##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended:September 30, 2006
 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: 0-27662
 IPC Holdings, Ltd.
  Bermuda
    
    Not Applicable(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 29 Richmond Road, Pembroke, HM 08, Bermuda
  (441) 298-5100
 þ o
  þ o o
 o þ




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TABLE OF CONTENTS  PART I. FINANCIAL INFORMATIONItem 1. Financial StatementsItem 2. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures about Market RiskItem 4. Controls and ProceduresPART II. OTHER INFORMATIONItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sale of Equity Securities and Use of ProceedsItem 3. Defaults upon Senior SecuritiesItem 4. Submission of Matters to a Vote of Security HoldersItem 5. Other InformationItem 6. ExhibitsEXHIBIT INDEXEX-11.1: RECONCILIATION OF BASIC AND DILUTED NET INCOMEEX-12.1: STATEMENT OF COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGESEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION    Table of Contents  
 PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 IPC HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
  As of
    
    
    As ofSeptember 30, 2006
    
    
    December 31, 2005(unaudited)ASSETS:Fixed maturity investments:Available for sale at fair value (amortized
cost 2006: $1,881,448; 2005: $2,014,735)
    
    $
    1,896,541
    
    
    $
    1,998,606Equity investments: available for sale at fair
value (cost 2006: $447,292; 2005: $420,910)
    
    
    546,619
    
    
    
    530,127Cash and cash equivalents
    
    
    50,916
    
    
    
    31,113Reinsurance premiums receivable
    
    
    182,917
    
    
    
    180,798Deferred premiums ceded
    
    
    6,463
    
    
    
    4,120Losses and loss adjustment expenses recoverable
    
    
    2,137
    
    
    
    1,054Accrued investment income
    
    
    22,937
    
    
    
    19,885Deferred acquisition costs
    
    
    18,633
    
    
    
    7,843Prepaid expenses and other assets
    
    
    3,234
    
    
    
    4,735TOTAL ASSETS
    
    $
    2,730,397
    
    
    $
    2,778,281LIABILITIES:Reserve for losses and loss adjustment expenses
    
    $
    652,015
    
    
    $
    1,072,056Unearned premiums
    
    
    168,335
    
    
    
    66,311Reinsurance premiums payable
    
    
    9,698
    
    
    
    4,991Deferred fees and commissions
    
    
    2,348
    
    
    
    1,363Accounts payable and accrued liabilities
    
    
    14,768
    
    
    
    17,160TOTAL LIABILITIES
    
    
    847,164
    
    
    
    1,161,881SHAREHOLDERS EQUITY:Common shares outstanding, par value
U.S.$0.01: 2006: 63,703,567; 2005: 63,666,368
shares
    
    
    637
    
    
    
    637Preferred shares  Series A mandatory
convertible preferred shares outstanding, par
value U.S.$0.01: 2006: 9,000,000; 2005: 9,000,000
    
    
    90
    
    
    
    90Additional paid-in capital
    
    
    1,475,092
    
    
    
    1,473,257Deferred stock grant compensation
    
    
    (1,788
    )
    
    
    (2,492
    )Retained earnings
    
    
    295,088
    
    
    
    52,126Accumulated other comprehensive income
    
    
    114,114
    
    
    
    92,782TOTAL SHAREHOLDERS EQUITY
    
    
    1,883,233
    
    
    
    1,616,400TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    2,730,397
    
    
    $
    2,778,281
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##### Table of Contents



IPC HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
  Quarter ended September 30,
    
    
    Nine months ended September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(unaudited)
    
    
    (unaudited)
    
    
    (unaudited)
    
    
    (unaudited)REVENUES:Gross premiums written
    
    $
    56,288
    
    
    $
    165,980
    
    
    $
    412,206
    
    
    $
    458,815Change in unearned premiums
    
    
    56,617
    
    
    
    47,697
    
    
    
    (102,023
    )
    
    
    (65,569
    )Premiums earned
    
    
    112,905
    
    
    
    213,677
    
    
    
