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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
   FORM 10-Q
 [X]
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended: March 31, 2004 OR [   ]
    
    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.)
 American International Building, 29 Richmond Road, Pembroke, HM 08, Bermuda 
  (441) 298-5100 
 
 Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes.
 [X] No [   ] Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes.
 [X] No [   ] The number of outstanding common shares par value U.S. $0.01 per share of IPC
Holdings, Ltd., as of April 28, 2004, was 48,259,145.




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|                                                   |                                                                                               |                                                 |  |  |  |  |  | 
|-------------------------------------------------- | --------------------------------------------------------------------------------------------- | ----------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION                     
|                                                   | Item 1. Financial Statements                                                                 
|                                                   |                                                                                               | CONSOLIDATED BALANCE SHEETS                    
|                                                   |                                                                                               | CONSOLIDATED STATEMENTS OF INCOME              
|                                                   |                                                                                               | CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|                                                   |                                                                                               | CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
|                                                   |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS          
|                                                   |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     
|                                                   | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                   | Item 3. Quantitative and Qualitative Disclosures about Market Risk                           
|                                                   | Item 4. Controls and Procedures                                                              
|PART II. OTHER INFORMATION                        
|                                                   | Item 1. Legal Proceedings                                                                    
|                                                   | Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities     
|                                                   | Item 3. Defaults upon Senior Securities                                                      
|                                                   | Item 4. Submission of Matters to a Vote of Security Holders                                  
|                                                   | Item 5. Other Information                                                                    
|                                                   | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                        
|EXHIBIT INDEX                                     
|AMENDED SCHEDULE I                                
|AMENDED AND RESTATED UNDERWRITING AGENCY AGREEMENT
|RECONCILIATION OF BASIC AND DILUTED NET INCOME    
|CERTIFICATION OF CHIEF EXECUTIVE OFFICER          
|CERTIFICATION OF CHIEF FINANCIAL OFFICER          
|CERTIFICATION OF CHIEF EXECUTIVE OFFICER          
|CERTIFICATION OF CHIEF FINANCIAL OFFICER          



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PART I. FINANCIAL INFORMATION 
 Item 1. Financial Statements 
 IPC HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Expressed in thousands of United States dollars, except for per share amounts) As of
    
    As ofMarch 31, 2004
    
    December 31, 2003(unaudited)ASSETS:Fixed maturity investments:Available for sale, at fair value
(amortized cost 2004 $1,319,519; 2003 $1,240,188)
    
    $
    1,347,352
    
    
    $
    1,260,467Equity investments, available for sale at fair
value (cost 2004 $323,373; 2003: $248,179)
    
    
    401,481
    
    
    
    319,007Cash and cash equivalents
    
    
    20,466
    
    
    
    91,949Reinsurance premiums receivable
    
    
    154,947
    
    
    
    61,194Deferred premiums ceded
    
    
    7,813
    
    
    
    1,317Loss and loss adjustment expenses recoverable
    
    
    1,758
    
    
    
    1,810Accrued investment income
    
    
    20,394
    
    
    
    19,821Deferred acquisition costs
    
    
    20,046
    
    
    
    8,035Prepaid expenses and other assets
    
    
    9,362
    
    
    
    5,858TOTAL ASSETS
    
    $
    1,983,619
    
    
    $
    1,769,458LIABILITIES:Reserve for losses and loss adjustment expenses
    
    $
    125,615
    
    
    $
    123,320Unearned premiums
    
    
    184,707
    
    
    
    61,795Reinsurance premiums payable
    
    
    10,251
    
    
    
    3,877Deferred fees and commissions
    
    
    3,062
    
    
    
    834Accounts payable and accrued liabilities
    
    
    11,462
    
    
    
    10,473335,097
    
    
    
    200,299SHAREHOLDERS EQUITY:Share capital (Common shares outstanding, par
value $0.01: 2004 48,371,520; 2003: 48,292,970 shares)
    
    
    484
    
    
    
    483Additional paid-in capital
    
    
    853,294
    
    
    
    850,133Deferred stock grant compensation
    
    
    (4,107
    )
    
    
    (1,495
    )Retained earnings
    
    
    692,910
    
    
    
    628,931Accumulated other comprehensive income
    
    
    105,941
    
    
    
    91,1071,648,522
    
    
    
    1,569,159TOTAL SHAREHOLDERS EQUITY AND LIABILITIES
    
    $
    1,983,619
    
    
    $
    1,769,458
 The accompanying notes are an integral part of these consolidated financial statements 2




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IPC HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Expressed in thousands of United States dollars, except for per share amounts) Quarter ended March 31,2004
    
    2003(unaudited)
    
    (unaudited)REVENUES:Gross premiums written
    
    $
    210,157
    
    
    $
    191,852Change in unearned premiums
    
    
    (122,912
    )
    
    
    (114,225
    )Premiums earned
    
    
    87,245
    
    
    
    77,627Reinsurance premiums ceded
    
    
    (10,180
    )
    
