##### 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, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Transition Period From  to
 001-33374
 Commission File Number
 CASTLEPOINT HOLDINGS, LTD.
  Bermuda
(State or other jurisdiction 
of incorporation or organization)
    
    N/A
(I.R.S. Employer Identification No.)
 Victoria Hall
11 Victoria Street
Hamilton HM 11
Bermuda
 (441) 294-6409
 None   Common Shares, $0.01 par value
 o þ
 o þ
 þ o
 þ
 o þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



TABLE OF CONTENTS
 PAGEPART IItem 1.
    
    Business
    
    4Item 1A.
    
    Risk Factors
    
    38Item 1B.
    
    Unresolved Staff Comments
    
    58Item 2.
    
    Properties
    
    58Item 3.
    
    Legal Proceedings
    
    58Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    58PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters, and IssuerPurchases of Equity Securities
    
    59Item 6.
    
    Selected Financial Data
    
    61Item 7.
    
    Management's Discussion and Analysis of Financial Condition and Results of Operations
    
    63Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    97Item 8.
    
    Financial Statements and Supplementary Data
    
    99Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    99Item 9A.
    
    Controls and Procedures
    
    99Item 9B.
    
    Other Information
    
    100PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    100Item 11.
    
    Executive Compensation
    
    100Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and RelatedStockholder Matters
    
    100Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    100Item 14.
    
    Principal Accounting Fees and Services
    
    101PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    101Signatures
    
    101EX-10.24: PROGRAM MANAGEMENT AGREEMENTEX-10.37: AMENDMENT NO. 4 TO AMENDED AND RESTATED BROKERAGE BUSINESS QUOTA SHARE REINSURANCE AGREEMENTEX-10.38: AGGREGATE EXCESS OF LOSS REINSURANCE AGREEMENTEX-10.39: AGGREGATE EXCESS OF LOSS REINSURANCE AGREEMENTEX-10.40: SERVICE AGREEMENTEX-21.1: LIST OF SUBSIDIARIESEX-23.1: CONSENT OF PRICEWATERHOUSECOOPERS (BERMUDA)EX-31.1: CHIEF EXECUTIVE OFFICER - CERTIFICATIONEX-31.2: CHIEF FINANCIAL OFFICER - CERTIFICATIONEX-32: CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER - CERTIFICATION




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##### Table of Contents



CERTAIN IMPORTANT INFORMATION
 For your convenience, we have included below definitions of terms used in this Annual Report
on Form 10-K that are specific to the business of CastlePoint Holdings Ltd.
 In this Annual Report on Form 10-K :
 
    
    Unless the context suggests otherwise, CastlePoint, our company, we, us or our refer to
CastlePoint Holdings, Ltd. and its subsidiaries, which include CastlePoint Management Corp.
(CastlePoint Management), a Delaware corporation and our program management company; CastlePoint
Bermuda Holdings, Ltd. (CastlePoint Bermuda Holdings), our Bermuda intermediate holding company;
CastlePoint Reinsurance Company, Ltd. (CastlePoint Re), our Bermuda reinsurance subsidiary; and
CastlePoint Insurance Company, a New York corporation and our U.S. licensed insurance company.
CastlePoint Holdings refers to CastlePoint Holdings, Ltd.; CastlePoint Management directly owns
two of our financing subsidiaries, CastlePoint Management Statutory Trust I and CastlePoint
Management Statutory Trust II, which we formed to facilitate the trust preferred financing we
completed in December 2006; CastlePoint Bermuda Holdings directly owns our other financing
subsidiary, CastlePoint Bermuda Holdings Statutory Trust I, which we formed to facilitate the trust
preferred financings we completed in September 2007; these financing subsidiaries are
non-consolidated variable interest entities;
    
    Unless the context suggests otherwise, Tower refers to Tower Group, Inc. and its subsidiaries,
which includes Tower Insurance Company of New York, Tower National Insurance Company, Preserver
Insurance Company, Mountain Valley Indemnity Company, North East Insurance Company and Tower Risk
Management Corp.;
    
    brokerage business refers to broad classes of business that are underwritten on an individual
policy basis by an insurance companys underwriting staff through wholesale and retail agents, and
for which most or all of the services are provided by the insurance company as part of the overall
product offering;
    
    program business refers to narrowly defined classes of business that are underwritten on an
individual policy basis by program underwriting managers on behalf of insurance companies;
    
    traditional program business refers to blocks of program business in excess of $5 million in
gross written premium that Tower historically has underwritten, consisting of non-auto related
personal lines and the following commercial lines of business: retail stores and wholesale trades,
commercial and residential real estate, restaurants, grocery stores, office and service industries
and artisan contractors;
    
    specialty program business refers to (i) program business other than traditional program
business and (ii) traditional program business that we and Tower agree will be deemed to be
specialty program business;
 1




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
    
    insurance risk-sharing refers to various risk sharing arrangements that are designed to provide
to client insurance companies or program underwriting managers the ability to contract with our
insurance company and to share in the premiums and losses of the business subject to such
arrangements;
    
    quota share reinsurance refers to a type of reinsurance whereby a reinsurer provides
reinsurance coverage to an insurance company on a pro-rata basis based on a ceding percentage
without any provisions to limit meaningful losses within the contractual limits; and
    
    program underwriting manager refers to an insurance intermediary that aggregates business from
retail and wholesale agents and manages business on behalf of insurance companies, including
functions such as risk selection and underwriting, premium collection, policy form design and
client service.
  A WARNING ABOUT FORWARD-LOOKING STATEMENTS
   
    
    our lack of extensive operating history;
    
    our heavy dependence on Tower for revenue in our initial years of operation, which is expected to
continue, and the continued growth of Towers business;
    
    the risk that CastlePoint Bermuda Holdings or CastlePoint Holdings may be deemed to be engaged in
a U.S. trade or business, or that CastlePoint Re may be considered to be doing business through a
permanent establishment in the United States, either of which would subject these companies to U.S.
taxation;
 2




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
    
    changes in regulation or tax laws applicable to us, our brokers or our customers;
    
    the terms of our arrangements with Tower may change as a result of the regulatory review and
approval process;
    
    our ability to write premiums with clients other than Tower;
    
    the possibility that we will need additional capital for our reinsurance and insurance
businesses, as well as to acquire at least one additional broadly-licensed U.S. insurance company
for our insurance business, and to make strategic investments in some of our clients, including
Tower, and the risk that we may not be able to obtain future additional financing on favorable
terms or at all;
    
    the ineffectiveness or obsolescence of our planned business strategy due to changes in current or
future market conditions;
    
    changes in the availability, cost or quality of insurance business that meets our reinsurance
underwriting standards;
    
    actual results, changes in market conditions, the occurrence of catastrophic losses and other
factors outside our control that may require us to alter our anticipated methods of conducting our
business, such as the nature, amount and types of risk we assume and the terms, limits or other
characteristics of the products we write or intend to write;
    
    possible future downgrade in the A.M. Best rating of some or all of our insurance or reinsurance
subsidiaries, or any that we may acquire;
    
    changes in rating agency policies or practices;
    
    changes in general economic conditions, including inflation, foreign currency exchange rates,
interest rates and other factors.
   3




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Item 1.
    
    Business.
  Overview
      4




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Our Business Solutions, Products and Services
   Reinsurance Solutions
 
    
    Quota
Share
    
    Property and Casualty Per Risk
Excess of Loss
    
    Property Catastrophe
Excess of Loss
    
    Aggregate Excess of Loss
    
    Property Surplus Share
 Insurance Solutions
 
    
    Risk Sharing
    
    Appointment of Insurance Companies as
Program
Underwriting Manager
    
    Program Business
 Product Lines
 
    
    Commercial
Package
    
    Fire and Allied
Lines
    
    Commercial General
Liability
    
    Workers
Compensation
    
    Homeowners and
Personal Dwellings
    
    Professional Liability
    
    Commercial and Personal
Inland Marine
    
    Commercial and Personal
Automobile
 Unbundled Insurance Services
 
    
    Claims Handling
and Administration
    
    Policy
Administration
    
    Insurance Technology
   5




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Reinsurance Solutions
     6




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Quota Share Reinsurance
   Property and Casualty Per Risk Excess of Loss Reinsurance
   7




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Property Catastrophe Excess of Loss Reinsurance
     Property Aggregate Excess of Loss Reinsurance
  8




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Property Surplus Share Reinsurance
  Insurance Solutions
    Program Business
  9




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
    
    Broad product line platform.We offer a broad range of commercial and personal lines of
business which expands the range of program opportunities available in the marketplace.
 
    
    Competitive commissions.We offer what we believe to be attractive commissions paid to
program underwriting managers based upon our efficient infrastructure and platform. We base
our commissions upon the loss ratio track record of the program business and offer profit
commissions when loss ratios develop better than expected.
 
    
    Reinsured program business.We offer, on a fee basis, issuing company capability to
reinsurers desiring to write program business, while retaining a limited percentage of the
underwriting risk.
 
    
    Insurance and reinsurance risk assumption.In addition to providing primary underwriting
capacity to retain most or all of the underwriting risk as an insurance company, we facilitate
program business transactions by providing reinsurance products through our reinsurance
subsidiary.
 
    
    Alternative risk transfer.We offer alternative risk-transfer transactions that provide
program underwriting managers with the opportunity to increase their profit margin by
participating in underwriting risk on the business they produce. We also offer management
services to manage captives and facilitate rent-a-captive transactions both in the United
States and in Bermuda. Captives are insurance companies that are formed and owned by
non-insurance companies, their affiliates, or their member organizations, the main purpose of
which is to insure the risks of the non-insurance company parent organizations.
Rent-a-captives are captive insurance companies that allow parent organizations, such as
program underwriting managers, to receive the benefit of captives without owning them.
 
    
    Unbundled insurance company services.Through our relationship with Tower, we offer
comprehensive insurance company services on an unbundled basis to attract program underwriting
managers with large and profitable books of business that need or desire to access such
services. See Unbundled Insurance Services below.
 Product Lines
 Our reinsurance and insurance solutions primarily include the following lines of business.
    
    Commercial Package.Coverage offered under our commercial package and business owners
policies combines property, liability (including general liability and products and completed
operations), business interruption, equipment breakdown, fidelity and inland marine coverages
tailored for commercial businesses and enterprises.
 
    
    Fire and Allied Lines.We write fire and allied lines policies, which consist of dwelling
policies, including personal property and liability optional coverage, providing an
alternative to the homeowners policy for the personal lines customer. Commercial fire and
allied lines policies provide protection for damage to commercial buildings and their
 10




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contents, and these policies may be utilized in selected circumstances as an alternative to
a commercial package policy.
 
    
    Commercial General Liability.We write other liability products in personal and commercial
lines including monoline commercial, general liability (for risks that do not have property
exposure or whose property exposure is insured elsewhere) and commercial umbrella policies.
 
    
    Workers Compensation.We write workers compensation policies, which are a statutory
coverage requirement in almost every state to protect employees in case of injury on the job,
and the employer from liability for an accident involving an employee.
 
    
    Homeowners and Personal Dwellings.Our homeowners policy is a multiple-peril policy,
providing property and liability coverages for one and two-family, owner-occupied residences
or additional coverage to the homeowner for personal umbrella and personal inland marine.
 
    
    Professional Liability.We offer professional liability and errors and omissions insurance
for commercial enterprises that may face liability as a result of their performance or failure
to perform professional services. Coverage can be designed to respond to customer needs
including employment practices, fidelity or crime-related loss and fiduciary liabilities.
 
    
    Commercial and Personal Inland Marine.We write inland marine insurance protection for the
property of businesses that is not at a fixed location and for items of personal property that
are easily transportable, typically including builders risk, contractors equipment and
installation, domestic transit and transportation, fine arts, property floaters and leased
property.
 
    
    Commercial and Personal Automobile.We write coverage for automobile policies by providing
automobile liability, collision and comprehensive insurance including commercial and personal
automobile policies for both fleet and non-fleet risks.
 Unbundled Insurance Services
  11




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
    
    Claims Handling and Administration.As described below in Description of Our Business
Relationships with Tower, we have access to Towers significant experience and expertise in
handling and managing claims.
 
    
    Insurance Technology Services.We offer technology solutions to our clients that include
policy and claims processing systems. We also have access to web-based quoting and issuance
systems that improve service delivery by agents as well as reduce costs through elimination of
data entry.
 
    
    Policy Administration Services. We offer several administration services, including policy
intake and clearance, scanning and distribution of work, web-based quote and bind
capabilities, policy printing and mailing, billing and collections, loss control, premium
audit, bureau reporting and management reporting. We believe these types of services allow our
customers the benefit of the economies of scale that they may not be able to achieve on their
own. We customize our offerings to provide our customers with a specific set of services that
will complement their own internal capabilities.
 