    310,183
    
    
    
    393,246Reinsurance premiums ceded
    
    
    (1,585
    )
    
    
    (1,948
    )
    
    
    (16,974
    )
    
    
    (20,404
    )Change in deferred premiums ceded
    
    
    (3,480
    )
    
    
    (4,438
    )
    
    
    2,344
    
    
    
    3,616Premiums ceded
    
    
    (5,065
    )
    
    
    (6,386
    )
    
    
    (14,630
    )
    
    
    (16,788
    )Net premiums earned
    
    
    107,840
    
    
    
    207,291
    
    
    
    295,553
    
    
    
    376,458Net investment income
    
    
    25,383
    
    
    
    15,731
    
    
    
    81,051
    
    
    
    48,103Net realized gains (losses) on investments
    
    
    9,072
    
    
    
    (2,002
    )
    
    
    979
    
    
    
    (4,180
    )Other income
    
    
    979
    
    
    
    2,141
    
    
    
    2,741
    
    
    
    4,277143,274
    
    
    
    223,161
    
    
    
    380,324
    
    
    
    424,658EXPENSES:Net losses and loss adjustment expenses
    
    
    7,918
    
    
    
    855,977
    
    
    
    43,401
    
    
    
    918,347Net acquisition costs
    
    
    9,869
    
    
    
    14,160
    
    
    
    27,701
    
    
    
    30,722General and administrative expenses
    
    
    10,435
    
    
    
    9,200
    
    
    
    25,556
    
    
    
    20,993Net exchange loss (gain)
    
    
    87
    
    
    
    394
    
    
    
    (2,768
    )
    
    
    3,16028,309
    
    
    
    879,731
    
    
    
    93,890
    
    
    
    973,222NET INCOME (LOSS)
    
    
    114,965
    
    
    
    (656,570
    )
    
    
    286,434
    
    
    
    (548,564
    )Dividends on preferred shares
    
    
    4,329
    
    
    
    
    
    
    
    12,941
    
    
    
    Net income (loss) available to common
shareholders
    
    $
    110,636
    
    
    $
    (656,570
    )
    
    $
    273,493
    
    
    $
    (548,564
    )Basic net income per common share
    
    $
    1.74
    
    
    $
    (13.57
    )
    
    $
    4.30
    
    
    $
    (11.34
    )Diluted net income per common share
    
    $
    1.60
    
    
    $
    (13.57
    )
    
    $
    3.99
    
    
    $
    (11.34
    )Weighted average number of common shares
- basic
    
    
    63,646,666
    
    
    
    48,385,232
    
    
    
    63,629,883
    
    
    
    48,354,839Weighted average number of common shares
- diluted
    
    
    71,855,963
    
    
    
    48,385,232
    
    
    
    71,838,779
    
    
    
    48,354,839
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IPC HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
  Quarter ended September 30,
    
    
    Nine months ended September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(unaudited)
    
    
    (unaudited)
    
    
    (unaudited)
    
    
    (unaudited)NET INCOME (LOSS)
    
    $
    114,965
    
    
    $
    (656,570
    )
    
    $
    286,434
    
    
    $
    (548,564
    )Other comprehensive income (loss):Net holding gains (losses) on
investments during period
    
    
    49,606
    
    
    
    4,133
    
    
    
    22,311
    
    
    
    (10,328
    )Reclassification adjustment
for (gains) losses included in
net income
    
    
    (9,072
    )
    
    
    2,002
    
    
    
    (979
    )
    
    
    4,18040,534
    
    
    
    6,135
    
    
    
    21,332
    
    
    
    (6,148
    )COMPREHENSIVE INCOME (LOSS)
    
    $
    155,499
    
    
    $
    (650,435
    )
    
    $
    307,766
    
    
    $
    (554,712
    )
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IPC HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
  As of
    
    
    As ofSeptember 30, 2006
    
    
    December 31, 2005(unaudited)COMMON SHARES PAR VALUE $0.01:Balance, beginning of year
    
    $
    637
    
    
    $
    484Additional shares issued
    
    
    