    
    (9,979
    )Change in deferred premiums ceded
    
    
    6,496
    
    
    
    6,652Premiums ceded
    
    
    (3,684
    )
    
    
    (3,327
    )Net premiums earned
    
    
    83,561
    
    
    
    74,300Net investment income
    
    
    11,563
    
    
    
    11,525Net realized gains on investments
    
    
    5,663
    
    
    
    3,726Other income
    
    
    916
    
    
    
    666101,703
    
    
    
    90,217EXPENSES:Net losses and loss adjustment expenses
    
    
    13,548
    
    
    
    11,156Net acquisition costs
    
    
    9,740
    
    
    
    7,723General and administrative expenses
    
    
    5,080
    
    
    
    4,365Net exchange gain
    
    
    (293
    )
    
    
    (555
    )28,075
    
    
    
    22,689NET INCOME
    
    $
    73,628
    
    
    $
    67,528Basic net income per common share
    
    $
    1.53
    
    
    $
    1.40Diluted net income per common share
    
    $
    1.52
    
    
    $
    1.40Weighted
average number of common shares - basic
    
    
    48,249,825
    
    
    
    48,179,805Weighted
average number of common shares - diluted
    
    
    48,459,653
    
    
    
    48,259,651
 The accompanying notes are an integral part of these consolidated financial statements 3




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IPC HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Expressed in thousands of United States dollars) Quarter ended March 31,2004
    
    2003(unaudited)
    
    (unaudited)NET INCOME
    
    $
    73,628
    
    
    $
    67,528Other comprehensive income (loss):Net holding gains on investments
during period
    
    
    20,497
    
    
    
    1,580Reclassification adjustment for gains
included in net income
    
    
    (5,663
    )
    
    
    (3,726
    )14,834
    
    
    
    (2,146
    )COMPREHENSIVE INCOME
    
    $
    88,462
    
    
    $
    65,382
 The accompanying notes are an integral part of these consolidated financial statements 4




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IPC HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY (Expressed in thousands of United States dollars, except per share amounts) As of
    
    As ofMarch 31, 2004
    
    December 31, 2003(unaudited)COMMON SHARES PAR VALUE $0.01:Balance, beginning of year
    
    $
    483
    
    
    $
    483Additional shares issued
    
    
    1
    
    
    
    0Balance, end of period
    
    $
    484
    
    
    $
    483ADDITIONAL PAID-IN CAPITAL:Balance, beginning of year
    
    $
    850,133
    
    
    $
    846,397Shares issued
    
    
    0
    
    
    
    2,719Shares repurchased
    
    
    0
    
    
    
    (1,321
    )Stock options and grants
    
    
    3,161
    
    
    
    2,338Balance, end of period
    
    $
    853,294
    
    
    $
    850,133DEFERRED STOCK GRANT COMPENSATION:Balance, beginning of year
    
    $
    (1,495
    )
    
    $
    0Stock grants awarded
    
    
    (2,928
    )
    
    
    (2,011
    )Amortization
    
    
    316
    
    
    
    516Balance, end of period
    
    $
    (4,107
    )
    
    $
    (1,495
    )RETAINED EARNINGS:Balance, beginning of year
    
    $
    628,931
    
    
    $
    404,345Net income
    
    
    73,628
    
    
    
    260,629Reduction on share repurchase
    
    
    0
    
    
    
    (1,334
    )Dividends paid
    
    
    (9,649
    )
    
    
    (34,709
    )Balance, end of period
    
    $
    692,910
    
    
    $
    628,931ACCUMULATED OTHER COMPREHENSIVE INCOME:Balance, beginning of year
    
    $
    91,107
    
    
    $
    40,259Other comprehensive income
    
    
    14,834
    
    
    
    50,848Balance, end of period
    
    $
    105,941
    
    
    $
    91,107TOTAL SHAREHOLDERS EQUITY
    
    $
    1,648,522
    
    
    $
    1,569,159
 The accompanying notes are an integral part of these consolidated financial statements 5




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IPC HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in thousands of United States dollars) Quarter ended March 31,2004
    
    2003(unaudited)
    
    (unaudited)CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    73,628
    
    
    $
    67,528Adjustments to reconcile net income to cash provided
by operating activities:Amortization of fixed maturity premiums (discount), net
    
    
    3,539
    
    
    
    3,354Net realized gains on investments
    
    
    (5,663
    )
    
    
    (3,726
    )Stock compensation
    
    
    551
    
    
    
    81Changes in:Reinsurance premiums receivable
    
    
    (93,753
    )
    
    
    (87,062
    )Deferred premiums ceded
    
    
    (6,496
    )
    
    
    (6,652
    )Loss and loss adjustment expenses recoverable
    
    
    52
    
    
    
    (2,513
    )Accrued investment income
    
    
    (573
    )
    
    
    (1,376
    )Deferred acquisition costs
    
    
    (12,011
    )
    
    
    (11,060
    )Prepaid expenses and other assets
    
    
    (3,504
    )
    