    
    Insurance Consulting Services.We provide various management consulting services, including
underwriting audits, claims audits, program design and reinsurance structuring. Specifically,
we focus on:
 
    
    program and product design;
    
    actuarial and loss reserve analysis;
    
    loss prevention and control;
    
    operational audit support;
    
    reinsurance placement and handling;
    
    regulatory compliance.
 Ceded Reinsurance
   12




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Claims Management
   Underwriting
  
    
    We accept only those risks that we believe will earn a level of profit commensurate with the
risk they present;
 
    
    We perform independent pricing or risk review of insurance risks;
 
    
    We accept only those risks which have demonstrated track records of profitable performance or
else present limited downside potential; and
 
    
    We consistently use peer review in our underwriting acceptance process as well as to
continually audit the performance of underwriting managers against agreed standards and
guidelines.
 13




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Licensing of U.S. Insurance Companies
  14




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Strategic Investments, Including Investment in Tower
    15




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Our Relationship With Tower
    16




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Description of Our Business Relationships with Tower
  TraditionalProgram
    
    Specialty ProgramDescription of Risk-Sharing
    
    Brokerage Business
    
    Business
    
    BusinessManager
    
    Tower
    
    CastlePoint
    
    CastlePointIndividual Risk Underwriting Authority
    
    Retained by Tower
    
    Granted to program
    
    Granted to programexcept limited
    
    underwriting
    
    underwriting managersauthority to bind
    
    managersrisks to brokersCastlePoint Share
    
    Subject to a
    
    50% in 2007 and
    
    85% in 2007 and 2008,minimum of 25% and
    
    2008, subject to a
    
    subject to a minimum of 50%a maximum of 50%;
    
    minimum of 50% and
    
    and a maximum of 85%a maximum of 85%Management Fee Percentage
    
    34% provisional,
    
    30%
    
    30%subject to aminimum of 31% anda maximum of 36%based upon lossratioDistribution Sources
    
    Retail and wholesale
    
    Wholesale and
    
    Program underwriting managersprogramunderwritingmanagersIndustry Classes of Business
    
    All industry
    
    Limited to classes
    
    All industry classes ofclasses of business
    
    of business that
    
    business other thancan be written, but
    
    Tower has
    
    traditional program businesswill be comprised
    
    historicallyof classes of
    
    writtenbusiness that Towerhas historicallywritten
 Agreements
  
    
    An amended and restated brokerage business quota share reinsurance agreement between
CastlePoint Re and Tower for brokerage business written on Tower policies. Tower is the
manager of the brokerage business.
 17




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
    
    An amended and restated traditional program business quota share reinsurance agreement
between CastlePoint Re and Tower Insurance Company of New York and Tower National Insurance
Company, governing the insurance of this type to be reinsured by CastlePoint Re. CastlePoint
Management is the manager for the traditional program business. We utilize Towers insurance
companies and CastlePoint Insurance Company to write this business.
 
    
    An amended and restated specialty program business and insurance risk-sharing business quota
share reinsurance agreement between CastlePoint Re and Tower Insurance Company of New York and
Tower National Insurance Company. CastlePoint Management is the manager for the specialty
program business. We utilize Towers insurance companies and CastlePoint Insurance Company to
write this business.
 
    
    A service and expense sharing agreement between CastlePoint Management and Tower and certain
of its subsidiaries, pursuant to which we can purchase from them insurance company services at
cost and market these services to our program underwriting managers on an unbundled basis at
market rates. We share with Tower 50% of the profits and losses generated from these services.
 
    
    a brokerage business management agreement under which Tower manages brokerage business
written in CastlePoint Insurance Company and pursuant to which Tower receives a commission of
34%, subject to a maximum of 36% and a minimum of 31%, based upon the loss ratio; and
 
    
    a program business management agreement under which CastlePoint manages traditional and
specialty program business written on Tower policies.
 
    
    reciprocal aggregate excess of loss agreements between CastlePoint Insurance Company and
Tower, such that the loss ratios for the brokerage business in Tower and in CastlePoint
Insurance Company will be equal under most circumstances.During 2007, Tower brokerage business written in CastlePoint Insurance Company totaled $96.6
million in gross written premiums. The aggregate excess of loss reinsurance agreements for
the brokerage business contemplate that, if for such combined brokerage business,
CastlePoint Insurance Company incurs a loss ratio that is in excess of the attachment point
in the aggregate excess of loss reinsurance, then CastlePoint Insurance Company will cede to
Tower under the aggregate excess of loss reinsurance a portion of the amount of losses in
excess of that attachment point. Similarly, if the loss ratio on the brokerage business
written directly in Towers insurance companies is in excess of the attachment point under
the aggregate excess of loss reinsurance, then Tower will cede to CastlePoint Insurance
Company a portion of the losses in excess of that attachment point. Based on the above,
CastlePoint Insurance Company incurs and is expected to continue to incur approximately 15%
of the combined brokerage business losses while receiving approximately 15% of the combined
brokerage business premiums, and Tower incurs and is expected to continue to incur
approximately 85% of the combined brokerage business losses while receiving approximately
85% of the
 18




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combined brokerage business premiums. Therefore, the loss ratios of CastlePoint Insurance
Company and Tower for their respective brokerage business (which loss ratios are defined for
each as the ratio of losses and loss adjustment expenses to premiums earned) should be
approximately equal.
 Acquisition of CastlePoint Insurance Company from Tower
  Excess of Loss Reinsurance Arrangements
     Additional Agreements regarding Third-Party Reinsurance
  19




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The Acquisition of Preserver by Tower and its Effect on Existing Agreements
  Agreements Subject to Regulatory Review
  Competition
   20




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
    
    reputation;
    
    multiple solution capability;
    
    strength of client relationships;
    
    perceived financial strength;
    
    managements experience in the line of insurance or reinsurance to be written;
    
    premiums charged and other terms and conditions offered;
    
    services provided, products offered and scope of business, both by size and geographic location;
    
    financial ratings assigned by independent rating agencies; and
    
    speed of claims payment.
  Reserves
  21




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
    
    Reserves for reported lossesWhen a claim is received from an insured, broker or ceding
company, or claimant we establish a case reserve for the estimated amount of its ultimate
settlement and its estimated loss expenses. Like other insurers, we establish case reserves
based upon the amount of claims reported and may subsequently supplement or reduce the
reserves as our claims department deems necessary as appropriate.
 
    
    IBNR reservesWe also estimate and establish reserves for loss and loss adjustment expense
(loss and LAE) amounts incurred but not yet reported, including expected development of
reported claims. IBNR reserves are calculated as ultimate losses and loss adjustment expenses
less reported losses and loss adjustment expenses. Ultimate losses are projected by using
generally accepted actuarial techniques, including but not limited to, loss development
methods, loss ratio methods, and Bornhuetter-Ferguson methods. Loss development methods rely
upon patterns of historical paid or incurred losses from prior periods and actual paid or
incurred losses. Loss ratio methods rely upon a loss ratio, determined from historical and
industry experience with adjustment for inflation, trend, and rate changes. Loss ratio
methods rely on an exposure base and are independent of actual loss experience. This method
is given weight for more recent periods when there is high volatility in the development
patterns at early ages. Bornhuetter-Ferguson methods serve as a compromise between the loss
development and loss ratio approaches, blending the loss ratio approach for unpaid or
unreported losses with actual paid or reported losses. In the projections, our actuaries
utilize available loss development statistics from the program underwriting managers and
primary insurance companies with whom we do business. Management sets reserves based on the
actuarial best estimate of ultimate loss and loss adjustment expense.
   Loss Development
  22




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,
 ,
  Analysis of Loss and Loss Adjustment Reserve Development
  Year ended December 31,1997
    
    1998
    
    1999
    
    2000
    
    2001
    
    2002
    
    2003
    
    2004
    
    2005
    
    2006
    
    2007($ in thousands)Net liability as
originally estimated:
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    34,192
    
    
    
    121,426Net cumulative payments
as of:One year later
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    19,753Two years later
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Three years later
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
 23




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##### Table of Contents



Year ended December 31,1997
    
    1998
    
    1999
    
    2000
    
    2001
    
    2002
    
    2003
    
    2004
    
    2005
    
    2006
    
    2007($ in thousands)Four years later
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Five years later
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Six years later
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Seven years later
    
    
    0
    
    
    
    0
    
    
    
    0Eight years later
    
    
    0
    
    
    
    0Nine years later
    
    
    0Ten years laterNet liability
re-estimated as of:One year later
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    32,942Two years later
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Three years later
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Four years later
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Five years later
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Six years later
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Seven years later
    
    
    0
    
    
    
    0
    
    
    
    0Eight years later
    
    
    0
    
    
    
    0Nine years later
    
    
    0Ten years laterCumulative
redundancy/(deficiency)0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    1,250Gross (direct plus
assumed) reserves:As originally estimated:Net reserves
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    34,192Ceded reserves
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Gross reserves
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    34,192As re-estimated:Net re-estimated
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    32,942Ceded re-estimated
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Gross re-estimated
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    32,942Cumulative
redundancy/(deficiency)0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    $
    1,250
 Investments
  24




---



##### Table of Contents



Ratings
    25




---



##### Table of Contents



Employees and Administration
  Regulatory Matters
  
    
    approval of policy forms and premium rates for our primary insurance operations;
    
    standards of solvency, including risk-based capital measurements;
    
    licensing of insurers and their agents;
    
    restrictions on the nature, quality and concentration of investments;
    
    restrictions on the ability of CastlePoint Insurance Company, CastlePoint Re and any other
insurance company or reinsurance company subsidiaries we may acquire to pay dividends to us;
    
    restrictions on transactions between insurance company subsidiaries and their affiliates;
    
    restrictions on the size of risks insurable under a single policy;
    
    requiring deposits for the benefit of policyholders;
    
    requiring certain methods of accounting;
    
    periodic examinations of our operations and finances;
    
    establishment of trust funds for the protection of policyholders;
    
    prescribing the form and content of records of financial condition required to be filed; and
    
    requiring reserves for unearned premium, losses and other purposes.
 26




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##### Table of Contents



Regulation in the United States
   General
  27




---



##### Table of Contents



Holding Company Acts
 28




---



##### Table of Contents



Regulation of Dividends and other Payments from Insurance Subsidiaries
  29




---



##### Table of Contents



Insurance Regulatory Information System Ratios
  Investment Regulation
  Accreditation
  30




---



##### Table of Contents



Risk-Based Capital Requirements
  
    
    underwriting, which encompasses the risk of adverse loss developments and inadequate pricing;
    
    declines in asset values arising from credit risk; and
    
    declines in asset values arising from investment risks.
  
    
    insurer is required to submit a plan for corrective action,
    
    insurer is subject to examination, analysis and specific corrective action and regulatory
control,
    
    regulators may place insurer under a court-ordered supervision or insolvency proceeding, and
    
    regulators are required to place insurer under a court-ordered supervision or insolvency
proceeding.
 Guaranty Funds and Assigned Risk Plans
  31




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Credit for Reinsurance
   
    
    if the reinsurer is licensed in the state in which the primary insurer is domiciled or, in
some instances, in certain states in which the primary insurer is licensed;
    
    if the reinsurer is an accredited or otherwise approved reinsurer in the state in which the
primary insurer is domiciled or, in some instances, in certain states in which the primary
insurer is licensed;
    
    in some instances, if the reinsurer (a) is domiciled in a state that is deemed to have
substantially similar credit for reinsurance standards as the state in which the primary
insurer is domiciled and (b) meets financial requirements; or
    
    if none of the above apply, to the extent that the reinsurance obligations of the reinsurer
are secured appropriately, typically through the posting of a letter of credit for the benefit
of the primary insurer or the deposit of assets into a trust fund established for the benefit
of the primary insurer.
  Statutory Accounting Principles
  32




---



##### Table of Contents



Regulation in Bermuda.
     33




---



##### Table of Contents



Principal Representative
  Independent Approved Auditor
  Loss Reserve Specialist
  Statutory Financial Statements
  34




---



##### Table of Contents



Annual Statutory Financial Return
  Minimum Solvency Margin and Restrictions on Dividends and Distributions.
  (1)
    
    is required, with respect to its general business, to maintain a
minimum solvency margin equal to greatest of:
 (A)
    
    $1,000,000; or(B)
    
    20% of net premiums written (being gross premiums written less any
premiums ceded by CastlePoint Re) up to $6 million and 15% thereafter,
or(C)
    
    15% of loss and other insurance reserves;
 (2)
    
    shall not declare or pay 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;(3)
    
    before reducing by 15% or more its total statutory capital, as set out
in its previous years financial statements, shall apply to the
Authority for its approval; and
 35




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##### Table of Contents



(4)
    
    is required, at any time it fails to meet its solvency margin, within
30 days after becoming aware of that failure or having reason to
believe that such failure has occurred, to file with the Authority a
written report containing certain information.
  Minimum Liquidity Ratio
  Supervision and Intervention
  Notification by Shareholder Controller of New or Increased Control
  36




---



##### Table of Contents



Objection to Existing Shareholder Controller
  Certain Other Bermuda Law Considerations
     37




---



##### Table of Contents



Available Information
   
 Item 1A. Risk Factors.
 Risks Related to Our Business
 We have a limited operating history.
  Our business relationship with Tower and our management overlap with it may present, and make us
vulnerable to, difficult conflicts of interest and business opportunity issues and related
challenges.
 38




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##### Table of Contents



We are dependent on Tower and its subsidiaries for a substantial portion of our business.
  Reinsurance of Towers insurance companies business and Towers management of business written on
CastlePoint Insurance policies could expose us to substantial risk of loss.
  39




---



##### Table of Contents



Our agreements with Towers insurance companies are subject to regulatory review and may be
changed, which would adversely affect us.
    Our initial arrangements with Tower were negotiated while we were its wholly-owned subsidiary and
thus do not necessarily reflect terms that we would agree to in an arms-length negotiations with an
independent third party.
  40




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##### Table of Contents



The Chairman of the Board and Chief Executive Officer of CastlePoint Holdings, and the Chief
Executive Officer of CastlePoint Management presently holds the positions of Chairman of the Board,
President and Chief Executive Officer at Tower, and this dual position may present, and make us
vulnerable to, legal challenges under anti-trust laws.
  We plan to make strategic investments in Tower, which would add another dimension to our related
party transactions with Tower and which may be influenced by our relationships with Tower or which
may lead to perceptions in the marketplace that our operations are too intertwined with Tower; such
perceptions may lead customers to pursue business with other reinsurers and insurance companies.
  41




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Our primary insurance operations may be adversely affected by a failure of Tower to provide
services needed for us to conduct our domestic insurance company business.
  If we are unable to implement our business strategy or operate our business as we currently expect,
our results may be adversely affected.
  
    
    gain greater name recognition and establish a solid reputation in the insurance and
reinsurance industry;
    
    continue to develop business relationships with clients other than Tower;
    
    obtain, as necessary, additional funding to further capitalize CastlePoint Re, CastlePoint
Insurance Company and any other U.S. licensed insurance companies that we may acquire or form;
    
    successfully capitalize on the industry relationships of our senior management;
    
    hire additional key employees and other staff;
    
    continue to develop and refine operating procedures;
    
    obtain appropriate facilities;
    
    implement new technology systems;
    
    find and acquire or form an insurer or insurers or further license CastlePoint Insurance
Company and receive the necessary regulatory approvals, so that we are able to write
 42




---



##### Table of Contents



primary insurance policies in the United States in additional states on an admitted or
non-admitted basis.
   We may not be able to manage our growth effectively.
  If we misevaluate the risks we insure or reinsure, our actual insured losses may be greater than
our loss reserves, which would negatively impact our financial condition and results of operations.
   43




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##### Table of Contents



Even if we accurately assess the risks we insure, the occurrence of severe catastrophic events or
unforeseen losses may adversely affect us.
  We may require additional capital in the future, which may not be available on favorable terms or
at all.
  44




---



##### Table of Contents



Even if we are able to raise capital through equity and/or debt financings, the terms of those
financings may adversely affect the holdings or rights of our existing shareholders.
  Our failure to purchase or form additional U.S. licensed insurance companies or, to obtain and
maintain required licenses and regulatory approvals could adversely affect us.
     We are dependent on our key executives and may not be able to attract and retain key employees to
fully implement our business strategy.
  45




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##### Table of Contents



We are currently dependent on our reinsurance business for a substantial portion of our revenues
and profits and may not be able to maintain or increase this business.
  A significant amount of our invested assets is subject to changes in interest rates and market
volatility, both generally and specifically in the insurance and reinsurance industries.
  46




---



##### Table of Contents



Our business could be adversely affected by Bermuda employment restrictions.
  Our business is dependent upon reinsurance brokers and program underwriting managers and the
failure to develop or maintain these relationships could adversely affect us.
  47




---



##### Table of Contents



Our reliance on brokers and program underwriting managers subjects us to their credit risk.
  We compete with a large number of companies in the insurance and reinsurance industry for
underwriting revenues.
   48




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##### Table of Contents



Our competitive position may be adversely affected by new, proposed or potential legislative or
industry developments or other developments that affect the markets we serve.
  
