant;                                                                                                    
|
| |  | The geographical location of the cedants original risks;                                                                                                                                                                 
|
| |  | Historical loss data of the cedant and, where available, of the
    industry as a whole in the relevant regions, in order to compare
    the cedants historical catastrophe loss experience to
    industry averages; and
|
| |  | The perceived financial strength of the cedant.                                                                                                                                                                           





8



---



##### Table of Contents







Marketing






Gross Premiums Written by Broker


|                   |  |                          |       |  |      |  |       |      |  |   |       |  |  |  |       |   |  |   |       |  |  |  |       |  
|------------------ |  | ------------------------ | ----- |  | ---- |  | ----- | ---- |  | - | ----- |  |  |  | ----- | - |  | - | ----- |  |  |  | ----- | -
|                   |  | Years Ended December 31, |      
|                   |  |                          |      
|                   |  | 2005                     |       |  | 2004 |  |       | 2003 | 
|                   |  |                          |       |  |      |  |       |      | 
|Marsh              |  | $                        | 272.8 |  |      |  | 30.3  | %    |  | $ | 188.7 |  |  |  | 24.8  | % |  | $ | 204.7 |  |  |  | 28.1  | %
|Benfield(1)        |  |                          | 170.7 |  |      |  | 19.0  |      |  |   | 133.9 |  |  |  | 17.6  |   |  |   | 147.1 |  |  |  | 20.2  |  
|Aon                |  |                          | 168.5 |  |      |  | 18.7  |      |  |   | 166.9 |  |  |  | 21.9  |   |  |   | 145.9 |  |  |  | 20.0  |  
|Willis Group(1)    |  |                          | 134.7 |  |      |  | 15.0  |      |  |   | 104.1 |  |  |  | 13.7  |   |  |   | 120.9 |  |  |  | 16.6  |  
|Other brokers      |  |                          | 153.0 |  |      |  | 17.0  |      |  |   | 167.2 |  |  |  | 22.0  |   |  |   | 110.1 |  |  |  | 15.1  |  
|                   |  |                          |       |  |      |  |       |      |  |   |       |  |  |  |       |   |  |  
|Total brokers      |  |                          | 899.7 |  |      |  | 100.0 | %    |  |   | 760.8 |  |  |  | 100.0 | % |  |   | 728.7 |  |  |  | 100.0 | %
|                   |  |                          |       |  |      |  |       |      |  |   |       |  |  |  |       |   |  |  
|Direct (no broker) |  |                          | 79.0  |  |      |  |       |      |  |   | 76.2  |  |  |  |       |   |  |   | 81.0  |  |  |  |       |  
|                   |  |                          |       |  |      |  |       |      |  |   |       |  |  |  |       |   |  |  
|Total              |  | $                        | 978.7 |  |      |  |       |      |  | $ | 837.0 |  |  |  |       |   |  | $ | 809.7 |  |  |  |       |  
|                   |  |                          |       |  |      |  |       |      |  |   |       |  |  |  |       |   |  |  






|    |                                     
|--- | ------------------------------------
|(1) | Includes QQS gross premiums written.



9



---



##### Table of Contents



Claims Management




Loss and Loss Adjustment Expense Reserves












Managements Discussion and Analysis of Financial
Condition and Results of Operations.


Investments




10



---



##### Table of Contents





|                                                      |  |                    |           |  |      |   |           | 
|----------------------------------------------------- |  | ------------------ | --------- |  | ---- | - | --------- | 
|                                                      |  | As at December 31, |          
|                                                      |  |                    |          
|                                                      |  | 2005               |           |  | 2004 |  
|                                                      |  |                    |           |  |      |  
|Fixed maturities, available for sale, at fair value   |  | $                  | 2,307,054 |  |      | $ | 2,325,273 | 
|Equity investments, available for sale, at fair value |  |                    | 113,553   |  |      |   | 143,435   | 
|Other investments, at estimated fair value            |  |                    | 31,569    |  |      |   | 19,373    | 
|Cash and cash equivalents, at fair value              |  |                    | 450,146   |  |      |   | 110,576   | 
|                                                      |  |                    |           |  |      |  
|Total Invested Assets                                 |  | $                  | 2,902,322 |  |      | $ | 2,598,657 | 
|                                                      |  |                    |           |  |      |  









11



---



##### Table of Contents





|                                     |  |                          |        |   |      |   |         |      |  |   |         |  
|------------------------------------ |  | ------------------------ | ------ | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                     |  | Years Ended December 31, |       
|                                     |  |                          |       
|                                     |  | 2005                     |        |   | 2004 |   |         | 2003 | 
|                                     |  |                          |        |   |      |   |         |      | 
|Fixed maturities                     |  | $                        | 89,980 |   |      | $ | 82,180  |      |  | $ | 65,902  |  
|Net amortization of premium/discount |  |                          | (7,995 | ) |      |   | (14,640 | )    |  |   | (14,603 | )
|Equity investments                   |  |                          | 1,689  |   |      |   | 1,300   |      |  |   | 407     |  
|Cash and cash equivalents            |  |                          | 6,238  |   |      |   | 2,270   |      |  |   | 1,506   |  
|Securities lending                   |  |                          | 551    |   |      |   | 588     |      |  |   | 157     |  
|                                     |  |                          |        |   |      |   |         |      | 
|                                     |  |                          | 90,463 |   |      |   | 71,698  |      |  |   | 53,369  |  
|Net investment expenses              |  |                          | (3,458 | ) |      |   | (2,626  | )    |  |   | (3,221  | )
|                                     |  |                          |        |   |      |   |         |      | 
|                                     |  | $                        | 87,005 |   |      | $ | 69,072  |      |  | $ | 50,148  |  
|                                     |  |                          |        |   |      |   |         |      | 







Managements Discussion and Analysis of Financial
Condition and Results of Operations Financial Statements and Supplementary Data.


Competition




12



---



##### Table of Contents







| |   |                                                                                             
| | - | --------------------------------------------------------------------------------------------
| |  | Premiums charged and other terms and conditions offered;                                    
|
| |  | Services provided;                                                                          
|
| |  | Financial ratings assigned by independent rating agencies;                                  
|
| |  | Speed of claims payment;                                                                    
|
| |  | Reputation;                                                                                 
|
| |  | Perceived financial strength; and                                                           
|
| |  | The experience of the underwriter in the line of insurance or
    reinsurance to be written.



Bermuda Insurance Regulation




The Insurance Act. day-to






Classification of Insurers.


13



---



##### Table of Contents



Cancellation of Insurers Registration.


Principal Representative.


Independent Approved Auditor.


Loss Reserve Specialist.


Statutory Financial Statements.


Annual Statutory Financial Return.


14



---



##### Table of Contents



Minimum Solvency Margin and Restrictions on Dividends and
Distributions.




| |                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) is required, with respect to its general business, to
    maintain a minimum solvency margin (the prescribed amount by
    which the value of its general business assets must exceed its
    general business liabilities) equal to the greatest of:



| |                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (A) $100 million;                                                                                                                                                                                                            
|
| | (B) 50% of net premiums written (being gross premiums
    written less any premiums ceded by Montpelier Re but Montpelier
    Re may not deduct more than 25% of gross premiums when computing
    net premiums written); and
|
| | (C) 15% of net loss, loss expense and other insurance
    reserves;                                                                                                                                                          



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) is prohibited from declaring or paying any dividends
    during any financial year if it is in breach of its minimum
    solvency margin or minimum liquidity ratio or if the declaration
    or payment of such dividends would cause it to fail to meet such
    margin or ratio (if it has failed to meet its minimum solvency
    margin or minimum liquidity ratio on the last day of any
    financial year, Montpelier Re will be prohibited, without the
    approval of the BMA, from declaring or paying any dividends
    during the next financial year);
|
| | (3) is prohibited from declaring or paying in any financial
    year dividends of more than 25% of its total statutory capital
    and surplus (as shown on its previous financial years
    statutory balance sheet) unless it files (at least 7 days
    before payment of such dividends) with the BMA an affidavit
    stating that it will continue to meet the required margins;                                                                                                                                                                                  
|
| | (4) is prohibited, without the prior approval of the BMA,
    from reducing by 15% or more its total statutory capital as set
    out in its previous years financial statements and any
    application for such approval must include an affidavit stating
    that it will continue to meet the required margins; and                                                                                                                                                                                                                                                
|
| | (5) is required, at any time it fails to meet its solvency
    margin, within 30 days (45 days where total statutory
    capital and surplus falls to $75 million or less) after
    becoming aware of that failure or having reason to believe that
    such failure has occurred, to file with the BMA a written report
    containing certain information and is precluded from declaring
    and/or paying dividends until the failure is rectified.                                                                                                                 

Minimum Liquidity Ratio.


Supervision, Investigation and Intervention.




15



---



##### Table of Contents





Disclosure of Information.






Employees






Additional Information


10-K, 10-Q, 8-K,





Item 1A.     Risk
Factors.


10-K


16



---



##### Table of Contents



Risks Related to the Major Natural Catastrophes that
occurred during 2005


Uncertainty related to estimated losses rellated to the major
natural catastrophes which occurred during 2005 may further
impact our financial results.








Our A. M. Best rating and Standard & Poors
rating both have a negative outlook.












| |                         |                                                                             
| | ----------------------- | ----------------------------------------------------------------------------
| | A.M. Best:        A-  | (Excellent), fourth highest of fifteen rating levels, negative
    outlook; 
|
| | Standard & Poors: A- | (Strong), seventh highest of twenty-one rating levels, negative
    outlook;



| |                          |                                                                                   
| | ------------------------ | ----------------------------------------------------------------------------------
| | Moodys:          Baa1 | (Adequate), eighth highest rating of twenty-one rating levels,
    stable outlook.



17



---



##### Table of Contents





We have exhausted the majority of our retrocessional coverage
with respect to Hurricanes Katrina, Rita and Wilma.




Risks Related to Our Company


Our future performance is difficult to predict because of
changes in perceived catastrophe risk and industry capital
requirements.




We could be adversely affected by the loss of one or more
principal employees or by an inability to attract and retain
staff.






Our ability to conduct our business may be adversely affected
by Bermuda employment restrictions.




18



---



##### Table of Contents









We could face unanticipated losses from war, terrorism and
political unrest, and these or other unanticipated losses could
have a material adverse effect on our financial condition and
results of operations.




Our financial condition could be adversely affected by the
occurrence of disasters.




Emerging claim and coverage issues could adversely affect our
casualty business.




19



---



##### Table of Contents





If actual claims exceed our loss reserves, our financial
results could be significantly adversely affected.














The failure of any of the loss limitation methods we employ
could have a material adverse effect on our financial condition
or our results of operations.




20



---



##### Table of Contents





Our ability to pay dividends may be constrained by our
holding company structure and the limitations on payment of
dividends Bermuda law and regulations impose on us.




We may encounter difficulties in maintaining the information
technology systems necessary to run our business.






One of our founders and certain of our directors and officers
may have conflicts of interest with us.








| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | John D, Gillespie, the Chairman of our Finance Committee, is the
    founder and Managing Member of Prospector Partners, LLC
    (Prospector), an investment manager to various
    private funds sponsored by Prospector which funds own less than
    5% of our common shares. Mr. Gillespie is also a member of
    the Board of Directors of White Mountains. From November 2002 to
    August 2005, Mr. Gillespie served as the non-executive
    Deputy Chairman of White Mountains, Chairman and President of
    OneBeacon Asset Management, Inc. (known as White Mountains
    Advisors LLC after March 2003) and as an officer of various
    other subsidiaries of White Mountains. During the third quarter
    of 2005,

21



---



##### Table of Contents



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | White Mountains restructured its relationship with
    Mr. Gillespie and Prospector. Under the revised
    arrangement, Mr. Gillespie and certain other former White
    Mountains investment professionals are solely employed by
    Prospector. Prospector has entered into investment management
    agreements with White Mountains Advisors pursuant to which
    Prospector manages White Mountains common equity
    portfolios and our public market equity portfolio. Subsequent to
    December 31, 2005, Mr. Gillespie has announced his
    intention to step down from our Board of Directors with effect
    from the conclusion of the 2006 Annual General Meeting.
|
| |  | Kernan V. Oberting, our Chief Financial Officer, was previously
    employed by and is permitted to provide limited services to
    White Mountains Capital, Inc. or its affiliates. Long-term
    incentive awards granted by White Mountains Capital, Inc. to
    Mr. Oberting prior to his employment with us continue to
    vest.                                                                                                                                                                                                                                                                                                                                              





We may be unable to purchase reinsurance protection to the
extent we desire on acceptable terms; we are subject to the
credit risk of our reinsurers.








Since we depend on a few reinsurance brokers for a large
portion of our revenues, loss of business they provide could
adversely affect us.




22



---



##### Table of Contents





Our reliance on reinsurance brokers subjects us to their
credit risk.




Our investment performance may affect our financial results
and ability to conduct business.








Our operating results may be adversely affected by currency
fluctuations.






We may require additional capital in the future.




23



---



##### Table of Contents



If our subsidiary is unable to obtain the necessary credit,
we may not be able to offer reinsurance in certain markets.






|                                  |                                   |             |         |       |       |   |       |             |  |  |            |           |  |  |                   |                   | 
|--------------------------------- | --------------------------------- | ----------- | ------- | ----- | ----- | - | ----- | ----------- |  |  | ---------- | --------- |  |  | ----------------- | ----------------- | 
|                                  |                                   | Credit Line |         |       | Usage |   |       | Expiry Date |  |  | Purpose    |          
|                                  |                                   |             |         |       |       |   |       |             |  |  |            |          
|Secured operational LOC facility: |                                   |             |         |       |       |   |       |             |  |  |            |           |  |  |                   |                  
|                                  | Syndicated facility: Tranche A    |             | $       | 250.0 |       |   | $     | 209.8       |  |  |            | May 2006  |  |  |                   | General Corporate | 
|                                  | Syndicated facility: Tranche B(1) |             | $       | 225.0 |       |   | $     | 238.2       |  |  |            | Aug. 2010 |  |  |                   | General Corporate | 
|Syndicated 364 Day facility       |                                   | $           | 1,000.0 |       |       | $ | 183.3 |             |  |  | Nov. 2006  |           |  |  | General Corporate |                  
|Bilateral facility A              |                                   | $           | 100.0   |       |       | $ | 12.4  |             |  |  | Sept. 2007 |           |  |  | General Corporate |                  






|    |                                                    
|--- | ---------------------------------------------------
|(1) | Excess usage subsequently reallocated to Tranche A.

364-day












| |                              
| | -----------------------------
| | Risks Related to Our Industry

Substantial new capital inflows into the reinsurance industry
will increase competition.


non-U.S.


24



---



##### Table of Contents





Events may result in political, regulatory and industry
initiatives, which could adversely affect our business.








| |   |                                                                                             
| | - | --------------------------------------------------------------------------------------------
| |  | Providing insurance and reinsurance capacity in markets and to
    consumers that we target;
|
| |  | Requiring our participation in industry pools and guaranty
    associations;                
|
| |  | Expanding the scope of coverage under existing policies;                                    
|
| |  | Regulating the terms of insurance and reinsurance
    policies; or                          
|
| |  | Disproportionately benefiting the companies of one country over
    those of another.       



Current legal and regulatory activities relating to insurance
brokers and agents, contingent commissions and certain
finite-risk insurance products could affect our business,
results of operations and financial condition.






Competition in the insurance industry could reduce our
operating margins.




25



---



##### Table of Contents





The reinsurance business is historically cyclical and we
expect to experience periods with excess underwriting capacity
and unfavorable premiums.




We may be adversely affected by interest rate changes.




Quantitative and Qualitative Disclosures About Market
Risk.




| |                                   
| | ----------------------------------
| | Risks Related to Our Common Shares

Future sales of common shares may affect their market
price.




There are provisions in our charter documents which restrict
the voting rights of our common shares.




26



---



##### Table of Contents



U.S. persons who own our common shares may have more
difficulty in protecting their interests than U.S. persons
who are shareholders of a U.S. corporation.




Interested Directors.




| |   |                                                                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the material facts as to such interested directors
    relationship or interests were disclosed or were known to the
    board of directors and the board had in good faith authorized
    the transaction by the affirmative vote of a majority of the
    disinterested directors;
|
| |  | such material facts were disclosed or were known to the
    stockholders entitled to vote on such transaction and the
    transaction were specifically approved in good faith by vote of
    the majority of shares entitled to vote thereon; or                                    
|
| |  | the transaction were fair as to the corporation as of the time
    it was authorized, approved or ratified.                                                                                                                                                                          



Business Transactions with Large Shareholders or
Affiliates.


Shareholders Suits.


Indemnification of Directors.


27



---



##### Table of Contents





Anti-takeover provisions in our bye-laws could impede an
attempt to replace or remove our directors, which could diminish
the value of our common shares.






| |   |                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | election of our directors is staggered, meaning that the members
    of only one of three classes of our directors are elected each
    year;                                                                                                                                                                  
|
| |  | shareholders have limited ability to remove directors;                                                                                                                                                                                                                                                         
|
| |  | the total voting power of any shareholder owning more than 9.5%
    of our common shares will be reduced to 9.5% of the total voting
    power of our common shares; and                                                                                                                                       
|
| |  | our directors may decline to record the transfer of any common
    shares on our share register if they believe that registration
    of the transfer is required under any federal or state
    securities law or under the laws of any other jurisdiction and
    the registration has not yet been effected.

You may have difficulty effecting service of process on us or
enforcing judgments against us in the United States.






| |   |                                                                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a holder of our common shares would be able to enforce, in the
    courts of Bermuda, judgments of United States courts against
    persons who reside in Bermuda based upon the civil liability
    provisions of the United States federal securities laws;                                                              
|
| |  | a holder of our common shares would be able to enforce, in the
    courts of Bermuda, judgments of United States courts based upon
    the civil liability provisions of the United States federal
    securities laws;                                                                                                    
|
| |  | a holder of our common shares would be able to bring an original
    action in the Bermuda courts to enforce liabilities against us
    or our directors and officers, as well as the experts named in
    this 10-K, who
    reside outside the United States based solely upon United States
    federal securities laws.



28



---



##### Table of Contents



We may require our shareholders to sell us their clommon
shares.






| |                          
| | -------------------------
| | Risks Related to Taxation

We may be subject to U.S. tax.




U.S. persons who hold common shares may be subject to
U.S. income taxation at ordinary income rates on their
proportionate share of our related party insurance
income (RPII).


non-U.S.


29



---



##### Table of Contents



U.S. persons who hold common shares will be subject to
adverse tax consequences if we are considered a passive foreign
investment company for U.S. federal income tax purposes.




We may become subject to adverse U.S. tax legislation
concerning Bermuda companies.




We may become subject to taxes in Bermuda after 2016, which
may have a material adverse effect on our financial
condition.




The impact of Bermudas commitment to the Organization
for Economic Cooperation and Development to eliminate harmful
tax practices is uncertain and could adversely affect our tax
status in Bermuda.




After December 31, 2008, qualified dividends on our common
shares may no longer be taxed at the rate applicable for
long-term capital gains unless Congress enacts legislation
providing otherwise.




30



---



##### Table of Contents





| |                            
| | ---------------------------
| | Risks Related to Regulation

If we become subject to insurance statutes and regulations in
jurisdictions other than Bermuda or there is a change to Bermuda
law or regulations or application of Bermuda law or regulations,
there could be a significant and negative impact on our
business.






| |   |                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------
| |  | maintain a minimum level of capital, surplus and liquidity;                                                   
|
| |  | satisfy solvency standards;                                                                                   
|
| |  | restrict dividends and distributions;                                                                         
|
| |  | obtain prior approval of ownership and transfer of shares;                                                    
|
| |  | maintain a principal office and appoint and maintain a principal
    representative in Bermuda; and           
|
| |  | provide for the performance of certain periodic examinations of
    Montpelier Re and its financial condition.











31



---



##### Table of Contents








|         |                           
|-------- | --------------------------
|Item 1B. | Unresolved Staff Comments.








|        |            
|------- | -----------
|Item 2. | Properties.








|        |                   
|------- | ------------------
|Item 3. | Legal Proceedings.








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



32



---



##### Table of Contents






PART II







|        |                                                                                                                      
|------- | ---------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities.



|                                        |  |                |       |  |     |   |       | 
|--------------------------------------- |  | -------------- | ----- |  | --- | - | ----- | 
|                                        |  | Price Range of |      
|                                        |  | Common Shares  |      
|                                        |  |                |      
|Period                                  |  | High           |       |  | Low |  
|                                        |  |                |       |  |     |  
|2004                                    |  |                |       |  |     |   |       | 
|First Quarter                           |  | $              | 39.25 |  |     | $ | 34.25 | 
|Second Quarter                          |  | $              | 37.24 |  |     | $ | 32.85 | 
|Third Quarter                           |  | $              | 37.79 |  |     | $ | 34.17 | 
|Fourth Quarter                          |  | $              | 39.15 |  |     | $ | 35.19 | 
|2005                                    |  |                |       |  |     |   |       | 
|First Quarter                           |  | $              | 43.10 |  |     | $ | 33.85 | 
|Second Quarter                          |  | $              | 35.75 |  |     | $ | 32.45 | 
|Third Quarter                           |  | $              | 36.35 |  |     | $ | 22.28 | 
|Fourth Quarter                          |  | $              | 24.87 |  |     | $ | 16.33 | 
|2006                                    |  |                |       |  |     |   |       | 
|First Quarter through February 28, 2006 |  | $              | 20.84 |  |     | $ | 16.91 | 



Dividend Policy




Bermuda Insurance Regulation.


33



---



##### Table of Contents



Unregistered Sales of Equity Securities and Use of
Proceeds




|                                           |  |              |   |  |                |                 |                      |  |                    |                      |   |  |  |   |            | 
|------------------------------------------ |  | ------------ | - |  | -------------- | --------------- | -------------------- |  | ------------------ | -------------------- | - |  |  | - | ---------- | 
|                                           |  |              |   |  |                | (c)             |                      |  | (d)                |                     
|                                           |  |              |   |  |                | Total Number of |                      |  | Approximate Dollar |                     
|                                           |  | (a)          |   |  |                |                 | Shares Purchased     |  |                    | Value of Shares      |  
|                                           |  | Total Number |   |  | (b)            |                 | as Part of           |  |                    | that May Yet Be      |  
|                                           |  | of Shares    |   |  | Average Price  |                 | Publicly Announced   |  |                    | Purchased Under the  |  
|                                           |  | Purchased    |   |  | Paid Per Share |                 | Plans or Programs(1) |  |                    | Plans or Programs(1) |  
|                                           |  |              |   |  |                |                 |                      |  |                    |                      |  
|October 1, 2005 through October 31, 2005   |  |              |  |  |                | $               |                     |  |                    |                      |  |  |  | $ | 84,521,657 | 
|November 1, 2005 through November 30, 2005 |  |              |  |  |                |                 |                     |  |                    |                      |  |  |  |   |           | 
|December 1, 2005 through December 31, 2005 |  |              |  |  |                |                 |                     |  |                    |                      |  |  |  |   |           | 
|                                           |  |              |   |  |                |                 |                      |  |                    |                      |   | 
|Total                                      |  |              |  |  |                | $               |                     |  |                    |                      |  |  |  | $ | 84,521,657 | 






|    |                                                                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | On May 26, 2004, the Companys Board of Directors
    approved a plan to repurchase up to $150.0 million of the
    Companys shares from time to time depending on market
    conditions during a period of up to 24 months.