    
    (2,573
    )Reserve for losses and loss adjustment expenses
    
    
    2,295
    
    
    
    (1,184
    )Unearned premiums
    
    
    122,912
    
    
    
    114,225Reinsurance premiums payable
    
    
    6,374
    
    
    
    7,808Deferred fees and commissions
    
    
    2,228
    
    
    
    2,526Accounts payable and accrued liabilities
    
    
    989
    
    
    
    1,664Cash provided by operating activities
    
    
    90,568
    
    
    
    81,040CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of fixed maturity investments
    
    
    (577,619
    )
    
    
    (300,366
    )Proceeds from sale of fixed maturity investments
    
    
    500,411
    
    
    
    194,145Proceeds from maturities of fixed maturity investments
    
    
    0
    
    
    
    35,896Purchases of equity investments
    
    
    (75,194
    )
    
    
    (172
    )Proceeds from sale of equity investments
    
    
    0
    
    
    
    0Cash used in investing activities
    
    
    (152,402
    )
    
    
    (70,497
    )CASH
FLOWS FROM FINANCING ACTIVITIES:Cash dividends paid to shareholders
    
    
    (9,649
    )
    
    
    (7,709
    )Cash used by financing activities
    
    
    (9,649
    )
    
    
    (7,709
    )Net (decrease) increase in cash and cash equivalents
    
    
    (71,483
    )
    
    
    2,834Cash and cash equivalents, beginning of period
    
    
    91,949
    
    
    
    16,656Cash and cash equivalents, end of period
    
    $
    20,466
    
    
    $
    19,490
 The accompanying notes are an integral part of these consolidated financial statements 6




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IPC HOLDINGS, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Expressed in thousands of United States dollars, except for per share amounts)
(unaudited)  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 (GAAP) 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 quarterly periods
ended March 31, 2004 and 2003, respectively, the balance sheet as of
March 31, 2004 and the cash flows for the quarterly periods ended March
31, 2004 and 2003, respectively. These interim consolidated financial
statements should be read in conjunction with the audited consolidated
financial statements for the year ended December 31, 2003, 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 March 25, 2004 we paid a dividend of $0.20 per share to shareholders of
record on March 9, 2004.  On April 20, 2004 we declared a dividend of $0.20 per share to be paid on
June 24, 2004, to shareholders of record on June 8, 2004.  3.
    
    ACCOUNTING FOR STOCK-BASED COMPENSATION AND DISCLOSURE:  Management has adopted the fair value method of accounting for stock-based
employee compensation as prescribed by Financial Accounting Standards Board
(FASB) issued Statement No. 123 Accounting for Stock-Based Compensation
(SFAS 123) on a prospective basis for all awards granted, modified or
settled after January 1, 2003. The amount of the charge recorded in the
three months ended March 31, 2004 was $235.  On June 13, 2003 the shareholders approved a new stock incentive plan. The
plan allows for the issuance of up to one million shares as grants of
restricted stock to selected employees to compensate them for their
contributions to the long-term growth and profits of the Company. The charge
recorded for the quarter ended March 31, 2004 was $316. 7




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The following table illustrates the effect on net income 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 123. Quarter ended March 31,2004
    
    2003(unaudited)
    
    (unaudited)Net income, as reported
    
    $
    73,628
    
    
    $
    67,528Add: Stock-based employee expense
    
    
    551
    
    
    
    81Deduct: Total stock-based employee expense determined under fair value based method for all awards
    
    
    (678
    )
    
    
    (255
    )Pro forma net income
    
    $
    73,501
    
    
    $
    67,354Earnings per share:Basic  as reported
    
    
    1.53
    
    
    
    1.40Basic  pro forma
    
    
    1.52
    
    
    
    1.40Diluted  as reported
    
    
    1.52
    
    
    
    1.40Diluted  pro forma
    
    
    1.52
    
    
    
    1.40
  4.
    
    NEW ACCOUNTING PRONOUNCEMENTS:  In December 2003, the FASB revised the previously issued Interpretation No.
46, Consolidation of Variable Interest Entities with Interpretation No. 46
(Revised December 2003), Consolidation of Variable Interest Entities (FIN
46-R). FIN 46-R requires a variable interest entity to be consolidated by a
company if that company is the primary beneficiary, as defined in FIN 46-R.
FIN 46-R is effective for the Company as of March 31, 2004. Certain
disclosures in relation to the Companys interests in variable interest
entities were provided in the audited consolidated financial statements for
the year ended December 31, 2003 in accordance with the transition
requirements of FIN 46-R. The adoption of this new accounting pronouncement
did not have any material impact on the Companys financial position or
results of operations. 8