    
    Programs in which state-sponsored entities provide property insurance in catastrophe-prone
areas or other alternative markets types of coverage (for example, the state of Florida has
created a state-owned insurer to provide homeowners insurance, which may offer coverage at
lower rates than private insurers and may result in lower demand for quota share and property
catastrophe reinsurance).
 
    
    The introduction of federal legislation that, if enacted in its current form, would allow
insurers to elect federal, as opposed to state, regulation. If enacted, this could increase
competition by allowing insurers that are not licensed in particular states to transact
insurance in such states if they become federally licensed.
 
    
    The introduction of federal legislation that, if enacted in its current form, would preclude
states from prohibiting excess or surplus lines brokers from placing non-admitted insurance
with, or procuring non-admitted insurance from, alien insurers that are included on the NAIC
list. Such legislation would also impose uniform standards for insurers domiciled in the
United States to seek to become excess and surplus lines eligible in each state. If enacted,
this could increase competition by allowing certain insurers to act, or to seek to act, as
eligible excess and surplus lines insurers in states where they would not otherwise be
permitted or qualified to do so.
 
    
    Potential federal legislation that could reduce or eliminate tax advantages in the United
States for companies based in and conducting their operations out of Bermuda that reinsure
business from the United States.
 49




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##### Table of Contents



We may face substantial exposure to losses from terrorism. Our U.S. insurance companies are
required by law to offer coverage against such losses and the protection afforded by federal
legislation has been reduced.
  The reinsurance and retrocessional coverage that we use to limit our exposure to risks may not
ultimately provide the protection we sought, and credit and other risks associated with our
reinsurance arrangements may result in losses which could adversely affect us.
  50




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##### Table of Contents



Our holding company structure and certain regulatory and other constraints affect our ability to
pay dividends and make other payments.
    We have recently become subject to additional financial and other reporting and corporate
governance requirements that may be difficult for us to satisfy.
  51




---



##### Table of Contents




    
    supplement our internal accounting function, including hiring staff with expertise in
accounting and financial reporting for a public company, as well as implement appropriate and
sufficient accounting and reporting systems, and enhance and formalize closing procedures at
the end of our accounting periods;
 
    
    prepare and distribute periodic public reports as required by the U.S. federal securities
laws;
 
    
    involve and retain to a greater degree outside counsel and accountants in the activities
listed above; and
 
    
    enhance our investor relations function.
  Provisions in our bye-laws may reduce or increase the voting rights of our shares.
    52




---



##### Table of Contents



Anti-takeover provisions in our bye-laws could impede an attempt to replace or remove our directors
or acquire us, which could diminish the value of our common shares.
   We are a Bermuda company and it may be more difficult for our shareholders to protect their
interests or to enforce judgments against us or our directors and executive officers than if we
were a U.S. corporation.
   53




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##### Table of Contents



We may require our shareholders to sell their shares of CastlePoint Holdings to us.
  Each of CastlePoint Re and CastlePoint Insurance Company has received a rating of A- (Excellent)
from A.M. Best. Our inability to maintain such ratings or obtain the same rating for any additional
primary insurance subsidiaries that we may acquire or a future downgrade in our ratings would
adversely affect our competitive position with customers, our standing among brokers, program
underwriting managers and insurance company clients and would adversely affect us.
     54




---



##### Table of Contents



Our internal audit and reporting systems might not be effective in the future, which could increase
the risk that we would become subject to regulatory action or litigation or other developments that
could adversely affect us.
  Risks Related to Taxation
 CastlePoint Holdings or CastlePoint Bermuda Holdings may be deemed to be engaged in a U.S. trade or
business, or CastlePoint Re may be considered to be doing business through a permanent
establishment in the United States.
  55




---



##### Table of Contents



We may become subject to taxes in Bermuda after March 28, 2016.
  U.S. persons who hold shares could be subject to adverse tax consequences if we are considered a
passive foreign investment company, or PFIC, for U. S. federal income tax purposes.
  It might be held that transactions between Tower and CastlePoint Re do not constitute insurance,
due to the proportion of CastlePoint Res premiums provided by Tower.
  56




---



##### Table of Contents



U.S. persons who hold shares may be subject to U.S. income taxation on their pro rata share of our
related person insurance income, or RPII.
   57




---



##### Table of Contents



Changes in U.S. federal income tax law could adversely affect an investment in our shares.
    
 Item 1B. Unresolved Staff Comments.
  
 Item 2. Properties.
  
 Item 3. Legal Proceedings.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
 58




---



##### Table of Contents



Item 5. Market for Registrants Common Equity, Related Stockholder Matters, and Issuer Purchases
of Equity Securities.
 (a) Market Price of our Common Shares and Related Shareholder Matters
  2007
    
    High
    
    LowMarch 23, 2007 through March 31, 2007
    
    $
    16.73
    
    
    $
    15.52Second Quarter
    
    $
    16.56
    
    
    $
    14.29Third Quarter
    
    $
    15.00
    
    
    $
    10.33Fourth Quarter
    
    $
    13.50
    
    
    $
    10.84
   Holders of Our Shares
  Dividend Policy
  59




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##### Table of Contents



Equity Compensation Plans
  (share amounts inthousands)Number ofsecurities to be
    
    
    
    
    
    Number ofissued upon
    
    Weighted-average
    
    securities remainingexercise of
    
    exercise price of
    
    available for futureoutstanding
    
    outstanding
    
    issuance underoptions, warrants
    
    options, warrants
    
    equityPlan Category
    
    and rights
    
    and rights
    
    compensation plansEquity compensation plans approved by security holders (1)
    
    
    1,666,347
    
    
    $
    11.57
    
    
    
    1,074,674Equity compensation plans not approved by security holders
    
    
    0
    
    
    $
    0
    
    
    
    0Total
    
    
    1,666,347
    
    
    $
    11.57
    
    
    
    1,074,674
 
 (1)
    
    The following equity compensation plan was approved by our shareholders: the 2006 Long-Term
Equity Compensation Plan, as amended. (b)
 60




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(c)
 
 Item 6. Selected Financial Data
  61




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CastlePoint Holdings, Ltd.
Consolidated Statement of Income and Comprehensive Income
($ in thousands except per share amounts)
 Year Ended December 31,2007
    
    
    2006
    
    
    2005RevenuesGross premiums written
    
    $
    395,800
    
    
    $
    165,151
    
    
    $
    Ceded premiums written
    
    
    19,575
    
    
    
    
    
    
    
    Net premiums written
    
    $
    376,225
    
    
    $
    165,151
    
    
    $
    Net premiums earned
    
    $
    248,364
    
    
    $
    78,970
    
    
    $
    Insurance service revenue
    
    
    7,453
    
    
    
    2,334
    
    
    
    Net investment income
    
    
    29,506
    
    
    
    11,184
    
    
    
    Net realized (loss) gain on investment
    
    
    (8,236
    )
    
    
    35
    
    
    
    Total Revenues
    
    
    277,087
    
    
    
    92,523
    
    
    
    ExpensesLoss and loss adjustment expenses
    
    
    131,335
    
    
    
    40,958
    
    
    
    Commission and other acquisition expenses
    
    
    91,602
    
    
    
    29,405
    
    
    
    Other operating expenses
    
    
    17,851
    
    
    
    12,153
    
    
    
    36Interest expense
    
    
    9,416
    
    
    
    557
    
    
    
    Total Expenses
    
    
    250,204
    
    
    
    83,073
    
    
    
    36Income (loss) before income taxes
    
    
    26,883
    
    
    
    9,450
    
    
    
    (36
    )Income tax benefit
    
    
    5,857
    
    
    
    1,093
    
    
    
    Net Income (loss)
    
    $
    32,740
    
    
    $
    10,543
    
    
    $
    (36
    )Net Income (loss) available to common shareholders
    
    $
    32,740
    
    
    $
    10,543
    
    
    $
    (36
    )Per Share Data:Basic earnings per share
    
    
    0.90
    
    
    
    0.47
    
    
    NMDiluted earnings per share
    
    
    0.89
    
    
    
    0.47
    
    
    NMBasic weighted average shares outstanding
    
    
    36,313
    
    
    
    22,336
    
    
    
    Diluted weighted average shares outstanding
    
    
    36,635
    
    
    
    22,336
    
    
    
    Shares outstanding at end of period
    
    
    38,289
    
    
    
    29,580Selected insurance ratiosNet loss ratio (1)
    
    
    52.9
    %
    
    
    51.9
    %
    
    
    0.0
    %Net expense ratio (2)
    
    
    36.0
    %
    
    
    36.2
    %
    
    
    0.0
    %Net combined ratio (3)
    
    
    88.9
    %
    
    
    88.1
    %
    
    
    0.0
    %Summary Balance Sheet DataTotal investments and cash and cash equivalents
    
    
    693,531
    
    
    
    425,147
    
    
    
    Reinsurance and program receivable
    
    
    134,680
    
    
    
    46,225
    
    
    
    Deferred acquisition costs
    
    
    73,073
    
    
    
    30,363
    
    
    
    Total assets
    
    
    926,743
    
    
    
    511,342
    
    
    
    648Loss and loss adjustment expense reserves
    
    
    121,426
    
    
    
    34,191
    
    
    
    Unearned Premium
    
    
    214,043
    
    
    
    86,181
    
    
    
    Long-Term Debt
    
    
    134,022
    
    
    
    103,094
    
    
    
    Total Shareholders equity
    
    
    421,806
    
    
    
    279,713
    
    
    
    (36
    )Per Share DataBook value per share (4)
    
    $
    11.02
    
    
    $
    9.46
    
    
    $
    Dividends declared by share
    
    $
    0.100
    
    
    $
    0.075
    
    
    $
    
 
 Note:
    
    NM  Not meaningful. 62




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##### Table of Contents



(1)
    
    The net loss ratio is calculated by dividing loss and loss adjustment expenses by net premiums
earned.(2)
    
    The net expense ratio is calculated by dividing net underwriting expenses (consisting of
commission expense and operating expense) by net premiums earned.(3)
    
    The net combined ratio is the sum of the net loss ratio and the net expense ratio.(4)
    
    Book value per common share is calculated based on total shareholders equity divided by the
number of common shares outstanding
at the end of the period. 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
     Net premiums written (NPW)
    
    $
    376.2Net premiums earned (NPE)
    
    $
    248.4% NPE to NPW
    
    
    66
    %Premiums written from Tower
    
    
    75
    %Premiums written from others
    
    
    25
    %Operating net income
    
    $
    41.6
    (1)Operating Return on Average Equity
    
    
    10.9
    %(1)Operating EPS  Diluted
    
    $
    1.14
    (1)Consolidated combined ratio
    
    
    93.9
    %(1)
 63




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(1)
    
    see Measurement of Results for definition of non-GAAP measures
and reconciliation to GAAP  Tower
   Other Customers.
 Our Business Segments
 64




---



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Results of Operations
 Critical Accounting Estimates
    Premiums
  65




---



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66




---



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Losses and Loss Adjustment Expense Reserves
   67




---



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68




---



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69




---



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i.e. i.e
 70




---



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Deferred acquisition costs
  Investments
  71




---



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Reinsurance accounting
   Deferred taxes
 72




---



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Unpaid losses and loss adjustment expenses recoverable
 Measurement of Results
  Premiums written
 73




---



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Managed Premiums.
 Loss ratio
 Underwriting expense ratio
 Combined ratio
 Consolidated combined ratio
 Net income and return on average equity
 Operating net income, operating earnings per share, and operating return on average equity.
  2007
    
    
    2006($ in thousands)Operating net income
    
    
    41,615
    
    
    
    10,508
 74




---



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2007
    
    
    2006($ in thousands)Reconciliation to Net Income:Realized and unrealized gains (losses) on investment in Partnership (1)
    
    
    (1,956
    )
    
    
    0Net realized gains (losses) on investments
    
    
    (8,236
    )
    
    
    35Tax effect on realized and unrealized gains (losses)
    
    
    1,317
    
    
    
    0Net Income
    
    $
    32,740
    
    
    $
    10,543
 
 (1)
    
    Realized and unrealized gains and losses from our investment in a
limited partnership were recorded as a component of net investment
income Consolidated Results of Operations
  Year EndedDecember 31,($ in thousands)2007
    