Equity Compensation Plan Information




|                                                              |       |                      |           |           |                      |                         |                       |                         |  |  |           |           | 
|------------------------------------------------------------- | ----- | -------------------- | --------- | --------- | -------------------- | ----------------------- | --------------------- | ----------------------- |  |  | --------- | --------- | 
|                                                              |       |                      |           |           |                      | Number of Securities    |                      
|                                                              |       |                      |           |           |                      | Remaining Available for |                      
|                                                              |       | Number of Securities |           |           |                      |                         | Future Issuance Under |                        
|                                                              |       | to be Issued         |           |           | Weighted-Average     |                         |                       | Equity Compensation     | 
|                                                              |       | Upon Exercise of     |           |           | Exercise Price of    |                         |                       | Plans (Excluding        | 
|                                                              |       | Outstanding Options, |           |           | Outstanding Options, |                         |                       | Securities Reflected in | 
|                                                              |       | Warrants and Rights  |           |           | Warrants and Rights  |                         |                       | Column (a))             | 
|Plan Category                                                 |       | (a)                  |           |           | (b)                  |                         |                       | (c)                     | 
|                                                              |       |                      |           |           |                      |                         |                       |                         | 
|Equity compensation plans approved by security holders        |       |                      | 800,000   | (1)       |                      |                         | 0                     | (1)                     |  |  | 3,200,000 |          
|Equity compensation plans not approved by security holders(2) |       |                      | 1,352,390 | (3)       |                      |                         | 0                     |                         |  |  | 90,830    |          
|                                                              |       |                      |           |           |                      |                         |                       |                         | 
|                                                              | Total |                      |           | 2,152,390 |                      |                         |                       | 0                       |  |  |           | 3,290,830 | 
|                                                              |       |                      |           |           |                      |                         |                       |                         | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Consists of 800,000 Common Shares underlying Performance Shares
    outstanding under the Long-Term Incentive Plan. The number of
    Common Shares subject to the Performance Share awards shown in
    the table represents the maximum number of Common Shares that
    may be issued if the performance targets applicable to such
    units are achieved at the maximum level. If
    target performance levels are achieved, only half of
    these shares would be issued. The Compensation and Nominating
    Committee of the Board has discretion to settle these awards in
    cash, Common Shares or a combination of cash and Common Shares.
    Performance Shares do not require the payment of an exercise
    price. Accordingly, there is no weighted average exercise price
    for these awards.
|   
|(2) | The Performance Unit Plan was approved prior to the
    Companys October 2002 initial public offering of Common
    Shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(3) | Consists of 1,343,220 Common Shares underlying awards issued
    under the Performance Unit Plan and 9,170 share equivalents
    issued under the Directors Share Plan. The number of Common
    Shares shown in the table represents the maximum number of
    Common Shares that may be issued if the performance targets
    applicable to such outstanding awards are achieved at the
    maximum level. If target performance
    levels are achieved, only half of these shares would be issued.
    The Compensation and Nominating Committee of the Board has
    discretion to settle these awards in cash, Common Shares or a                                                                                                                                                                             

34



---



##### Table of Contents



| |                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | combination of cash and Common Shares. Performance units do not
    require the payment of an exercise price. Accordingly, there is
    no weighted average exercise price for these awards.



Montpelier Long-Term Incentive Plan (LTIP).






Performance Unit Plan (PUP). year-to






| |                         
| | ------------------------
| | Directors Incentive Plan



35



---



##### Table of Contents





Shareholders Agreement






S-3


36



---



##### Table of Contents








|        |                         
|------- | ------------------------
|Item 6. | Selected Financial Data.

Financial Statements and
Supplementary Data Managements Discussion and Analysis of Financial
Condition and Results of Operations


|                      |                                                                    |      |   |            |      |  |   |            |  |  |      |            |  |      |   |            |  |  |   |            |  
|--------------------- | ------------------------------------------------------------------ | ---- | - | ---------- | ---- |  | - | ---------- |  |  | ---- | ---------- |  | ---- | - | ---------- |  |  | - | ---------- | -
|                      |                                                                    | 2005 |   |            | 2004 |  |   | 2003       |  |  | 2002 |            |  | 2001 |  
|                      |                                                                    |      |   |            |      |  |   |            |  |  |      |            |  |      |  
|Income Statement Data |                                                                    |      |   |            |      |  |   |            |  |  |      |            |  |      |   |            |  |  |   |           
|                      | Gross premiums written                                             |      | $ | 978,730    |      |  | $ | 837,051    |  |  | $    | 809,733    |  |      | $ | 607,688    |  |  | $ | 150        |  
|                      | Reinsurance premiums ceded                                         |      |   | 221,735    |      |  |   | 87,735     |  |  |      | 31,758     |  |      |   | 41,779     |  |  |   |           |  
|                      | Net premiums written                                               |      |   | 756,995    |      |  |   | 749,316    |  |  |      | 777,975    |  |      |   | 565,909    |  |  |   | 150        |  
|                      | Net premiums earned                                                |      |   | 848,486    |      |  |   | 787,515    |  |  |      | 705,333    |  |      |   | 329,926    |  |  |   | 8          |  
|                      | Net investment income                                              |      |   | 87,005     |      |  |   | 69,072     |  |  |      | 50,148     |  |      |   | 39,748     |  |  |   | 1,139      |  
|                      | Net realized gains on investments                                  |      |   | 40,632     |      |  |   | 7,248      |  |  |      | 7,631      |  |      |   | 7,716      |  |  |   |           |  
|                      | Net foreign exchange gains (losses)                                |      |   | (10,039    | )    |  |   | 6,999      |  |  |      | 8,310      |  |      |   | 1,681      |  |  |   |           |  
|                      | Loss and loss adjustment expenses                                  |      |   | 1,510,701  |      |  |   | 404,802    |  |  |      | 164,107    |  |      |   | 133,310    |  |  |   |           |  
|                      | Acquisition costs and general and administrative expenses          |      |   | 192,214    |      |  |   | 208,073    |  |  |      | 190,412    |  |      |   | 89,204     |  |  |   | 1,208      |  
|                      | Financing expense                                                  |      |   | 16,854     |      |  |   | 17,534     |  |  |      | 9,688      |  |      |   | 4,460      |  |  |   | 236        |  
|                      | Fair value of warrants issued(1)                                   |      |   |           |      |  |   |           |  |  |      |           |  |      |   |           |  |  |   | 61,321     |  
|                      | Income (loss) before minority interest and taxes                   |      |   | (752,879   | )    |  |   | 240,425    |  |  |      | 407,215    |  |      |   | 152,097    |  |  |   | (61,618    | )
|                      | Minority interest  Blue Ocean loss                                |      |   | 13         |      |  |   |           |  |  |      |           |  |      |   |           |  |  |   |           |  
|                      | Net income (loss)                                                  |      | $ | (752,902   | )    |  | $ | 240,281    |  |  | $    | 407,178    |  |      | $ | 152,045    |  |  | $ | (61,618    | )
|                      | Basic earnings (loss) per share(2)                                 |      | $ | (10.49     | )    |  | $ | 3.84       |  |  | $    | 6.42       |  |      | $ | 2.76       |  |  | $ | (1.18      | )
|                      | Diluted earnings (loss) per share(2)                               |      | $ | (10.49     | )    |  | $ | 3.55       |  |  | $    | 6.05       |  |      | $ | 2.74       |  |  | $ | (1.18      | )
|                      | Weighted average number of common shares outstanding 
    basic   |      |   | 71,757,651 |      |  |   | 62,633,467 |  |  |      | 63,392,597 |  |      |   | 55,178,150 |  |  |   | 52,440,000 |  
|                      | Weighted average number of common shares outstanding 
    diluted |      |   | 71,757,651 |      |  |   | 67,706,972 |  |  |      | 67,275,287 |  |      |   | 55,457,141 |  |  |   | 52,440,000 |  
|                      | Cash dividends per share                                           |      | $ | 6.655      |      |  | $ | 1.36       |  |  | $    | 0.34       |  |      | $ |           |  |  | $ |           |  
|Balance Sheet Data    |                                                                    |      |   |            |      |  |   |            |  |  |      |            |  |      |   |            |  |  |   |           
|                      | Fixed maturities                                                   |      | $ | 2,307,054  |      |  | $ | 2,325,273  |  |  | $    | 1,976,165  |  |      | $ | 1,354,845  |  |  | $ | 640,403    |  
|                      | Equity investments                                                 |      |   | 113,553    |      |  |   | 143,435    |  |  |      | 37,564     |  |      |   |           |  |  |   |           |  
|                      | Other investments                                                  |      |   | 31,569     |      |  |   | 19,373     |  |  |      | 84,354     |  |      |   | 63,691     |  |  |   |            |  
|                      | Cash and cash equivalents                                          |      |   | 450,146    |      |  |   | 110,576    |  |  |      | 139,587    |  |      |   | 162,925    |  |  |   | 350,606    |  
|                      | Total Assets                                                       |      |   | 4,059,706  |      |  |   | 3,398,113  |  |  |      | 2,552,589  |  |      |   | 1,833,918  |  |  |   | 1,021,798  |  
|                      | Net loss and loss adjustment expense reserves                      |      |   | 1,476,195  |      |  |   | 454,841    |  |  |      | 242,064    |  |      |   | 129,459    |  |  |   |           |  
|                      | Debt                                                               |      |   | 249,084    |      |  |   | 248,963    |  |  |      | 248,843    |  |      |   | 150,000    |  |  |   | 150,000    |  
|                      | Minority Interest  Blue Ocean  Preferred                         |      |   | 54,166     |      |  |   |           |  |  |      |           |  |      |   |           |  |  |   |           |  
|                      | Minority Interest  Blue Ocean  Common                            |      |   | 109,722    |      |  |   |           |  |  |      |           |  |      |   |           |  |  |   |           |  
|                      | Shareholders Equity                                               |      | $ | 1,057,659  |      |  | $ | 1,751,944  |  |  | $    | 1,657,705  |  |      | $ | 1,252,535  |  |  | $ | 860,653    |  

37



---



##### Table of Contents



|                                             |                                         |      |   |       |      |  |   |       |   |  |      |       |   |      |   |       |   |  |   |       | 
|-------------------------------------------- | --------------------------------------- | ---- | - | ----- | ---- |  | - | ----- | - |  | ---- | ----- | - | ---- | - | ----- | - |  | - | ----- | 
|                                             |                                         | 2005 |   |       | 2004 |  |   | 2003  |   |  | 2002 |       |   | 2001 |  
|                                             |                                         |      |   |       |      |  |   |       |   |  |      |       |   |      |  
|Operating Ratios and Other Non-GAAP Measures |                                         |      |   |       |      |  |   |       |   |  |      |       |   |      |   |       |   |  |   |      
|                                             | Loss ratio(3)                           |      |   | 178.0 | %    |  |   | 51.4  | % |  |      | 23.3  | % |      |   | 40.4  | % |  |   |      | 
|                                             | Expense ratio(4)                        |      |   | 22.7  | %    |  |   | 26.4  | % |  |      | 27.0  | % |      |   | 27.0  | % |  |   | N/M   | 
|                                             | Combined ratio(5)                       |      |   | 200.7 | %    |  |   | 77.8  | % |  |      | 50.3  | % |      |   | 67.4  | % |  |   | N/M   | 
|                                             | Book value per share(6)                 |      | $ | 11.86 |      |  | $ | 28.20 |   |  | $    | 26.15 |   |      | $ | 19.76 |   |  | $ | 16.41 | 
|                                             | Fully converted book value per share(7) |      | $ | 11.86 |      |  | $ | 26.75 |   |  | $    | 24.92 |   |      | $ | 19.39 |   |  | $ | 16.41 | 








|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Fair value of warrants issued to the founding shareholders. The
    warrants are classified as equity instruments, and in accordance
    with EITF 00-19,
    the estimated aggregate fair value was reported as an expense
    and an addition to additional paid-in capital.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(2) | Basic earnings (loss) per share is calculated using the basic
    weighted average number of common shares. Diluted earnings
    (loss) per share assumes the exercise of all dilutive warrants
    and options, using the treasury stock method.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(3) | The loss ratio is calculated by dividing loss and loss
    adjustment expenses by net premiums earned.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(4) | The expense ratio is calculated by dividing acquisition costs
    plus general and administrative expenses by net premiums earned.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(5) | Combined ratio is the sum of the loss ratio and the expense
    ratio.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(6) | Book value per share is calculated using total
    shareholders equity divided by basic shares outstanding.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(7) | Fully converted book value per share is a non-GAAP measure,
    based on total shareholders equity divided by common
    shares outstanding of 89,178,490 at December 31, 2005.
    Warrants outstanding at December 31, 2005 are not included
    as the exercise price of $16.67 per common share is greater
    than book value per share. At December 31, 2004 fully
    converted book value per share is based on total
    shareholders equity plus the assumed proceeds from the
    exercise of outstanding options and warrants of
    $157.5 million for the year ended December 31, 2004
    and $168.1 million, for the years ended December 31,
    2003, 2002 and 2001 divided by the sum of shares, outstanding
    options and warrants (assuming their exercise) of
    71,372,892 shares at December 31, 2004,
    73,261,757 shares at December 31, 2003 and 2002 and
    52,440,000 shares at December 31, 2002. We believe
    that fully converted book value per share more accurately
    reflects the value attributable to a common share.








|        |                                                                                           
|------- | ------------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations.

Overview




Cautionary Statement under Safe Harbor
Provision of the Private Securities Litigation Reform Act of
1995. Risk Factors


38



---



##### Table of Contents



Executive Overview








Property Specialty






Property Catastrophe


Managements Discussion and Analysis of Financial
Condition and Results of Operations.


Other Specialty


39



---



##### Table of Contents





Qualifying Quota Share (QQS)














Summary of Critical Accounting Estimates


Loss and Loss Adjustment Expense Reserves.




40



---



##### Table of Contents

















follow-up


41



---



##### Table of Contents

























42



---



##### Table of Contents





Managements Discussion and Analysis of Financial
Condition and Results of Operations.








|                       |  |                   |       |  |                        |                     |       |                   |  |   |         | 
|---------------------- |  | ----------------- | ----- |  | ---------------------- | ------------------- | ----- | ----------------- |  | - | ------- | 
|                       |  |                   |       |  |                        | Gross Loss and Loss |      
|                       |  |                   |       |  |                        | Adjustment Expense  |      
|                       |  | Gross IBNR at     |       |  | Gross Case Reserves at |                     |       | Reserves at       | 
|                       |  | December 31, 2005 |       |  | December 31, 2005      |                     |       | December 31, 2005 | 
|                       |  |                   |       |  |                        |                     |       |                   | 
|Property Specialty     |  | $                 | 189.1 |  |                        | $                   | 351.6 |                   |  | $ | 540.7   | 
|Property Catastrophe   |  |                   | 413.3 |  |                        |                     | 455.6 |                   |  |   | 868.9   | 
|Other Specialty        |  |                   | 294.9 |  |                        |                     | 58.6  |                   |  |   | 353.5   | 
|Qualifying Quota Share |  |                   | 12.0  |  |                        |                     | 6.8   |                   |  |   | 18.8    | 
|                       |  |                   |       |  |                        |                     |       |                   | 
|Total                  |  | $                 | 909.3 |  |                        | $                   | 872.6 |                   |  | $ | 1,781.9 | 
|                       |  |                   |       |  |                        |                     |       |                   | 

Premiums.




43



---



##### Table of Contents







Loss and Loss
Adjustment Expense Reserves






Reinsurance Recoverable.


Loss and Loss Adjustment Expense Reserves


Montpelier Long-Term Incentive Plan (LTIP).


44



---



##### Table of Contents





year-to


Performance Unit Plan (PUP).








Outlook and Trends




45



---



##### Table of Contents

















| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We are structuring our gross portfolio within tighter
    constraints on aggregate exposures in most peak zones relative
    to our capital base. We have done this in part by declining
    inadequately priced business in targeted segments, but also
    through changes in terms and conditions. As an example, we are
    attempting to channel catastrophe peril coverage previously
    included in non catastrophe excess of loss property classes into
    the catastrophe excess of loss market, where in our view the
    exposure is more appropriately priced;
|
| |  | We have adjusted our internal models for increased severity and
    frequency in advance of the changes in commercial models;                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | We have purchased more retrocession protection and initiated our
    first catastrophe bond transaction; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | We sponsored the launch of Blue Ocean Re Holdings Ltd., to
    enable us to write property/catastrophe retrocessional business
    on an unrated but fully collateralized basis. This expands our
    policy of generating fee income through the provision of
    underwriting services to third party capital in one of the most
    capital intensive segments of the market.                                                                                                                                                                                            



Results of Operations




| |                                             
| | --------------------------------------------
| | Years Ended December 31, 2005, 2004 and 2003



46



---



##### Table of Contents







| |   |                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Hurricanes Katrina, Rita and Wilma, which resulted in
    $1,202.8 million of net losses incurred at
    December 31, 2005 compared to net losses incurred related
    to the 2004 hurricanes for the year ended December 31, 2004
    of $261.6 million;
|
| |  | An increase in outwards reinstatement premiums as a result of
    the 2005 hurricanes; and                                                                                                                                                               
|
| |  | A reduction in net premiums written and earned from the purchase
    of additional retrocessional protection, particularly during the
    fourth quarter of 2005.                                                                                        





| |   |                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------
| |  | An increase in reinstatement premium written as a result of the
    2005 hurricanes;                           
|
| |  | A decrease in incentive compensation and profit commission
    expenses as a result of the 2005 hurricanes;    
|
| |  | An increase in net investment income as a result of our higher
    portfolio balance; and                      
|
| |  | An increase in realized gains, principally due to gains on the
    sale of the remainder of our Aspen holdings.





|                                         |  |                          |         |   |      |   |       |      |  |   |       | 
|---------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ----- | ---- |  | - | ----- | 
|                                         |  | Years Ended December 31, |        
|                                         |  |                          |        
|                                         |  | 2005                     |         |   | 2004 |   |       | 2003 | 
|                                         |  |                          |         |   |      |   |       |      | 
|Net premiums earned                      |  | $                        | 848.5   |   |      | $ | 787.5 |      |  | $ | 705.4 | 
|Net investment income                    |  |                          | 87.1    |   |      |   | 69.1  |      |  |   | 50.1  | 
|Net realized gains on investments        |  |                          | 40.6    |   |      |   | 7.2   |      |  |   | 7.6   | 
|Net foreign exchange gains (losses)      |  |                          | (10.0   | ) |      |   | 7.0   |      |  |   | 8.3   | 
|Other income                             |  |                          | 0.8     |   |      |   |      |      |  |   |      | 
|                                         |  |                          |         |   |      |   |       |      | 
|Loss and loss adjustment expenses        |  |                          | 1,510.7 |   |      |   | 404.9 |      |  |   | 164.1 | 
|Acquisition costs                        |  |                          | 166.3   |   |      |   | 152.7 |      |  |   | 140.4 | 
|General and administrative expenses      |  |                          | 25.9    |   |      |   | 55.3  |      |  |   | 50.0  | 
|Financing expense                        |  |                          | 17.0    |   |      |   | 17.5  |      |  |   | 9.7   | 
|Income tax expense                       |  |                          |        |   |      |   | 0.1   |      |  |   |      | 
|                                         |  |                          |         |   |      |   |       |      | 
|Net income (loss)                        |  | $                        | (752.9  | ) |      | $ | 240.3 |      |  | $ | 407.2 | 
|Basic earnings (loss) per common share   |  | $                        | (10.49  | ) |      | $ | 3.84  |      |  | $ | 6.42  | 
|                                         |  |                          |         |   |      |   |       |      | 
|Diluted earnings (loss) per common share |  | $                        | (10.49  | ) |      | $ | 3.55  |      |  | $ | 6.05  | 
|                                         |  |                          |         |   |      |   |       |      | 



|                                        |  |                    |       |  |      |   |       |      |  |   |       | 
|--------------------------------------- |  | ------------------ | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                                        |  | As at December 31, |      
|                                        |  |                    |      
|                                        |  | 2005               |       |  | 2004 |   |       | 2003 | 
|                                        |  |                    |       |  |      |   |       |      | 
|Book value per share(1)                 |  | $                  | 11.86 |  |      | $ | 28.20 |      |  | $ | 26.15 | 
|Fully converted book value per share(2) |  | $                  | 11.86 |  |      | $ | 26.75 |      |  | $ | 24.92 | 

47



---



##### Table of Contents








|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Based on total shareholders equity divided by basic shares
    outstanding.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(2) | Fully converted book value per share is a non-GAAP measure,
    based on total shareholders equity divided by common
    shares outstanding of 89,178,490 at December 31, 2005.
    Warrants outstanding at December 31, 2005 are not included
    as the exercise price of $16.67 per common share is greater
    than book value per share. At December 31, 2004 and 2003,
    fully converted book value per share is based on total
    shareholders equity plus the assumed proceeds from the
    exercise of outstanding options and warrants of
    $157.5 million and $168.1 million, respectively,
    divided by the sum of shares, options and outstanding warrants
    (assuming their exercise) of 71,372,892 for 2004 and 73,261,757
    for 2003. We believe that fully converted book value per share
    more accurately reflects the value attributable to a common
    share.