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Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations  Critical Accounting PoliciesThe following is a summary of the accounting policies for the three main
components of our balance sheet and statement of income: premiums, losses
(claims) including reserves and investments/investment income.PremiumsPremiums are recorded as written at the beginning of each policy, based upon
information received from ceding companies and their brokers, and are earned
over the policy period. For excess of loss contracts, the amount of deposit
premium is contractually documented at inception, and no management judgement
is necessary in accounting for this. Premiums are earned on a pro rata
basis over the policy period. For proportional treaties, the amount of
premium is normally estimated at inception by the ceding company. We account
for such premium using the initial estimates, which are reviewed regularly
with respect to the actual premium reported by the ceding company. For the
three months ended March 31, 2004 the net amount of premium written resulting
from estimate accruals was approximately 4% of total premiums written. We
also accrue for reinstatement premiums (premiums paid to reinstate
reinsurance coverage following a claim). Such accruals are based upon actual
contractual terms applied to the amount of loss reserves expected to be paid,
and the only element of management judgement involved is with respect to the
amount of loss reserves, as described below. The amount accrued at March 31,
2004 for reinstatement premiums on Reported But Not Enough losses (RBNE)
and Incurred But Not Reported (IBNR) loss reserves was $5.6 million.Loss ReservesUnder accounting principles generally accepted in the United States of
America, we are not permitted to establish loss reserves until the occurrence
of an event which may give rise to a claim. As a result, only loss reserves
applicable to losses incurred up to the reporting date may be established,
with no allowance for the provision of a contingency reserve to account for
expected future losses. Claims arising from future catastrophic events can
be expected to require the establishment of substantial reserves from time to
time.Estimating appropriate loss reserves for catastrophes is an inherently
uncertain process. Loss reserves represent our estimates, at a given point
in time, of ultimate settlement and administration costs of losses incurred
(including IBNR and RBNE losses). We regularly review and update these
estimates, using the most current information available to us. Consequently,
the ultimate liability for a catastrophic loss is likely to differ from the
original estimate. Whenever we determine that any existing loss reserves are
inadequate, we are required to increase the loss reserves with a
corresponding reduction, which could be material, in our operating results in
the period in which the deficiency is identified. The establishment of new
reserves, or the adjustment of reserves for reported claims, could result in
significant upward or downward changes to our financial condition or results
of operations in any particular period.The reserve for losses and loss adjustment expenses is based upon reports
from industry sources, individual case estimates received from ceding
companies and/or their brokers, output from commercially available
catastrophe loss models and managements estimates. When a catastrophic event
occurs, we first determine which treaties may be affected using our
geographic database of exposures. We then contact the respective brokers and
ceding companies involved with those treaties, to determine their estimate of
involvement and the extent to which the reinsurance program is affected. We
may also use computer modeling to measure and estimate loss exposure under
the actual event scenario, if available. Since 1993, we have contracted AIR
Worldwide Corporation for the use of their proprietary models - currently
CATRADER ® - as part of our modeling approach. These computer-based loss
modeling systems utilize A.M. Bests data and direct exposure information
obtained from our clients. Once an event occurs, we establish a specific
reserve for that event, based upon estimates of total losses incurred by the
ceding insurers as a result of the event and a specific estimate of the
portion of such loss we have reinsured. Managements estimates are used
mostly for IBNR or RBNE loss amounts. For certain catastrophic events there
is considerable uncertainty underlying the assumptions and associated
estimated reserves for losses and loss adjustment expenses. Reserves are
reviewed regularly and, as experience develops and additional information
becomes known, the reserves are adjusted as necessary. Such adjustments, if
necessary, are reflected in results of operations in the period in which they
become known. For excess of loss business, which is generally over 90% of
the premium we write, we are aided by the fact that each treaty has a defined
limit of liability arising from one event. Once that limit has been reached,
we have no further exposure to additional losses from that treaty for the
same event. For proportional treaties, we generally use an initial estimated
loss and loss expense ratio (the ratio of losses and loss adjustment expenses
incurred to premiums earned), based upon information provided by the ceding
company and/or their broker and our historical experience of that treaty, if
any. The estimate is adjusted as actual experience becomes known.At March 31, 2004 managements estimates for IBNR/RBNE represented
approximately 50% of total loss reserves. The majority of the estimate
relates to reserves for claims from the attack on the World Trade Center, the
explosion at an Algerian liquefied natural gas (LNG) facility in January
2004, September 2003 windstorms in various parts of the world, 9