    
    2006Revenues:Net premiums earned
    
    $
    248,364
    
    
    $
    78,970Commission income
    
    
    7,453
    
    
    
    2,334Net investment income
    
    
    29,506
    
    
    
    11,184Net realized investment gains/(losses)
    
    
    (8,236
    )
    
    
    35Total revenues
    
    
    277,087
    
    
    
    92,523Expenses:Net loss and loss adjustment expenses
    
    
    131,335
    
    
    
    40,958Commission and other acquisition expenses
    
    
    91,602
    
    
    
    29,405Other operating expenses
    
    
    17,851
    
    
    
    12,153Interest expenses
    
    
    9,416
    
    
    
    557Total expenses
    
    
    250,204
    
    
    
    83,073Income before taxes
    
    
    26,883
    
    
    
    9,450Income tax benefit
    
    
    5,857
    
    
    
    1,093Net Income
    
    $
    32,740
    
    
    $
    10,543
 75




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Year EndedDecember 31,($ in thousands)2007
    
    
    2006Key MeasuresReturn on average equity
    
    
    8.6
    %
    
    
    5.1
    %Operating return on average equity
    
    
    10.9
    %
    
    
    5.1
    %Consolidated combined ratio
    
    
    93.9
    %
    
    
    101.5
    %
  Summary
    Total revenues
 76




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Premiums earned.
 Gross
    
    Net($ in thousands)2007Premiums earned
    
    $
    252,309
    
    
    $
    248,364Premiums written
    
    $
    383,645
    
    
    $
    376,225Premium earned % of premiums written
    
    
    65.8
    %
    
    
    66.0
    %2006Premiums earned
    
    $
    78,970
    
    
    $
    78,970Premiums written
    
    $
    165,151
    
    
    $
    165,151Premium earned % of premiums written
    
    
    47.8
    %
    
    
    47.8
    %
  Commission income
 Net investment income and realized gains/(losses)
 77




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Loss and loss adjustment expenses
 Expenses.
 Interest Expense.
 Income tax benefit
 78




---



##### Table of Contents



Net income and return on average equity
 Consolidated combined ratio
 Insurance Segment Results of Operations
  Year EndedDecember 31, 2007($ in thousands)Revenues:Premiums earned
    
    $Gross premiums earned
    
    
    25,061Less: ceded premiums earned
    
    
    (5,985
    )Net premiums earned
    
    
    19,076Expenses:Loss and loss adjustment expensesGross loss and loss adjustment expenses
    
    
    15,219Less: ceded loss and loss adjustment expenses
    
    
    (3,446
    )Net loss and loss adjustment expenses
    
    
    11,773Underwriting expenses
 79




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Year EndedDecember 31, 2007($ in thousands)Commission expense
    
    
    7,814Other underwriting expenses
    
    
    596Total underwriting expenses
    
    
    8,410Underwriting Loss
    
    $
    (1,107
    )Key MeasuresPremiums writtenGross premiums written
    
    $
    110,957Less: ceded premiums written
    
    
    (19,571
    )Net premiums written
    
    $
    91,386Loss RatiosGross
    
    
    60.7
    %Net
    
    
    61.7
    %Accident Year Loss RatiosGross
    
    
    60.7
    %Net
    
    
    61.7
    %Underwriting Expense RatiosGross
    
    
    33.6
    %Net
    
    
    44.1
    %Combined RatiosGross
    
    
    94.3
    %Net
    
    
    105.8
    %
 Summar
 Gross premiums and net premiums
 80




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Gross and net loss and loss adjustment expenses and loss ratio
 Underwriting expenses and underwriting expense ratio
 Underwriting loss and net combined ratio
 Reinsurance Segment Results of Operations
  Year EndedDecember 31,($ in thousands)2007
    
    
    2006Revenues:Premiums earnedGross premiums earned
    
    $
    229,292
    
    
    $
    78,970Less: ceded premiums earned
    
    
    (5
    )
    
    
    Net premiums earned
    
    
    229,287
    
    
    
    78,970Expenses:Loss and loss adjustment expensesGross loss and loss adjustment expenses
    
    
    119,562
    
    
    
    40,958Less: ceded loss and loss adjustment expenses
    
    
    
    
    
    
    Net loss and loss adjustment expenses
    
    
    119,562
    
    
    
    40,958Underwriting expensesCeding commission expense
    
    
    77,551
    
    
    
    27,209Other underwriting expenses
    
    
    3,502
    
    
    
    1,383Total underwriting expenses
    
    
    81,053
    
    
    
    28,592
 81




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##### Table of Contents



Year EndedDecember 31,($ in thousands)2007
    
    
    2006Underwriting Profit
    
    $
    28,672
    
    
    $
    9,420Key MeasuresPremiums writtenGross premiums written
    
    $
    284,843
    
    
    $
    165,151Less: ceded premiums written
    
    
    (5
    )
    
    
    Net premiums written
    
    $
    284,838
    
    
    $
    165,151Loss RatiosGross
    
    
    52.1
    %
    
    
    51.9
    %Net
    
    
    52.1
    %
    
    
    51.9
    %Accident Year Loss RatiosGross
    
    
    52.7
    %
    
    
    51.9
    %Net
    
    
    52.7
    %
    
    
    51.9
    %Underwriting Expense RatiosGross
    
    
    35.3
    %
    
    
    36.2
    %Net
    
    
    35.4
    %
    
    
    36.2
    %Combined RatiosGross
    
    
    87.4
    %
    
    
    88.1
    %Net
    
    
    87.5
    %
    
    
    88.1
    %
 Summary
 Gross premiums and net premiums.
 82




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Loss and loss adjustment expenses and loss ratio.
 Underwriting expenses and underwriting expense ratio.
 Underwriting profit and combined ratio.
 Insurance Services Segment Results of Operations
  Year EndedDecember 31($ in thousands)2007
    
    
    2006Revenues:Direct commission revenue from programs
    
    $
    7,453
    
    
    $
    2,334Total Revenues
    
    
    7,453
    
    
    
    2,334Expenses:Direct commissions expense for programs
    
    
    6,236
    
    
    
    1,688
 83




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Year EndedDecember 31($ in thousands)2007
    
    
    2006Other insurance services expenses
    
    
    6,725
    
    
    
    3,601Total Expenses
    
    
    12,961
    
    
    
    5,289Insurance Services Loss
    
    $
    (5,508
    )
    
    $
    (2,955
    )
 Direct commission revenue.
 Direct commission expense.
 Other insurance services expenses.
 Insurance services loss.
 Liquidity and Capital Resources
  84




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Dividends
   85




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Bermuda
  United States
  Sources and Uses of Cash and Cash Flows
 86




---



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87




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Catastrophes
  88




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Income Taxes
  Inflation
   Investments
   89




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##### Table of Contents



Market Value($ millions)
    
    Avg Rating
    
    NotesGovernment and Government Agencies
    
    
    8.8
    
    
    AAAAsset-Backed (ABS):Auto loans and credit card receivables
    
    
    54.0
    
    
    AAASubprime
    
    
    2.5
    
    
    AAA
    
    
    (1
    )Total ABS
    
    
    56.5Mortgages:RMBS  Agency
    
    
    154.9
    
    
    AAARMBS  Non-Agency
    
    
    66.4
    
    
    AAACMBS
    
    
    66.1
    
    
    AAATotal Mortgages
    
    
    287.4
    
    
    
    
    
    
    
    (2
    )Corporates
    
    
    132.3
    
    
    
    A+Total Fixed Maturities
    
    
    485.0Equities:ABS Bond Fund (40% Subprime)
    
    
    13.9
    
    
    BBB
    
    
    (1
    )Preferred Stocks
    
    
    14.2
    
    
    
    A+Trust Preferred Bond Fund
    
    
    9.9
    
    
    BBBSecuritized Bank Loan Bond Fund
    
    
    2.3
    
    
    BBBPublic Mortgage REIT Common Stocks
    
    
    2.1
    
    
    
    n/aTotal Equities
    
    
    42.4Total Available For Sale Investments
    
    
    527.4
    
    
    AA
 
 (1)
    
    sold subsequent to December 31, 2007(2)
    
    All mortgages are directly held; there are no mortgages held in any funds   90




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91




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Corporate Fixed Maturities
 92




---



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Mortgage and Asset Backed Securities.
 Equity Securities.
  
    
    The unrealized loss on the fund was $7.1 million and was in an unrealized loss position
for 7-12 months. The market value at December 31, 2007 was 66% of cost. The fund consists
of primarily floating rate mortgage and asset backed securities with 40% of the funds
assets invested in home equity loans backed by subprime mortgages. The average credit
rating of the fund, based on the ratings of the underlying securities, is BBB. We sold our
position in the fund on February 1, 2008 and realized a loss of $0.2 million, after
recording the other-than-temporary impairment charge at year end.
    
    The unrealized loss on the three ABS backed by subprime credit was $33,000 at year end
and were in an unrealized loss position for less than 6 months. They are rated AAA. We
have subsequently sold these three securities in February 2008 and recorded a $65,000
realized loss, after recording the other-than-temporary impairment charge at year end.
 93




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##### Table of Contents




    
    The unrealized loss on the four equity securities, all of which are mortgage real estate
investment trusts (REITs), was $1.8 million and these securities were in an unrealized
loss position for less than twelve months. The market values at December 31, 2007 were 54%
of cost. These four equity securities are all publicly traded mortgage REITs whose purpose
is to own various mortgage backed securities, including CMBS, and agency and non-agency
residential MBS. To date, these equity securities continue to generate the earnings
necessary to continue the dividend payments. However, the biggest risk of not generating
earnings and therefore discontinuing dividend payments is if the funds are forced to unwind
holdings due to the inability to borrow against current holdings due to market prices that
are based on distressed sale levels vs. actual value. Based on the magnitude of the
unrealized loss and the time period it may take for full recovery, we do not necessarily
have the intent to hold these securities until full recovery. Therefore, we considered
them other-than-temporarily impaired at December 31, 2007.
 Subordinated Debt
   94




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Posting of Security by Our Non-U.S. Operating Subsidiaries
    95




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Off-Balance Sheet Arrangements
   Contractual Obligations
   Contractual
    
    
    
    
    
    Less Than
    
    
    
    
    
    
    
    
    
    More thanObligations
    
    Total
    
    1 Year
    
    1-3 Years
    
    4-5 Years
    
    5 YearsSubordinated
debentures(1)
    
    $
    134,022
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    134,022Capital leasesOperating leases(2)
    
    
    2,199
    
    
    
    845
    
    
    
    1,004
    
    
    
    350
    
    
    
    Purchase obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss reserves(3)
    
    
    121,426
    
    
    
    33,618
    
    
    
    37,020
    
    
    
    25,427
    
    
    
    25,361Interest expense on
debt
    
    
    324,441
    
    
    
    11,123
    
    
    
    22,245
    
    
    
    22,245
    
    
    
    268,828Total
    
    $
    582,088
    
    
    $
    45,586
    
    
    $
    60,269
    
    
    $
    48,022
    
    
    $
    428,211
 
 (1)
    
    For a description of the terms of the subordinated debentures, see Our Liquidity and Capital
Resources above.(2)
    
    We lease and/or sublease office space in (i) Hamilton, Bermuda, (ii) New York, New York and
(iii) Lisle, Illinois. CastlePoint Re executed a sublease agreement for premises in Hamilton,
Bermuda, as of September 1, 2006, which is expected to expire on June 30, 2012. In December 96




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##### Table of Contents



2007, CastlePoint Re increased the amount of space at these premises it has been occupying since
2006, with a five-year term of such lease commencing on July 1, 2007. CastlePoint Res current
sublease arrangement requires monthly payments of $14,599. CastlePoint also leased three
residential premises (on behalf of certain of its employees located in Bermuda) on varying terms.
CastlePoint Management and CastlePoint Insurance Company currently sublease office space in New
York, New York from Tower Insurance Company of New York, at its cost, pursuant to an arrangement
covered by the service and expense sharing agreement between these parties. CastlePoint Management
currently leases office space in Lisle, Illinois which expires on June 30, 2008.(3)
    
    The timing and amounts of actual claims payments related to loss reserves vary based on many
factors, including large individual losses, changes in the legal environment, as well as general
market conditions. The ultimate amount of the claims payments could differ materially from the
amounts estimated by us. For more information regarding estimates for unpaid loss and loss
adjustment expenses, as well as factors affecting potential payment patterns of reserves for actual
and potential claims related to our lines of business, see Critical Accounting EstimatesLosses
and Loss Adjustment Expense Reserves above. Certain of our lines of business may have loss
experience characterized as low frequency and high severity. This may result in significant
variability in loss payment patterns and, therefore, may impact the related asset/liability
investment management process. 
 Item 7A. Quantitative and Qualitative Disclosures about Market Risk
  Credit Risk
   Equity Risk
  97




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Interest Rate Risk
   Sensitivity Analysis
    98




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Estimated Increase
    
    Estimated Percentage(Decrease) in Fair Value
    
    Increase (Decrease)Change in Interest Rate
    
    ($ in thousands)
    
    in Fair Value300 basis points rise
    
    
    (47,651
    )
    
    
    (9.7
    )%200 basis points rise
    
    
    (31,,293
    )
    
    
    (6.4
    )%100 basis points rise
    
    
    (15,023
    )
    
    
    (3.1
    )%100 basis points decline
    
    
    12,781
    
    
    
    2.6
    %200 basis points decline
    
    
    23,854
    
    
    
    4.8
    %300 basis points decline
    
    
    35,009
    
    
    
    7.1
    %
   
 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
  99




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Item 9B. Other Information
 Not applicable
 
 Item 10. Directors and Executive Officers of the Registrant
  
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management Related Stockholder
Matters
  
 Item 13. Certain Relationships and Related Transactions
  100




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##### Table of Contents



Item 14. Principal Accounting Fees and Services
  
 Item 15. Exhibits and Financial Statement Schedules
 101




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##### Table of Contents



Exhibit No.
    