| |                       
| | ----------------------
| | Gross Premiums Written



|                                      |  |                          |       |        |  |  |       |   |  |   |       |  |  |  |       |   |  |   |       |  |  |  |       |  
|------------------------------------- |  | ------------------------ | ----- | ------ |  |  | ----- | - |  | - | ----- |  |  |  | ----- | - |  | - | ----- |  |  |  | ----- | -
|                                      |  | 2005                     |       |        |  |  |       |   |  |   |      
|                                      |  |                          |       |        |  |  |       |   |  |   |      
|                                      |  |                          |       | 2004   |  |  |       |   | 
|                                      |  |                          |       |        |  |  |       |   | 
|                                      |  | Years Ended December 31, |      
|                                      |  |                          |      
|                                      |  |                          |       | 2003(1 | 
|Property Specialty                    |  | $                        | 357.9 |        |  |  | 36.6  | % |  | $ | 314.0 |  |  |  | 37.5  | % |  | $ | 307.4 |  |  |  | 37.9  | %
|Property Catastrophe                  |  |                          | 420.3 |        |  |  | 42.9  |   |  |   | 330.3 |  |  |  | 39.5  |   |  |   | 315.4 |  |  |  | 39.0  |  
|Other Specialty                       |  |                          | 200.4 |        |  |  | 20.5  |   |  |   | 186.8 |  |  |  | 22.3  |   |  |   | 134.1 |  |  |  | 16.6  |  
|Qualifying Quota Share                |  |                          | 0.1   |        |  |  | 0.0   |   |  |   | 5.9   |  |  |  | 0.7   |   |  |   | 52.8  |  |  |  | 6.5   |  
|                                      |  |                          |       |        |  |  |       |   |  |   |       |  |  |  |       |   |  |  
|Total                                 |  | $                        | 978.7 |        |  |  | 100.0 | % |  | $ | 837.0 |  |  |  | 100.0 | % |  | $ | 809.7 |  |  |  | 100.0 | %
|                                      |  |                          |       |        |  |  |       |   |  |   |       |  |  |  |       |   |  |  
|Reinstatement premiums(2)             |  |                          | 129.3 |        |  |  |       |   |  |   | 24.0  |  |  |  |       |   |  |   | 2.0   |  |  |  |       |  
|                                      |  |                          |       |        |  |  |       |   |  |   |       |  |  |  |       |   |  |  
|Total excluding reinstatement premium |  | $                        | 849.4 |        |  |  |       |   |  | $ | 813.0 |  |  |  |       |   |  | $ | 807.7 |  |  |  |       |  
|                                      |  |                          |       |        |  |  |       |   |  |   |       |  |  |  |       |   |  |  

48



---



##### Table of Contents








|    |                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | During 2003, we refined the classification of gross premiums
    written for certain pro-rata contracts between the Property
    Specialty line and the Property Catastrophe and Other Specialty
    lines. There was no effect on total gross premiums written.
|   
|(2) | For 2005 $116.3 million related to the 2005 hurricanes and
    the remainder to the 2004 catastrophes.                                                                                                                                                          













49



---



##### Table of Contents















| |   |                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Our agreement with Aspen affiliates dating from 2003 whereby
    Aspen agreed to cede $60 million per year of gross premiums
    written to us for three years expired at the end of
    2005; and
|
| |  | We did not renew a substantial portion of continental European
    business due to insufficient pricing and terms.                                                                                



| |                           
| | --------------------------
| | Reinsurance Premiums Ceded

|                                      |  |                          |       |  |      |   |      |      |  |   |      | 
|------------------------------------- |  | ------------------------ | ----- |  | ---- | - | ---- | ---- |  | - | ---- | 
|                                      |  | Years Ended December 31, |      
|                                      |  |                          |      
|                                      |  | 2005                     |       |  | 2004 |   |      | 2003 | 
|                                      |  |                          |       |  |      |   |      |      | 
|                                      |  | ($ in millions)          |      
|Reinsurance premiums ceded            |  | $                        | 221.7 |  |      | $ | 87.7 |      |  | $ | 31.7 | 
|Reinstatement premiums                |  |                          | 54.4  |  |      |   | 19.4 |      |  |   |     | 
|Total excluding reinstatement premium |  | $                        | 167.3 |  |      | $ | 68.3 |      |  | $ | 31.7 | 





50



---



##### Table of Contents









| |                    
| | -------------------
| | Net Premiums Earned

|                    |  |                          |       |  |      |   |       |      |  |   |       | 
|------------------- |  | ------------------------ | ----- |  | ---- | - | ----- | ---- |  | - | ----- | 
|                    |  | Years Ended December 31, |      
|                    |  |                          |      
|                    |  | 2005                     |       |  | 2004 |   |       | 2003 | 
|                    |  |                          |       |  |      |   |       |      | 
|                    |  | ($ in millions)          |      
|Net premiums earned |  | $                        | 848.5 |  |      | $ | 787.5 |      |  | $ | 705.4 | 







| |                                  
| | ---------------------------------
| | Loss and Loss Adjustment Expenses



51



---



##### Table of Contents





|               |  |                          |       |   |      |  |      |      |  |  |      |  
|-------------- |  | ------------------------ | ----- | - | ---- |  | ---- | ---- |  |  | ---- | -
|               |  | Years Ended December 31, |      
|               |  |                          |      
|               |  | 2005                     |       |   | 2004 |  |      | 2003 | 
|               |  |                          |       |   |      |  |      |      | 
|Loss ratio     |  |                          | 178.0 | % |      |  | 51.4 | %    |  |  | 23.3 | %
|Expense ratio  |  |                          | 22.7  | % |      |  | 26.4 | %    |  |  | 27.0 | %
|               |  |                          |       |   |      |  |      |      | 
|Combined ratio |  |                          | 200.7 | % |      |  | 77.8 | %    |  |  | 50.3 | %
|               |  |                          |       |   |      |  |      |      | 







|                       |  |                          |       |   |         |  |      |         |  |  |      |  
|---------------------- |  | ------------------------ | ----- | - | ------- |  | ---- | ------- |  |  | ---- | -
|                       |  | Years Ended December 31, |      
|                       |  |                          |      
|                       |  | 2005(1)                  |       |   | 2004(2) |  |      | 2003(3) | 
|                       |  |                          |       |   |         |  |      |         | 
|Property Specialty     |  |                          | 142.4 | % |         |  | 51.5 | %       |  |  | 24.8 | %
|Property Catastrophe   |  |                          | 242.8 |   |         |  | 50.3 |         |  |  | 9.5  |  
|Other Specialty        |  |                          | 120.3 |   |         |  | 61.7 |         |  |  | 37.5 |  
|Qualifying Quota Share |  |                          | 145.6 |   |         |  | 18.9 |         |  |  | 48.4 |  
|Overall Ratio          |  |                          | 178.0 | % |         |  | 51.4 | %       |  |  | 23.3 | %






|    |                                                                                  
|--- | ---------------------------------------------------------------------------------
|(1) | The overall gross loss ratio for the year ended
    December 31, 2005 was 182.8%.
|   
|(2) | The overall gross loss ratio for the year ended
    December 31, 2004 was 56.8%. 
|   
|(3) | The overall gross loss ratio for the year ended
    December 31, 2003 was 21.3%. 



52



---



##### Table of Contents











Gross Loss and Loss Adjustment Expense Reserves


|                       |  |              |       |           |             |   |       |             |        |              |              |   |       |              |         |  |  |   |         | 
|---------------------- |  | ------------ | ----- | --------- | ----------- | - | ----- | ----------- | ------ | ------------ | ------------ | - | ----- | ------------ | ------- |  |  | - | ------- | 
|                       |  |              |       |           |             |   |       | Estimated   |        |              |             
|                       |  |              |       |           |             |   |       | Ultimate    |        |              |             
|                       |  |              |       | Change in |             |   |       |             | Losses |              |              |  
|                       |  | Gross        |       |           | Prior Years |   |       |             |        | for the 2005 |              |   | Gross |             
|                       |  | Reserves at  |       |           | Estimates   |   |       | Paid Losses |        |              | Year at      |   |       | Reserves at  |        
|                       |  | December 31, |       |           | During      |   |       | During      |        |              | December 31, |   |       | December 31, |        
|                       |  | 2004         |       |           | 2005        |   |       | 2005        |        |              | 2005         |   |       | 2005         |        
|                       |  |              |       |           |             |   |       |             |        |              |              |   |       |              |        
|Property Specialty     |  | $            | 207.7 |           |             | $ | 3.3   |             |        | $            | (253.9       | ) |       | $            | 583.6   |  |  | $ | 540.7   | 
|Property Catastrophe   |  |              | 156.8 |           |             |   | 38.5  |             |        |              | (272.0       | ) |       |              | 945.6   |  |  |   | 868.9   | 
|Other Specialty        |  |              | 128.6 |           |             |   | (17.7 | )           |        |              | (28.5        | ) |       |              | 271.1   |  |  |   | 353.5   | 
|Qualifying Quota Share |  |              | 56.4  |           |             |   | 2.3   |             |        |              | (42.4        | ) |       |              | 2.5     |  |  |   | 18.8    | 
|                       |  |              |       |           |             |   |       |             |        |              |              |   |       |              |        
|Total                  |  | $            | 549.5 |           |             | $ | 26.4  |             |        | $            | (596.8       | ) |       | $            | 1,802.8 |  |  | $ | 1,781.9 | 
|                       |  |              |       |           |             |   |       |             |        |              |              |   |       |              |        

Net Loss and Loss Adjustment Expense Reserves


|                       |  |              |       |           |             |   |       |             |        |              |              |   |     |              |         |  |  |   |         | 
|---------------------- |  | ------------ | ----- | --------- | ----------- | - | ----- | ----------- | ------ | ------------ | ------------ | - | --- | ------------ | ------- |  |  | - | ------- | 
|                       |  |              |       |           |             |   |       | Estimated   |        |              |             
|                       |  |              |       |           |             |   |       | Ultimate    |        |              |             
|                       |  |              |       | Change in |             |   |       |             | Losses |              |              |  
|                       |  | Net          |       |           | Prior Years |   |       |             |        | for the 2005 |              |   | Net |             
|                       |  | Reserves at  |       |           | Estimates   |   |       | Paid Losses |        |              | Year at      |   |     | Reserves at  |        
|                       |  | December 31, |       |           | During      |   |       | During      |        |              | December 31, |   |     | December 31, |        
|                       |  | 2004         |       |           | 2005        |   |       | 2005        |        |              | 2005         |   |     | 2005         |        
|                       |  |              |       |           |             |   |       |             |        |              |              |   |     |              |        
|Property Specialty     |  | $            | 160.8 |           |             | $ | (24.3 | )           |        | $            | (186.6       | ) |     | $            | 448.5   |  |  | $ | 398.4   | 
|Property Catastrophe   |  |              | 117.9 |           |             |   | 20.5  |             |        |              | (236.6       | ) |     |              | 818.0   |  |  |   | 719.8   | 
|Other Specialty        |  |              | 128.6 |           |             |   | (17.7 | )           |        |              | (28.4        | ) |     |              | 258.8   |  |  |   | 341.3   | 
|Qualifying Quota Share |  |              | 47.5  |           |             |   | 4.4   |             |        |              | (37.7        | ) |     |              | 2.5     |  |  |   | 16.7    | 
|                       |  |              |       |           |             |   |       |             |        |              |              |   |     |              |        
|Total                  |  | $            | 454.8 |           |             | $ | (17.1 | )           |        | $            | (489.3       | ) |     | $            | 1,527.8 |  |  | $ | 1,476.2 | 
|                       |  |              |       |           |             |   |       |             |        |              |              |   |     |              |        



53



---



##### Table of Contents







| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In the Property Specialty category, our net estimated ultimate
    losses for prior years decreased by $24.3 million during
    the year ended December 31, 2005. Our gross estimated
    ultimate losses increased slightly, but this was more than
    offset on a net basis by an increase in the ceded losses
    attributable to the 2004 hurricanes. We have continued to see
    lower-than-expected loss development on the 2003 accident year.
    As these years develop, we place more weight in the reserving
    process on the actual loss experience compared with the initial
    loss ratio expectation. The low level of losses for 2003 and for
    2004 (excluding the hurricanes) coupled with the increasing
    weight on the actual experience have led to the reduction in the
    ultimate loss projection of $24.3 million during 2005.                                                                                                                      
|
| |  | Property Catastrophe net loss and loss adjustment expense
    reserves as at December 31, 2004 increased by
    $20.5 million during the year ended December 31, 2005.
    The increase in ultimate losses for the year was due mostly to
    increases in the estimates for the 2004 hurricanes and Typhoon
    Songda. The increase in the gross loss reserves was offset
    somewhat by an increase in the ceded losses attributable to the
    2004 hurricanes. Excluding the 2004 hurricanes and Songda, there
    was little movement in the Property Cat loss reserves for prior
    years.                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | We continued to see low claim frequency in the Other Specialty
    classes of business during 2005. As this business has matured,
    we have given more weight to the actual loss experience compared
    to the initial expected loss ratios in our reserving process.
    This has resulted in reduced projections for prior accident
    years and lower selected net loss ratios. The low level of loss
    development, combined with the increasing weight placed on our
    actual experience in selecting a loss ratio resulted in a
    reduction in ultimate losses of $17.7 million for prior
    accident years for the year ended December 31, 2005.                                                                                                                                                                                                                                                                                                                      
|
| |  | Due to the potential variability in ultimate premiums and the
    limited availability of underlying loss information with the QQS
    business, our actuaries selected an expected loss ratio based on
    a review of the information supplied by cedants and applied it
    to projected premiums. For the year ended December 31,
    2005, the projected ultimate losses have increased, due mostly
    to foreign currency fluctuations. Much of the negative impact
    from the currency fluctuations affected the 2002 contracts. As
    expected, we commuted all three of the 2002 QQS contracts during
    the second quarter of 2005. Taking into account the effect of
    reinsurance purchased by the QQS syndicates with respect to the
    contracts in which we participate, our net projected ultimate
    losses increased by $4.4 million for the year ended
    December 31, 2005. We expect to commute the 2003 QQS
    contracts during the first half of 2006.









54



---



##### Table of Contents





Gross Loss and Loss Adjustment Expense Reserves at
December 31, 2005


|                       |  |            |         |  |          |   |             |           |  |   |         | 
|---------------------- |  | ---------- | ------- |  | -------- | - | ----------- | --------- |  | - | ------- | 
|                       |  | Low End of |         |  |          |   | High End of |          
|                       |  | the Range  |         |  | Selected |   |             | the Range | 
|                       |  |            |         |  |          |   |             |           | 
|Property Specialty     |  | $          | 405.5   |  |          | $ | 540.7       |           |  | $ | 675.9   | 
|Property Catastrophe   |  |            | 695.2   |  |          |   | 868.9       |           |  |   | 1,042.6 | 
|Qualifying Quota Share |  |            | 16.0    |  |          |   | 18.8        |           |  |   | 21.6    | 
|Other Specialty        |  |            | 265.1   |  |          |   | 353.5       |           |  |   | 441.9   | 
|                       |  |            |         |  |          |   |             |           | 
|Total                  |  | $          | 1,381.8 |  |          | $ | 1,781.9     |           |  | $ | 2,182.0 | 
|                       |  |            |         |  |          |   |             |           | 

Net Loss and Loss Adjustment Expense Reserves at
December 31, 2005


|                       |  |            |         |  |          |   |             |           |  |   |         | 
|---------------------- |  | ---------- | ------- |  | -------- | - | ----------- | --------- |  | - | ------- | 
|                       |  | Low End of |         |  |          |   | High End of |          
|                       |  | the Range  |         |  | Selected |   |             | the Range | 
|                       |  |            |         |  |          |   |             |           | 
|Property Specialty     |  | $          | 298.8   |  |          | $ | 398.4       |           |  | $ | 498.0   | 
|Property Catastrophe   |  |            | 575.8   |  |          |   | 719.8       |           |  |   | 863.8   | 
|Qualifying Quota Share |  |            | 14.2    |  |          |   | 16.7        |           |  |   | 19.2    | 
|Other Specialty        |  |            | 256.0   |  |          |   | 341.3       |           |  |   | 426.6   | 
|                       |  |            |         |  |          |   |             |           | 
|Total                  |  | $          | 1,144.8 |  |          | $ | 1,476.2     |           |  | $ | 1,807.6 | 
|                       |  |            |         |  |          |   |             |           | 



| |                                    
| | -----------------------------------
| | Net Foreign Exchange Gains (Losses)

non-U.S.




| |                      
| | ---------------------
| | Underwriting Expenses

|                                                |  |                          |       |   |      |   |       |      |  |   |       |  
|----------------------------------------------- |  | ------------------------ | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                                |  | Years Ended December 31, |      
|                                                |  |                          |      
|                                                |  | 2005                     |       |   | 2004 |   |       | 2003 | 
|                                                |  |                          |       |   |      |   |       |      | 
|                                                |  | ($ in millions)          |      
|Acquisition costs (including profit commission) |  | $                        | 166.3 |   |      | $ | 152.7 |      |  | $ | 140.4 |  
|General and administrative expenses             |  | $                        | 25.9  |   |      | $ | 55.3  |      |  | $ | 50.0  |  
|Expense Ratio (including profit commission)     |  |                          | 22.7  | % |      |   | 26.4  | %    |  |   | 27.0  | %
|Expense Ratio (excluding profit commission)     |  |                          | 21.9  | % |      |   | 25.4  | %    |  |   | 24.2  | %



55



---



##### Table of Contents







|                                            |  |                          |       |   |      |   |      |      |  |   |      | 
|------------------------------------------- |  | ------------------------ | ----- | - | ---- | - | ---- | ---- |  | - | ---- | 
|                                            |  | Years Ended December 31, |      
|                                            |  |                          |      
|                                            |  | 2005                     |       |   | 2004 |   |      | 2003 | 
|                                            |  |                          |       |   |      |   |      |      | 
|Fixed expenses, excluding share options     |  | $                        | 38.8  |   |      | $ | 34.2 |      |  | $ | 29.0 | 
|Current and deferred incentive compensation |  |                          | (14.2 | ) |      |   | 18.8 |      |  |   | 17.0 | 
|Fair value of share options expense         |  |                          | 1.3   |   |      |   | 2.3  |      |  |   | 4.0  | 
|                                            |  |                          |       |   |      |   |      |      | 
|Total General and Administrative expenses   |  | $                        | 25.9  |   |      | $ | 55.3 |      |  | $ | 50.0 | 
|                                            |  |                          |       |   |      |   |      |      | 















56



---



##### Table of Contents







| |                      
| | ---------------------
| | Net Investment Income

|                                                     |  |                          |      |  |      |   |      |      |  |   |      | 
|---------------------------------------------------- |  | ------------------------ | ---- |  | ---- | - | ---- | ---- |  | - | ---- | 
|                                                     |  | Years Ended December 31, |     
|                                                     |  |                          |     
|                                                     |  | 2005                     |      |  | 2004 |   |      | 2003 | 
|                                                     |  |                          |      |  |      |   |      |      | 
|                                                     |  | ($ in millions)          |     
|Net investment income                                |  | $                        | 87.1 |  |      | $ | 69.1 |      |  | $ | 50.1 | 
|Accretion of premium on bonds                        |  | $                        | 8.0  |  |      | $ | 14.6 |      |  | $ | 14.6 | 
|Investment management, accounting and custodian fees |  | $                        | 3.5  |  |      | $ | 2.6  |      |  | $ | 3.2  | 







|                                                            |  |                          |       |   |      |   |       |      |  |   |       |  
|----------------------------------------------------------- |  | ------------------------ | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                                            |  | Years Ended December 31, |      
|                                                            |  |                          |      
|                                                            |  | 2005                     |       |   | 2004 |   |       | 2003 | 
|                                                            |  |                          |       |   |      |   |       |      | 
|Total investment return                                     |  |                          | 2.1   | % |      |   | 3.4   | %    |  |   | 4.7   | %
|Weighted average investment portfolio balance (in millions) |  | $                        | 2,576 |   |      | $ | 2,486 |      |  | $ | 1,789 |  



57



---



##### Table of Contents





|                                                                                 |  |                          |         |  |      |   |         |      |  |   |         | 
|-------------------------------------------------------------------------------- |  | ------------------------ | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|                                                                                 |  | Years Ended December 31, |        
|                                                                                 |  |                          |        
|                                                                                 |  | 2005                     |         |  | 2004 |   |         | 2003 | 
|                                                                                 |  |                          |         |  |      |   |         |      | 
|                                                                                 |  | ($ in millions)          |        
|Proceeds from sales of available for sale securities                             |  | $                        | 2,113.1 |  |      | $ | 1,135.6 |      |  | $ | 1,324.6 | 
|Gross realized losses  other than temporary
    impairment  fixed maturities   |  | $                        | 5.8     |  |      | $ |        |      |  | $ |        | 
|Gross realized losses  other than temporary
    impairment  equity investments |  | $                        | 1.3     |  |      | $ | 0.1     |      |  | $ |        | 
|Aggregate fair value of securities in unrealized loss position                   |  | $                        | 1,807.2 |  |      | $ | 1,354.0 |      |  | $ | 397.2   | 
|Aggregate fair value of securities in unrealized loss position
    (> 12 months) |  | $                        | 491.1   |  |      | $ | 8.3     |      |  | $ |        | 









| |                  
| | -----------------
| | Financing Expense

|                                              |  |                 |      |   |      |   |      |      |  |   |     | 
|--------------------------------------------- |  | --------------- | ---- | - | ---- | - | ---- | ---- |  | - | --- | 
|                                              |  | Years Ended     |     
|                                              |  | December 31,?   |     
|                                              |  |                 |     
|                                              |  | 2005            |      |   | 2004 |   |      | 2003 | 
|                                              |  |                 |      |   |      |   |      |      | 
|                                              |  | ($ in millions) |     
|Fees  letter of credit facilities            |  | $               | 1.6  |   |      | $ | 1.7  |      |  | $ | 1.0 | 
|Interest  Senior Notes                       |  |                 | 15.4 |   |      |   | 15.4 |      |  |   | 6.4 | 
|Interest  term loan and revolving facilities |  |                 |     |   |      |   |     |      |  |   | 2.3 | 
|Interest  catastrophe bond                   |  |                 | 0.3  |   |      |   |     |      |  |   |    | 
|Interest  funds withheld                     |  |                 | (0.4 | ) |      |   | 0.4  |      |  |   |    | 
|Equity offering expenses  Blue Ocean         |  |                 | 0.9  |   |      |   |     |      |  |   |    | 
|                                              |  |                 |      |   |      |   |      |      | 
|Total Financing Expense                       |  | $               | 17.8 |   |      | $ | 17.5 |      |  | $ | 9.7 | 
|                                              |  |                 |      |   |      |   |      |      | 

Capital
Resources


58



---



##### Table of Contents







| |             
| | ------------
| | Other Income





| |                                 
| | --------------------------------
| | Net Realized Gains on Investment

|                   |  |                 |      |  |      |   |     |      |  |   |     | 
|------------------ |  | --------------- | ---- |  | ---- | - | --- | ---- |  | - | --- | 
|                   |  | Years Ended     |     
|                   |  | December 31,    |     
|                   |  |                 |     
|                   |  | 2005            |      |  | 2004 |   |     | 2003 | 
|                   |  |                 |      |  |      |   |     |      | 
|                   |  | ($ in millions) |     
|Net realized gains |  | $               | 40.6 |  |      | $ | 7.2 |      |  | $ | 7.6 | 





| |                  
| | -----------------
| | Minority Interest



Financial Condition and Liquidity


Business


Capital Resources




59



---



##### Table of Contents





Contractual Obligations and Commitments


|                                                |  |                  |           |           |        |   |           |         |  |           |         |  |           |         |         |  |  |   |         | 
|----------------------------------------------- |  | ---------------- | --------- | --------- | ------ | - | --------- | ------- |  | --------- | ------- |  | --------- | ------- | ------- |  |  | - | ------- | 
|                                                |  |                  |           | Due in    |        |   |           |         |  |           | Due in  | 
|                                                |  |                  |           | Less than |        |   | Due in 1- |         |  | Due in 3- |         |  | More than |        
|                                                |  | Total            |           |           | 1 Year |   |           | 3 Years |  |           | 5 Years |  |           | 5 Years |        
|                                                |  |                  |           |           |        |   |           |         |  |           |         |  |           |         |        
|                                                |  | ($ in thousands) |          
|Debt:                                           |  |                  |           |           |        |   |           |         |  |           |         |  |           |         |         |  |  |   |         | 
|6.125% Senior Notes due 2013                    |  | $                | 366,758   |           |        | $ | 15,313    |         |  | $         | 30,625  |  |           | $       | 30,625  |  |  | $ | 290,195 | 
|Gross Loss and Loss Adjustment Expense Reserves |  |                  | 1,781,940 |           |        |   | 713,241   |         |  |           | 796,631 |  |           |         | 208,854 |  |  |   | 63,214  | 
|Letters of credit fees                          |  |                  | 2,971     |           |        |   | 2,971     |         |  |           |        |  |           |         |        |  |  |   |        | 
|Catastrophe bond fees                           |  |                  | 34,762    |           |        |   | 11,587    |         |  |           | 23,175  |  |           |         |        |  |  |   |        | 
|Operating leases                                |  |                  | 39,782    |           |        |   | 3,469     |         |  |           | 8,639   |  |           |         | 8,736   |  |  |   | 18,938  | 
|                                                |  |                  |           |           |        |   |           |         |  |           |         |  |           |         |        
|Total                                           |  | $                | 2,226,213 |           |        | $ | 746,581   |         |  | $         | 859,070 |  |           | $       | 248,215 |  |  | $ | 372,347 | 
|                                                |  |                  |           |           |        |   |           |         |  |           |         |  |           |         |        



Loss and Loss Adjustment Expense Reserves




S-3


60



---



##### Table of Contents









3-month


Credit Facilities






|                                  |                                   |             |         |       |       |   |       |             |  |  |            |           |  |  |                   |                   | 
|--------------------------------- | --------------------------------- | ----------- | ------- | ----- | ----- | - | ----- | ----------- |  |  | ---------- | --------- |  |  | ----------------- | ----------------- | 
|                                  |                                   | Credit Line |         |       | Usage |   |       | Expiry Date |  |  | Purpose    |          
|                                  |                                   |             |         |       |       |   |       |             |  |  |            |          
|Secured operational LOC facility: |                                   |             |         |       |       |   |       |             |  |  |            |           |  |  |                   |                  
|                                  | Syndicated facility: Tranche A    |             | $       | 250.0 |       |   | $     | 209.8       |  |  |            | May 2006  |  |  |                   | General Corporate | 
|                                  | Syndicated facility: Tranche B(1) |             | $       | 225.0 |       |   | $     | 238.2       |  |  |            | Aug. 2010 |  |  |                   | General Corporate | 
|Syndicated 364 Day facility       |                                   | $           | 1,000.0 |       |       | $ | 183.3 |             |  |  | Nov. 2006  |           |  |  | General Corporate |                  
|Bilateral facility A              |                                   | $           | 100.0   |       |       | $ | 12.4  |             |  |  | Sept. 2007 |           |  |  | General Corporate |                  






|    |                                                    
|--- | ---------------------------------------------------
|(1) | Excess usage subsequently reallocated to Tranche A.