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hailstorms and tornado losses in April/May 2003 in the United States and
Europe, the floods which affected central and eastern Europe in August 2002,
Tropical Storm Allison which affected parts of Texas in June 2001 and
reserves for proportional treaties. In accordance with IPCRes registration
under the Bermuda Insurance Act 1978 and Related Regulations (the Insurance
Act), the loss reserves are certified annually by an independent loss
reserve specialist. If our estimate of IBNR/RBNE at March 31, 2004 was
inaccurate by a factor of 10%, our results of operations would be impacted by
a positive or negative movement of approximately $6.3 million. If our total
reserve for losses at December 31, 2003 was inaccurate by a factor of 10%,
our incurred losses would be impacted by approximately $12.6 million, which
represents less than 1% of shareholders equity.InvestmentsIn accordance with our investment guidelines, our investments consist of
certain marketable equity securities and high-grade marketable fixed income
securities. Investments are carried at fair value as determined by the most
recently traded price of each security at the balance sheet date. Unrealized
gains and losses are included within Accumulated other comprehensive income
as a separate component of shareholders equity. Realized gains and losses
on sales of investments are determined on a first-in, first-out basis.
Investment income is recorded when earned and includes the amortization of
premiums and discounts on investments.We regularly monitor the difference between the cost and fair value of our
investments, which involves uncertainty as to whether declines in value are
temporary in nature. If we believe a decline in value of a particular
investment is temporary, we record the decline as an unrealized loss as a
separate component of our shareholders equity. If we believe the decline is
other-than-temporary, we write down the cost basis of the investment to the
market price as of the reporting date and record a realized loss in our
statement of income. The determination that a security has incurred an
other-than-temporary decline in value requires the judgement of IPCs
management, which includes the views of our investment managers and a regular
review of our investments. Our assessment of a decline in value includes our
current judgement as to the financial position and future prospects of the
entity that issued the security. If that judgement changes in the future we
may ultimately record a realized loss, after having originally concluded that
the decline in value was temporary.Generally, we review all securities that are trading at a significant
discount to par, amortized cost (if lower) or cost for an extended period of
time. We generally focus our attention on all securities whose market value
is less than 75% of their cost. The specific factors we consider in
evaluating potential impairment include the following:  
    
    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  At March 31, 2004 our equity investments comprised
investments in the following: a U.S.
equity fund, a global equity growth fund, a fund of hedge funds and a fund
with attributes similar to those of the S & P 500 Index. None of the funds
have a significant concentration in any one business sector; accordingly, the
value of our equity funds is principally influenced by macro economic factors
rather than issuer-specific factors. Our equity investments are subject
to the same analyses as described above for the determination of
other-than-temporary declines in value. Since there is a portfolio of
securities within each fund, the qualitative issues are usually broader
than those for individual securities and therefore the assessment of
impairment is inherently more difficult and requires more management
judgement.  At March 31, 2004 we did not hold any fixed maturity securities that are not
investment grade, not rated or not traded on a recognized exchange.  At March 31, 2004 we determined that there was no other-than-temporary
impairment of securities. 10




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RESULTS OF OPERATIONS, QUARTERS ENDED MARCH 31, 2004 AND 2003  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 three months
ended March 31, 2004.Our net income for the quarter ended March 31, 2004 was $73.6 million,
compared to $67.5 million for the quarter ended March 31, 2003, an increase
of 9%. We have continued to benefit from an increase in written and earned
premiums, as well as a tenth consecutive quarter where there has been little
in the way of catastrophe losses that have impacted our clients catastrophe
reinsurance programs, as discussed below.In the quarter ended March 31, 2004, we wrote premiums of $210.2
million, compared to $191.9 million in the first quarter of 2003, an
increase of 10%. Written premiums in the quarter were higher primarily
because we wrote new business of $18.7 million. The premium from
existing business was approximately $12.1 million more in the first
quarter of 2004 compared to the first quarter of 2003, due to larger
lines, program re-structuring and foreign exchange rate differences.
These additions were offset in part by business which was not renewed
because of unsatisfactory terms and conditions, which totaled
approximately $11.0 million. Adjustment premiums, which are adjustments
generally arising from differences between cedents actual premium
income and the original estimates thereof, were $4.8 million in the
first quarter of 2004 compared to $4.7 million in the first quarter of
2003. Reinstatement premiums were approximately the same in the quarter
ended March 31, 2004 as they were in the first quarter of 2003, at $3.3
million. We retroceded premiums of $10.2 million in the first quarter
of 2004, a similar amount to the $10.0 million ceded in the first
quarter of 2003. Net premiums earned in the quarter ended March 31,
2004 were $83.6 million, compared to $74.3 million in the same period in
2003, an increase of 12%. Net premiums earned were higher due to the
increase in written premiums over the past twelve months.Net investment income was $11.6 million in the quarter ended March 31,
2004, compared to $11.5 million for the first quarter of 2003. The
overall yield of the fixed income portfolio was less for the quarter
ended March 31, 2004 than for the corresponding quarter in 2003, due to
lower interest rates and their adverse impact on the reinvestment of
maturing fixed income securities. This negative factor was more than
offset by the increase in the average balance of invested assets in the
quarter ended March 31, 2004, which was 21% higher than the first
quarter of 2003, because of positive operating cash flow in the period.There was a net realized gain from investments in the quarter ended March
31, 2004 of $5.7 million, compared to $3.7 million in the first quarter
of 2003. Generally, net realized gains and losses fluctuate from period
to period, depending on the individual securities sold, as recommended
by IPCRes investment advisor.In the first quarter of 2004, we incurred net losses and loss adjustment
expenses of $13.5 million, compared to $11.2 million in the first quarter of
2003. Losses in the first quarter of 2004 include a $6.0 million reserve for
the explosion at an LNG facility in Algeria in January 2004, $3.7 million in
reserves for pro-rata treaties and $2.1 million in reserves for two newly
reported marine claims from prior periods.Acquisition costs incurred, which consist primarily of commissions and
brokerage fees paid to intermediaries for the production of business, were
$9.7 million for the quarter ended March 31, 2004, compared to $7.7 million
in the first quarter of 2003, an increase of 26%. Acquisition costs have
increased primarily because of the increase in earned premiums, as well as
some commission adjustments in respect of additional premiums earned
primarily on 2003 contracts. General and administrative expenses were $5.1
million in the quarter ended March 31, 2004, compared to $4.4 million in the
first quarter of 2003. This increase is due primarily to increases in
administrative fees which are based on earned premiums, as well as some
increases for certain operating expenses, including salaries and benefits,
which include the impact of expensing stock grants and stock options granted
to certain officers, and professional fees resulting from corporate
governance requirements under the Sarbanes-Oxley Act of 2002.LIQUIDITY AND CAPITAL RESOURCESIPC Holdings is a holding company that conducts no reinsurance operations of
its own. Its cash flows are limited to distributions from IPCRe and IPCUSL
by way of loans or dividends. The dividends that IPCRe may pay are limited
under Bermuda legislation and IPCRes revolving credit facility. The
Insurance Act and subsequent amendments thereto, require IPCRe to maintain a
minimum solvency margin and a minimum liquidity ratio. The maximum dividend
payable by IPCRe in accordance with Bermuda regulations as of March 31, 2004
was approximately $405.3 million. The maximum amount IPCRe could have paid
in the first quarter under the terms of the revolving credit facility was
$645.7 million. 11