    Description*3.1
    
    Memorandum of Association of the Company3.2
    
    Amended and Restated Bye-Laws of the Company, filed as
Exhibit 3.2 to the Companys Quarterly Report on Form 10-Q
filed on November 14, 2007**4.1
    
    Form of Common Share Certificate**4.2
    
    Amended and Restated Warrant, effective April 6, 2006, granted
by the Company to Tower Group, Inc.*4.3
    
    Registration Rights Agreement, dated as of April 4, 2006, by
and between the Company and Friedman, Billings, Ramsey &
Co., Inc.*4.4
    
    Registration Rights Agreement, dated as of April 4, 2006, by
and between the Company and Tower Group, Inc.*10.1
    
    Employment Agreement, dated as of April 4, 2006, between
CastlePoint Holdings, Ltd. and Michael H. Lee10.2
    
    Employment Agreement, dated as of April 4, 2006, between
Joel S. Weiner and CastlePoint Holdings, Ltd.**10.3
    
    Employment Agreement, dated as of May 1, 2006, between
CastlePoint Reinsurance Company, Ltd. and Joseph P. Beitz10.4
    
    Employment Agreement, dated as of January 16, 2007, between
Gregory T. Doyle and CastlePoint Holdings, Ltd.*10.5
    
    2006 Long-Term Equity Compensation Plan*10.6
    
    Form of Stock Option Agreement for Executive Employee
Recipients of Options under 2006 Long-Term Equity Compensation
Plan*10.7
    
    Form of Stock Option Agreement for Non-Employee Director
Recipients of Options under 2006 Long-Term Equity Compensation
Plan
 102




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##### Table of Contents



Exhibit No.
    
    Description*10.8
    
    Master Agreement, dated as of April 4, 2006, among the Company, CastlePoint Management
Corp., Tower Group, Inc., Tower Insurance Company of New York and Tower National
Insurance Company10.9
    
    Addendum No. 1 to Master Agreement, dated as of April 4, 2006, between the Company and
Tower Group, Inc.**10.10
    
    Amended and Restated Brokerage Business Quota Share Reinsurance Agreement, effective as
of April 1, 2006, among CastlePoint Reinsurance Company, Ltd., Tower Insurance Company of
New York and Tower National Insurance Company**10.11
    
    Amended and Restated Traditional Program Business Quota Share Reinsurance Agreement,
effective as of April 1, 2006, among CastlePoint Reinsurance Company, Ltd., Tower
Insurance Company of New York and Tower National Insurance Company**10.12
    
    Amended and Restated Specialty Program Business and Insurance Risk Sharing Business Quota
Share Reinsurance Agreement, effective as of April 1, 2006, among CastlePoint Reinsurance
Company, Ltd., Tower Insurance Company of New York and Tower National Insurance Company
 103




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##### Table of Contents



Exhibit No.
    
    Description10.13
    
    Amendment No. 1 to Amended and Restated Brokerage Business Quota Share Reinsurance
Agreement, dated as of August 30, 2006, among CastlePoint Reinsurance Company, Ltd.,
Tower Insurance Company of New York and Tower National Insurance Company10.14
    
    Amendment No. 1 to Amended and Restated Traditional Program Business Quota Share
Reinsurance Agreement, dated as of August 30, 2006, among CastlePoint Reinsurance
Company, Ltd., Tower Insurance Company of New York and Tower National Insurance Company10.15
    
    Amendment No. 1 to Amended and Restated Specialty Program Business and Insurance Risk
Sharing Business Quota Share Reinsurance Agreement, dated as of August 30, 2006, among
CastlePoint Reinsurance Company, Ltd., Tower Insurance Company of New York and Tower
National Insurance Company10.16
    
    Parent Guarantee Agreement, dated as of December 1, 2006, between CastlePoint Holdings,
Ltd. and Wilmington Trust Company10.17
    
    Guarantee Agreement, dated as of December 1, 2006, between CastlePoint Management Corp.
and Wilmington Trust Company10.18
    
    Indenture, dated as of December 1, 2006, between CastlePoint Management Corp. and
Wilmington Trust Company10.19
    
    Amended and Restated Declaration of Trust, dated as of December 1, 2006, among Wilmington
Trust Company as Institutional Trustee, Wilmington Trust Company, as Delaware Trustee,
CastlePoint Management Corp., as Sponsor, and Joel Weiner, James Dulligan and Roger
Brown, as Administrators10.20
    
    Parent Guarantee Agreement, dated as of December 14, 2006, between CastlePoint Holdings,
Ltd. and Wilmington Trust Company
 104




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##### Table of Contents



Exhibit No.
    
    Description10.21
    
    Guarantee Agreement of CastlePoint Management Corp., dated as of December 14, 2006,
between CastlePoint Management Corp. and Wilmington Trust Company10.22
    
    Indenture, dated as of December 14, 2006, between CastlePoint Management Corp. and
Wilmington Trust Company10.23
    
    Amended and Restated Declaration of Trust, dated as of December 14, 2006, among
Wilmington Trust Company as Institutional Trustee, Wilmington Trust Company, as Delaware
Trustee, CastlePoint Management Corp., as Sponsor, and Joel Weiner, James Dulligan and
Roger Brown, as Administrators10.24
    
    Program Management Agreement entered into as of January 1, 2007 between CastlePoint Management Corp. and Tower
Insurance Company of New York10.25
    
    Form of Program Management Agreement between CastlePoint Management Corp. and Tower
National Insurance Company10.26
    
    Service and Expense Sharing Agreement, entered into as of October 1, 2006,
between CastlePoint Management Corp. and Tower Insurance Company of New York10.27
    
    Employment Offer Letter, dated as of July 1, 2006, between CastlePoint Management Corp.
and Mark Dale10.28
    
    Consulting Agreement and Release, dated January 1, 2007, between CastlePoint Management
Corp. and Mark Dale10.29
    
    Exchange Agreement, dated as of January 11, 2007, between CastlePoint Management Corp.
and Tower Group, Inc.10.30
    
    Management Agreement, dated as of July 1, 2007, by and between CastlePoint Insurance
Company and Tower Risk Management Corp., filed as Exhibit 10.1 to the Companys Quarterly
Report on Form 10-Q filed on November 14, 200710.31
    
    Amendment No. 2 to Amended and Restated Brokerage Business Quota Share Reinsurance
Agreement, between Tower Insurance Company of New York and CastlePoint Reinsurance
Company, Ltd., filed as Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q filed
on November 14, 200710.32
    
    Amendment No.3 to Amended and Restated Brokerage Business Quota Share Reinsurance
Agreement, among Tower Insurance Company of New York, Tower National Insurance Company
and CastlePoint Reinsurance Company, Ltd., filed as Exhibit 10.1 to the Companys
Quarterly Report on Form 10-Q filed on November 14, 200710.33
    
    Indenture between CastlePoint Bermuda Holdings, Ltd. and Wilmington Trust Company, as
Trustee, dated September 27, 2007, filed as Exhibit 4.1 to the Companys Current Report
on Form 8-K filed on October 1, 200710.34
    
    Guarantee Agreement dated September 27, 2007 by and between CastlePoint Bermuda Holdings,
Ltd. and Wilmington Trust Company, filed as Exhibit 4.2 to the Companys Current Report
on Form 8-K filed on October 1, 2007
 105




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##### Table of Contents



Exhibit No.
    
    Description10.35
    
    Amended and Restated Declaration of Trust, dated September 27, 2007, by Wilmington Trust,
as Institutional Trustee and as Delaware Trustee; Castlepoint Bermuda Holdings, Ltd. as
Sponsor, and Trust Administrators Roger A. Brown, Joel S. Weiner and James Dulligan,
filed as Exhibit 4.3 to the Companys Current Report on Form 8-K filed on October 1, 200710.36
    
    Fixed/Floating Rate Junior Subordinated Deferrable Interest Debenture, dated September
27, 2007 by CastlePoint Bermuda Holdings, Ltd. in favor of Wilmington Trust Company as
Institutional Trustee, filed as Exhibit 4.4 to the Companys Current Report on Form 8-K
filed on October 1, 200710.37
    
    Amendment No. 4 to Amended and Restated Brokerage Business Quota Share Reinsurance Agreement,
dated July 1, 2007 by and among Tower Group, Inc., Tower Insurance Company of New York and CastlePoint Reinsurance Company, Ltd.10.38
    
    Aggregate Excess of Loss Reinsurance Agreement dated October 1, 2007 by
and among Tower Insurance Company of New York, Tower National Insurance Company, Preserver Insurance Company,
Mountain Valley Indemnity Company and North East Insurance Company, and CastlePoint Insurance Company10.39
    
    Aggregate Excess of Loss Reinsurance Agreement dated October 1, 2007
by and among Tower Insurance Company of New York and CastlePoint Insurance Company10.40
    
    Service Agreement dated May 1, 2007 by and among Tower Risk
Management Corp. and CastlePoint Management Corp.21.1
    
    List of subsidiaries of the Company23.1
    
    Consent of PricewaterhouseCoopers (Bermuda)31.1
    
    Chief Executive Officer  Certification pursuant to Sarbanes-Oxley Act of 2002 Section 30231.2
    
    Chief Financial Officer  Certification pursuant to Sarbanes-Oxley Act of 2002 Section 30232
    
    Chief Executive Officer and Chief Financial Officer  Certification pursuant to Sarbanes-
Oxley Act of 2002 Section 906
 
 *
    
    Incorporated by reference to the Companys Registration Statement on Form S-1 (No. 333-134628)
filed on June 1, 2006.**
    
    Incorporated by reference to Amendment No. 1 to the Companys Registration Statement on Form S-1
(No. 333- 134628) filed on September 25, 2006.***
    
    Incorporated by reference to Amendment No. 2 to the Companys Registration Statement on
Form S-1 (No. 333- 134628) filed on November 22, 2006.
    
    Incorporated by reference to the Companys Registration Statement on Form S-1 (No. 333- 139939)
filed on January 11, 2007.
    
    Incorporated by reference to Amendment No. 1 to the Companys Registration Statement on Form S-1
(No. 333- 139939) filed on February 28, 2007.
    
    Filed herewith 106




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SIGNATURES
  CASTLEPOINT HOLDINGS, LTD.Date:  March 31, 2008
    By:
    /s/  Michael H. LeeMichael H. LeeChief Executive Officer  Signature
    
    Capacity/s/  Michael H. Lee
    
    Chief Executive Officer and DirectorMichael H. Lee
    
    (principal executive officer)/s/  Joel S. Weiner
    
    Chief Financial OfficerJoel S. Weiner
    
    (principal financial officer)/s/  Richard M. Barrow
    
    Chief Accounting OfficerRichard M. Barrow
    
    (principal accounting officer)/s/  Gregory T. Doyle
    
    DirectorGregory T. Doyle/s/  William A. Robbie
    
    DirectorWilliam A. Robbie/s/  Robert S. Smith
    
    DirectorRobert S. Smith/s/  Jan Van Gorder
    
    DirectorJan Van Gorder




---



##### 



ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 Index to Consolidated Financial Statements
 PageReport of PricewaterhouseCoopers (Bermuda), Independent Registered
Public Accounting Firm with respect to audited consolidated
financial statements as of and for the years ended December 31, 2007
and 2006
    
    
    F-2Consolidated Balance Sheets as of December 31, 2007 and 2006
    
    
    F-3Consolidated Statements of Income and Comprehensive Income for the
years ended December 31, 2007, 2006 and the period ended 2005
    
    
    F-4Consolidated Statements of Cash Flows for the years ended December
31, 2007, 2006 and the period ended 2005
    
    
    F-5Consolidated Statements of Changes in Shareholders Equity for the
years ended December 31, 2007, 2006 and the period ended 2005
    
    
    F-6Consolidated Notes to Financial Statements for the years ended
December 31, 2007, 2006 and the period ended 2005
    
    
    F-7
  F-1




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##### Table of Contents



PricewaterhouseCoopersChartered AccountantsDorchester House7 Church StreetHamilton HM11BermudaTelephone +1 (441) 295 2000Facsimile +1 (441) 295 1242www.pwc.com/bermuda
 Report of Independent Registered Public Accounting Firm
 
  
 
 F-2




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##### Table of Contents



CastlePoint Holdings, Ltd.
 