364-day




61



---



##### Table of Contents















Off-Balance Sheet Arrangements




Investments




|                                                      |  |                          |           |  |      |   |           | 
|----------------------------------------------------- |  | ------------------------ | --------- |  | ---- | - | --------- | 
|                                                      |  | Years Ended December 31, |          
|                                                      |  |                          |          
|                                                      |  | 2005                     |           |  | 2004 |  
|                                                      |  |                          |           |  |      |  
|                                                      |  | ($ in thousands)         |          
|Fixed maturities, available for sale, at fair value   |  | $                        | 2,307,054 |  |      | $ | 2,325,273 | 
|Equity investments, available for sale, at fair value |  |                          | 113,553   |  |      |   | 143,435   | 
|Other investments, at estimated fair value            |  |                          | 31,569    |  |      |   | 19,373    | 
|Cash and cash equivalents, at fair value              |  |                          | 450,146   |  |      |   | 110,576   | 
|                                                      |  |                          |           |  |      |  
|Total Invested Assets                                 |  | $                        | 2,902,322 |  |      | $ | 2,598,657 | 
|                                                      |  |                          |           |  |      |  



62



---



##### Table of Contents



start-up




|                                                 |  |                  |           |  |      |  |       |  
|------------------------------------------------ |  | ---------------- | --------- |  | ---- |  | ----- | -
|                                                 |  | Years Ended      |          
|                                                 |  | December 31,     |          
|                                                 |  |                  |          
|                                                 |  | 2005             |           |  | 2004 | 
|                                                 |  |                  |           |  |      | 
|                                                 |  | ($ in thousands) |          
|U.S. government securities                       |  | $                | 298,563   |  |      |  | 12.9  | %
|U.S. government-sponsored enterprises securities |  |                  | 596,631   |  |      |  | 25.9  |  
|Corporate debt securities                        |  |                  | 750,477   |  |      |  | 32.5  |  
|Mortgage-backed and asset-backed securities      |  |                  | 632,569   |  |      |  | 27.4  |  
|Non U.S. government securities                   |  |                  | 28,814    |  |      |  | 1.3   |  
|                                                 |  |                  |           |  |      | 
|Total fixed maturity investments                 |  | $                | 2,307,054 |  |      |  | 100.0 | %
|                                                 |  |                  |           |  |      | 









Cash Flows




63



---



##### Table of Contents

















3-month


64



---



##### Table of Contents








|         |                                                                
|-------- | ---------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures About Market
    Risk.





Interest Rate Risk.










Foreign Currency Risk.






65



---



##### Table of Contents







Credit Risk.




| |                  
| | -----------------
| | Equity Price Risk



Effects of Inflation











|        |                                             
|------- | --------------------------------------------
|Item 8. | Financial Statements and Supplementary Data.








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure.






Item 9A. Controls and Procedures.




| |                                                  
| | -------------------------------------------------
| | Evaluation of disclosure controls and procedures.

§§240.13a-15(e) 240.15d-15(e)


66



---



##### Table of Contents





| |                                                                     
| | --------------------------------------------------------------------
| | Managements Report on Internal Control Over Financial
    Reporting

13a-15(f) 15d-15(f)




| |   |                                                                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Pertain to the maintenance of records that in reasonable detail
    accurately and fairly reflect the transactions and dispositions
    of the assets of the company;                                                                                                                                                                                          
|
| |  | Provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with generally accepted accounting principles, and
    that receipts and expenditures of the company are being made
    only in accordance with authorizations of management and
    directors of the company; and
|
| |  | Provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of the
    companys assets that could have a material effect on the
    financial statements.                                                                                                                                       









| |                              
| | -----------------------------
| | Changes in internal controls.








|         |                   
|-------- | ------------------
|Item 9B. | Other Information.






PART III







|         |                                                    
|-------- | ---------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant.








|         |                        
|-------- | -----------------------
|Item 11. | Executive Compensation.



67



---



##### Table of Contents








|         |                                                                                                    
|-------- | ---------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters.








|         |                                                
|-------- | -----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions.








|         |                                        
|-------- | ---------------------------------------
|Item 14. | Principal Accounting Fees and Services.



68



---



##### Table of Contents






PART IV







|         |                                         
|-------- | ----------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules.





|   |                     
|-- | --------------------
|1. | Financial Statements





|   |                              
|-- | -----------------------------
|2. | Financial Statement Schedules





|   |         
|-- | --------
|3. | Exhibits



|        |    |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------- | -- | ----------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        
|Number  |    | Description of Document
|        |    |                        
|        | 3  | .1                      |  | Memorandum of Association (incorporated herein by reference to
    Exhibit 3.1 to the Companys Registration Statement on
    Form S-1 (Registration No. 333-89408)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       
|        | 3  | .2                      |  | Amended and Restated Bye-Laws (incorporated herein by reference
    to Exhibit 3.1 to the Companys Current Report on
    Form 8-K dated May 20, 2003).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|        | 4  | .1                      |  | Specimen Ordinary Share Certificate (incorporated herein by
    reference to Exhibit 4.1 to the Companys Registration
    Statement on Form S-1 (Registration No. 333-89408)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       
|        | 4  | .3                      |  | Share Purchase Warrant, dated January 3, 2002, between the
    Registrant and entities affiliated with White Mountains
    Insurance Group (originally issued to Benfield Group plc), as
    amended by Amendment, dated as of February 11, 2002, as
    further amended by Amendment, dated as of July 1, 2002
    (incorporated herein by reference to Exhibit 4.3 to the
    Companys Registration Statement on Form S-1
    (Registration No. 333-89408)), as further amended by
    Amendment 3 dated as of March 31, 2003 (incorporated herein
    by reference to Exhibit 4.5 to the Companys Quarterly
    Report on Form 10-Q for the period ended March 31,
    2003).
|       
|        | 4  | .4                      |  | Share Purchase Warrant, dated January 3, 2002, between the
    Registrant and White Mountains Insurance Group, Ltd., as amended
    by Amendment, dated as of February 11, 2002, as further
    amended by Amendment, dated as of July 1, 2002
    (incorporated herein by reference to Exhibit 4.4 to the
    Companys Registration Statement on Form S-1
    (Registration No. 333-89408)), as further amended by
    Amendment 3 dated as of March 31, 2003 (incorporated herein
    by reference to Exhibit 4.5 to the Companys Quarterly
    Report on Form 10-Q for the period ended March 31,
    2003).                                                                 
|       
|        | 4  | .5                      |  | Senior Indenture, dated as of July 15, 2003, between the
    Company, as Issuer, and The Bank of New York, as Trustee
    (incorporated herein by reference to Exhibit 4.1 to the
    Companys Registration Statement on Form S-1
    (Registration No. 333-106919)).                                                                                                                                                                                                                                                                                                                                                                                                            
|       
|        | 4  | .6                      |  | First Supplemental Indenture to Senior Indenture, dated as of
    July 30, 2003, between the Company, as Issuer, and The Bank
    of New York, as Trustee (incorporated herein by reference to
    Exhibit 4.2 to the Companys Registration Statement on
    Form S-1 (Registration No. 333-106919)).                                                                                                                                                                                                                                                                                                                                                                            
|       
|        | 10 | .1                      |  | Shareholders Agreement, dated as of December 12, 2001,
    among the Registrant and each of the persons listed on schedule
    1 thereto, as amended by Amendment No. 1, dated
    December 24, 2001 (incorporated herein by reference to
    Exhibit 10.1 to the Companys Registration Statement
    on Form S-1(Registration No. 333-89408)).                                                                                                                                                                                                                                                                                                                                  
|       
|        | 10 | .2                      |  | Service Agreement, dated as of December 12, 2001, between
    Anthony Taylor, the Registrant and Montpelier Reinsurance Ltd.
    (incorporated herein by reference to Exhibit 10.2 to the
    Companys Registration Statement on Form S-1
    (Registration No. 333-89408)), as further amended by
    Amendment dated as of August 27, 2004 (incorporated herein
    by reference to Exhibit 10.1 to the Companys Current
    Report on Form 8-K filed September 1, 2004).                                                                                                                                                                                                     

69



---



##### Table of Contents



|        |    |                         |  |                                                                                                                                                                                                                                                                                                                                              
|------- | -- | ----------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        
|Number  |    | Description of Document
|        |    |                        
|       
|        | 10 | .3                      |  | Service Agreement, dated as of January 24, 2002, between
    Anthony Taylor and Montpelier Marketing Services (UK) Limited
    (incorporated herein by reference to Exhibit 10.3 to the
    Companys Registration Statement on Form S-1
    (Registration No. 333-89408)).                                                                  
|       
|        | 10 | .4                      |  | Service Agreement, dated as of January 1, 2002, between C.
    Russell Fletcher, III and Montpelier Reinsurance Ltd.
    (incorporated herein by reference to Exhibit 10.4 to the
    Companys Registration Statement on Form S-1
    (Registration No. 333-89408)).                                                                        
|       
|        | 10 | .5                      |  | Service Agreement, dated as of January 1, 2002, between
    Thomas George Story Busher and Montpelier Reinsurance Ltd.
    (incorporated herein by reference to Exhibit 10.5 to the
    Companys Registration Statement on Form S-1
    (Registration No. 333-89408)).                                                                      
|       
|        | 10 | .6                      |  | Service Agreement, dated as of January 24, 2002, between
    Thomas George Story Busher and Montpelier Marketing Services
    (UK) Limited (incorporated herein by reference to
    Exhibit 10.6 to the Companys Registration Statement
    on Form S-1 (Registration No. 333-89408)).                                                      
|       
|        | 10 | .7                      |  | Service Agreement, dated as of January 24, 2002, between
    Nicholas Newman-Young and Montpelier Marketing Services (UK)
    Limited (incorporated herein by reference to Exhibit 10.6
    to the Companys Registration Statement on Form S-1
    (Registration No. 333-89408)).                                                           
|       
|        | 10 | .9                      |  | Share Option Plan, as amended August 27, 2004 (incorporated
    herein by reference to Exhibit 10.7 to the Companys
    Current Report on Form 8-K filed September 1, 2004).                                                                                                                                                                
|       
|        | 10 | .10                     |  | Performance Unit Plan as amended August 27, 2004
    (incorporated herein by reference to Exhibit 10.6 to the
    Companys Current Report on Form 8-K filed
    September 1, 2004).                                                                                                                                                         
|       
|        | 10 | .11                     |  | Long-Term Incentive Plan as amended August 27, 2004
    (incorporated herein by reference to Exhibit 10.5 to the
    Companys Current Report on Form 8-K filed
    September 1, 2004).                                                                                                                                                      
|       
|        | 10 | .12                     |  | Second Amended and Restated Letter of Credit Reimbursement and
    Pledge Agreement, among the Company and Bank of America, N.A.
    and a syndicate of lending institutions, dated as of
    August 4, 2005 (incorporated herein by reference to
    Exhibit 10.12 to the Companys Quarterly Report on
    Form 10-Q filed August 9, 2005).
|       
|        | 10 | .13                     |  | Service Agreement, dated as of August 27, 2004, between
    Anthony Taylor and Montpelier Re Holdings Ltd. (incorporated
    herein by reference to Exhibit 10.2 to the Companys
    Current Report on Form 8-K filed September 1, 2004).                                                                                                   
|       
|        | 10 | .14                     |  | Service Agreement, dated as of August 27, 2004, between
    Anthony Taylor and Montpelier Marketing Services (UK) Limited
    (incorporated herein by reference to Exhibit 10.3 to the
    Companys Current Report on Form 8-K filed
    September 1, 2004).                                                                                
|       
|        | 10 | .15                     |  | Severance Plan, dated as of August 27, 2004, among certain
    Executives and the Company (incorporated herein by reference to
    Exhibit 10.4 to the Companys Current Report on
    Form 8-K filed September 1, 2004).                                                                                                                    
|       
|        | 10 | .16                     |  | Service Agreement, dated as of September 8, 2004, between
    Kernan V. Oberting and Montpelier Reinsurance Ltd. (incorporated
    herein by reference to Exhibit 10.1 to the Companys
    Current Report on Form 8-K filed September 9, 2004).                                                                                             
|       
|        | 10 | .17                     |  | Letter of Credit Reimbursement and Pledge Agreement, between
    Montpelier Reinsurance Ltd. and HSBC Bank USA, National
    Association, dated December 23, 2004 (incorporated herein
    by reference to Exhibit 10.1 to the Companys Current
    Report on Form 8-K filed on December 23, 2004).                                         
|       
|        | 10 | .18                     |  | Form of Performance Share Award under the Montpelier Re Holdings
    Ltd. Long-Term Incentive Plan (incorporated herein by reference
    to Exhibit 10.1 to the Companys Current Report on
    Form 8-K filed February 28, 2005).                                                                                                           
|       
|        | 10 | .19                     |  | Montpelier Re Holdings Ltd. 2005 Annual Bonus Plan (incorporated
    herein by reference to Exhibit 10.2 to the Companys
    Current Report on Form 8-K filed February 28, 2005).                                                                                                                                                           
|       
|        | 10 | .20                     |  | Montpelier Re Holdings Ltd. Directors Share Plan (incorporated
    herein by reference to Exhibit 10.3 to the Companys
    Current Report on Form 8-K filed February 28, 2005).                                                                                                                                                             
|       
|        | 10 | .21                     |  | Net Share Settlement Agreement between Montpelier Re Holdings
    Ltd. and Anthony Taylor, incorporated herein by reference to
    Exhibit 10.25 to the Companys Annual Report on
    Form 10-K filed March 4, 2005.                                                                                                                        

70



---



##### Table of Contents



|        |    |                         |  |                                                                                                                                                                                                                                                                                                                                                 
|------- | -- | ----------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        
|Number  |    | Description of Document
|        |    |                        
|       
|        | 10 | .22                     |  | Net Share Settlement Agreement between Montpelier Re Holdings
    Ltd. and Thomas George Story Busher (incorporated herein by
    reference to Exhibit 10.22 to the Companys Annual
    Report on Form 10-K filed March 4, 2005).                                                                                                              
|       
|        | 10 | .23                     |  | Net Share Settlement Agreement between Montpelier Re Holdings
    Ltd. and C. Russell Fletcher III (incorporated herein by
    reference to Exhibit 10.23 to the Companys Annual
    Report on Form 10-K filed March 4, 2005).                                                                                                                 
|       
|        | 10 | .24                     |  | Net Share Settlement Agreement between Montpelier Re Holdings
    Ltd. and Nicholas Newman-Young (incorporated herein by reference
    to Exhibit 10.24 to the Companys Annual Report on
    Form 10-K filed March 4, 2005).                                                                                                                   
|       
|        | 10 | .25                     |  | Montpelier Reinsurance Ltd. Amended and Restated Deferred
    Compensation Plan (incorporated herein by reference to
    Exhibit 10.25 to the Companys Annual Report on
    Form 10-K filed March 4, 2005).                                                                                                                                    
|       
|        | 10 | .26                     |  | Letter of Credit Reimbursement and Pledge Agreement among
    Montpelier Reinsurance Ltd., the lenders named therein, Bank of
    America, N.A., as Administrative Agent, and the other agents
    named therein (incorporated herein by reference to
    Exhibit 10.1 to the Companys Current Report on
    Form 8-K filed November 18, 2005).
|       
|        | 10 | .27                     |  | Standing Agreement for Letters of Credit between Montpelier
    Reinsurance Ltd. and the Bank of New York (incorporated herein
    by reference to Exhibit 10.2 to the Companys Current
    Report on Form 8-K filed November 18, 2005).                                                                                                       
|       
|        | 10 | .28                     |  | Form of Performance Share and Restricted Share Unit Award
    Agreement under Montpeliers Long-Term Incentive Plan,
    filed with this report.                                                                                                                                                                                                
|       
|        | 10 | .29                     |  | Montpelier Re Holdings Ltd. 2006 Annual Bonus Plan (incorporated
    herein by reference to Exhibit 10.2 to the Companys
    Current Report on Form 8-K filed November 21, 2005).                                                                                                                                                              
|       
|        | 21 | .1                      |  | Subsidiaries of the Registrant, filed with this report.                                                                                                                                                                                                                                                                                         
|       
|        | 23 | .1                      |  | Consent of PricewaterhouseCoopers, filed with this report.                                                                                                                                                                                                                                                                                      
|       
|        | 31 | .1                      |  | Officer Certifications of Anthony Taylor, Chief Executive
    Officer of Montpelier Re Holdings Ltd., and Kernan Oberting,
    Chief Financial Officer of Montpelier Re Holdings Ltd., as
    adopted pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002, filed with this report.                                                    
|       
|        | 32 | .1                      |  | Officer Certifications of Anthony Taylor, Chief Executive
    Officer of Montpelier Re Holdings Ltd., and Kernan Oberting,
    Chief Financial Officer of Montpelier Re Holdings Ltd., pursuant
    to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002, submitted
    with this report.        



71



---



##### Table of Contents



SIGNATURES


10-K




| |                            
| | ---------------------------
| | Montpelier Re Holdings Ltd.
| | (Registrant)               



| |     |                   
| | --- | ------------------
| | By: | /s/ Anthony Taylor

| |                                                  
| | -------------------------------------------------
| |                                                  
| | Name: Anthony Taylor                             
| | Title:   Chairman and Chief Executive
    Officer

72



---



##### Table of Contents



POWER OF ATTORNEY


10-K attorneys-in 10-K attorneys-in attorneys-in


10-K


|                                                 |  |                                                                                     |  | 
|------------------------------------------------ |  | ----------------------------------------------------------------------------------- |  | 
|Signature                                        |  | Title                                                                              
|                                                 |  |                                                                                    
|                                                
|/s/ Anthony TaylorAnthony Taylor                 |  | Chairman and Chief Executive Officer and
    Director (Principal Executive Officer)
|                                                
|/s/ Kernan V. ObertingKernan V. Oberting         |  | Chief Financial Officer
    (Principal Financial Officer)                          
|                                                
|/s/ Neil W. GreenspanNeil W. Greenspan           |  | Chief Accounting Officer
    (Principal Accounting Officer)                        
|                                                
|/s/ K. Thomas KempK. Thomas Kemp                 |  | Director                                                                           
|                                                
|/s/ John D. GillespieJohn D. Gillespie           |  | Director                                                                           
|                                                
|/s/ Raymond BarretteRaymond Barrette             |  | Director                                                                           
|                                                
|/s/ Raymond M. SalterRaymond M. Salter           |  | Director                                                                           
|                                                
|/s/ Allan W. FulkersonAllan W. Fulkerson         |  | Director                                                                           
|                                                
|/s/ William L. SpiegelWilliam L. Spiegel         |  | Director                                                                           
|                                                
|/s/ Steven J. GilbertSteven J. Gilbert           |  | Director                                                                           
|                                                
|/s/ Kamil M. SalameKamil M. Salame               |  | Director                                                                           
|                                                
|/s/ John F. Shettle,
    Jr.John F. Shettle, Jr. |  | Director                                                                           

73



---



##### Table of Contents



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


|                                                                                                                                   |  |      |     | 
|---------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                                   |  | Page |    
|                                                                                                                                   |  |      |    
|Report of Independent Registered Public
    Accounting Firm                                                                        |  |      | F-2 | 
|Consolidated Balance Sheets as at
    December 31, 2005 and 2004                                                                   |  |      | F-4 | 
|Consolidated Statements of Operations and
    Comprehensive Income (Loss) for the years ended
    December 31, 2005, 2004 and 2003 |  |      | F-5 | 
|Consolidated Statements of
    Shareholders Equity for the years ended December 31,
    2005, 2004 and 2003                       |  |      | F-6 | 
|Consolidated Statement of Cash Flows for
    the years ended December 31, 2005, 2004 and 2003                                      |  |      | F-7 | 
|Notes to Consolidated Financial
    Statements                                                                                     |  |      | F-8 | 

F-1



---



##### Table of Contents






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM






Consolidated Financial Statements and Financial Statement
Schedules




Internal Control Over Financial Reporting







F-2



---



##### Table of Contents









|                               | 
|------------------------------ | 
|/s/
    PricewaterhouseCoopers | 
|                               | 
|PricewaterhouseCoopers         | 
|                              
|Hamilton, Bermuda              | 
|March 13, 2006                 | 

F-3



---



##### Table of Contents






MONTPELIER RE HOLDINGS LTD.