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IPCRes sources of funds consist of premiums written, investment income, paid
losses recovered from retrocedents, underwriting agency commissions and
proceeds from sales and redemptions of investments. Cash is used primarily
to pay losses and loss adjustment expenses, premiums retroceded, brokerage
commissions, excise taxes, general and administrative expenses and dividends.
The potential for a large catastrophe means that unpredictable and
substantial payments may need to be made within relatively short periods of
time, and therefore our cash flows fluctuate significantly from period to
period.Net cash flows from operating activities in the three months ended March 31,
2004 were $90.6 million compared to $81.0 million in the first quarter of
2003. The increase is primarily the result of the increase in premium
volume, combined with a reduction in net claims paid during the period, which
were $11.0 million in the three months ended March 31, 2004, compared to
$15.6 million in the first quarter of 2003.Net cash outflows from investing activities in the three months ended March
31, 2004 were $152.4 million. Cash and cash equivalents decreased by $71.5
million in the three months ended March 31, 2004, resulting in a balance of
$20.5 million at March 31, 2004. At March 31, 2004, 46% of IPCs fixed
maturity investment portfolio (based on fair value) was held in securities
rated AAA, and 28% was held in securities rated AA. The average modified
duration of IPCs fixed maturity portfolio was 2.7 years. We renewed our
revolving credit facility on July 1, 2003 in the amount of $200 million,
provided by a syndicate of lenders led jointly by Bank One N.A. and Citibank
N.A. We believe that this facility, together with the relatively short
duration and high quality of IPCs investment portfolio, will provide
sufficient liquidity to meet IPCs cash demands.IPCRe is not a licensed insurer in the United States and therefore, under the
terms of most of its contracts with U.S.-based companies, must provide
security to reinsureds to cover unpaid liabilities in a form acceptable to
state insurance commissioners. Typically, this type of security takes the
form of a letter of credit issued by an acceptable bank, the establishment of
a trust, or a cash advance. Currently IPCRe obtains letters of credit
through one commercial bank pursuant to a $100.0 million facility. In turn,
IPCRe provides the bank security by giving the bank a lien over certain of
IPCRes investments in an amount not to exceed the aggregate letters of
credit outstanding to a maximum of $118.0 million. At March 31, 2004, there
were outstanding letters of credit of $50.5 million. If we were unable to
obtain the necessary credit, IPCRe could be limited in its ability to write
business for our clients in the United States.Our investment portfolio does not currently include options, warrants, swaps,
collars or similar derivative instruments. Our investment policy guidelines
provide that financial futures and options and foreign exchange contracts may
not be used in a speculative manner, but may be used, subject to certain
numerical limits, only as part of a defensive strategy to protect the market
value of the portfolio. Also, our portfolio does not contain any investments
in real estate or mortgage loans.Neither the Company, IPCRe nor IPCUSL have any material commitments for
capital expenditures.Off Balance Sheet ArrangementsNeither the Company nor any of its subsidiaries has any other forms of
off-balance sheet arrangements, other than those disclosed above.Transactions with Non-Independent PartiesThe following is a summary of amounts in respect of significant
non-independent party transactions during the three month periods ended March
31, 2004 and March 31, 2003, respectively (expressed in thousands of U.S.
dollars): March 31, 2004
    
    March 31, 2003Administrative services fees (included in General & Admin. expenses)
    
    $
    2,181
    
    
    $
    1,943Investment fees netted against investment income:
    