 Consolidated Balance Sheets
($ in thousands)
 December 31,2007
    
    
    2006AssetsFixed-maturity securities, available-for-sale, at fair value (amortized cost
$484,523 for 2007; $293,878 for 2006)
    
    $
    484,972
    
    
    $
    295,527Equity securities, available-for-sale, at fair value (cost $43,927
for 2007; $0 for 2006)
    
    
    42,402
    
    
    
    Short-term investments, available-for-sale, at fair value (amortized cost
$0 for 2007; $51,626 for 2006)
    
    
    
    
    
    
    51,638Total available-for-sale investments
    
    
    527,374
    
    
    
    347,165Investment in Tower preferred stock
    
    
    
    
    
    
    40,000Investment in Partnership, equity method
    
    
    8,503
    
    
    
    Common trust securitiesstatutory business trusts, equity method
    
    
    4,022
    
    
    
    3,094Total investments
    
    
    539,899
    
    
    
    390,259Cash and cash equivalents
    
    
    153,632
    
    
    
    34,784Accrued investment income
    
    
    4,064
    
    
    
    2,211Assumed premiums receivable (primarily with related partiesSee note 3)
    
    
    125,597
    
    
    
    44,930Premiums receivableprograms (primarily with related partiesSee note 3)
    
    
    9,083
    
    
    
    1,295Prepaid reinsurance premiums
    
    
    3,475
    
    
    
    Deferred acquisition costs (primarily with related partiesSee note 3)
    
    
    73,073
    
    
    
    30,363Deferred income taxes
    
    
    7,051
    
    
    
    1,089Deferred financing fees
    
    
    3,673
    
    
    
    3,084Other assets
    
    
    7,196
    
    
    
    3,327Total Assets
    
    $
    926,743
    
    
    $
    511,342Liabilities and Shareholders EquityLiabilitiesLoss and loss adjustment expenses (primarily with related partiesSee note 3)
    
    $
    121,426
    
    
    $
    34,192Unearned premium (primarily with related partiesSee note 3)
    
    
    217,518
    
    
    
    86,181Assumed losses payable (primarily with related partiesSee note 3)
    
    
    8,527
    
    
    
    3,496Premiums payableprograms (primarily with related partiesSee note 3)
    
    
    16,257
    
    
    
    1,072Accounts payable and accrued expenses
    
    
    3,592
    
    
    
    2,869Other liabilities
    
    
    3,595
    
    
    
    725Subordinated debentures
    
    
    134,022
    
    
    
    103,094Total Liabilities
    
    
    504,937
    
    
    
    231,629Commitments and Contingent Liabilities (Note 11)Shareholders EquityCommon shares ($0.01 par value, 100,000,000 shares authorized, 38,289,430 shares issued
as of December 31, 2007 and 29,580,000 shares issued as of December 31, 2006)
    
    
    383
    
    
    
    296Additional paid-in-capital
    
    
    385,057
    
    
    
    269,472Accumulated other comprehensive (loss) income
    
    
    (1,051
    )
    
    
    1,657Retained earnings
    
    
    37,417
    
    
    
    8,288Total Shareholders Equity
    
    
    421,806
    
    
    
    279,713Total Liabilities and Shareholders Equity
    
    $
    926,743
    
    
    $
    511,342
  F-3




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##### Table of Contents



CastlePoint Holdings, Ltd.
Consolidated Statement of Income and Comprehensive Income
($ in thousands except per share amounts)
 Year Ended December 31,2007
    
    
    2006
    
    
    2005RevenuesNet premiums earned (primarily with related partiesSee note 3)
    
    $
    248,364
    
    
    $
    78,970
    
    
    $
    Insurance service revenue (primarily with related partiesSee note 3)
    
    
    7,453
    
    
    
    2,334
    
    
    
    Net investment income
    
    
    29,506
    
    
    
    11,184
    
    
    
    Net realized (loss) gain on investments
    
    
    (8,236
    )
    
    
    35
    
    
    
    Total Revenues
    
    
    277,087
    
    
    
    92,523
    
    
    
    ExpensesLoss and loss adjustment expenses (primarily with related partiesSee note 3)
    
    
    131,335
    
    
    
    40,958
    
    
    
    Commission and other acquisition expenses (primarily with related partiesSee note 3)
    
    
    91,602
    
    
    
    29,405
    
    
    
    Other operating expenses
    
    
    17,851
    
    
    
    12,153
    
    
    
    36Interest expense
    
    
    9,416
    
    
    
    557
    
    
    
    Total Expenses
    
    
    250,204
    
    
    
    83,073
    
    
    
    36Income (loss) before income taxes
    
    
    26,883
    
    
    
    9,450
    
    
    
    (36
    )Income tax benefit
    
    
    5,857
    
    
    
    1,093
    
    
    
    Net Income (loss)
    
    $
    32,740
    
    
    $
    10,543
    
    
    $
    (36
    )Comprehensive Income (loss)Net income (loss)
    
    $
    32,740
    
    
    $
    10,543
    
    
    $
    (36
    )Other comprehensive income (loss):Gross unrealized investment holding (losses) gains arising during
period
    
    
    (11,048
    )
    
    
    1,696
    
    
    
    Less: reclassification adjustment for (losses) gains included in net
income
    
    
    (8,236
    )
    
    
    35
    
    
    
    (2,812
    )
    
    
    1,661
    
    
    
    Income tax benefit (expense) related to items of other comprehensive
income (loss)
    
    
    104
    
    
    
    (4
    )
    
    
    Total other comprehensive (loss) income
    
    
    (2,708
    )
    
    
    1,657
    
    
    
    Comprehensive Income (loss)
    
    $
    30,032
    
    
    $
    12,200
    
    
    $
    (36
    )Earnings Per ShareBasic earnings per common share
    
    $
    0.90
    
    
    $
    0.47
    
    
    NMDiluted earnings per common share
    
    $
    0.89
    
    
    $
    0.47
    
    
    NMWeighted-average common shares outstandingBasic
    
    
    36,313
    
    
    
    22,336
    
    
    
    Diluted
    
    
    36,635
    
    
    
    22,336
    
    
    
    
   F-4




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##### Table of Contents



CastlePoint Holdings, Ltd.
Consolidated Statements of Cash Flows
($ in thousands)
 Year Ended December 31,2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    32,740
    
    
    $
    10,543Adjustments to reconcile net income to net cash provided by
(used in) operations:Loss (Gain) on sale of investments
    
    
    8,236
    
    
    
    (35
    )Depreciation and amortization
    
    
    220
    
    
    
    25Amortization of bond premium or discount
    
    
    (586
    )
    
    
    (396
    )Amortization of stock-based compensation expense
    
    
    2,021
    
    
    
    998Amortization of deferred financing fees
    
    
    110Equity in limited partnerships
    
    
    1,387
    
    
    
    Deferred income tax
    
    
    (5,857
    )
    
    
    (1,093
    )Warrants issued
    
    
    
    
    
    
    4,605Increase in assets:Accrued investment income
    
    
    (1,853
    )
    
    
    (2,211
    )Assumed premiums receivable
    
    
    (80,667
    )
    
    
    (44,930
    )Premiums receivableprograms
    
    
    (7,788
    )
    
    
    (1,295
    )Prepaid reinsurance premiums
    
    
    (3,475
    )
    
    
    Deferred acquisition costs
    
    
    (42,710
    )
    
    
    (30,363
    )Other assets
    
    
    (3,776
    )
    
    
    (750
    )Increase in liabilities:Loss and loss adjustment expenses
    
    
    87,234
    
    
    
    34,192Unearned premium
    
    
    131,337
    
    
    
    86,181Assumed losses payable
    
    
    5,031
    
    
    
    3,496Premiums payableprograms
    
    
    15,185
    
    
    
    1,072Accounts payable and accrued expenses
    
    
    1,053
    
    
    
    2,538Other liabilities
    
    
    2,891
    
    
    
    41Net cash flows provided by operations
    
    
    140,733
    
    
    
    62,618Cash flows from investing activities:Cost of fixed assets purchased
    
    
    (1,547
    )
    
    
    (331
    )Purchases of investments:Cost of fixed-maturity securities purchased
    
    
    (492,618
    )
    
    
    (418,317
    )Cost of equities securities purchased
    
    
    (52,867
    )
    
    
    (40,000
    )Cost of purchase of shell company (net of cash acquired)
    
    
    
    
    
    
    (2,795
    )Sale of investments:Proceeds from sales of fixed-maturity securities
    
    
    303,298
    
    
    
    127,315Other Investments
    
    
    40,000
    
    
    
    Cost of limited partnerships (purchased)/sold
    
    
    (10,000
    )
    
    
    Net short term investments matured (purchased )
    
    
    51,626
    
    
    
    (51,626
    )Net cash flows used in investing activities
    
    
    (162,108
    )
    
    
    (385,754
    )Cash flows from financing activities:Net proceeds from subordinated debentures
    
    
    29,301
    
    
    
    96,916Net proceeds from Tower Group, Inc.
    
    
    
    
    
    
    15,000Net proceeds from Private Offering
    
    
    
    
    
    
    249,165Net proceeds from Initial Public Offering
    
    
    114,533
    
    
    
    Registration costs paid and deferred
    
    
    
    
    
    
    (942
    )Dividends to shareholders
    
    
    (3,611
    )
    
    
    (2,219
    )Net cash flows provided by financing activities
    
    
    140,223
    
    
    
    357,920Increase in cash and cash equivalents
    
    
    118,848
    
    
    
    34,784Cash and cash equivalents, beginning of period
    
    
    34,784
    
    
    
    Cash and cash equivalents, end of period
    
    $
    153,632
    
    
    $
    34,784Supplemental disclosure of cash flow information:Cash paid for income taxes
    
    $
    19
    
    
    $
    Cash paid for interest
    
    $
    9,446
    
    
    $
    174
 
 *
    
    Note: The Company commenced operations in 2006 thus there were no cash flows in 2005.  F-5




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##### Table of Contents



CastlePoint Holdings, Ltd.
Consolidated Statement of Changes in Shareholders Equity
($ in thousands)
 Additional
    
    
    Accumulated Other
    
    
    Retained
    
    
    TotalCommon
    
    
    Paid-in
    
    
    Comprehensive
    
    
    Earnings
    
    
    ShareholdersShares
    
    
    Capital
    
    
    Income (loss)
    
    
    (Deficit)
    
    
    EquityBalance at November 16, 2005
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Net (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36
    )
    
    
    (36
    )Net unrealized gains
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Dividends to shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at December 31, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36
    )
    
    
    (36
    )Tower Group, Inc., proceeds
    
    
    26
    
    
    
    14,974
    
    
    
    
    
    
    
    
    
    
    
    15,000Private offering, net proceeds
    
    
    270
    
    
    
    248,895
    
    
    
    
    
    
    
    
    
    
    
    249,165Warrant to purchase common shares
    
    
    
    
    
    
    4,605
    
    
    
    
    
    
    
    
    
    
    
    4,605Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,543
    
    
    
    10,543Net unrealized gains
    
    
    
    
    
    
    
    
    
    
    1,657
    
    
    
    
    
    
    
    1,657Stock based compensation
    
    
    
    
    
    
    998
    
    
    
    
    
    
    
    
    
    
    
    998Dividends to shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,219
    )
    
    
    (2,219
    )Balance at December 31, 2006
    
    
    296
    
    
    
    269,472
    
    
    
    1,657
    
    
    
    8,288
    
    
    
    279,713Initial public offering, net proceeds
    
    
    87
    
    
    
    113,564
    
    
    
    
    
    
    
    
    
    
    
    113,651Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,740
    
    
    
    32,740Net unrealized loss
    
    
    
    
    
    
    
    
    
    
    (2,708
    )
    
    
    
    
    
    
    (2,708
    )Stock based compensation
    
    
    
    
    
    
    2,021
    
    
    
    
    
    
    
    
    
    
    
    2,021Dividends to shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,611
    )
    
    
    (3,611
    )Balance at December 31, 2007
    
    $
    383
    
    
    $
    385,057
    
    
    $
    (1,051
    )
    
    $
    37,417
    
    
    $
    421,806
  F-6




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##### Table of Contents



CASTLEPOINT HOLDINGS, LTD.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
for the years, ended December 31, 2007, 2006 and the period ended 2005
 Note 1 General
      F-7




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##### Table of Contents



Note 2 Summary of Significant Accounting Policies
 Basis of Presentation
  Use of Estimates
  Premiums Earned
  Reinsurance Accounting
 F-8




---



##### Table of Contents



Liability for Loss and Loss Adjustment Expenses
    Cash and Cash Equivalents
  Investments
  F-9




---



##### Table of Contents



Fixed maturity and equity securities:
 Investments in partnerships and other funds
 Common trust securitiesstatutory business trusts:
  Premiums Receivable/PayablePrograms
  Commission Income/ExpensesPrograms
  F-10




---



##### Table of Contents



Assumed Commission Expense
  Deferred Acquisition Costs
  Debt Issuance Cost
  Income Taxes
    F-11




---



##### Table of Contents



Equity Compensation Plans
  Earnings Per Share
  Offerings and Incorporation Expense
   Intangible Assets
  Fixed Assets
  Variable Interest Entities
  F-12




---



##### Table of Contents



Segment Reporting
  Recent Accounting Developments
     F-13




---



##### Table of Contents



Note 3 Related Party Transactions
   Reinsurance Agreements
   F-14




---



##### Table of Contents



December 31,2007
    
    2006($in thousands)Net premiums earned
    
    $
    201,959
    
    
    $
    76,963Net losses incurred
    
    
    103,154
    
    
    
    39,940Net commission expense
    
    
    72,835
    
    
    
    26,534
 Management Agreements
   Service and Expense Sharing Agreements
  Note 4 Investments
  F-15




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##### Table of Contents



Cost or
    
    
    Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value($in thousands)December 31, 2007:Bonds:US Government and agencies securities
    
    $
    8,598
    
    
    $
    214
    
    
    $
    
    
    
    $
    8,812Corporate fixed maturities
    
    
    132,268
    
    
    
    1,372
    
    
    
    (1,370
    )
    
    
    132,270Mortgage & asset-backed securities
    
    
    343,623
    
    
    
    3,124
    
    
    
    (2,857
    )
    
    
    343,890Total fixed maturities
    
    
    484,489
    
    
    
    4,710
    
    
    
    (4,227
    )
    
    
    484,972Equity Securities
    
    
    44,036
    
    
    
    28
    
    
    
    (1,662
    )
    
    
    42,402Total
available-for-sale
investments
    
    $
    528,525
    
    
    $
    4,738
    
    
    $
    (5,889
    )
    
    $
    527,374December 31, 2006:Bonds:U.S. Government and agencies securities
    
    $
    18,650
    
    
    $
    19
    
    
    $
    (9
    )
    
    $
    18,660Corporate fixed maturities
    
    
    88,785
    
    
    
    398
    
    
    
    (22
    )
    
    
    89,161Mortgage & asset-backed securities
    
    
    186,443
    
    
    
    1,342
    
    
    
    (78
    )
    
    
    187,707Total fixed maturities
    
    
    293,878
    
    
    
    1,759
    
    
    
    (109
    )
    
    
    295,528Short term investments
    
    
    51,626
    
    
    
    12
    
    
    
    (1
    )
    
    
    51,637Total
available-for-sale
investments
    
    $
    345,504
    
    
    $
    1,771
    
    
    $
    (110
    )
    
    $
    347,165
   Amortized
    
    
    EstimatedYears to Maturity
    
    Cost
    
    
    Fair Value($ in thousands)December 31, 2007Less than one year
    
    $
    25,482
    
    
    $
    25,541One to five years
    
    
    73,578
    
    
    
    74,646Five to ten years
    
    
    15,440
    
    
    
    15,507Due after ten years
    
    
    26,366
    
    
    