CONSOLIDATED BALANCE SHEETS


As at December 31, 2005 and 2004


(Expressed in thousands of United States Dollars, except
share amounts)


|                                                                                                                                                                          |                         |                                                                   |           |         |           |   |           |   |           | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------- | ----------------------------------------------------------------- | --------- | ------- | --------- | - | --------- | - | --------- | 
|                                                                                                                                                                          |                         | 2005                                                              |           |         | 2004      |  
|                                                                                                                                                                          |                         |                                                                   |           |         |           |  
|ASSETS                                                                                                                                                                    |                         |                                                                   |           |         |           |   |           |  
|Fixed maturities, at fair value (amortized cost:
    2005  $2,334,314; 2004  $2,320,229)                                                                                |                         | $                                                                 | 2,307,054 |         |           | $ | 2,325,273 |  
|Equity investments, at fair value (cost: 2005 
    $96,982, 2004  $92,997)                                                                                              |                         |                                                                   | 113,553   |         |           |   | 143,435   |  
|                                                                                                                                                                          |                         |                                                                   |           |         |           |  
|Total investments available for sale                                                                                                                                      |                         |                                                                   | 2,420,607 |         |           |   | 2,468,708 |  
|Other investments, at estimated fair value (cost:
    2005  $30,000; 2004  $20,000)                                                                                     |                         |                                                                   | 31,569    |         |           |   | 19,373    |  
|                                                                                                                                                                          |                         |                                                                   |           |         |           |  
|Total investments                                                                                                                                                         |                         |                                                                   | 2,452,176 |         |           |   | 2,488,081 |  
|Cash and cash equivalents, at fair value                                                                                                                                  |                         |                                                                   | 450,146   |         |           |   | 110,576   |  
|Unearned premium ceded                                                                                                                                                    |                         |                                                                   | 83,777    |         |           |   | 16,982    |  
|Premiums receivable                                                                                                                                                       |                         |                                                                   | 270,947   |         |           |   | 173,763   |  
|Securities lending collateral                                                                                                                                             |                         |                                                                   | 315,591   |         |           |   | 420,856   |  
|Investment trades pending                                                                                                                                                 |                         |                                                                   | 4,747     |         |           |   |          |  
|Funds withheld                                                                                                                                                            |                         |                                                                   | 1,456     |         |           |   | 5,130     |  
|Deferred acquisition costs                                                                                                                                                |                         |                                                                   | 53,445    |         |           |   | 59,031    |  
|Reinsurance receivable on paid losses                                                                                                                                     |                         |                                                                   | 55,570    |         |           |   |          |  
|Reinsurance recoverable on unpaid losses                                                                                                                                  |                         |                                                                   | 305,745   |         |           |   | 94,700    |  
|Accrued investment income                                                                                                                                                 |                         |                                                                   | 22,087    |         |           |   | 23,822    |  
|Other assets                                                                                                                                                              |                         |                                                                   | 44,019    |         |           |   | 5,172     |  
|                                                                                                                                                                          |                         |                                                                   |           |         |           |  
|                                                                                                                                                                          |                         | Total Assets                                                      |           | $       | 4,059,706 |   |           | $ | 3,398,113 | 
|                                                                                                                                                                          |                         |                                                                   |           |         |           |  
|                                                                                                                                                                         
|LIABILITIES                                                                                                                                                               |                         |                                                                   |           |         |           |   |           |  
|Loss and loss adjustment expense reserves                                                                                                                                 |                         |                                                                   | 1,781,940 |         |           |   | 549,541   |  
|Unearned premium                                                                                                                                                          |                         |                                                                   | 262,850   |         |           |   | 287,546   |  
|Reinsurance balances payable                                                                                                                                              |                         |                                                                   | 205,094   |         |           |   | 74,909    |  
|Investment trades pending                                                                                                                                                 |                         |                                                                   |          |         |           |   | 129       |  
|Securities lending payable                                                                                                                                                |                         |                                                                   | 315,591   |         |           |   | 420,856   |  
|Debt                                                                                                                                                                      |                         |                                                                   | 249,084   |         |           |   | 248,963   |  
|Accounts payable, accrued expenses and other liabilities                                                                                                                  |                         |                                                                   | 16,374    |         |           |   | 40,612    |  
|Dividends payable                                                                                                                                                         |                         |                                                                   | 7,226     |         |           |   | 23,613    |  
|                                                                                                                                                                          |                         |                                                                   |           |         |           |  
|                                                                                                                                                                          |                         | Total Liabilities                                                 |           |         | 2,838,159 |   |           |   | 1,646,169 | 
|                                                                                                                                                                          |                         |                                                                   |           |         |           |  
|Minority Interest  Blue Ocean preferred shares                                                                                                                           |                         |                                                                   | 54,166    |         |           |   |          |  
|Minority Interest  Blue Ocean common shares                                                                                                                              |                         |                                                                   | 109,722   |         |           |   |          |  
|                                                                                                                                                                          |                         |                                                                   |           |         |           |  
|                                                                                                                                                                          | Total Minority Interest |                                                                   |           | 163,888 |           |   |           |  |          
|                                                                                                                                                                          |                         |                                                                   |           |         |           |  
|Commitments and Contingent Liabilities                                                                                                                                    |                         |                                                                   |           |         |           |   |           |  
|                                                                                                                                                                         
|SHAREHOLDERS EQUITY                                                                                                                                                      |                         |                                                                   |           |         |           |   |           |  
|Common voting shares: 1/6 cent par value; authorized
    1,200,000,000 shares; issued and outstanding at
    December 31, 2005; 89,178,490 shares (2004 
    62,131,232) |                         |                                                                   | 149       |         |           |   | 104       |  
|Additional paid-in capital                                                                                                                                                |                         |                                                                   | 1,714,904 |         |           |   | 1,111,735 |  
|Accumulated other comprehensive income (loss)                                                                                                                             |                         |                                                                   | (9,081    | )       |           |   | 55,094    |  
|Retained earnings (deficit)                                                                                                                                               |                         |                                                                   | (648,313  | )       |           |   | 585,011   |  
|                                                                                                                                                                          |                         |                                                                   |           |         |           |  
|                                                                                                                                                                          |                         | Total Shareholders Equity                                        |           |         | 1,057,659 |   |           |   | 1,751,944 | 
|                                                                                                                                                                          |                         |                                                                   |           |         |           |  
|                                                                                                                                                                          |                         | Total Liabilities, Minority Interest and Shareholders
    Equity |           | $       | 4,059,706 |   |           | $ | 3,398,113 | 
|                                                                                                                                                                          |                         |                                                                   |           |         |           |  





F-4



---



##### Table of Contents






MONTPELIER RE HOLDINGS LTD.


CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME


For the Years Ended December 31, 2005, 2004 and 2003


(Expressed in thousands of United States Dollars, except
share amounts)


|                                                 |                                                                                 |      |          |            |      |   |         |            |   |   |         |            |  
|------------------------------------------------ | ------------------------------------------------------------------------------- | ---- | -------- | ---------- | ---- | - | ------- | ---------- | - | - | ------- | ---------- | -
|                                                 |                                                                                 | 2005 |          |            | 2004 |   |         | 2003       |  
|                                                 |                                                                                 |      |          |            |      |   |         |            |  
|REVENUES                                         |                                                                                 |      |          |            |      |   |         |            |   |   |         |           
|                                                 | Gross premiums written                                                          |      | $        | 978,730    |      |   | $       | 837,051    |   |   | $       | 809,733    |  
|                                                 | Reinsurance premiums ceded                                                      |      |          | (221,735   | )    |   |         | (87,735    | ) |   |         | (31,758    | )
|                                                 |                                                                                 |      |          |            |      |   |         |            |  
|                                                 | Net premiums written                                                            |      |          | 756,995    |      |   |         | 749,316    |   |   |         | 777,975    |  
|                                                 | Change in net unearned premiums                                                 |      |          | 91,491     |      |   |         | 38,199     |   |   |         | (72,642    | )
|                                                 |                                                                                 |      |          |            |      |   |         |            |  
|                                                 | Net premiums earned                                                             |      |          | 848,486    |      |   |         | 787,515    |   |   |         | 705,333    |  
|                                                 | Net investment income                                                           |      |          | 87,005     |      |   |         | 69,072     |   |   |         | 50,148     |  
|                                                 | Net realized gains on investments                                               |      |          | 41,605     |      |   |         | 7,248      |   |   |         | 7,631      |  
|                                                 | Net foreign exchange gains (losses)                                             |      |          | (10,039    | )    |   |         | 6,999      |   |   |         | 8,310      |  
|                                                 | Other income                                                                    |      |          | 806        |      |   |         |           |   |   |         |           |  
|                                                 |                                                                                 |      |          |            |      |   |         |            |  
|                                                 | Total Revenues                                                                  |      |          | 967,863    |      |   |         | 870,834    |   |   |         | 771,422    |  
|                                                 |                                                                                 |      |          |            |      |   |         |            |  
|EXPENSES                                         |                                                                                 |      |          |            |      |   |         |            |   |   |         |           
|                                                 | Loss and loss adjustment expenses                                               |      |          | 1,510,701  |      |   |         | 404,802    |   |   |         | 164,107    |  
|                                                 | Acquisition costs                                                               |      |          | 166,271    |      |   |         | 152,779    |   |   |         | 140,391    |  
|                                                 | General and administrative expenses                                             |      |          | 25,943     |      |   |         | 55,294     |   |   |         | 50,021     |  
|                                                 | Financing expense                                                               |      |          | 17,827     |      |   |         | 17,534     |   |   |         | 9,688      |  
|                                                 |                                                                                 |      |          |            |      |   |         |            |  
|                                                 | Total Expenses                                                                  |      |          | 1,720,742  |      |   |         | 630,409    |   |   |         | 364,207    |  
|                                                 |                                                                                 |      |          |            |      |   |         |            |  
|Income (loss) before minority interest and taxes |                                                                                 |      | (752,879 | )          |      |   | 240,425 |            |   |   | 407,215 |           
|                                                 |                                                                                 |      |          |            |      |   |         |            |  
|Minority Interest  Blue Ocean loss              |                                                                                 |      | 13       |            |      |   |        |            |   |   |        |           
|Income tax expense                               |                                                                                 |      | 36       |            |      |   | 144     |            |   |   | 37      |           
|                                                 |                                                                                 |      |          |            |      |   |         |            |  
|NET INCOME (LOSS)                                |                                                                                 | $    | (752,902 | )          |      | $ | 240,281 |            |   | $ | 407,178 |           
|                                                 |                                                                                 |      |          |            |      |   |         |            |  
|COMPREHENSIVE INCOME (LOSS)                      |                                                                                 |      |          |            |      |   |         |            |   |   |         |           
|                                                 | Net income (loss)                                                               |      | $        | (752,902   | )    |   | $       | 240,281    |   |   | $       | 407,178    |  
|                                                 | Other comprehensive income (loss)                                               |      |          | (64,175    | )    |   |         | 1,363      |   |   |         | 18,164     |  
|                                                 |                                                                                 |      |          |            |      |   |         |            |  
|                                                 | Comprehensive income (loss)                                                     |      | $        | (817,077   | )    |   | $       | 241,644    |   |   | $       | 425,342    |  
|                                                 |                                                                                 |      |          |            |      |   |         |            |  
|Per share data                                   |                                                                                 |      |          |            |      |   |         |            |   |   |         |           
|                                                 | Weighted average number of common and common equivalent shares
    outstanding: |      |          |            |      |   |         |            |   |   |         |            |  
|                                                 | Basic                                                                           |      |          | 71,757,651 |      |   |         | 62,633,467 |   |   |         | 63,392,597 |  
|                                                 | Diluted                                                                         |      |          | 71,757,651 |      |   |         | 67,706,972 |   |   |         | 67,275,287 |  
|                                                 | Basic earnings (loss) per common share                                          |      | $        | (10.49     | )    |   | $       | 3.84       |   |   | $       | 6.42       |  
|                                                 |                                                                                 |      |          |            |      |   |         |            |  
|                                                 | Diluted earnings (loss) per common share                                        |      | $        | (10.49     | )    |   | $       | 3.55       |   |   | $       | 6.05       |  
|                                                 |                                                                                 |      |          |            |      |   |         |            |  





F-5



---



##### Table of Contents






MONTPELIER RE HOLDINGS LTD.


CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY


For the Years Ended December 31, 2005, 2004 and 2003


(Expressed in thousands of United States Dollars)


|                                              |                                                        |                       |           |           |           |   |           |           |           |   |           |           |           | 
|--------------------------------------------- | ------------------------------------------------------ | --------------------- | --------- | --------- | --------- | - | --------- | --------- | --------- | - | --------- | --------- | --------- | 
|                                              |                                                        | 2005                  |           |           | 2004      |   |           | 2003      |          
|                                              |                                                        |                       |           |           |           |   |           |           |          
|Common voting shares                          |                                                        |                       |           |           |           |   |           |           |           |   |           |          
|                                              | Balance  beginning of year                            |                       | $         | 104       |           |   | $         | 106       |           |   | $         | 106       |          
|                                              | Issue of common shares                                 |                       |           | 45        |           |   |           | 1         |           |   |           |          |          
|                                              | Repurchase of common shares                            |                       |           |          |           |   |           | (3        | )         |   |           |          |          
|                                              |                                                        |                       |           |           |           |   |           |           |          
|                                              |                                                        | Balance  end of year |           |           | 149       |   |           |           | 104       |   |           |           | 106       | 
|                                              |                                                        |                       |           |           |           |   |           |           |          
|Additional paid-in-capital                    |                                                        |                       |           |           |           |   |           |           |           |   |           |          
|                                              | Balance  beginning of year                            |                       |           | 1,111,735 |           |   |           | 1,130,305 |           |   |           | 1,126,435 |          
|                                              | Issue of common shares                                 |                       |           | 622,120   |           |   |           | 10,612    |           |   |           |          |          
|                                              | Repurchase of common shares                            |                       |           |          |           |   |           | (31,487   | )         |   |           |          |          
|                                              | Direct equity offering expenses                        |                       |           | (20,423   | )         |   |           |          |           |   |           | (170      | )        
|                                              | Compensation recognized under stock option plan        |                       |           | 1,244     |           |   |           | 2,305     |           |   |           | 4,040     |          
|                                              | Director participation in directors share plan        |                       |           | 228       |           |   |           |          |           |   |           |          |          
|                                              |                                                        |                       |           |           |           |   |           |           |          
|                                              |                                                        | Balance  end of year |           |           | 1,714,904 |   |           |           | 1,111,735 |   |           |           | 1,130,305 | 
|                                              |                                                        |                       |           |           |           |   |           |           |          
|Accumulated other comprehensive income (loss) |                                                        |                       |           |           |           |   |           |           |           |   |           |          
|                                              | Balance  beginning of year                            |                       |           | 55,094    |           |   |           | 53,731    |           |   |           | 35,567    |          
|                                              | Net change in unrealized gains (losses) on investments |                       |           | (64,110   | )         |   |           | 1,309     |           |   |           | 18,120    |          
|                                              | Net change in currency translation adjustments         |                       |           | (65       | )         |   |           | 54        |           |   |           | 44        |          
|                                              |                                                        |                       |           |           |           |   |           |           |          
|                                              |                                                        | Balance  end of year |           |           | (9,081    | ) |           |           | 55,094    |   |           |           | 53,731    | 
|                                              |                                                        |                       |           |           |           |   |           |           |          
|Retained earnings (deficit)                   |                                                        |                       |           |           |           |   |           |           |           |   |           |          
|                                              | Balance  beginning of year                            |                       |           | 585,011   |           |   |           | 473,563   |           |   |           | 90,427    |          
|                                              | Net income (loss)                                      |                       |           | (752,902  | )         |   |           | 240,281   |           |   |           | 407,178   |          
|                                              | Repurchase of common shares                            |                       |           |          |           |   |           | (33,989   | )         |   |           |          |          
|                                              | Dividends on common shares                             |                       |           | (480,422  | )         |   |           | (94,844   | )         |   |           | (24,042   | )        
|                                              |                                                        |                       |           |           |           |   |           |           |          
|                                              |                                                        | Balance  end of year |           |           | (648,313  | ) |           |           | 585,011   |   |           |           | 473,563   | 
|                                              |                                                        |                       |           |           |           |   |           |           |          
|Total Shareholders Equity                    |                                                        | $                     | 1,057,659 |           |           | $ | 1,751,944 |           |           | $ | 1,657,705 |          
|                                              |                                                        |                       |           |           |           |   |           |           |          





F-6



---



##### Table of Contents






MONTPELIER RE HOLDINGS LTD.


CONSOLIDATED STATEMENTS OF CASH FLOWS


For the Years Ended December 31, 2005, 2004 and 2003


(Expressed in thousands of United States Dollars)


|                                                       |                                                                                              |                                                                        |   |            |           |   |   |            |         |   |   |            |         |  
|------------------------------------------------------ | -------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------- | - | ---------- | --------- | - | - | ---------- | ------- | - | - | ---------- | ------- | -
|                                                       |                                                                                              | 2005                                                                   |   |            | 2004      |   |   | 2003       |        
|                                                       |                                                                                              |                                                                        |   |            |           |   |   |            |        
|Cash flows provided by operating activities:           |                                                                                              |                                                                        |   |            |           |   |   |            |         |   |   |           
|                                                       | Net income (loss)                                                                            |                                                                        | $ | (752,902   | )         |   | $ | 240,281    |         |   | $ | 407,178    |        
|                                                       | Adjustments to reconcile net income (loss) to net cash provided
    by operating activities: |                                                                        |   |            |           |   |   |            |         |   |   |            |        
|                                                       |                                                                                              | Accretion (amortization) of premium/(discount) on fixed
    maturities |   |            | 7,995     |   |   |            | 14,640  |   |   |            | 14,679  |  
|                                                       |                                                                                              | Depreciation                                                           |   |            | 1,365     |   |   |            | 1,808   |   |   |            | 903     |  
|                                                       |                                                                                              | Equity in other earnings of other ventures                             |   |            | (42       | ) |   |            |        |   |   |            |        |  
|                                                       |                                                                                              | Compensation recognized under stock option plan                        |   |            | 1,244     |   |   |            | 2,305   |   |   |            | 4,040   |  
|                                                       |                                                                                              | Net realized gains on investments                                      |   |            | (41,605   | ) |   |            | (7,248  | ) |   |            | (7,631  | )
|                                                       |                                                                                              | Realized gain on disposal of equipment                                 |   |            |          |   |   |            | (68     | ) |   |            |        |  
|                                                       |                                                                                              | Amortization of deferred financing costs                               |   |            |          |   |   |            |        |   |   |            | 1,325   |  
|                                                       |                                                                                              | Accretion of Senior Notes                                              |   |            | 121       |   |   |            | 120     |   |   |            | 50      |  
|                                                       | Change in:                                                                                   |                                                                        |   |            |           |   |   |            |         |   |   |            |        
|                                                       |                                                                                              | Unearned premium ceded                                                 |   |            | (66,795   | ) |   |            | (7,072  | ) |   |            | (6,158  | )
|                                                       |                                                                                              | Premiums receivable                                                    |   |            | (97,184   | ) |   |            | 34,138  |   |   |            | (60,693 | )
|                                                       |                                                                                              | Funds withheld                                                         |   |            | 3,674     |   |   |            | (1,406  | ) |   |            | 16,783  |  
|                                                       |                                                                                              | Deferred acquisition costs                                             |   |            | 5,586     |   |   |            | 786     |   |   |            | (14,936 | )
|                                                       |                                                                                              | Reinsurance receivable on paid losses                                  |   |            | (55,570   | ) |   |            |        |   |   |            |        |  
|                                                       |                                                                                              | Reinsurance recoverable on unpaid losses                               |   |            | (211,045  | ) |   |            | (86,973 | ) |   |            | 8,929   |  
|                                                       |                                                                                              | Accrued investment income                                              |   |            | 1,735     |   |   |            | (3,156  | ) |   |            | (7,609  | )
|                                                       |                                                                                              | Other assets                                                           |   |            | (39,249   | ) |   |            | 496     |   |   |            | 66      |  
|                                                       |                                                                                              | Loss and loss adjustment expense reserves                              |   |            | 1,232,399 |   |   |            | 299,750 |   |   |            | 103,676 |  
|                                                       |                                                                                              | Unearned premium                                                       |   |            | (24,696   | ) |   |            | (31,127 | ) |   |            | 77,673  |  
|                                                       |                                                                                              | Reinsurance balances payable                                           |   |            | 130,185   |   |   |            | 49,974  |   |   |            | 22,487  |  
|                                                       |                                                                                              | Accounts payable, accrued expenses and other liabilities               |   |            | (24,238   | ) |   |            | 12,388  |   |   |            | 20,684  |  
|                                                       |                                                                                              | Minority interest in undistributed net loss of Blue Ocean              |   |            | (13       | ) |   |            |        |   |   |            |        |  
|                                                       |                                                                                              | Other                                                                  |   |            | (65       | ) |   |            | 54      |   |   |            | 44      |  
|                                                       |                                                                                              |                                                                        |   |            |           |   |   |            |        
|                                                       | Net cash provided by operating activities                                                    |                                                                        |   | 70,900     |           |   |   | 519,690    |         |   |   | 581,490    |        
|                                                       |                                                                                              |                                                                        |   |            |           |   |   |            |        
|Cash flows used in investing activities:               |                                                                                              |                                                                        |   |            |           |   |   |            |         |   |   |           
|                                                       | Purchases of fixed maturities                                                                |                                                                        |   | (2,003,909 | )         |   |   | (1,501,642 | )       |   |   | (1,991,760 | )      
|                                                       | Purchases of equity investments                                                              |                                                                        |   | (93,880    | )         |   |   | (10,338    | )       |   |   | (34,204    | )      
|                                                       | Purchases of other investments                                                               |                                                                        |   | (10,000    | )         |   |   | (20,000    | )       |   |   |           |        
|                                                       | Proceeds from sale and maturity of fixed maturities                                          |                                                                        |   | 1,961,389  |           |   |   | 1,123,882  |         |   |   | 1,322,003  |        
|                                                       | Proceeds from sale of equity investments                                                     |                                                                        |   | 146,971    |           |   |   | 11,769     |         |   |   | 2,585      |        
|                                                       | Investment of securities lending collateral                                                  |                                                                        |   | 105,265    |           |   |   | (66,332    | )       |   |   | (354,524   | )      
|                                                       | Payment on settlement of interest rate swap                                                  |                                                                        |   |           |           |   |   |           |         |   |   | (1,002     | )      
|                                                       | Purchases of equipment                                                                       |                                                                        |   | (963       | )         |   |   | (2,993     | )       |   |   | (1,072     | )      
|                                                       | Sale of equipment                                                                            |                                                                        |   |           |           |   |   | 759        |         |   |   |           |        
|                                                       |                                                                                              |                                                                        |   |            |           |   |   |            |        
|                                                       | Net cash used in investing activities                                                        |                                                                        |   | (104,873   | )         |   |   | (464,895   | )       |   |   | (1,057,974 | )      
|                                                       |                                                                                              |                                                                        |   |            |           |   |   |            |        
|Cash flows (used in) provided by financing activities: |                                                                                              |                                                                        |   |            |           |   |   |            |         |   |   |           
|                                                       | Net increase in minority interest                                                            |                                                                        |   | 163,901    |           |   |   |           |         |   |   |           |        
|                                                       | Issue of common shares                                                                       |                                                                        |   | 622,393    |           |   |   | 10,612     |         |   |   |           |        
|                                                       | Repurchase of common shares                                                                  |                                                                        |   |           |           |   |   | (65,476    | )       |   |   |           |        
|                                                       | Securities lending collateral received                                                       |                                                                        |   | (105,265   | )         |   |   | 66,332     |         |   |   | 354,524    |        
|                                                       | Repayment of debt                                                                            |                                                                        |   |           |           |   |   |           |         |   |   | (150,000   | )      
|                                                       | Net proceeds received from issuance of Senior Notes                                          |                                                                        |   |           |           |   |   |           |         |   |   | 248,792    |        
|                                                       | Dividends paid                                                                               |                                                                        |   | (496,809   | )         |   |   | (95,274    | )       |   |   |           |        
|                                                       | Direct equity offering expenses                                                              |                                                                        |   | (20,423    | )         |   |   |           |         |   |   | (170       | )      
|                                                       |                                                                                              |                                                                        |   |            |           |   |   |            |        
|                                                       | Net cash (used in) provided by financing activities                                          |                                                                        |   | (163,797   | )         |   |   | (83,806    | )       |   |   | 453,146    |        
|                                                       |                                                                                              |                                                                        |   |            |           |   |   |            |        
|                                                       | Increase (decrease) in cash and cash equivalents                                             |                                                                        |   | 339,570    |           |   |   | (29,011    | )       |   |   | (23,338    | )      
|                                                       |                                                                                              |                                                                        |   |            |           |   |   |            |        
|                                                       | Cash and cash equivalents  Beginning of year                                                |                                                                        |   | 110,576    |           |   |   | 139,587    |         |   |   | 162,925    |        
|                                                       |                                                                                              |                                                                        |   |            |           |   |   |            |        
|                                                       | Cash and cash equivalents  End of year                                                      |                                                                        | $ | 450,146    |           |   | $ | 110,576    |         |   | $ | 139,587    |        
|                                                       |                                                                                              |                                                                        |   |            |           |   |   |            |        