    
    
    
    153Balance, end of period
    
    $
    637
    
    
    $
    637PREFERRED SHARES PAR VALUE $0.01Balance beginning of year
    
    $
    90
    
    
    $
    Additional shares issued
    
    
    
    
    
    
    90Balance, end of period
    
    $
    90
    
    
    $
    90ADDITIONAL PAID-IN CAPITAL:Balance, beginning of year
    
    $
    1,473,257
    
    
    $
    854,797Shares issued
    
    
    25
    
    
    
    617,561Shares repurchased
    
    
    
    
    
    
    (1,334
    )Stock options and grants awarded
    
    
    1,810
    
    
    
    2,233Balance, end of period
    
    $
    1,475,092
    
    
    $
    1,473,257DEFERRED STOCK GRANT
COMPENSATION:Balance, beginning of year
    
    $
    (2,492
    )
    
    $
    (2,899
    )Stock grants awarded
    
    
    (682
    )
    
    
    (1,316
    )Stock grants forfeited
    
    
    
    
    
    
    454Amortization
    
    
    1,386
    
    
    
    1,269Balance, end of period
    
    $
    (1,788
    )
    
    $
    (2,492
    )RETAINED EARNINGS:Balance, beginning of year
    
    $
    52,126
    
    
    $
    724,907Net income (loss)
    
    
    286,434
    
    
    
    (623,399
    )Reduction on share repurchase
    
    
    
    
    
    
    (1,738
    )Dividends paid and accrued
    
    
    (43,472
    )
    
    
    (47,644
    )Balance, end of period
    
    $
    295,088
    
    
    $
    52,126ACCUMULATED OTHER COMPREHENSIVE
INCOME:Balance, beginning of year
    
    $
    92,782
    
    
    $
    91,150Other comprehensive income
    
    
    21,332
    
    
    
    1,632Balance, end of period
    
    $
    114,114
    
    
    $
    92,782TOTAL SHAREHOLDERS EQUITY
    
    $
    1,883,233
    
    
    $
    1,616,400
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IPC HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
  Nine months ended September 30,2006
    
    
    2005(unaudited)
    
    
    (unaudited)CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    286,434
    
    
    $
    (548,564
    )Adjustments to reconcile net income (loss) to cash (used
in) provided by operating activities:Amortization of fixed maturity (discounts) premiums, net
    
    
    (8,095
    )
    
    
    8,476Net realized (gains) losses on investments
    
    
    (979
    )
    
    
    4,180Stock compensation
    
    
    2,542
    
    
    
    2,215Changes in:Reinsurance premiums receivable
    
    
    (2,119
    )
    
    
    (152,495
    )Deferred premiums ceded
    
    
    (2,343
    )
    
    
    (3,616
    )Loss and loss adjustment expenses recoverable
    
    
    (1,083
    )
    
    
    1,342Accrued investment income
    
    
    (3,052
    )
    
    
    4,202Deferred acquisition costs
    
    
    (10,790
    )
    
    
    (6,399
    )Prepaid expenses and other assets
    
    
    1,501
    
    
    
    (2,551
    )Reserve for losses and loss adjustment expenses
    
    
    (420,041
    )
    
    
    769,861Unearned premiums
    
    
    102,024
    
    
    
    65,569Reinsurance premiums payable
    
    
    4,707
    
    
    
    5,222Deferred fees and commissions
    
    
    985
    
    
    
    1,189Accounts payable and accrued liabilities
    
    
    (1,963
    )
    
    
    3,531Cash (used in) provided by operating activities
    
    
    (52,272
    )
    
    
    152,162CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of fixed maturity investments
    
    
    (1,396,085
    )
    
    
    (1,483,593
    )Proceeds from sale of fixed maturity investments
    
    
    1,040,990
    
    
    
    1,276,237Proceeds from maturities of fixed maturity investments
    
    
    461,450
    
    
    
    91,740Purchases of equity investments
    
    
    (104,059
    )
    