    25,388Mortgage and asset-backed securities
    
    
    343,657
    
    
    
    343,890Total fixed maturities
    
    $
    484,523
    
    
    $
    484,972December 31, 2006Less than one year
    
    $
    8,557
    
    
    $
    8,558One to five years
    
    
    96,622
    
    
    
    96,996Five to ten years
    
    
    2,256
    
    
    
    2,266Mortgage and asset-backed securities
    
    
    186,443
    
    
    
    187,707Total fixed maturities
    
    $
    293,878
    
    
    $
    295,527
 F-16




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##### Table of Contents



December 31,2007
    
    
    2006($ in thousands)Income:Fixed maturity securities:
    
    $
    23,843
    
    
    $
    8,908Short term securities
    
    
    164
    
    
    
    100Dividends on common stock
    
    
    2,209
    
    
    
    Dividends on preferred stock
    
    
    498
    
    
    
    250Limited Partnerships
    
    
    (1,497
    )
    
    
    Cash and cash equivalents
    
    
    5,523
    
    
    
    2,378Total
    
    $
    30,740
    
    
    $
    11,636Expenses:Investment expenses
    
    $
    1,234
    
    
    $
    452Net Investment income
    
    $
    29,506
    
    
    $
    11,184
   F-17




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##### Table of Contents



December 31,2007
    
    
    2006($ in thousands)Fixed maturities:Gross realized gains
    
    $
    864
    
    
    $
    41Gross realized losses
    
    
    (158
    )
    
    
    (6
    )Net realized gains
    
    
    706
    
    
    
    35Equities:Gross realized gains
    
    
    
    
    
    
    Gross realized losses
    
    
    (8,945
    )
    
    
    Net realized losses
    
    
    (8,945
    )
    
    
    Cash equivalents:Gross realized gains
    
    
    9
    
    
    
    Gross realized losses
    
    
    (6
    )
    
    
    Net realized gains
    
    
    3
    
    
    
    Total net realized (losses) gains
    
    $
    (8,236
    )
    
    $
    35Change in net unrealized (depreciation) appreciation on investments:Fixed maturitiesavailable for sale
    
    
    (1,167
    )
    
    
    1,661Equitiesavailable for sale
    
    
    (1,645
    )
    
    
    Total investments
    
    $
    (2,812
    )
    
    $
    1,661Deferred taxes
    
    
    104
    
    
    
    (4
    )Change in net unrealized (depreciation) appreciation on investments, net of tax
    
    
    (2,708
    )
    
    
    1,657Total net realized (losses) gains and change in net unrealized (depreciation)
appreciation on investments
    
    $
    (10,944
    )
    
    $
    1,692
  F-18




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##### Table of Contents



Less than 12 Months
    
    
    More than 12 Months
    
    
    TotalNumber of
    
    
    
    
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    
    
    
    
    UnrealizedPositions
    
    
    Book Value
    
    
    Fair Value
    
    
    losses
    
    
    Book Value
    
    
    Fair Value
    
    
    losses
    
    
    Book Value
    
    
    Fair Value
    
    
    losses($ in thousands)As of December 31, 2007Corporates
    
    
    17
    
    
    $
    28,206
    
    
    $
    26,836
    
    
    $
    (1,370
    )
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    28,206
    
    
    $
    26,836
    
    
    $
    (1,370
    )Mortgage & asset backed
    
    
    23
    
    
    
    77,757
    
    
    
    74,911
    
    
    
    (2,846
    )
    
    
    3,669
    
    
    
    3,658
    
    
    
    (11
    )
    
    
    81,426
    
    
    
    78,569
    
    
    
    (2,857
    )Total fixed maturities
    
    
    40
    
    
    
    105,963
    
    
    
    101,747
    
    
    
    (4,216
    )
    
    
    3,669
    
    
    
    3,658
    
    
    
    (11
    )
    
    
    109,632
    
    
    
    105,405
    
    
    
    (4,227
    )Equities
    
    
    9
    
    
    
    21,383
    
    
    
    19,721
    
    
    
    (1,662
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,383
    
    
    
    19,721
    
    
    
    (1,662
    )Total
    
    
    49
    
    
    $
    127,346
    
    
    $
    121,468
    
    
    $
    (5,878
    )
    
    $
    3,669
    
    
    $
    3,658
    
    
    $
    (11
    )
    
    $
    131,015
    
    
    $
    125,126
    
    
    $
    (5,889
    )As of December 31, 2006US Govt/Agency
    
    
    3
    
    
    $
    4,660
    
    
    $
    4,670
    
    
    $
    (10
    )
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    4,660
    
    
    $
    4,669
    
    
    $
    (9
    )Corporates
    
    
    10
    
    
    
    11,693
    
    
    
    11,671
    
    
    
    (22
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,693
    
    
    
    11,671
    
    
    
    (22
    )Mortgage & asset backed
    
    
    17
    
    
    
    31,822
    
    
    
    31,744
    
    
    
    (78
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,822
    
    
    
    31,744
    
    
    
    (78
    )Total fixed maturities
    
    
    30
    
    
    
    48,175
    
    
    
    48,085
    
    
    
    (110
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,175
    
    
    
    48,084
    
    
    
    (109
    )Short term
    
    
    2
    
    
    
    1,757
    
    
    
    1,757
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,757
    
    
    
    1,756
    
    
    
    (1
    )Total
    
    
    32
    
    
    $
    49,932
    
    
    $
    49,842
    
    
    $
    (110
    )
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    49,932
    
    
    $
    49,840
    
    
    $
    (110
    )
    F-19




---



##### Table of Contents




    
    The unrealized loss on the fund was $7.1 million and was in an unrealized loss position
for 7 -12 months. The market value at December 31, 2007 was 34% of cost. The fund
consists of primarily floating rate mortgage and asset backed securities with 40% of the
funds assets invested in home equity loans backed by subprime mortgages. The average
credit rating of the fund, based on the ratings of the underlying securities, is BBB. We
sold our position in the fund on February 1, 2008 and realized a loss of $0.2 million,
after recording the other-than-temporary charge at year end.
    
    The unrealized loss on the three ABS backed by subprime credit was $33,000 at year end
and were in an unrealized loss position for less than 6 months. They are rated AAA. We
have subsequently sold these 3 securities in February 2008 and recorded a $0.1 million
realized loss, after recording the other-than-temporary charge at year end.
    
    The unrealized loss on the four equity securities, all of which are mortgage real estate
investment trusts (REITs), was $1.8 million and these securities were in an unrealized
loss position for less than 12 months. The market values at December 31, 2007 were 54% of
cost. These 4 equity securities are all publicly traded mortgage REITs whose purpose is to
own various mortgage backed securities, including CMBS and agency and non-agency
residential MBS. To date, these equity securities continue to generate the earnings
necessary to continue the dividend payments. However, the biggest risk of not generating
earnings and therefore discontinuing dividend payments is if the funds are forced to unwind
holdings due to the inability to borrow against current holdings due to market prices that
are based on distressed sale levels vs. expected longer term value. Based on the magnitude
of the unrealized loss and the time period it may take for full recovery, the Company does
not necessarily have the intent to hold these securities until full recovery. Therefore
the Company considered them other-than-temporarily impaired at December 31, 2007.
  F-20




---



##### Table of Contents



Note 5 Property-Casualty Insurance Activity
 (a)
 Direct
    
    
    Assumed
    
    
    Ceded
    
    
    Net($ in thousands)2007Premiums written
    
    $
    86,604
    
    
    $
    297,040
    
    
    $
    (7,419
    )
    
    $
    376,225Change in unearned premiums
    
    
    (71,899
    )
    
    
    (59,437
    )
    
    
    3,475
    
    
    
    (127,861
    )Premiums earned
    
    $
    14,705
    
    
    $
    237,603
    
    
    $
    (3,944
    )
    
    $
    248,3642006Premiums written
    
    $
    
    
    
    $
    165,151
    
    
    $
    
    
    
    $
    165,151Change in unearned premiums
    
    
    
    
    
    
    (86,181
    )
    
    
    
    
    
    
    (86,181
    )Premiums earned
    
    $
    
    
    
    $
    78,970
    
    
    $
    
    
    
    $
    78,9702005Premiums written
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Change in unearned premiums
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Premiums earned
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 (b)
 Gross
    
    
    ReinsuranceLiability
    
    
    Recoverables($ in thousands)December 31, 2007Case-basis reserves
    
    $
    52,601
    
    
    $
    IBNR reserves
    
    
    68,825
    
    
    
    Total
    
    $
    121,426
    
    
    $
    December 31, 2006Case-basis reserves
    
    $
    11,813
    
    
    $
    IBNR reserves
    
    
    22,379
    
    
    
    Total
    
    $
    34,192
    
    
    $
    
  F-21




---



##### Table of Contents



2007
    
    
    2006($ in thousands)Balance at January 1
    
    $
    34,192
    
    
    $
    Less reinsurance recoverables
    
    
    
    
    
    
    34,192
    
    
    
    Incurred related to:Current year
    
    
    132,585
    
    
    
    40,958Prior years
    
    
    (1,250
    )
    
    
    Total incurred
    
    
    131,335
    
    
    
    40,958Loss portfolio transfer
    
    
    
    
    
    
    21Paid related to:Current year
    
    
    24,348
    
    
    
    6,787Prior years
    
    
    19,753
    
    
    
    Total paid
    
    
    44,101
    
    
    
    6,787Net balance at December 31,
    
    
    121,426
    
    
    
    Add reinsurance recoverables
    
    
    
    
    
    
    Balance at December 31
    
    $
    121,426
    
    
    $
    34,192
     Note 6 Deferred Acquisition Costs
  December 31,2007
    
    
    2006($ in thousands)Deferred acquisition costs at January 1,
    
    $
    30,363
    
    
    $
    Cost paid during period:Commission and brokerage
    
    
    133,084
    
    
    
    58,794Other underwriting and acquisition costs
    
    
    1,228
    
    
    
    974Total cost paid during period
    
    
    134,312
    
    
    
    59,768Amortization
    
    
    (91,602
    )
    
    
    (29,405
    )Deferred acquisition costs at December 31,
    
    $
    73,073
    
    
    $
    30,363
 Note 7 Capital Stock  (a) Authorized and issued
 F-22




---



##### Table of Contents



(b) Warrants
    Note 8 Equity Compensation Plans
 2006 Long-Term Equity Compensation Plan
  F-23




---



##### Table of Contents



Stock Options
  2007
    
    
    2006Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageNumber of
    
    
    Exercise
    
    
    Number of
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    PriceSTOCK OPTIONSOutstanding, beginning of period
    
    
    1,082,666
    
    
    $
    10.00
    
    
    
    
    
    
    
    Granted at market value 3-22-07, 04-04-06 respectively
    
    
    539,447
    
    
    
    14.50
    
    
    
    1,126,166
    
    
    
    10.00Granted at market value 4-30-07
    
    
    16,807
    
    
    
    15.25
    
    
    
    
    
    
    
    Forfeitures and expirations
    
    
    (20,137
    )
    
    
    14.50
    
    
    
    (43,500
    )
    
    
    10.00Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding, end of period
    
    
    1,618,783
    
    
    
    11.50
    
    
    
    1,082,666
    
    
    
    10.00Exercisable, end of period
    
    
    376,133
    
    
    
    10.00
    
    
    
    
    
    
    
    Weighted average fair value per share of options granted
    
    
    
    
    
    
    4.28
    
    
    
    
    
    
    
    4.09
  F-24




---



##### Table of Contents



Options outstanding
    
    
    Options exercisableAverageRemainingNumber of
    
    
    Contractual
    
    
    Average
    
    
    Number of
    
    
    AverageRange of Exercise Prices
    
    Shares
    
    
    Life
    
    
    Exercise Price
    
    
    Shares
    
    
    Exercise PriceDecember 31, 2007:$10  2006
    
    
    1,082,666
    
    
    8.25 years
    
    $
    10.00
    
    
    
    376,133
    
    
    $
    10.00$14.5  03/22/07
    
    
    519,310
    
    
    9.25 years
    
    $
    14.50
    
    
    
    
    
    
    
    $15.25  04/30/07
    
    
    16,807
    
    
    9.33 years
    
    $
    15.25
    
    
    
    
    
    
    
    Total Options
    
    
    1,618,783
    
    
    8.58 years
    
    $
    11.50
    
    
    
    376,133
    
    
    $
    10.00December 31, 2006:$10.00
    
    
    1,082,666
    
    
    9.25 years
    
    $
    10.00
    
    
    
    
    
    
    
    Total Options
    
    
    1,082,666
    
    
    9.25 years
    
    $
    10.00
    
    
    
    
    
    
    
    
   Note 9  Taxation
 Bermuda
  United States
   December 31, 2007
    
    
    December 31, 2006($in thousands)Current federal income tax expense
    
    $
    
    
    
    $
    2Current state income tax expense
    
    
    
    
    
    
    Deferred federal and state income tax benefit
    
    
    (5,857
    )
    
    
    (1,095
    )Income tax benefit
    
    $
    (5,857
    )
    
    $
    (1,093
    )
 F-25




---



##### Table of Contents



December 31, 2007
    
    
    December 31, 2006($in thousands)Deferred tax assets:Claims reserve discount
    
    $
    488
    
    
    $
    Unearned premium
    
    
    5,061
    
    
    
    Stock options
    
    
    653
    
    
    
    177Other
    
    
    1,834
    
    
    
    (4
    )Net operating losses, carried forward
    
    
    8,230
    
    
    
    916Total deferred tax assets
    
    $
    16,266
    
    
    $
    1,089Deferred tax liabilities:Deferred acquisition costs
    
    $
    9,215
    
    
    $
    Total deferred tax liabilities
    
    
    9,215
    
    
    
    Net deferred income tax assets
    
    $
    7,051
    
    
    $
    1,089
   December 31, 2007
    
    
    Effective Tax Rate($in thousands)Income tax expense at the Federal Statutory Rate
    
    $
    9,409
    
    
    