F-7



---



##### Table of Contents






MONTPELIER RE HOLDINGS LTD.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


December 31, 2005 and 2004


(Expressed in thousands of United States Dollars,


except per share amounts or as where otherwise described)




|   |        
|-- | -------
|1. | General







|   |                                
|-- | -------------------------------
|2. | Significant Accounting Policies



| |                      
| | ---------------------
| | Basis of Presentation



F-8



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                           
| | --------------------------
| | Premiums and related costs















| |            
| | -----------
| | Reinsurance





F-9



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |               
| | --------------
| | Funds Withheld





| |                  
| | -----------------
| | Equity Accounting





| |                     
| | --------------------
| | Investments and cash







first-in,










| |                                          
| | -----------------------------------------
| | Loss and Loss Adjustment Expense Reserves



F-10



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










| |                          
| | -------------------------
| | Earnings (Loss) Per Share





| |                             
| | ----------------------------
| | Foreign Currency Translation





F-11



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                           
| | --------------------------
| | Variable Interest Entities





| |                         
| | ------------------------
| | Employee Incentive Plans

Montpelier Long-Term Incentive Plan (LTIP).


Performance Unit Plan (the PUP).




Option Plan.


Deferred Compensation Plan.




| |                         
| | ------------------------
| | Directors Incentive Plan



F-12



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|   |            
|-- | -----------
|3. | Investments



|                        |                                             |           |           |         |            |   |        |            |  |   |            |        |  |   |           |         | 
|----------------------- | ------------------------------------------- | --------- | --------- | ------- | ---------- | - | ------ | ---------- |  | - | ---------- | ------ |  | - | --------- | ------- | 
|                        |                                             | Cost or   |           |         | Gross      |   |        | Gross      |  |   |           
|                        |                                             | Amortized |           |         | Unrealized |   |        | Unrealized |  |   | Estimated  |       
|As at December 31, 2005 |                                             | Cost      |           |         | Gains      |   |        | Losses     |  |   | Fair Value |       
|                        |                                             |           |           |         |            |   |        |            |  |   |            |       
|Fixed Maturities:       |                                             |           |           |         |            |   |        |            |  |   |            |        |  |   |           |        
|                        | U.S. government                             |           | $         | 301,901 |            |   | $      | 241        |  |   | $          | 3,579  |  |   | $         | 298,563 | 
|                        | U.S. government-sponsored enterprises       |           |           | 607,676 |            |   |        | 12         |  |   |            | 11,057 |  |   |           | 596,631 | 
|                        | Non U.S. government                         |           |           | 30,484  |            |   |        |           |  |   |            | 1,670  |  |   |           | 28,814  | 
|                        | Corporate debt securities                   |           |           | 757,087 |            |   |        | 5,690      |  |   |            | 12,300 |  |   |           | 750,477 | 
|                        | Mortgage-backed and asset-backed securities |           |           | 637,166 |            |   |        | 144        |  |   |            | 4,741  |  |   |           | 632,569 | 
|                        |                                             |           |           |         |            |   |        |            |  |   |            |       
|                        |                                             |           | 2,334,314 |         |            |   | 6,087  |            |  |   | 33,347     |        |  |   | 2,307,054 |        
|                        |                                             |           |           |         |            |   |        |            |  |   |            |       
|Equity investments      |                                             |           | 96,982    |         |            |   | 18,602 |            |  |   | 2,031      |        |  |   | 113,553   |        
|Total                   |                                             | $         | 2,431,296 |         |            | $ | 24,689 |            |  | $ | 35,378     |        |  | $ | 2,420,607 |        
|                        |                                             |           |           |         |            |   |        |            |  |   |            |       

|                        |                                             |           |           |         |            |   |        |            |  |   |            |       |  |   |           |         | 
|----------------------- | ------------------------------------------- | --------- | --------- | ------- | ---------- | - | ------ | ---------- |  | - | ---------- | ----- |  | - | --------- | ------- | 
|                        |                                             | Cost or   |           |         | Gross      |   |        | Gross      |  |   |           
|                        |                                             | Amortized |           |         | Unrealized |   |        | Unrealized |  |   | Estimated  |      
|As at December 31, 2004 |                                             | Cost      |           |         | Gains      |   |        | Losses     |  |   | Fair Value |      
|                        |                                             |           |           |         |            |   |        |            |  |   |            |      
|Fixed Maturities:       |                                             |           |           |         |            |   |        |            |  |   |            |       |  |   |           |        
|                        | U.S. government                             |           | $         | 416,140 |            |   | $      | 58         |  |   | $          | 4,363 |  |   | $         | 411,835 | 
|                        | U.S. government-sponsored enterprises       |           |           | 952,326 |            |   |        | 3,557      |  |   |            | 2,234 |  |   |           | 953,649 | 
|                        | Non U.S. government                         |           |           | 19,987  |            |   |        |           |  |   |            | 73    |  |   |           | 19,914  | 
|                        | Corporate debt securities                   |           |           | 713,755 |            |   |        | 10,072     |  |   |            | 3,161 |  |   |           | 720,666 | 
|                        | Mortgage-backed and asset-backed securities |           |           | 218,021 |            |   |        | 2,417      |  |   |            | 1,229 |  |   |           | 219,209 | 
|                        |                                             |           |           |         |            |   |        |            |  |   |            |      
|                        |                                             |           | 2,320,229 |         |            |   | 16,104 |            |  |   | 11,060     |       |  |   | 2,325,273 |        
|                        |                                             |           |           |         |            |   |        |            |  |   |            |      
|Equity investments      |                                             |           | 92,997    |         |            |   | 50,494 |            |  |   | 56         |       |  |   | 143,435   |        
|Total                   |                                             | $         | 2,413,226 |         |            | $ | 66,598 |            |  | $ | 11,116     |       |  | $ | 2,468,708 |        
|                        |                                             |           |           |         |            |   |        |            |  |   |            |      

F-13



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                        |                                       |           |           |         |   |  |       |      |  
|----------------------- | ------------------------------------- | --------- | --------- | ------- | - |  | ----- | ---- | -
|                        |                                       | Cost or   |           |         |  
|                        |                                       | Amortized |           |         |  
|As at December 31, 2005 |                                       | Cost      |           |         | % | 
|                        |                                       |           |           |         |   | 
|Ratings                 |                                       |           |           |         |   |  |       |     
|                        | U.S. government                       |           | $         | 301,901 |   |  |       | 13.0 | %
|                        | U.S. government-sponsored enterprises |           |           | 607,676 |   |  |       | 26.0 |  
|                        | Non U.S. government                   |           |           | 30,484  |   |  |       | 1.3  |  
|                        | AAA                                   |           |           | 592,361 |   |  |       | 25.4 |  
|                        | AA                                    |           |           | 119,645 |   |  |       | 5.1  |  
|                        | A                                     |           |           | 284,582 |   |  |       | 12.2 |  
|                        | BBB                                   |           |           | 375,806 |   |  |       | 16.1 |  
|                        | BB                                    |           |           | 7,486   |   |  |       | 0.3  |  
|                        | B                                     |           |           | 2,458   |   |  |       | 0.1  |  
|Other                   |                                       |           | 11,915    |         |   |  | 0.5   |     
|                        |                                       |           |           |         |   | 
|                        |                                       | $         | 2,334,314 |         |   |  | 100.0 | %   
|                        |                                       |           |           |         |   | 

|                        |                                       |           |           |         |   |  |       |      |  
|----------------------- | ------------------------------------- | --------- | --------- | ------- | - |  | ----- | ---- | -
|                        |                                       | Cost or   |           |         |  
|                        |                                       | Amortized |           |         |  
|As at December 31, 2004 |                                       | Cost      |           |         | % | 
|                        |                                       |           |           |         |   | 
|Ratings                 |                                       |           |           |         |   |  |       |     
|                        | U.S. government                       |           | $         | 416,140 |   |  |       | 17.9 | %
|                        | U.S. government-sponsored enterprises |           |           | 952,326 |   |  |       | 41.0 |  
|                        | Non U.S. government                   |           |           | 19,987  |   |  |       | 0.9  |  
|                        | AAA                                   |           |           | 232,794 |   |  |       | 10.0 |  
|                        | AA                                    |           |           | 118,202 |   |  |       | 5.1  |  
|                        | A                                     |           |           | 410,289 |   |  |       | 17.7 |  
|                        | BBB                                   |           |           | 166,974 |   |  |       | 7.2  |  
|                        | BB                                    |           |           | 162     |   |  |       |     |  
|                        | B                                     |           |           | 231     |   |  |       |     |  
|Other                   |                                       |           | 3,124     |         |   |  | 0.2   |     
|                        |                                       |           |           |         |   | 
|                        |                                       | $         | 2,320,229 |         |   |  | 100.0 | %   
|                        |                                       |           |           |         |   | 

F-14



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                            |  |           |           |  |            |   |           |      |  |   |            |  |  |   |           | 
|------------------------------------------- |  | --------- | --------- |  | ---------- | - | --------- | ---- |  | - | ---------- |  |  | - | --------- | 
|                                            |  | 2005      |           |  | 2004       |  
|                                            |  |           |           |  |            |  
|                                            |  | Cost or   |           |  |            |   | Cost or   |      |  |  
|                                            |  | Amortized |           |  |            |   | Amortized |      |  |  
|Years Ended December 31,                    |  | Cost      |           |  | Fair Value |   |           | Cost |  |   | Fair Value | 
|                                            |  |           |           |  |            |   |           |      |  |   |            | 
|Due within one year                         |  | $         | 154,983   |  |            | $ | 152,646   |      |  | $ | 5,019      |  |  | $ | 5,000     | 
|Due after one year through five years       |  |           | 1,105,871 |  |            |   | 1,087,550 |      |  |   | 1,873,661  |  |  |   | 1,874,372 | 
|Due after five years through ten years      |  |           | 399,811   |  |            |   | 392,392   |      |  |   | 216,998    |  |  |   | 219,616   | 
|Due after ten years                         |  |           | 36,483    |  |            |   | 41,896    |      |  |   | 6,530      |  |  |   | 7,076     | 
|Mortgage-backed and asset-backed securities |  |           | 637,166   |  |            |   | 632,570   |      |  |   | 218,021    |  |  |   | 219,209   | 
|                                            |  |           |           |  |            |   |           |      |  |   |            | 
|                                            |  | $         | 2,334,314 |  |            | $ | 2,307,054 |      |  | $ | 2,320,229  |  |  | $ | 2,325,273 | 
|                                            |  |           |           |  |            |   |           |      |  |   |            | 





|                                                            |  |                          |         |   |      |   |        |      |  |   |        |  
|----------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                            |  | Years Ended December 31, |        
|                                                            |  |                          |        
|                                                            |  | 2005                     |         |   | 2004 |   |        | 2003 | 
|                                                            |  |                          |         |   |      |   |        |      | 
|Gross realized gains                                        |  | $                        | 63,590  |   |      | $ | 9,312  |      |  | $ | 13,859 |  
|Gross realized losses                                       |  |                          | (22,958 | ) |      |   | (2,064 | )    |  |   | (5,226 | )
|Realized loss on settlement of interest rate swap           |  |                          |        |   |      |   |       |      |  |   | (1,002 | )
|                                                            |  |                          |         |   |      |   |        |      | 
|Net realized gains on investments                           |  |                          | 40,632  |   |      |   | 7,248  |      |  |   | 7,631  |  
|Net unrealized gains (losses)                               |  |                          | (64,110 | ) |      |   | 1,309  |      |  |   | 18,120 |  
|                                                            |  |                          |         |   |      |   |        |      | 
|Total realized and unrealized gains (losses) on investments |  | $                        | (23,478 | ) |      | $ | 8,557  |      |  | $ | 25,751 |  
|                                                            |  |                          |         |   |      |   |        |      | 



|                                     |  |                          |        |   |      |   |         |      |  |   |         |  
|------------------------------------ |  | ------------------------ | ------ | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                     |  | Years Ended December 31, |       
|                                     |  |                          |       
|                                     |  | 2005                     |        |   | 2004 |   |         | 2003 | 
|                                     |  |                          |        |   |      |   |         |      | 
|Fixed maturities                     |  | $                        | 89,980 |   |      | $ | 82,180  |      |  | $ | 65,902  |  
|Net amortization of premium/discount |  |                          | (7,995 | ) |      |   | (14,640 | )    |  |   | (14,603 | )
|Equity investments                   |  |                          | 1,689  |   |      |   | 1,300   |      |  |   | 407     |  
|Cash and cash equivalents            |  |                          | 6,238  |   |      |   | 2,270   |      |  |   | 1,506   |  
|Securities lending                   |  |                          | 551    |   |      |   | 588     |      |  |   | 157     |  
|                                     |  |                          |        |   |      |   |         |      | 
|                                     |  |                          | 90,463 |   |      |   | 71,698  |      |  |   | 53,369  |  
|Net investment expenses(1)           |  |                          | (3,458 | ) |      |   | (2,626  | )    |  |   | (3,221  | )
|                                     |  |                          |        |   |      |   |         |      | 
|                                     |  | $                        | 87,005 |   |      | $ | 69,072  |      |  | $ | 50,148  |  
|                                     |  |                          |        |   |      |   |         |      | 






|    |                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------
|(1) | $2.9 million, $2.4 million and $3.2 million
    relates to White Mountains Advisors LLC for 2005, 2004 and 2003,
    respectively.

F-15



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                         |                                             |                     |           |                     |                |   |        |              |            |   |         |         |  |   |        |       | 
|------------------------ | ------------------------------------------- | ------------------- | --------- | ------------------- | -------------- | - | ------ | ------------ | ---------- | - | ------- | ------- |  | - | ------ | ----- | 
|                         |                                             |                     |           | Equal to or Greater |               
|                         |                                             | Less than 12 Months |           |                     | than 12 Months |  
|                         |                                             |                     |           |                     |                |  
|                         |                                             |                     |           | Gross               |                |   |        |              | Gross      |  
|                         |                                             |                     |           | Unrealized          |                |   |        |              | Unrealized |  
|                         |                                             | Market Value        |           |                     | Losses         |   |        | Market Value |            |   | Losses  |        
|                         |                                             |                     |           |                     |                |   |        |              |            |   |         |        
|Fixed Maturities:        |                                             |                     |           |                     |                |   |        |              |            |   |         |         |  |   |        |      
|                         | U.S. government                             |                     | $         | 117,287             |                |   | $      | 1,450        |            |   | $       | 130,051 |  |   | $      | 2,129 | 
|                         | U.S. government-sponsored enterprises       |                     |           | 343,517             |                |   |        | 6,338        |            |   |         | 232,102 |  |   |        | 4,719 | 
|                         | Non U.S. government                         |                     |           | 9,367               |                |   |        | 1,125        |            |   |         | 19,447  |  |   |        | 545   | 
|                         | Corporate debt securities                   |                     |           | 405,405             |                |   |        | 10,184       |            |   |         | 55,624  |  |   |        | 2,117 | 
|                         | Mortgage-backed and asset-backed securities |                     |           | 425,430             |                |   |        | 3,632        |            |   |         | 53,901  |  |   |        | 1,108 | 
|Equity investments       |                                             |                     | 15,042    |                     |                |   | 1,873  |              |            |   |        |         |  |   |       |      
|                         |                                             |                     |           |                     |                |   |        |              |            |   |         |        
|Total available for sale |                                             | $                   | 1,316,048 |                     |                | $ | 24,602 |              |            | $ | 491,125 |         |  | $ | 10,618 |      
|                         |                                             |                     |           |                     |                |   |        |              |            |   |         |        



|                         |                                             |                     |           |                     |                |   |        |              |            |   |        |       |  |   |    |    | 
|------------------------ | ------------------------------------------- | ------------------- | --------- | ------------------- | -------------- | - | ------ | ------------ | ---------- | - | ------ | ----- |  | - | -- | -- | 
|                         |                                             |                     |           | Equal to or Greater |               
|                         |                                             | Less than 12 Months |           |                     | than 12 Months |  
|                         |                                             |                     |           |                     |                |  
|                         |                                             |                     |           | Gross               |                |   |        |              | Gross      |  
|                         |                                             |                     |           | Unrealized          |                |   |        |              | Unrealized |  
|                         |                                             | Market Value        |           |                     | Losses         |   |        | Market Value |            |   | Losses |      
|                         |                                             |                     |           |                     |                |   |        |              |            |   |        |      
|Fixed Maturities:        |                                             |                     |           |                     |                |   |        |              |            |   |        |       |  |   |    |   
|                         | U.S. government                             |                     | $         | 352,501             |                |   | $      | 4,363        |            |   | $      |      |  |   | $  |   | 
|                         | U.S. government-sponsored enterprises       |                     |           | 494,771             |                |   |        | 2,234        |            |   |        |      |  |   |    |   | 
|                         | Non U.S. government                         |                     |           | 19,914              |                |   |        | 73           |            |   |        |      |  |   |    |   | 
|                         | Corporate debt securities                   |                     |           | 314,191             |                |   |        | 3,120        |            |   |        | 6,074 |  |   |    | 41 | 
|                         | Mortgage-backed and asset-backed securities |                     |           | 162,833             |                |   |        | 1,200        |            |   |        | 2,263 |  |   |    | 29 | 
|Equity investments       |                                             |                     | 1,457     |                     |                |   | 56     |              |            |   |       |       |  |   |   |   
|                         |                                             |                     |           |                     |                |   |        |              |            |   |        |      
|Total available for sale |                                             | $                   | 1,345,667 |                     |                | $ | 11,046 |              |            | $ | 8,337  |       |  | $ | 70 |   
|                         |                                             |                     |           |                     |                |   |        |              |            |   |        |      

|                                                                                 |  |                          |         |  |      |   |         |      |  |   |         | 
|-------------------------------------------------------------------------------- |  | ------------------------ | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|                                                                                 |  | Years Ended December 31, |        
|                                                                                 |  |                          |        
|                                                                                 |  | 2005                     |         |  | 2004 |   |         | 2003 | 
|                                                                                 |  |                          |         |  |      |   |         |      | 
|                                                                                 |  | ($ in millions)          |        
|Proceeds from sales of available for sale securities                             |  | $                        | 2,113.1 |  |      | $ | 1,135.6 |      |  | $ | 1,324.6 | 
|Gross realized losses  other than temporary
    impairment  fixed maturities   |  | $                        | 5.8     |  |      | $ |        |      |  | $ |        | 
|Gross realized losses  other than temporary
    impairment  equity investments |  | $                        | 1.3     |  |      | $ | 0.1     |      |  | $ |        | 
|Aggregate fair value of securities in unrealized loss position                   |  | $                        | 1,807.2 |  |      | $ | 1,354.0 |      |  | $ | 397.2   | 
|Aggregate fair value of securities in unrealized loss position
    (> 12 months) |  | $                        | 491.1   |  |      | $ | 8.3     |      |  | $ |        | 



F-16



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








| |                   
| | ------------------
| | Securities Lending





| |                  
| | -----------------
| | Other Investments





Related Party
Transactions




|   |                                          
|-- | -----------------------------------------
|4. | Loss and Loss Adjustment Expense Reserves



F-17



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                           |              |                          |           |           |      |   |         |         |   |   |         |         |  
|------------------------------------------ | ------------ | ------------------------ | --------- | --------- | ---- | - | ------- | ------- | - | - | ------- | ------- | -
|                                           |              | Years Ended December 31, |          
|                                           |              |                          |          
|                                           |              | 2005                     |           |           | 2004 |   |         | 2003    |  
|                                           |              |                          |           |           |      |   |         |         |  
|Net reserves at January 1                  |              | $                        | 454,841   |           |      | $ | 242,064 |         |   | $ | 129,459 |        
|Net losses incurred (released) related to: |              |                          |           |           |      |   |         |         |   |   |         |        
|                                           | Current year |                          |           | 1,527,846 |      |   |         | 502,341 |   |   |         | 222,261 |  
|                                           | Prior years  |                          |           | (17,145   | )    |   |         | (97,538 | ) |   |         | (58,154 | )
|                                           |              |                          |           |           |      |   |         |         |  
|Total net incurred losses                  |              |                          | 1,510,701 |           |      |   | 404,803 |         |   |   | 164,107 |        
|Net paid losses related to:                |              |                          |           |           |      |   |         |         |   |   |         |        
|                                           | Current year |                          |           | 275,139   |      |   |         | 150,737 |   |   |         | 30,029  |  
|                                           | Prior years  |                          |           | 214,208   |      |   |         | 41,289  |   |   |         | 23,188  |  
|                                           |              |                          |           |           |      |   |         |         |  
|Total net paid losses                      |              |                          | 489,347   |           |      |   | 192,026 |         |   |   | 53,217  |        
|Effect of foreign exchange movements(1)    |              |                          |          |           |      |   |        |         |   |   | 1,715   |        
|                                           |              |                          |           |           |      |   |         |         |  
|Total net reserves as at December 31       |              |                          | 1,476,195 |           |      |   | 454,841 |         |   |   | 242,064 |        
|Losses recoverable as at December 31       |              |                          | 305,745   |           |      |   | 94,700  |         |   |   | 7,727   |        
|                                           |              |                          |           |           |      |   |         |         |  
|Total gross reserves as at December 31     |              | $                        | 1,781,940 |           |      | $ | 549,541 |         |   | $ | 249,791 |        
|                                           |              |                          |           |           |      |   |         |         |  






|    |                                                                                                                                                                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | For 2005 and 2004, the effect of foreign currency movements on
    loss and loss adjustment expense reserves has been included in
    loss and loss adjustment expenses in the statement of operations
    as opposed to net foreign exchange gains as in prior years.