    
    (23,913
    )Proceeds from sale of equity investments
    
    
    113,683
    
    
    
    17,000Cash provided by (used in) investing activities
    
    
    115,979
    
    
    
    (122,529
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net proceeds from share issuance
    
    
    (3
    )
    
    
    105Cash dividends paid to shareholders
    
    
    (43,901
    )
    
    
    (34,808
    )Cash used in financing activities
    
    
    (43,904
    )
    
    
    (34,703
    )Net increase (decrease) in cash and cash equivalents
    
    
    19,803
    
    
    
    (5,070
    )Cash and cash equivalents, beginning of period
    
    
    31,113
    
    
    
    27,898Cash and cash equivalents, end of period
    
    $
    50,916
    
    
    $
    22,828
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IPC HOLDINGS, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 1.
    
    GENERAL:The consolidated interim financial statements presented herein have been prepared on the
basis of accounting principles generally accepted in the United States of America and
include the accounts of IPC Holdings, Ltd. (the Company) and its wholly-owned
subsidiaries, IPCRe Limited (IPCRe) and IPCRe Underwriting Services Limited (IPCUSL and,
together with the Company and IPCRe, IPC) and IPCRe Europe Limited, which is a
wholly-owned subsidiary of IPCRe. In the opinion of management, these financial statements
reflect all adjustments (consisting of normal recurring accruals) necessary for a fair
presentation of the results of operations for the nine month periods ended September 30,
2006 and 2005, respectively, the balance sheet as of September 30, 2006 and the cash flows
for the nine months ended September 30, 2006 and 2005, respectively. These interim
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements for the year ended December 31, 2005, in our report on
Form 10-K. The results of operations for any interim period are not necessarily indicative
of results for the full year.2.
    
    DIVIDENDS:On February 15, 2006 we paid a preferred dividend of $0.533932 per Series A Mandatory Convertible
preferred share, to shareholders of record on January 31, 2006.On March 23, 2006 we paid a common stock dividend of $0.16 per share to shareholders of record on
March 7, 2006.On May 15, 2006 we paid a preferred dividend of $0.475781 per Series A Mandatory Convertible
preferred share, to shareholders of record on May 1, 2006.On June 22, 2006 we paid a common stock dividend of $0.16 per common share, to shareholders of
record on June 6, 2006.On August 15, 2006 we paid a preferred dividend of $0.475781 per Series A Mandatory Convertible
preferred share, to shareholders of record on August 1, 2006.On September 21, 2006 we paid a common stock dividend of $0.16 per common share, to shareholders
of record on September 5, 2006.On October 24, 2006 we declared a common stock dividend of $0.16 per common share, to be paid on
December 14, 2006, to shareholders of record on November 29, 2006.On October 24, 2006 we declared a preferred dividend of $0.475781 per Series A Mandatory
Convertible preferred share, to be paid on November 15, 2006 to shareholders of record on
November 1, 2006.3.
    