    $
    723
    
    
    $
    742Underwriting services fee income (included in Other income)
    
    $
    916
    
    
    $
    666Premiums written
    
    $
    25,354
    
    
    $
    29,271Premiums ceded
    
    $
    713
    
    
    $
    645
  Underwriting services fee income is a percentage of the premiums written on
behalf of one client, which is related to a shareholder of the Company. Fees
are accrued and taken into income based on the premiums earned each quarter.For a discussion of certain of our contractual relationships with
non-independent parties, please see Certain Relationships and Related
Transactions in our definitive Proxy Statement on Schedule 14A, filed with
the Securities and Exchange Commission on April 29, 2004 and incorporated by
reference into our Form 10-K for the year ended December 31, 2003. 12




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All transactions with related parties are conducted at arms length, with
normal terms and conditions applicable. Neither the Company nor any of its
subsidiaries have entered into any other significant transactions with
non-independent parties. 
 Item 3. Quantitative and Qualitative Disclosures about Market Risk  The investment portfolio of IPCRe is exposed to market risk. Market risk is
the risk of loss of fair value resulting from adverse fluctuations in
interest rates, foreign currency exchange rates and equity prices.Measuring potential losses in fair values has become the focus of risk
management efforts by many companies. Such measurements are performed
through the application of various statistical techniques. One such
technique is Value at Risk (VaR). VaR is a summary statistical measure
that uses historical interest and foreign currency exchange rates and equity
prices and estimates of the volatility and correlation of each of these rates
and prices to calculate the maximum loss that could occur within a given
statistical confidence level and time horizon.We believe that statistical models alone do not provide a reliable method of
monitoring and controlling market risk. While VaR models are relatively
sophisticated, the quantitative market risk information is limited by the
assumptions and parameters established in creating the related models.
Therefore, such models are tools and do not substitute for the experience or
judgement of senior management.Our investment managers performed a VaR analysis to estimate the maximum
potential loss of fair value for each segment of market risk for our
investment portfolio, as of March 31, 2004 and December 31, 2003. The
analysis calculated the VaR with respect to the net fair value of our
financial instrument assets, which includes cash and cash equivalents,
certain equity and high grade fixed maturity securities, as of March 31, 2004
using historical simulation methodology. As of March 31, 2004 the VaR of
IPCRes investment portfolio was approximately $25.0 million, which
represents a 95th percentile value change over a one-month time horizon.
This result was obtained through historical simulation using approximately
750 days (3 years) of historical interest rate, foreign exchange rate and
equity market data.The following table presents the VaR of each component of market risk of
IPCRes investment portfolio as of March 31, 2004 and December 31, 2003,
respectively, and the average for the three months ended March 31, 2004
calculated using the beginning, quarterly and ending points (expressed in
thousands of U.S. dollars): Average forMarch 31,
    
    December 31,
    
    three monthsMarket Risk
    
    2004
    
    2003
    
    ended March 31, 2004Currency
    
    $
    2,024
    
    
    $
    3,021
    
    
    $
    2,523Interest Rate
    
    
    18,238
    
    
    
    17,685
    
    
    
    17,961Equity (incl. hedge fund)
    
    
    29,394
    
    
    
    29,666
    
    
    
    29,530Sum of Risk
    
    
    49,656
    
    
    
    50,372
    
    
    
    50,014Diversification Benefit
    
    
    (24,626
    )
    
    
    (22,757
    )
    
    
    (23,691
    )Total Net Risk
    
    $
    25,030
    
    
    $
    27,615
    
    
    $
    26,323
  The decrease in the overall VaR is because of the reduction in currency VaR
from non-U.S dollar securities within the Global Equity fund, as well as
increased diversification benefit resulting from the asset allocation in the
investment portfolio to the hedge fund. IPCRes premiums receivable and
liabilities for losses from reinsurance contracts it has written, are also
exposed to the risk of changes in value resulting from fluctuations in
foreign currency exchange rates. To an extent, the impact on loss reserves
of a movement in an exchange rate, will be partly offset by the impact on
assets (receivables and cash/investments) denominated in the same currency,
or vice versa. As of March 31, 2004 an estimated 40% or $62 million (March
31, 2003 - 36% or $50 million) of reinsurance premiums receivable, and an
estimated $30 million (March 31, 2003 - $30 million) of loss reserves, were
denominated in non-U.S. currencies. Accordingly, we do not believe that the
impact of exchange rate movements in respect of receivables or loss reserves
on our overall VaR as of March 31, 2004 to be material. 
 Item 4. Controls and Procedures  An evaluation was carried out under the supervision and with the
participation of the Companys management, including our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures (as defined in Rule
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based
upon that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that, as of the end of the period covered by this report, the
design and operation of these disclosure controls and procedures were
effective. No significant changes were made in our internal controls or in
other factors that could significantly affect these controls subsequent to
the date of their evaluation. 13