Property Specialty:


Property Catastrophe:


Other Specialty:


F-18



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Property Specialty:


Property Catastrophe:


Other Specialty:


QQS:




Property Specialty:


Property Catastrophe:


Other Specialty:


QQS:




|   |            
|-- | -----------
|5. | Reinsurance





F-19



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












|                                |  |        |        |  |            |  |      |  
|------------------------------- |  | ------ | ------ |  | ---------- |  | ---- | -
|Rating                          |  | Amount |        |  | % of Total | 
|                                |  |        |        |  |            | 
|A++                             |  | $      |       |  |            |  |     | %
|A+                              |  |        | 8,762  |  |            |  | 15.8 | %
|A                               |  |        | 41,389 |  |            |  | 74.5 | %
|A-*                             |  |        | 5,419  |  |            |  | 9.7  | %
|                                |  |        |        |  |            | 
|Total Receivable on paid losses |  | $      | 55,570 |  |            |  | 100  | %
|                                |  |        |        |  |            | 

F-20



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                   |  |        |         |  |            |  |      |  
|---------------------------------- |  | ------ | ------- |  | ---------- |  | ---- | -
|Rating                             |  | Amount |         |  | % of Total | 
|                                   |  |        |         |  |            | 
|A++                                |  | $      | 76,727  |  |            |  | 25.1 | %
|A+                                 |  |        | 27,645  |  |            |  | 9.0  | %
|A                                  |  |        | 155,714 |  |            |  | 50.9 | %
|A-*                                |  |        | 42,209  |  |            |  | 13.8 | %
|Not Rated                          |  |        | 3,450   |  |            |  | 1.2  | %
|                                   |  |        |         |  |            | 
|Total Recoverable on unpaid losses |  | $      | 305,745 |  |            |  | 100  | %
|                                   |  |        |         |  |            | 






|  |                                                                                                                                                                                                                                                                  
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | on February 16, 2006, one reinsurer was downgraded from
    A to B++ and on February 24, 2006 the same reinsurer
    was downgraded to B+. The Company does not believe that there
    are any amounts uncollectible related to this reinsurer at this
    time.



|   |                                
|-- | -------------------------------
|6. | Debt and Financing Arrangements



| |             
| | ------------
| | Senior Notes







| |                            
| | ---------------------------
| | Letter of Credit Facilities





|                                  |                                   |             |         |       |       |   |       |             |  |  |            |           |  |                   |                  
|--------------------------------- | --------------------------------- | ----------- | ------- | ----- | ----- | - | ----- | ----------- |  |  | ---------- | --------- |  | ----------------- | -----------------
|                                  |                                   | Credit Line |         |       | Usage |   |       | Expiry Date |  |  | Purpose   
|                                  |                                   |             |         |       |       |   |       |             |  |  |           
|Secured operational LOC facility: |                                   |             |         |       |       |   |       |             |  |  |            |           |  |                  
|                                  | Syndicated facility: Tranche A    |             | $       | 250.0 |       |   | $     | 209.8       |  |  |            | May 2006  |  |                   | General Corporate
|                                  | Syndicated facility: Tranche B(1) |             | $       | 225.0 |       |   | $     | 238.2       |  |  |            | Aug. 2010 |  |                   | General Corporate
|Syndicated 364 Day facility       |                                   | $           | 1,000.0 |       |       | $ | 183.3 |             |  |  | Nov. 2006  |           |  | General Corporate
|Bilateral facility A              |                                   | $           | 100.0   |       |       | $ | 12.4  |             |  |  | Sept. 2007 |           |  | General Corporate

F-21



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)







364-day








|   |                           
|-- | --------------------------
|7. | Related Party Transactions





|                                 |  |                 |     |  |      |   |     |      |  |   |     | 
|-------------------------------- |  | --------------- | --- |  | ---- | - | --- | ---- |  | - | --- | 
|                                 |  | Years Ended     |    
|                                 |  | December 31,    |    
|                                 |  |                 |    
|                                 |  | 2005            |     |  | 2004 |   |     | 2003 | 
|                                 |  |                 |     |  |      |   |     |      | 
|                                 |  | ($ in millions) |    
|Investment manager fees expensed |  | $               | 2.9 |  |      | $ | 2.4 |      |  | $ | 3.2 | 
|Investment manager fees payable  |  | $               | 1.6 |  |      | $ | 0.7 |      |  | $ | 0.9 | 



F-22



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|   |                  
|-- | -----------------
|8. | Minority Interest







F-23



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                            |  |      |        |  
|--------------------------- |  | ---- | ------ | -
|As at December 31,          |  | 2005 |       
|                            |  |      |       
|Balance  Beginning of year |  | $    |       |  
|Issue of preference shares  |  |      | 55     |  
|Additional paid-in-capital  |  |      | 54,945 |  
|Offering expenses           |  |      | (834   | )
|                            |  |      |       
|Balance  end of year       |  | $    | 54,166 |  
|                            |  |      |       



|   |                     
|-- | --------------------
|9. | Shareholders Equity



| |                      
| | ---------------------
| | Authorized and Issued









10b5-1




F-24



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






S-3


S-3






| |         
| | --------
| | Warrants



00-19: paid-in






F-25



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |          
| | ---------
| | Dividends





|    |                  
|--- | -----------------
|10. | Segment Reporting





|                                                            |  |   |           | 
|----------------------------------------------------------- |  | - | --------- | 
|Rated Reinsurance and Insurance business                    |  | $ | 3,759,653 | 
|Collateralized Property Catastrophe Retrocessional business |  |   | 300,053   | 
|                                                            |  |   |          
|Total                                                       |  | $ | 4,059,706 | 
|                                                            |  |   |          



Gross Premiums Written by Line


|                       |  |                          |       |  |      |  |       |      |  |   |       |  |  |  |       |   |  |   |       |  |  |  |       |  
|---------------------- |  | ------------------------ | ----- |  | ---- |  | ----- | ---- |  | - | ----- |  |  |  | ----- | - |  | - | ----- |  |  |  | ----- | -
|                       |  | Years Ended December 31, |      
|                       |  |                          |      
|                       |  | 2005                     |       |  | 2004 |  |       | 2003 | 
|                       |  |                          |       |  |      |  |       |      | 
|Property Specialty     |  | $                        | 357.9 |  |      |  | 36.6  | %    |  | $ | 314.0 |  |  |  | 37.5  | % |  | $ | 307.4 |  |  |  | 37.9  | %
|Property Catastrophe   |  |                          | 420.3 |  |      |  | 42.9  |      |  |   | 330.3 |  |  |  | 39.5  |   |  |   | 315.4 |  |  |  | 39.0  |  
|Other Specialty        |  |                          | 200.4 |  |      |  | 20.5  |      |  |   | 186.8 |  |  |  | 22.3  |   |  |   | 134.1 |  |  |  | 16.6  |  
|Qualifying Quota Share |  |                          | 0.1   |  |      |  | 0.0   |      |  |   | 5.9   |  |  |  | 0.7   |   |  |   | 52.8  |  |  |  | 6.5   |  
|                       |  |                          |       |  |      |  |       |      |  |   |       |  |  |  |       |   |  |  
|Total                  |  | $                        | 978.7 |  |      |  | 100.0 | %    |  | $ | 837.0 |  |  |  | 100.0 | % |  | $ | 809.7 |  |  |  | 100.0 | %
|                       |  |                          |       |  |      |  |       |      |  |   |       |  |  |  |       |   |  |  

F-26



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Gross Premiums Written by Geographic Area of Risks Insured


|                                                         |  |                          |       |  |      |  |       |      |  |   |       |  |  |  |       |   |  |   |       |  |  |  |       |  
|-------------------------------------------------------- |  | ------------------------ | ----- |  | ---- |  | ----- | ---- |  | - | ----- |  |  |  | ----- | - |  | - | ----- |  |  |  | ----- | -
|                                                         |  | Years Ended December 31, |      
|                                                         |  |                          |      
|                                                         |  | 2005                     |       |  | 2004 |  |       | 2003 | 
|                                                         |  |                          |       |  |      |  |       |      | 
|USA and Canada                                           |  | $                        | 460.5 |  |      |  | 47.0  | %    |  | $ | 375.6 |  |  |  | 44.9  | % |  | $ | 381.8 |  |  |  | 47.1  | %
|Worldwide(1)                                             |  |                          | 332.4 |  |      |  | 34.0  |      |  |   | 249.7 |  |  |  | 29.8  |   |  |   | 227.6 |  |  |  | 28.1  |  
|United Kingdom and Ireland                               |  |                          | 50.8  |  |      |  | 5.2   |      |  |   | 58.9  |  |  |  | 7.0   |   |  |   | 50.4  |  |  |  | 6.2   |  
|Japan                                                    |  |                          | 37.3  |  |      |  | 3.8   |      |  |   | 36.5  |  |  |  | 4.4   |   |  |   | 32.8  |  |  |  | 4.1   |  
|Western Europe, excluding the United Kingdom and Ireland |  |                          | 28.1  |  |      |  | 2.9   |      |  |   | 36.1  |  |  |  | 4.3   |   |  |   | 35.3  |  |  |  | 4.4   |  
|Worldwide, excluding USA and Canada(2)                   |  |                          | 23.4  |  |      |  | 2.4   |      |  |   | 29.9  |  |  |  | 3.6   |   |  |   | 35.8  |  |  |  | 4.4   |  
|Others (1.5% or less)                                    |  |                          | 46.2  |  |      |  | 4.7   |      |  |   | 50.3  |  |  |  | 6.0   |   |  |   | 46.0  |  |  |  | 5.7   |  
|                                                         |  |                          |       |  |      |  |       |      |  |   |       |  |  |  |       |   |  |  
|Total                                                    |  | $                        | 978.7 |  |      |  | 100.0 | %    |  | $ | 837.0 |  |  |  | 100.0 | % |  | $ | 809.7 |  |  |  | 100.0 | %
|                                                         |  |                          |       |  |      |  |       |      |  |   |       |  |  |  |       |   |  |  






|    |                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Worldwide comprises insurance and reinsurance
    contracts that insure or reinsure risks in more than one
    geographic area.                                                                          
|   
|(2) | Worldwide, excluding USA and Canada comprises
    insurance and reinsurance contracts that insure or reinsure
    risks in more than one geographic area but specifically exclude
    the USA and Canada.





Gross Premiums Written by Broker


|                   |  |                          |       |  |      |  |       |      |  |   |       |  |  |  |       |   |  |   |       |  |  |  |       |  
|------------------ |  | ------------------------ | ----- |  | ---- |  | ----- | ---- |  | - | ----- |  |  |  | ----- | - |  | - | ----- |  |  |  | ----- | -
|                   |  | Years Ended December 31, |      
|                   |  |                          |      
|                   |  | 2005                     |       |  | 2004 |  |       | 2003 | 
|                   |  |                          |       |  |      |  |       |      | 
|Marsh              |  | $                        | 272.8 |  |      |  | 30.3  | %    |  | $ | 188.7 |  |  |  | 24.8  | % |  | $ | 204.7 |  |  |  | 28.1  | %
|Benfield(1)        |  |                          | 170.7 |  |      |  | 19.0  |      |  |   | 133.9 |  |  |  | 17.6  |   |  |   | 147.1 |  |  |  | 20.2  |  
|Aon                |  |                          | 168.5 |  |      |  | 18.7  |      |  |   | 166.9 |  |  |  | 21.9  |   |  |   | 145.9 |  |  |  | 20.0  |  
|Willis Group(1)    |  |                          | 134.7 |  |      |  | 15.0  |      |  |   | 104.1 |  |  |  | 13.7  |   |  |   | 120.9 |  |  |  | 16.6  |  
|Other brokers      |  |                          | 153.0 |  |      |  | 17.0  |      |  |   | 167.2 |  |  |  | 22.0  |   |  |   | 110.1 |  |  |  | 15.1  |  
|                   |  |                          |       |  |      |  |       |      |  |   |       |  |  |  |       |   |  |  
|Total brokers      |  |                          | 899.7 |  |      |  | 100.0 | %    |  |   | 760.8 |  |  |  | 100.0 | % |  |   | 728.7 |  |  |  | 100.0 | %
|                   |  |                          |       |  |      |  |       |      |  |   |       |  |  |  |       |   |  |  
|Direct (no broker) |  |                          | 79.0  |  |      |  |       |      |  |   | 76.2  |  |  |  |       |   |  |   | 81.0  |  |  |  |       |  
|                   |  |                          |       |  |      |  |       |      |  |   |       |  |  |  |       |   |  |  
|Total              |  | $                        | 978.7 |  |      |  |       |      |  | $ | 837.0 |  |  |  |       |   |  | $ | 809.7 |  |  |  |       |  
|                   |  |                          |       |  |      |  |       |      |  |   |       |  |  |  |       |   |  |  






|    |                                    
|--- | -----------------------------------
|(1) | Includes QQS gross premiums written

F-27



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                          
|--- | -------------------------
|11. | Earnings (Loss) Per Share



|                                                                               |  |                          |            |   |      |   |            |      |  |   |            | 
|------------------------------------------------------------------------------ |  | ------------------------ | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | 
|                                                                               |  | Years Ended December 31, |           
|                                                                               |  |                          |           
|                                                                               |  | 2005                     |            |   | 2004 |   |            | 2003 | 
|                                                                               |  |                          |            |   |      |   |            |      | 
|Basic earnings (loss) per common share:                                        |  |                          |            |   |      |   |            |      |  |   |            | 
|Net income (loss) available to common shareholders                             |  | $                        | (752,902   | ) |      | $ | 240,281    |      |  | $ | 407,178    | 
|Weighted average common shares outstanding  Basic                             |  |                          | 71,757,651 |   |      |   | 62,633,467 |      |  |   | 63,392,597 | 
|                                                                               |  |                          |            |   |      |   |            |      | 
|Basic earnings (loss) per common share                                         |  | $                        | (10.49     | ) |      | $ | 3.84       |      |  | $ | 6.42       | 
|                                                                               |  |                          |            |   |      |   |            |      | 
|Diluted earnings (loss) per common share:                                      |  |                          |            |   |      |   |            |      |  |   |            | 
|Net income (loss) available to common shareholders                             |  | $                        | (752,902   | ) |      | $ | 240,281    |      |  | $ | 407,178    | 
|Weighted average common shares outstanding  Basic                             |  |                          | 71,757,651 |   |      |   | 62,633,467 |      |  |   | 63,392,597 | 
|Dilutive effect of warrants                                                    |  |                          |           |   |      |   | 3,967,866  |      |  |   | 3,110,351  | 
|Dilutive effect of share options                                               |  |                          |           |   |      |   | 1,105,639  |      |  |   | 772,339    | 
|                                                                               |  |                          |            |   |      |   |            |      | 
|Weighted average common and common equivalent shares
    outstanding  Diluted |  |                          | 71,757,651 |   |      |   | 67,706,972 |      |  |   | 67,275,287 | 
|                                                                               |  |                          |            |   |      |   |            |      | 
|Diluted earnings (loss) per common share                                       |  | $                        | (10.49     | ) |      | $ | 3.55       |      |  | $ | 6.05       | 
|                                                                               |  |                          |            |   |      |   |            |      | 






|    |                                                                                                                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As there is a net loss for 2005, the warrants, share options and
    share equivalents are anti-dilutive in the amounts of 3,782,729
    warrants, 153,882 share options and 2,614 share
    equivalents for 2005 and have therefore not been included in the
    calculation of diluted earnings (loss) per share.



|    |                                       
|--- | --------------------------------------
|12. | Commitments and Contingent Liabilities



| |                              
| | -----------------------------
| | Concentrations of Credit Risk







| |           
| | ----------
| | Litigation



F-28



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                  
| | -----------------
| | Lease Commitments





|    |                         
|--- | ------------------------
|13. | Employee Incentive Plans



| |                                                 
| | ------------------------------------------------
| | Montpelier Long-Term Incentive Plan
    (LTIP)











| |                              
| | -----------------------------
| | Performance Unit Plan (PUP)







F-29



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |            
| | -----------
| | Option Plan

10b5-1




|                              |  |             |           |  |          |   |       |             |  |  |           |  |  |             |       |  |          |  |           |  |  |   |       | 
|----------------------------- |  | ----------- | --------- |  | -------- | - | ----- | ----------- |  |  | --------- |  |  | ----------- | ----- |  | -------- |  | --------- |  |  | - | ----- | 
|                              |  | 2005        |           |  | 2004     |   |       | 2003        | 
|                              |  |             |           |  |          |   |       |             | 
|                              |  | Options for |           |  | Average  |   |       | Options for |  |  | Average   |  |  | Options for |       |  | Average  | 
|                              |  | Common      |           |  | Exercise |   |       | Common      |  |  | Exercise  |  |  | Common      |       |  | Exercise | 
|                              |  | Shares      |           |  | Price    |   |       | Shares      |  |  | Price     |  |  | Shares      |       |  | Price    | 
|                              |  |             |           |  |          |   |       |             |  |  |           |  |  |             |       |  |          | 
|Outstanding beginning of year |  |             | 1,922,500 |  |          | $ | 18.47 |             |  |  | 2,550,000 |  |  | $           | 18.08 |  |          |  | 2,550,000 |  |  | $ | 18.08 | 
|Options granted               |  |             |          |  |          |   |      |             |  |  |          |  |  |             |      |  |          |  |          |  |  |   |      | 
|Options exercised             |  |             | 1,922,500 |  |          |   | 18.47 |             |  |  | 627,500   |  |  |             | 16.91 |  |          |  |          |  |  |   |      | 
|Options forfeited             |  |             |          |  |          |   |      |             |  |  |          |  |  |             |      |  |          |  |          |  |  |   |      | 
|Options expired               |  |             |          |  |          |   |      |             |  |  |          |  |  |             |      |  |          |  |          |  |  |   |      | 
|Outstanding end of year       |  |             |          |  |          | $ |      |             |  |  | 1,922,500 |  |  | $           | 18.47 |  |          |  | 2,550,000 |  |  | $ | 18.08 | 







| |                                   
| | ----------------------------------
| | Deferred Compensation Plan (DCP)



F-30



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |         
|--- | --------
|14. | Taxation



| |        
| | -------
| | Bermuda





| |              
| | -------------
| | United States





| |      
| | -----
| | Other





|    |                       
|--- | ----------------------
|15. | Statutory Requirements









|    |                  
|--- | -----------------
|16. | Subsequent Events

3-month


F-31



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                   
|--- | ----------------------------------
|18. | Unaudited Quarterly Financial Data

|                                                 |  |           |            |   |          |   |            |               |  |   |              |   |  |   |            |  
|------------------------------------------------ |  | --------- | ---------- | - | -------- | - | ---------- | ------------- |  | - | ------------ | - |  | - | ---------- | -
|                                                 |  | March 31, |            |   | June 30, |   |            | September 30, |  |   | December 31, |  
|Quarters Ended                                   |  | 2005      |            |   | 2005     |   |            | 2005          |  |   | 2005         |  
|                                                 |  |           |            |   |          |   |            |               |  |   |              |  
|Gross premiums written                           |  | $         | 306,273    |   |          | $ | 275,648    |               |  | $ | 289,995      |   |  | $ | 106,814    |  
|Net premiums written                             |  |           | 279,437    |   |          |   | 231,634    |               |  |   | 237,657      |   |  |   | 8,267      |  
|Net premiums earned                              |  |           | 180,531    |   |          |   | 227,107    |               |  |   | 281,331      |   |  |   | 159,517    |  
|Net investment income                            |  |           | 21,414     |   |          |   | 19,060     |               |  |   | 20,550       |   |  |   | 25,981     |  
|Net realized gains (losses) on investments       |  |           | 12,338     |   |          |   | 16,876     |               |  |   | 17,079       |   |  |   | (5,661     | )
|Net foreign exchange losses                      |  |           | (3,355     | ) |          |   | (3,758     | )             |  |   | (781         | ) |  |   | (2,145     | )
|Other income                                     |  |           |           |   |          |   |           |               |  |   |             |   |  |   | 806        |  
|Total revenues                                   |  |           | 210,928    |   |          |   | 259,285    |               |  |   | 318,179      |   |  |   | 178,498    |  
|Loss and loss adjustment expenses                |  |           | 79,524     |   |          |   | 81,523     |               |  |   | 1,159,423    |   |  |   | 190,231    |  
|Acquisition costs                                |  |           | 37,364     |   |          |   | 49,941     |               |  |   | 43,186       |   |  |   | 35,780     |  
|General & administrative expenses                |  |           | 15,238     |   |          |   | 15,206     |               |  |   | (13,316      | ) |  |   | 8,815      |  
|Financing expense                                |  |           | 4,267      |   |          |   | 3,890      |               |  |   | 4,068        |   |  |   | 4,629      |  
|Total expenses                                   |  |           | 136,393    |   |          |   | 150,560    |               |  |   | 1,193,361    |   |  |   | 239,455    |  
|Income (loss) before minority interest and taxes |  |           | 74,535     |   |          |   | 108,725    |               |  |   | (875,182     | ) |  |   | (60,957    | )
|Minority Interest  Blue Ocean                   |  |           |           |   |          |   |           |               |  |   |             |   |  |   | 13         |  
|Income tax expense (recovery)                    |  |           | 30         |   |          |   | 18         |               |  |   | (34          | ) |  |   | 22         |  
|Net income (loss)                                |  | $         | 74,505     |   |          | $ | 108,707    |               |  | $ | (875,148     | ) |  | $ | (60,966    | )
|Basic earnings (loss) per common share           |  | $         | 1.19       |   |          | $ | 1.72       |               |  | $ | (12.16       | ) |  | $ | (0.68      | )
|Diluted earnings (loss) per common share         |  | $         | 1.11       |   |          | $ | 1.62       |               |  | $ | (12.16       | ) |  | $ | (0.68      | )
|Weighted average shares  basic                  |  |           | 62,580,009 |   |          |   | 63,327,564 |               |  |   | 71,944,539   |   |  |   | 89,178,490 |  
|Weighted average shares  diluted                |  |           | 67,729,778 |   |          |   | 66,949,587 |               |  |   | 71,944,539   |   |  |   | 89,178,490 |  
|Loss ratio                                       |  |           | 44.1       | % |          |   | 35.9       | %             |  |   | 412.0        | % |  |   | 119.2      | %
|Expense ratio                                    |  |           | 29.1       | % |          |   | 28.7       | %             |  |   | 10.7         | % |  |   | 28.0       | %
|Combined ratio                                   |  |           | 73.2       | % |          |   | 64.6       | %             |  |   | 422.7        | % |  |   | 147.2      | %