    ACCOUNTING FOR STOCK-BASED COMPENSATION AND DISCLOSURE:Effective January 1, 2006, management adopted the fair value method of accounting for stock-based
employee compensation as prescribed by Financial Accounting Standards Board (FASB) Statement
No. 123 (Revised 2004) Share-Based Payment (SFAS 123R). SFAS 123R requires entities to
measure the cost of employee services received in exchange for an award of equity instruments
based on the grant-date fair value of the award. The cost of such services will be recognized
over the period during which an employee is required to provide service in exchange for the
award. Since 2003 the Company has expensed compensation costs for stock options on a prospective
basis for all awards granted, modified or settled after January 1, 2003 in accordance with
Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation and
Disclosure.SFAS 123R requires expected forfeitures to be included in determining share-based employee
compensation expense. Prior to the adoption of SFAS 123R, forfeiture benefits were recorded
as a reduction to compensation expense when an employee left the Company and forfeited the
award. The transition impact of adopting SFAS 123R as of January 1, 2006, including the
effect of accruing for expected forfeitures on outstanding share-based awards, was not
material to our results of operations for the nine months ended September 30, 2006. In
addition, SFAS 123R requires the immediate expensing of share-based awards granted to
retirement-eligible employees. Share-based awards granted to retirement-eligible
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employees prior to the adoption of SFAS 123R must continue to be amortized over the stated
service period of the award (and accelerated if the employee actually retires). Consequently,
our compensation and benefits expenses in the year ending December 31, 2006 (and, to a lesser
extent, in the years ending December 31, 2007 and 2008) will include both the amortization (and
acceleration, if any) of awards granted to retirement-eligible employees prior to the adoption of
SFAS 123R as well as the full grant-date fair value of new awards granted to such employees under
SFAS 123R. The estimated annual non-cash expense in the year ending December 31, 2006 associated
with the continued amortization of share-based awards granted to retirement-eligible employees
prior to the adoption of SFAS 123R is approximately $676, of which $507 was recognized in the
nine months ended September 30, 2006.On June 13, 2003 the shareholders approved a new stock incentive plan. The plan allows for the
issuance of up to five hundred thousand common shares, $0.01 par value, as grants of restricted
stock to selected employees to compensate them for their contributions to the long-term growth
and profits of the Company. Pursuant to SFAS 123R, compensation expense is recorded ratably
based on the fair value of the grants at the date of grant (i) over the vesting period (ii)
immediately for grants awarded to retirement-eligible employees or (iii) over the period from the
grant date until the date when retirement-eligibility is achieved if earlier than the vesting
date. Such units vest at a rate of 25% annually and are expensed on the straight line basis, but
are recorded as outstanding upon issuance (regardless of the vesting period). The charge
recorded for the nine months ended September 30, 2006 for grants of restricted stock was $1,386
(2005: $1,060).The activity related to these restricted stock units is set forth below:
 Weighted average grant-date fairRestricted stock units
    
    value of restricted stock unitsoutstanding
    
    outstandingFuture
    
    No future
    
    Future
    
    No futureservice
    
    service
    
    service
    
    servicerequired
    
    required(2)
    
    required
    
    required(2)Outstanding, beginning of period
    
    
    49,984
    
    
    
    54,375
    
    
    
    36.44
    
    
    
    36.04Granted (1)
    
    
    15,477
    
    
    
    12,224
    
    
    
    23.10
    
    
    
    26.55Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Vested
    
    
    17,277
    
    
    
    19,125
    
    
    
    36.41
    
    
    
    36.02Outstanding, end of period
    
    
    48,184
    
    
    
    47,474
    
    
    
    32.22
    
    
    
    36.51
 
 (1)
    
    The weighted average grant-date fair value of restricted stock units granted for
the nine months ended September 30, 2006 was $24.62 per unit, compared with $39.42 per unit
for the corresponding period of 2005.(2)
    
    Restricted stock units are deemed to vest immediately for retirement-eligible
employees. The Company adopted a Stock Option Plan (the Option Plan), effective February 15, 1996. This
Option Plan was amended and approved by the shareholders in 1999 and further amended and approved
in 2003 and 2005. Under the last amended Option Plan, approved by shareholders in June 2005, at
the discretion of the Compensation Committee of the Board of Directors (the Committee), the
Company may grant to certain employees up to 2,327,500 common shares, $0.01 par value. The
exercise price of the options granted under the Option Plan shall be as determined by the
Committee in its sole discretion, including, but not limited to, the book value per share or the
publicly traded market price per share.On February 15, 1996 and July 25, 1996, the Company granted options to acquire 85,249 common shares to officers and management employees at an exercise price of $16.54 per common share which equaled the book value per common share as of December 31, 1995. Between January 2,
1997 and September 30, 2006, the Company granted options to acquire common shares to
officers and management employees at exercise prices ranging from $13.375 to $43.03 per
common share, which equaled the opening market prices on the dates of grant. Such options
vest at a rate of 25% annually, are recorded on the straight line basis and lapse on the
tenth anniversary of issue. The Option Plan contains different vesting conditions to the
restricted stock unit plan and therefore we do not deem options granted for
retirement-eligible employees as vesting immediately. The amount of the charge recorded in
the nine months ended September 30, 2006 for awards of stock options was $1,156 (2005:
$1,155).
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The following table illustrates the effect on net income (loss) and earnings per share if the
fair value based method had been applied to all outstanding and unvested awards in each period
in accordance with SFAS 123R.