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Note on Forward-Looking Statements  This report contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking statements are
statements other than historical information or statements of current
condition, including, but not limited to, expectations regarding market
cycles, renewals and our ability to increase written premium volume and
improve profit margins, market conditions, the impact of current market
conditions and trends on future periods, the impact of our business strategy
on our results, trends in pricing and claims and the insurance and
reinsurance market response to catastrophic events. Some forward-looking
statements may be identified by our use of terms such as believes,
anticipates, intends, or expects and relate to our plans and objectives
for future operations. In light of the risks and uncertainties inherent in
all forward-looking statements, the inclusion of such statements in this
report should not be considered as a representation by us or any other person
that our objectives or plans will be achieved. We do not intend, and are
under no obligation, to update any forward-looking statement contained in
this report. The largest single factor in our results has been and will
continue to be the severity or frequency of catastrophic events, which is
inherently unpredictable. Numerous factors could cause our actual results to
differ materially from those in the forward-looking statements, including,
but not limited to, the following: (i) the occurrence of natural or man-made
catastrophic events with a frequency or severity exceeding our estimates;
(ii) any lowering or loss of one of the financial ratings of IPCRe (together
with the Company, IPCRe Europe Limited and IPCUSL IPC we or our); (iii)
a decrease in the level of demand for property catastrophe reinsurance, or
increased competition owing to increased capacity of property catastrophe
reinsurers; (iv) the effect of competition on market trends and pricing; (v)
the adequacy of our loss reserves; (vi) loss of our non-admitted status in
United States jurisdictions or the passage of federal or state legislation
subjecting us to supervision or regulation in the United States; (vii)
challenges by insurance regulators in the United States to our claim of
exemption from insurance regulation under current laws; (viii) a contention
by the United States Internal Revenue Service that we are engaged in the
conduct of a trade or business within the U.S.; (ix) loss of services of any
one of our executive officers; (x) changes in interest rates and/or equity
values in the United States of America and elsewhere; or (xi) changes in
exchange rates and greater than expected currency exposure. 14




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PART II. OTHER INFORMATION 
 
 
 
 
 Item 1.
    
    Legal ProceedingsNONEItem 2.
    
    Changes in Securities, Use of Proceeds and Issuer Purchases of Equity SecuritiesLimitations on our ability to pay
dividends are discussed in Liquidity and Capital Resources under Part I - Financial
Information, Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.Item 3.
    
    Defaults upon Senior SecuritiesNONEItem 4.
    
    Submission of Matters to a Vote of Security HoldersNONEItem 5.
    
    Other InformationOn March 1, 2004, Jackie Clegg resigned from the Board of Directors of the Company and certain subsidiaries. On the
same day, Kenneth Hammond was appointed to the Board of Directors of the Company and certain subsidiaries.
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Item 6.
    
    Exhibits and Reports on Form 8-K(a) ExhibitsUnless otherwise indicated, exhibits are incorporated by reference to
the corresponding numbered exhibits to the Companys Registration
Statement on Form S-1 (Registration No. 333-00088).
 ExhibitNumber
    
    Description3.1
    
    Memorandum of Association of the Company3.2 +
    
    Amended and Restated Bye-laws of the Company3.3
    
    Form of Memorandum of Increase of Share Capital10.1
V
    
    Amended Schedule I (Investment Policy Guidelines) to
Investment Management Agreement between IPCRe and AIGIC10.2
V
    
    Amended and Restated Amendment One
to Underwriting Agency Agreement between Allied World Assurance
Company and IPCUSL.11.1 V
    
    Reconciliation of basic and diluted net income per common share (EPS).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+
    
    Incorporated by reference to our filing on Form 8-A/A (No. 000-27662) filed on July 9, 2003.**
    
    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.
 (b) Reports on Form 8-KOn February 11, 2004, the Company filed a Form 8-K current report
(date of earliest event reported: February 10, 2004) (a) advising that
the company had announced its financial results for the fiscal quarter
and year ended December 31, 2003 via a press release, and (b)
furnishing such statements.
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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 April 29th, 2004
    
    /s/ James P. BryceJames P. BrycePresident and Chief Executive OfficerDate April 29th, 2004
    
    /s/ John R. WealeJohn R. WealeSenior Vice President and Chief Financial Officer
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EXHIBIT INDEX Unless otherwise indicated, exhibits are incorporated by reference to the
corresponding numbered exhibits to the Companys Registration Statement on
Form S-1 (Registration No. 333-00088). ExhibitNumber
    
    Description3.1
    
    Memorandum of Association of the Company3.2 +
    
    Amended and Restated Bye-laws of the Company3.3
    
    Form of Memorandum of Increase of Share Capital10.1
V
    
    Amended Schedule I (Investment Policy Guidelines) to Investment Management Agreement between IPCRe and AIGIC10.2
V
    
    Amended and Restated Amendment One
to Underwriting Agency Agreement between Allied World Assurance
Company and IPCUSL.11.1
V
    
    Reconciliation of basic and diluted net income per common share (EPS)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+
    
    Incorporated by reference to our filing on Form 8-A/A (No. 000-27662) filed on July 9, 2003.**
    
    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.
 18