F-32



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                         |  |           |            |   |          |   |            |               |  |   |              |   |  |   |            |  
|---------------------------------------- |  | --------- | ---------- | - | -------- | - | ---------- | ------------- |  | - | ------------ | - |  | - | ---------- | -
|                                         |  | March 31, |            |   | June 30, |   |            | September 30, |  |   | December 31, |  
|Quarters Ended                           |  | 2004      |            |   | 2004     |   |            | 2004          |  |   | 2004         |  
|                                         |  |           |            |   |          |   |            |               |  |   |              |  
|Gross premiums written                   |  | $         | 333,225    |   |          | $ | 210,418    |               |  | $ | 184,443      |   |  | $ | 108,965    |  
|Net premiums written                     |  |           | 297,370    |   |          |   | 182,200    |               |  |   | 170,848      |   |  |   | 98,898     |  
|Net premiums earned                      |  |           | 190,824    |   |          |   | 193,633    |               |  |   | 209,982      |   |  |   | 193,076    |  
|Net investment income                    |  |           | 15,282     |   |          |   | 16,263     |               |  |   | 18,016       |   |  |   | 19,511     |  
|Net realized gains on investments        |  |           | 1,736      |   |          |   | 1,436      |               |  |   | 1,994        |   |  |   | 2,082      |  
|Net foreign exchange gains (losses)      |  |           | 1,009      |   |          |   | (1,033     | )             |  |   | 1,227        |   |  |   | 5,796      |  
|Total revenues                           |  |           | 208,851    |   |          |   | 210,299    |               |  |   | 231,219      |   |  |   | 220,465    |  
|Loss and loss adjustment expenses        |  |           | 46,185     |   |          |   | 40,172     |               |  |   | 263,461      |   |  |   | 54,984     |  
|Acquisition costs                        |  |           | 35,704     |   |          |   | 43,862     |               |  |   | 32,571       |   |  |   | 40,642     |  
|General & administrative expenses        |  |           | 13,711     |   |          |   | 14,816     |               |  |   | 8,897        |   |  |   | 17,870     |  
|Financing expense                        |  |           | 4,170      |   |          |   | 4,441      |               |  |   | 4,302        |   |  |   | 4,621      |  
|Total expenses                           |  |           | 99,770     |   |          |   | 103,291    |               |  |   | 309,231      |   |  |   | 118,117    |  
|Income (loss) before taxes               |  |           | 109,081    |   |          |   | 107,008    |               |  |   | (78,012      | ) |  |   | 102,348    |  
|Income tax expense (recovery)            |  |           | 38         |   |          |   | 25         |               |  |   | 158          |   |  |   | (77        | )
|Net income (loss)                        |  | $         | 109,043    |   |          | $ | 106,983    |               |  | $ | (78,170      | ) |  | $ | 102,425    |  
|Basic earnings (loss) per common share   |  | $         | 1.72       |   |          | $ | 1.70       |               |  | $ | (1.26        | ) |  | $ | 1.65       |  
|Diluted earnings (loss) per common share |  | $         | 1.59       |   |          | $ | 1.57       |               |  | $ | (1.26        | ) |  | $ | 1.53       |  
|Weighted average shares  basic          |  |           | 63,409,264 |   |          |   | 63,078,809 |               |  |   | 62,012,065   |   |  |   | 62,033,732 |  
|Weighted average shares  diluted        |  |           | 68,769,273 |   |          |   | 67,942,191 |               |  |   | 62,012,065   |   |  |   | 67,068,252 |  
|Loss ratio                               |  |           | 24.2       | % |          |   | 20.7       | %             |  |   | 125.5        | % |  |   | 28.5       | %
|Expense ratio                            |  |           | 25.9       | % |          |   | 30.3       | %             |  |   | 19.7         | % |  |   | 30.3       | %
|Combined ratio                           |  |           | 50.1       | % |          |   | 51.0       | %             |  |   | 145.2        | % |  |   | 58.8       | %

F-33



---



##### Table of Contents



INDEX TO FINANCIAL STATEMENT SCHEDULES


|                                                                                                   |  |      |     |          |        |  |     | 
|-------------------------------------------------------------------------------------------------- |  | ---- | --- | -------- | ------ |  | --- | 
|                                                                                                   |  |      |     | Schedule |       
|                                                                                                   |  | Page |     |          | Number | 
|                                                                                                   |  |      |     |          |        | 
|Summary of Investments  Other
    than Investments in Related Parties as at December 31,
    2005 |  |      | S-2 |          |        |  | I   | 
|Condensed Financial Information of
    Registrant                                                  |  |      | S-3 |          |        |  | II  | 
|Supplementary Insurance Information for the
    years ended December 31, 2005, 2004, and 2003      |  |      | S-6 |          |        |  | III | 
|Reinsurance for the years ended December 31, 2005, 2004 and
    2003                               |  |      | S-7 |          |        |  | IV  | 
|Note: Other Schedules have been omitted as they are not
    applicable to the Company              |  |      |     |          |        |  |     | 

S-1



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.





SCHEDULE I


Summary of Investments


Other than Investments in Related Parties


As at December 31, 2005


(Expressed in thousands of United States dollars)


|                                             |                                             |                        |           |         |            |              |           |               |           |   |           |         |           | 
|-------------------------------------------- | ------------------------------------------- | ---------------------- | --------- | ------- | ---------- | ------------ | --------- | ------------- | --------- | - | --------- | ------- | --------- | 
|                                             |                                             |                        |           |         |            | Amount Shown |          
|                                             |                                             | Cost or                |           |         | Estimated  |              |           | in the        |          
|Type of Investment                           |                                             | Amortized Cost         |           |         | Fair Value |              |           | Balance Sheet |          
|                                             |                                             |                        |           |         |            |              |           |               |          
|Fixed maturities:                            |                                             |                        |           |         |            |              |           |               |           |   |           |        
|                                             | U.S. government                             |                        | $         | 301,901 |            |              | $         | 298,563       |           |   | $         | 298,563 |          
|                                             | U.S. government-sponsored enterprises       |                        |           | 607,676 |            |              |           | 596,631       |           |   |           | 596,631 |          
|                                             | Non U.S. government                         |                        |           | 30,484  |            |              |           | 28,814        |           |   |           | 28,814  |          
|                                             | Corporate debt securities                   |                        |           | 757,087 |            |              |           | 750,477       |           |   |           | 750,477 |          
|                                             | Mortgage-backed and asset-backed securities |                        |           | 637,166 |            |              |           | 632,569       |           |   |           | 632,569 |          
|                                             |                                             |                        |           |         |            |              |           |               |          
|                                             |                                             | Total fixed maturities |           |         | 2,334,314  |              |           |               | 2,307,054 |   |           |         | 2,307,054 | 
|Equity investments:                          |                                             |                        | 96,982    |         |            |              | 113,553   |               |           |   | 113,553   |        
|Other investments:                           |                                             |                        | 30,000    |         |            |              | 31,569    |               |           |   | 31,569    |        
|Cash and cash equivalents                    |                                             |                        | 450,146   |         |            |              | 450,146   |               |           |   | 450,146   |        
|                                             |                                             |                        |           |         |            |              |           |               |          
|Total investments, cash and cash equivalents |                                             | $                      | 2,911,442 |         |            | $            | 2,902,322 |               |           | $ | 2,902,322 |        
|                                             |                                             |                        |           |         |            |              |           |               |          

S-2



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.





SCHEDULE II


Condensed Financial Information of Registrant


Condensed Balance Sheets  Parent Company only


As at December 31, 2005 and 2004


(Expressed in thousands of United States dollars)


|                                                                                                                                                                          |                                            |      |           |           |      |   |           |           | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ---- | --------- | --------- | ---- | - | --------- | --------- | 
|                                                                                                                                                                          |                                            | 2005 |           |           | 2004 |  
|                                                                                                                                                                          |                                            |      |           |           |      |  
|ASSETS                                                                                                                                                                   
|Cash and cash equivalents, at fair value                                                                                                                                  |                                            | $    | 4,996     |           |      | $ | 12,622    |          
|Investment in consolidated subsidiaries, on an equity basis                                                                                                               |                                            |      | 1,332,341 |           |      |   | 2,017,095 |          
|Other assets                                                                                                                                                              |                                            |      | 1,236     |           |      |   | 1,128     |          
|                                                                                                                                                                          |                                            |      |           |           |      |  
|                                                                                                                                                                          | Total Assets                               |      | $         | 1,338,573 |      |   | $         | 2,030,845 | 
|                                                                                                                                                                          |                                            |      |           |           |      |  
|                                                                                                                                                                         
|LIABILITIES                                                                                                                                                              
|Accounts payable and accrued expenses                                                                                                                                     |                                            |      | 6,573     |           |      |   | 6,325     |          
|Debt                                                                                                                                                                      |                                            |      | 249,084   |           |      |   | 248,963   |          
|Dividends payable                                                                                                                                                         |                                            |      | 7,226     |           |      |   | 23,613    |          
|Other Liabilities                                                                                                                                                         |                                            |      | 18,031    |           |      |   |          |          
|                                                                                                                                                                          |                                            |      |           |           |      |  
|                                                                                                                                                                          | Total Liabilities                          |      | $         | 280,914   |      |   | $         | 278,901   | 
|                                                                                                                                                                          |                                            |      |           |           |      |  
|                                                                                                                                                                         
|SHAREHOLDERS EQUITY                                                                                                                                                      |                                            |      |           |           |      |   |           |          
|Common voting shares: 1/6 cent par value; authorized
    1,200,000,000 shares; issued and outstanding at
    December 31, 2005; 89,178,490 shares (2004 
    62,131,232) |                                            |      | 149       |           |      |   | 104       |          
|Additional paid-in capital                                                                                                                                                |                                            |      | 1,714,904 |           |      |   | 1,111,735 |          
|Accumulated other comprehensive income (loss)                                                                                                                             |                                            |      | (9,081    | )         |      |   | 55,094    |          
|Retained earnings (deficit)                                                                                                                                               |                                            |      | (648,313  | )         |      |   | 585,011   |          
|                                                                                                                                                                          |                                            |      |           |           |      |  
|                                                                                                                                                                          | Total Shareholders Equity                 |      |           | 1,057,659 |      |   |           | 1,751,944 | 
|                                                                                                                                                                          |                                            |      |           |           |      |  
|                                                                                                                                                                          | Total Liabilities and Shareholders Equity |      | $         | 1,338,573 |      |   | $         | 2,030,845 | 
|                                                                                                                                                                          |                                            |      |           |           |      |  

S-3



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.


SCHEDULE II


Condensed Financial Information of Registrant


Statements of Operations


For the Years Ended December 31, 2005, 2004 and 2003


(Expressed in thousands of United States Dollars, except
share amounts)


|                                                   |                                               |                |          |          |        |   |         |         |        |   |         |         |        | 
|-------------------------------------------------- | --------------------------------------------- | -------------- | -------- | -------- | ------ | - | ------- | ------- | ------ | - | ------- | ------- | ------ | 
|                                                   |                                               | 2005           |          |          | 2004   |   |         | 2003    |       
|                                                   |                                               |                |          |          |        |   |         |         |       
|REVENUES                                           |                                               |                |          |          |        |   |         |         |        |   |         |        
|                                                   | Equity in net earnings (loss) of subsidiaries |                | $        | (731,579 | )      |   | $       | 261,871 |        |   | $       | 421,907 |       
|                                                   | Management fee from subsidiary                |                |          |         |        |   |         |        |        |   |         | 5,000   |       
|                                                   | Other income                                  |                |          | 164      |        |   |         | 331     |        |   |         | 52      |       
|                                                   |                                               |                |          |          |        |   |         |         |       
|                                                   | Total Revenue                                 |                |          | (731,415 | )      |   |         | 262,202 |        |   |         | 426,959 |       
|EXPENSES                                           |                                               |                |          |          |        |   |         |         |        |   |         |        
|                                                   | Financing expense                             |                |          | 15,433   |        |   |         | 15,433  |        |   |         | 8,731   |       
|                                                   | Payment on settlement of interest rate swap   |                |          |         |        |   |         |        |        |   |         | 1,002   |       
|                                                   | Other expenses                                |                |          | 6,054    |        |   |         | 6,488   |        |   |         | 10,047  |       
|                                                   |                                               |                |          |          |        |   |         |         |       
|                                                   |                                               | Total Expenses |          |          | 21,487 |   |         |         | 21,921 |   |         |         | 19,780 | 
|                                                   |                                               |                |          |          |        |   |         |         |       
|NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS |                                               | $              | (752,902 | )        |        | $ | 240,281 |         |        | $ | 407,179 |        
|                                                   |                                               |                |          |          |        |   |         |         |       

S-4



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.


SCHEDULE II


Condensed Financial Information of Registrant


Statements of Cash Flows  Parent company only


For the Years Ended December 31, 2005, 2004 and 2003


(Expressed in thousands of United States dollars)


|                                                       |                                                                                                 |            |                                                 |          |      |         |   |          |   |          |   |          |   |          |  
|------------------------------------------------------ | ----------------------------------------------------------------------------------------------- | ---------- | ----------------------------------------------- | -------- | ---- | ------- | - | -------- | - | -------- | - | -------- | - | -------- | -
|                                                       |                                                                                                 | 2005       |                                                 |          | 2004 |         |   | 2003     |  
|                                                       |                                                                                                 |            |                                                 |          |      |         |   |          |  
|Cash flows provided by (used in) operating activities: |                                                                                                 |            |                                                 |          |      |         |   |          |   |          |   |         
|                                                       | Net income (loss)                                                                               |            | $                                               | (752,902 | )    |         | $ | 240,281  |   |          | $ | 407,179  |  
|                                                       | Adjustments to reconcile net income to net cash provided by
    (used in) operating activities: |            |                                                 |          |      |         |   |          |   |          |   |          |  
|                                                       |                                                                                                 |            | Equity in net earnings (loss) of subsidiaries   |          |      | 731,579 |   |          |   | (261,871 | ) |          |   | (421,907 | )
|                                                       |                                                                                                 |            | Compensation recognized under stock option plan |          |      | 1,244   |   |          |   | 2,305    |   |          |   | 4,040    |  
|                                                       |                                                                                                 |            | Accretion of Senior Notes                       |          |      | 121     |   |          |   | 120      |   |          |   | 50       |  
|                                                       |                                                                                                 | Change in: |                                                 |          |      |         |   |          |   |          |   |          |   |         
|                                                       |                                                                                                 |            | Other assets and liabilities                    |          |      | 18,170  |   |          |   | 220      |   |          |   | 12,554   |  
|                                                       |                                                                                                 |            |                                                 |          |      |         |   |          |  
|                                                       | Net cash provided by (used in) operating activities                                             |            |                                                 | (1,788   | )    |         |   | (18,945  | ) |          |   | 1,916    |  
|                                                       |                                                                                                 |            |                                                 |          |      |         |   |          |  
|Cash flows provided by (used in) investing activities: |                                                                                                 |            |                                                 |          |      |         |   |          |   |          |   |         
|                                                       | Net capital contribution from (to) subsidiary                                                   |            |                                                 | (111,000 | )    |         |   | 122,910  |   |          |   | (47,161  | )
|                                                       |                                                                                                 |            |                                                 |          |      |         |   |          |  
|                                                       | Net cash provided by (used in) investing activities                                             |            |                                                 | (111,000 | )    |         |   | 122,910  |   |          |   | (47,161  | )
|                                                       |                                                                                                 |            |                                                 |          |      |         |   |          |  
|Cash flows provided by (used in) financing activities: |                                                                                                 |            |                                                 |          |      |         |   |          |   |          |   |         
|                                                       | Issue of common shares                                                                          |            |                                                 | 622,393  |      |         |   | 10,612   |   |          |   |         |  
|                                                       | Repurchase of common shares                                                                     |            |                                                 |         |      |         |   | (65,476  | ) |          |   |         |  
|                                                       | Repayment of debt                                                                               |            |                                                 |         |      |         |   |         |   |          |   | (150,000 | )
|                                                       | Net proceeds received from issuance of Senior Notes                                             |            |                                                 |         |      |         |   |         |   |          |   | 248,792  |  
|                                                       | Dividends paid                                                                                  |            |                                                 | (496,808 | )    |         |   | (95,274  | ) |          |   |         |  
|                                                       | Direct equity offering expenses                                                                 |            |                                                 | (20,423  | )    |         |   |         |   |          |   | (170     | )
|                                                       |                                                                                                 |            |                                                 |          |      |         |   |          |  
|                                                       | Net cash provided by (used in) financing activities                                             |            |                                                 | 105,162  |      |         |   | (150,138 | ) |          |   | 98,622   |  
|                                                       |                                                                                                 |            |                                                 |          |      |         |   |          |  
|                                                       | Increase (decrease) in cash and cash equivalents                                                |            |                                                 | (7,626   | )    |         |   | (46,173  | ) |          |   | 53,377   |  
|                                                       |                                                                                                 |            |                                                 |          |      |         |   |          |  
|                                                       | Cash and cash equivalents  Beginning of year                                                   |            |                                                 | 12,622   |      |         |   | 58,795   |   |          |   | 5,418    |  
|                                                       |                                                                                                 |            |                                                 |          |      |         |   |          |  
|                                                       | Cash and cash equivalents  End of year                                                         |            | $                                               | 4,996    |      |         | $ | 12,622   |   |          | $ | 58,795   |  
|                                                       |                                                                                                 |            |                                                 |          |      |         |   |          |  

S-5



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.





SCHEDULE III


Supplementary Insurance Information


As at and for the Periods Ended December 31, 2005, 2004,
and 2003


(Expressed in thousands of United States dollars)


|                             |  |             |        |               |                |   |           |          |  |     |          |  |               |                |         |              |             |   |        |             |  |       |           |  |       |          |         |  |  |   |        |  |  |   |         | 
|---------------------------- |  | ----------- | ------ | ------------- | -------------- | - | --------- | -------- |  | --- | -------- |  | ------------- | -------------- | ------- | ------------ | ----------- | - | ------ | ----------- |  | ----- | --------- |  | ----- | -------- | ------- |  |  | - | ------ |  |  | - | ------- | 
|                             |  |             |        | Future Policy |                |   |           |          |  |     |          |  | Net Benefits, |                |         | Amortization |             |   |        |             | 
|                             |  | Deferred    |        |               | Benefits,      |   |           |          |  |     |          |  |               | Claims, Losses |         |              | of Deferred |   |        |             |  |      
|                             |  | Policy      |        |               | Losses, Claims |   |           |          |  | Net |          |  | Net           |                |         | and          |             |   | Policy |             |  | Other |           |  | Gross |         
|                             |  | Acquisition |        |               | and Loss       |   |           | Unearned |  |     | Premiums |  |               | Investment     |         |              | Settlement  |   |        | Acquisition |  |       | Operating |  |       | Premiums |        
|                             |  | Costs       |        |               | Expenses       |   |           | Premiums |  |     | Earned   |  |               | Income         |         |              | Expenses    |   |        | Costs       |  |       | Expenses  |  |       | Written  |        
|                             |  |             |        |               |                |   |           |          |  |     |          |  |               |                |         |              |             |   |        |             |  |       |           |  |       |          |        
|2005  Property and Casualty |  | $           | 53,445 |               |                | $ | 1,781,940 |          |  | $   | 262,850  |  |               | $              | 848,486 |              |             | $ | 87,005 |             |  | $     | 1,510,701 |  |       | $        | 159,465 |  |  | $ | 25,943 |  |  | $ | 978,730 | 
|2004  Property and Casualty |  | $           | 59,031 |               |                | $ | 549,541   |          |  | $   | 287,546  |  |               | $              | 787,515 |              |             | $ | 69,072 |             |  | $     | 404,802   |  |       | $        | 145,184 |  |  | $ | 55,294 |  |  | $ | 837,051 | 
|2003  Property and Casualty |  | $           | 59,817 |               |                | $ | 249,791   |          |  | $   | 318,673  |  |               | $              | 705,333 |              |             | $ | 50,148 |             |  | $     | 164,107   |  |       | $        | 120,752 |  |  | $ | 50,021 |  |  | $ | 809,733 | 

S-6



---



##### Table of Contents



MONTPELIER RE HOLDINGS LTD.


SCHEDULE IV


Reinsurance


As at and for the Periods Ended December 31, 2005, 2004
and 2003


(Expressed in thousands of United States dollars)


|                             |  |           |        |          |           |   |              |              |  |   |            |               |                |        |         |  |  |  |     |  
|---------------------------- |  | --------- | ------ | -------- | --------- | - | ------------ | ------------ |  | - | ---------- | ------------- | -------------- | ------ | ------- |  |  |  | --- | -
|                             |  |           |        | Ceded to |           |   | Assumed from |              |  |   |            | Percentage of |               
|                             |  | Direct    |        |          | Other     |   |              | Other        |  |   |            |               | Amount Assumed |       
|                             |  | Amount(1) |        |          | Companies |   |              | Companies(1) |  |   | Net Amount |               |                | to Net |        
|                             |  |           |        |          |           |   |              |              |  |   |            |               |                |        |        
|2005  Property and Casualty |  | $         | 38,678 |          |           | $ | 221,735      |              |  | $ | 940,052    |               |                | $      | 756,995 |  |  |  | 124 | %
|2004  Property and Casualty |  | $         | 49,409 |          |           | $ | 87,735       |              |  | $ | 787,641    |               |                | $      | 749,316 |  |  |  | 105 | %
|2003  Property and Casualty |  | $         | 58,654 |          |           | $ | 31,758       |              |  | $ | 751,079    |               |                | $      | 777,975 |  |  |  | 97  | %






|    |                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | During 2004, the Company refined the classification of gross
    premiums written between direct insurance and reinsurance
    assumed from other companies for prior years. There was no
    effect on total gross premiums written.

S-7