Nine months endedQuarter ended September 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(unaudited)
    
    
    (unaudited)
    
    
    (unaudited)
    
    
    (unaudited)Net income (loss), as reported
    
    $
    114,965
    
    
    $
    (656,570
    )
    
    $
    286,434
    
    
    $
    (548,564
    )Add: Stock-based employee expense
    
    
    755
    
    
    
    368
    
    
    
    2,542
    
    
    
    1,155Deduct: Total stock-based
employee expense determined
under fair value based method
for all awards.
    
    
    (755
    )
    
    
    (446
    )
    
    
    (2,542
    )
    
    
    (1,403
    )Pro forma net income (loss)
    
    
    114,965
    
    
    
    (656,648
    )
    
    
    286,434
    
    
    
    (548,812
    )Dividends on preferred shares
    
    
    4,329
    
    
    
    
    
    
    
    12,941
    
    
    
    Net income (loss) available to
common shareholders
    
    $
    110,636
    
    
    $
    (656,648
    )
    
    $
    273,493
    
    
    $
    (548,812
    )Earnings per share:Basic  as reported
    
    $
    1.74
    
    
    $
    (13.57
    )
    
    $
    4.30
    
    
    $
    (11.34
    )Basic  pro forma
    
    $
    1.74
    
    
    $
    (13.57
    )
    
    $
    4.30
    
    
    $
    (11.35
    )Diluted  as reported
    
    $
    1.60
    
    
    $
    (13.57
    )
    
    $
    3.99
    
    
    $
    (11.34
    )Diluted  pro forma
    
    $
    1.60
    
    
    $
    (13.57
    )
    
    $
    3.99
    
    
    $
    (11.35
    )




Nine months ended September 30,2006
    
    
    2005Weighted
    
    
    
    
    
    
    Weightedaverage
    
    
    
    
    
    
    averageNumber of
    
    
    exercise
    
    
    Number of
    
    
    exerciseshares
    
    
    price
    
    
    shares
    
    
    priceOutstanding, beginning of period
    
    
    452,125
    
    
    $
    36.47
    
    
    
    474,625
    
    
    $
    31.43Granted
    
    
    162,500
    
    
    $
    28.00
    
    
    
    169,000
    
    
    $
    43.03Exercised
    
    
    1,500
    
    
    $
    16.54
    
    
    
    116,125
    
    
    $
    25.56Forfeited
    
    
    
    
    
    $
    
    
    
    
    22,375
    
    
    $
    35.20Outstanding, end of period
    
    
    613,125
    
    
    $
    34.27
    
    
    
    505,125
    
    
    $
    36.49Exercisable, end of period
    
    
    233,750
    
    
    $
    26.60
    
    
    
    144,375
    
    
    $
    30.37Weighted average fair value of
options granted (per share)
    
    
    
    
    
    $
    8.99
    
    
    
    
    
    
    $
    15.07








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##### Table of Contents



Weightedaverage
    
    
    Weighted
    
    
    
    
    
    
    WeightedOutstanding at
    
    
    contractual
    
    
    average
    
    
    Exercisable at
    
    
    averageRange of
    
    September 30,
    
    
    period in
    
    
    exercise
    
    
    September 30,
    
    
    exerciseexercise price
    
    2006
    
    
    years
    
    
    price
    
    
    2006
    
    
    price$13-19
    
    
    6,000
    
    
    
    3.25
    
    
    
    15.38
    
    
    
    6,000
    
    
    
    15.38$19-25
    
    
    11,500
    
    
    
    3.03
    
    
    
    21.83
    
    
    
    11,500
    
    
    
    21.83$25-31
    
    
    230,625
    
    
    
    8.07
    
    
    
    27.96
    
    
    
    55,000
    
    
    
    27.85$31-37
    
    
    83,750
    
    
    
    5.43
    
    
    
    31.65
    
    
    
    61,875
    
    
    
    31.68$37-43
    
    
    128,750
    
    
    
    7.25
    
    
    
    38.90
    
    
    
    61,250
    
    
    
    38.90$43-49
    
    
    152,500
    
    
    
    8.25
    
    
    
    43.03
    
    
    
    38,125
    
    
    
    43.03Total
    
    
    613,125
    
    
    
    
    
    
    
    
    
    
    
    233,750
 As of September 30, 2006, there was $4,757 of total unrecognized compensation cost related
to unvested share-based compensation arrangements. This cost is expected to be recognized over a
weighted average period of 1.95 years.
 4 NEW ACCOUNTING PRONOUNCEMENTS:
 There were no new accounting pronouncements issued in the quarter ended September 30, 2006 that
would materially affect the Companys financial statements for the period then ended.
 10




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Critical Accounting Policies
  Premiums
  Loss Reserves
      11




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##### Table of Contents



Business
 12




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##### Table of Contents



Investments
    
    
    The extent of decline in value
    
    The length of time the security is below cost
    
    The future prospects of the issuer, or in the case of mutual funds, the future prospects of the fund
    
    Whether the decline appears to be related to general market or industry conditions, or is issuer-specific
    
    Our intent and ability to hold the security
    
    Other qualitative and quantitative factors
    13




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##### Table of Contents



RESULTS OF OPERATIONS, QUARTERS ENDED SEPTEMBER 30, 2006 AND 2005
 The following is a discussion of the results of operations and financial position of IPC
Holdings, Ltd. References to we, our or IPC mean IPC Holdings together with its
wholly-owned subsidiaries, IPCRe and IPCUSL. This discussion should be read in conjunction
with our Consolidated Financial Statements and related notes for the quarter ended September
30, 2006.
        14




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##### Table of Contents



RESULTS OF OPERATIONS, NINE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
        15




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
      rd th
 16




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##### Table of Contents



Off Balance Sheet Arrangements
  Transactions with AIG
   September 30, 2006
    
    September 30, 2005Administrative services fees (included in General & Admin. expenses)
    
    $
    11,046
    
    
    $
    9,830Investment fees netted against investment income:
    
    $
    2,910
    
    
    $
    2,322Underwriting services fee income (included in Other income)
    
    $
    2,125
    
    
    $
    4,277Premiums written
    
    $
    23,712
    
    
    $
    42,808Premiums ceded
    
    $
    1,375
    
    
    $
    1,480
  17




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risk
      Market Risk
 Average for ninemonths endedSeptember 30,
    
    June 30,
    
    March 31,
    
    December 31,
    
    September 30,2006
    
    2006
    
    2006
    
    2005
    
    2006Currency
    
    $
    2,749
    
    
    $
    3,097
    
    
    $
    3,188
    
    
    $
    2,445
    
    
    $
    2,870Interest Rate
    
    
    31,210
    
    
    
    35,593
    
    
    
    37,363
    
    
    
    36,626
    
    
    
    35,198Equity (incl. hedge fund)
    
    
    17,793
    
    
    
    17,879
    
    
    
    18,786
    
    
    
    19,821
    
    
    
    18,569Sum of Risk
    
    
    51,752
    
    
    
    56,569
    
    
    
    59,337
    
    
    
    58,892
    
    
    
    56,637Diversification Benefit
    
    
    (18,757
    )
    
    
    (18,690
    )
    
    
    (19,657
    )
    
    
    (21,188
    )
    
    
    (19,573
    )Total Net Risk
    
    $
    32,995
    
    
    $
    37,879
    
    
    $
    39,680
    
    
    $
    37,704
    
    
    $
    37,064
  18




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##### Table of Contents



Item 4. Controls and Procedures
  Note on Forward-Looking Statements
  19




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sale of Equity Securities and Use of Proceeds
  
 Item 3. Defaults upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
 Exhibits
 ExhibitNumber
    
    Description3.1
    
    a
    
    Memorandum of Association of the Company.3.2
    
    +
    
    Amended and Restated Bye-laws of the Company.3.3
    
    a
    
    Form of Memorandum of Increase of Share Capital.10.1
    
    o
    
    Administrative Services Agreement among IPC Holdings, Ltd., IPCRe Limited and
American International Company, Limited, dated September 1, 2006.11.1
    
    V
    
    Reconciliation of basic and diluted net income (loss) per common share (EPS).12.1
    
    V
    
    Statement of Computation of Ratios of Earnings to Fixed Charges.31.1
    
    V
    
    Certification by Chief Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of
2002.31.2
    
    V
    
    Certification by Chief Financial Officer, as required by Section 302 of the
Sarbanes-Oxley Act of
2002.32.1
    
    **
    
    Certification by Chief Executive Officer, as required by Section 906 of the
Sarbanes-Oxley Act of
2002.32.2
    
    **
    
    Certification by Chief Financial Officer, as required by Section 906 of the
Sarbanes-Oxley Act of
2002.
 
 V
    
    Filed herewitha
    
    Incorporated by reference to the corresponding exhibit on our
Registration Statement on Form S-1 (No. 333-00088).+
    
    Incorporated by reference to Exhibit 4.2 to our Registration Statement on
Form S-3 filed on April 27, 2006 (Registration No. 333-133605).o
    
    Incorporated by reference to Exhibit 10.5 to the Companys Current Report
on Form 8-K filed on September 6, 2006 (File No. 0-27662)**
    
    These certifications are being furnished solely pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 (sub-sections (a) and (b) of Section 1350, Chapter 63
of Title 18, United States Code), and are not being filed as exhibits to this report. 
 20




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##### Table of Contents



IPC HOLDINGS, LTD.
 SIGNATURES
 Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 IPC Holdings, Ltd.(Registrant)Date November 2nd, 2006
    
    /s/ James P. BryceJames P. BrycePresident and Chief Executive OfficerDate November 2nd2006
    
    /s/ John R. WealeJohn R. WealeSenior Vice President and Chief Financial Officer
 21




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description3.1
    
    
    
    Memorandum of Association of the Company.3.2
    
    +
    
    Amended and Restated Bye-laws of the Company.3.3
    
    
    
    Form of Memorandum of Increase of Share Capital.10.1
    
    o
    
    Administrative Services Agreement among IPC Holdings, Ltd., IPCRe Limited and
American International Company, Limited, dated September 1, 2006.11.1
    
    V
    
    Reconciliation of basic and diluted net income (loss) per common share (EPS).12.1
    
    V
    
    Statement of Computation of Ratios of Earnings to Fixed Charges.31.1
    
    V
    
    Certification by Chief Executive Officer, as required by Section 302 of the Sarbanes-Oxley Act of
2002.31.2
    
    V
    
    Certification by Chief Financial Officer, as required by Section 302 of the
Sarbanes-Oxley Act of
2002.32.1
    
    **
    
    Certification by Chief Executive Officer, as required by Section 906 of the
Sarbanes-Oxley Act of
2002.32.2
    
    **
    
    Certification by Chief Financial Officer, as required by Section 906 of the
Sarbanes-Oxley Act of
2002.
 
 V
    
    Filed herewith.a
    
    Incorporated by reference to the corresponding exhibit on our
Registration Statement on Form S-1 (No. 333-00088).+
    
    Incorporated by reference to Exhibit 4.2 to our Registration Statement on
Form S-3 filed on April 27, 2006 (Registration No. 333-133605).o
    
    Incorporated by reference to Exhibit 10.5 to the Companys Current Report
on Form 8-K filed on September 6, 2006 (File No. 0-27662)**
    
    These certifications are being furnished solely pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 (sub-sections (a) and (b) of Section 1350, Chapter 63
of Title 18, United States Code), and are not being filed as exhibits to this report. 
 22