    35
    %Tax advantaged investments
    
    
    (137
    )
    
    
    -1
    %State income taxes
    
    
    (976
    )
    
    
    -4
    %Effect of foreign operations
    
    
    (14,163
    )
    
    
    -53
    %Other
    
    
    10
    
    
    
    0
    %Income tax benefit
    
    $
    (5,857
    )
    
    
    -23
    %
 December 31, 2006
    
    
    Effective Tax Rate($in thousands)Income tax expense at the Federal Statutory Rate
    
    $
    3,307
    
    
    
    35
    %Effect of foreign operations
    
    
    (4,407
    )
    
    
    -47
    %Other
    
    
    7
    
    
    
    0
    %Income tax benefit
    
    $
    (1,093
    )
    
    
    -12
    %
 F-26




---



##### Table of Contents



Note 10 Employee Benefit Plans
 United States
  Bermuda
   Note 11 Commitments and Contingencies
 (a) Concentrations of credit risk
     (b) Employment agreements
 F-27




---



##### Table of Contents



(c) Operating leases
  (d) Security Requirements
  Regulatory trusts
  Alien Excess or Surplus Lines Insurers
  (e) Deposit Insurance
 F-28




---



##### Table of Contents



(f) Commitments through guarantees
   Note 12 Statutory Financial Information and Accounting Policies
 Bermuda
    United States
   F-29




---



##### Table of Contents



Note 13 Fair Value of Financial Instruments
     Note 14 Earnings Per Share
  Income
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    Amount($ in thousands, except shares and per share amounts)December 31, 2007:Net income
    
    $
    32,740
    
    
    
    
    
    
    
    Basic earnings per share
    
    
    32,740
    
    
    
    36,313,276
    
    
    $
    0.90Effect of dilutive securities:Stock options
    
    
    
    
    
    
    71,929
    
    
    
    Warrants
    
    
    
    
    
    
    249,957
    
    
    
    Diluted earnings per share
    
    $
    32,740
    
    
    
    36,635,163
    
    
    $
    0.89December 31, 2006:Net income
    
    $
    10,543
    
    
    
    
    
    
    
    Basic earnings per share
    
    
    10,543
    
    
    
    22,336,002
    
    
    $
    0.47Effect of dilutive securities:Stock options
    
    
    
    
    
    
    
    
    
    
    Warrants
    
    
    
    
    
    
    
    
    
    
    Diluted earnings per share
    
    $
    10,543
    
    
    
    22,336,002
    
    
    $
    0.47
   F-30




---



##### Table of Contents



Note 15 Segment Information
  2007
    
    
    2006($ in thousands)Insurance Segment InformationRevenuesNet premiums earned
    
    $
    19,076
    
    
    $
    ExpensesNet loss and loss adjustment expenses
    
    
    11,773
    
    
    
    Commission Expense
    
    
    7,814
    
    
    
    Other underwriting expenses
    
    
    596
    
    
    
    Total expenses
    
    
    20,183
    
    
    
    Segment Loss
    
    $
    (1,107
    )
    
    $
    Reinsurance Segment InformationRevenuesNet premiums earned
    
    $
    229,287
    
    
    $
    78,970ExpensesNet loss and loss adjustment expenses
    
    
    119,562
    
    
    
    40,958Commission Expense
    
    
    77,551
    
    
    
    27,209Other underwriting expenses
    
    
    3,502
    
    
    
    1,383Total expenses
    
    
    200,615
    
    
    
    69,550Segment Profit
    
    $
    28,672
    
    
    $
    9,420Insurance Services Segment InformationRevenueDirect commission revenue from programs business
    
    $
    7,453
    
    
    $
    2,334ExpensesDirect commissions expense from programs
    
    
    6,236
    
    
    
    1,688Other insurance services expenses
    
    
    6,725
    
    
    
    3,601Total Expenses
    
    
    12,961
    
    
    
    5,289Segment (Loss)
    
    $
    (5,508
    )
    
    $
    (2,955
    )
 F-31




---



##### Table of Contents



2007
    
    
    2006($ in thousands)RevenueInsurance segment
    
    $
    19,076
    
    
    $
    Reinsurance segment
    
    
    229,288
    
    
    
    78,970Insurance services segment
    
    
    7,453
    
    
    
    2,334Total segment revenues
    
    
    255,817
    
    
    
    81,304Net Investment income
    
    
    29,506
    
    
    
    11,184Net realized capital (losses) gains
    
    
    (8,236
    )
    
    
    35Consolidated revenues
    
    $
    277,087
    
    
    $
    92,523
  2007
    
    
    2006($ in thousands)Insurance segment (loss)
    
    $
    (1,107
    )
    
    $
    Reinsurance segment profit
    
    
    28,672
    
    
    
    9,420Insurance services segment (loss)
    
    
    (5,508
    )
    
    
    (2,955
    )Segment Profit
    
    
    22,057
    
    
    
    6,465Net investment income
    
    
    29,506
    
    
    
    11,184Net realized investment (losses) gains
    
    
    (8,236
    )
    
    
    35Corporate expenses
    
    
    (7,028
    )
    
    
    (3,072
    )Interest expense
    
    
    (9,416
    )
    
    
    (557
    )Warrant expense
    
    
    
    
    
    
    (4,605
    )Income before taxes
    
    $
    26,883
    
    
    $
    9,450
 Note 16Dividends Declared
  Note 17 Debt
 Subordinated Debentures
  F-32




---



##### Table of Contents



Note 18 Business Combination
  Note 19 Subsequent Events
  Note 20 Unaudited Quarterly Financial Information
 F-33




---



##### Table of Contents



2007Quarter Ended
    
    Quarter Ended
    
    Quarter Ended
    
    Quarter EndedMarch 31,
    
    June 30,
    
    September 30,
    
    December 31,
    
    Total(in thousands, except per share amounts)Revenues
    
    $
    53,954
    
    
    $
    63,677
    
    
    $
    74,736
    
    
    $
    84,720
    
    
    $
    277,087Segment profit
    
    
    4,262
    
    
    
    5,597
    
    
    
    5,957
    
    
    
    6,241
    
    
    
    22,057Net income
    
    
    7,071
    
    
    
    10,518
    
    
    
    10,541
    
    
    
    4,610
    
    
    
    32,740Earnings per share:Basic
    
    
    0.23
    
    
    
    0.27
    
    
    
    0.28
    
    
    
    0.12
    
    
    
    0.90Diluted
    
    
    0.23
    
    
    
    0.27
    
    
    
    0.27
    
    
    
    0.12
    
    
    
    0.89
 2006Quarter Ended
    
    Quarter Ended
    
    Quarter Ended
    
    Quarter EndedMarch 31,
    
    June 30,
    
    September 30,
    
    December 31,
    
    Total(in thousands, except per share amounts)Revenues
    
    $
    
    
    
    $
    23,834
    
    
    $
    31,654
    
    
    $
    37,035
    
    
    $
    92,523Segment profit (loss)
    
    
    (122
    )
    
    
    1,223
    
    
    
    2,671
    
    
    
    2,693
    
    
    
    6,465Net income (loss)
    
    
    (472
    )
    
    
    (1,176
    )
    
    
    5,385
    
    
    
    6,806
    
    
    
    10,543Earnings per share:Basic
    
    NM
    
    
    (0.04
    )
    
    
    0.18
    
    
    
    0.23
    
    
    
    0.47Diluted
    
    NM
    
    
    (0.04
    )
    
    
    0.18
    
    
    
    0.23
    
    
    
    0.47
 
  F-34




---



##### Table of Contents



Index to Financial Statement Schedules
 PageSchedule I  Summary of Investments Other than Investments in Related Parties
    
    S-1Schedule II  Condensed Financial Information of Registrant
    
    S-2Schedule III  Supplementary Insurance Information
    
    S-5Schedule IV  Reinsurance
    
    S-6Schedule VI  Supplemental Information Concerning Property and Casualty Operations
    
    S-7
 Other Schedules not listed above have been omitted as they are not applicable to the Company




---



##### Table of Contents



CASTLEPOINT HOLDINGS, LTD.
SCHEDULE I  SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES
 December 31, 2007AmountCost or
    
    
    Fair
    
    
    Reflected onAmortized Cost
    
    
    Value
    
    
    Balance SheetFixed Maturities:U.S. government and agencies securities
    
    $
    8,598
    
    
    $
    8,812
    
    
    $
    8,812Corporate fixed maturities
    
    
    132,268
    
    
    
    132,270
    
    
    
    132,270Mortgage & asset-backed securities
    
    
    343,623
    
    
    
    343,890
    
    
    
    343,890Total fixed maturities
    
    
    484,489
    
    
    
    484,972
    
    
    
    484,972Equity Securities:
    
    
    44,036
    
    
    
    42,402
    
    
    
    42,402Total available-for-sale investments
    
    
    528,525
    
    
    
    527,374
    
    
    
    527,374Other invested assets
    
    
    10,000
    
    
    
    8,503
    
    
    
    8,503Total investments, other than investments in related parties
    
    $
    538,525
    
    
    $
    535,877
    
    
    $
    535,877
 S-1




---



##### Table of Contents



CASTLEPOINT HOLDINGS, LTD.
SCHEDULE IICONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
CONDENSED BALANCE SHEETS
($ in thousands)
 December 31,
    
    
    December 31,2007
    
    
    2006AssetsInvestment in subsidiaries on an equity basis
    
    $
    421,940
    
    
    $
    278,864Total investments
    
    
    421,940
    
    
    
    278,864Cash and cash equivalents
    
    
    152
    
    
    
    54Other assets
    
    
    994
    
    
    
    1,330Total Assets
    
    $
    423,086
    
    
    $
    280,248LiabilitiesAccounts payable and accrued expenses
    
    $
    1,280
    
    
    $
    535Total Liabilities
    
    
    1,280
    
    
    
    535Total Shareholders Equity
    
    
    421,806
    
    
    
    279,713Total Liabilities and Shareholders Equity
    
    $
    423,086
    
    
    $
    280,248
 S-2




---



##### Table of Contents



CASTLEPOINT HOLDINGS, LTD.
SCHEDULE IICONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
CONDENSED STATEMENTS OF CASH FLOWS
($ in thousands)
 Year ended December
    
    
    Year ended December31, 2007
    
    
    31, 2006Cash flows from operating activities:Net income
    
    $
    32,740
    
    
    $
    10,543Adjustments to reconcile net income to net cash provided by
(used in) operations:Dividends received from subsidiaries
    
    
    6,822
    
    
    
    2,229Equity in net income of subsidiaries
    
    
    (34,884
    )
    
    
    (15,854
    )Warrants issued
    
    
    
    
    
    
    4,605Increase in assets:Other assets
    
    
    (877
    )
    
    
    (58
    )Increase in liabilities:Other liabilities
    
    
    1,076
    
    
    
    204Net cash flows provided by operations
    
    
    4,876
    
    
    
    1,669Cash flows from investing activities:Investment in Subsidiaries
    
    
    (115,700
    )
    
    
    (262,620
    )Net cash flows used in investing activities
    
    
    (115,700
    )
    
    
    (262,620
    )Cash flows from financing activities:Net proceeds from Tower Group Inc.
    
    
    
    
    
    
    15,000Net proceeds from Private Offering
    
    
    
    
    
    
    249,165Net proceeds from Initial Public Offering
    
    
    114,533
    
    
    
    Registration costs paid and deferred
    
    
    
    
    
    
    (942
    )Dividends to shareholders
    
    
    (3,611
    )
    
    
    (2,219
    )110,922
    
    
    
    261,004Increase in cash and cash equivalents
    
    
    98
    
    
    
    54Cash and cash equivalents, beginning of period
    
    
    54
    
    
    
    Cash and cash equivalents, end of period
    
    $
    152
    
    
    $
    54Supplemental disclosures of cash flow information:Cash paid for income taxes
    
    $
    
    
    
    $
    Cash paid for interest
    
    $
    
    
    
    $
    
 
 *
    
    Note: There were no cash flows in 2005. S-3




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##### Table of Contents



CASTLEPOINT HOLDINGS, LTD.
SCHEDULE IICONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
($ in thousands)
 Year Ended
    
    
    Year Ended
    
    
    Period EndedDecember 31, 2007
    
    
    December 31, 2006
    
    
    December 31, 2005Equity in net earnings of subsidiaries
    
    $
    34,884
    
    
    $
    15,854
    
    
    $
    ExpensesOther operating expenses
    
    
    2,144
    
    
    
    5,311
    
    
    
    36Total underwriting expense
    
    
    2,144
    
    
    
    5,311
    
    
    
    36Net income (loss)
    
    $
    32,740
    
    
    $
    10,543
    
    
    $
    (36
    )Comprehensive Income (loss)Net income (loss)
    
    $
    32,740
    
    
    $
    10,543
    
    
    $
    (36
    )Equity in other comprehensive (loss)
income of subsidiaries
    
    
    (2,708
    )
    
    
    1,657
    
    
    
    Comprehensive income (loss)
    
    $
    30,032
    
    
    $
    12,200
    
    
    $
    (36
    )
 S-4




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##### Table of Contents



CASTLEPOINT HOLDINGS, LTD.
 
 SCHEDULE III  SUPPLEMENTARY INSURANCE INFORMATION
($ in thousands)
 Deferred
    
    Grossacquisition
    
    futurecost, net of
    
    policy
    
    
    
    
    
    OtherDeferred
    
    benefits,
    
    
    
    
    
    policy
    
    
    
    
    
    Benefits,ceding
    
    losses
    
    Gross
    
    claims and
    
    Net
    
    losses
    
    
    
    
    
    
    
    
    
    Netcommission
    
    and loss
    
    unearned
    
    benefits
    
    earned
    
    and loss
    
    Amortization
    
    Operating
    
    premiumsrevenue
    
    expenses
    
    premiums
    
    payable
    
    premiums
    
    expenses
    
    of DAC
    
    expenses
    
    written2007Segments:Insurance
    
    $
    26,329
    
    
    $
    10,430
    
    
    $
    85,896
    
    
    $
    442
    
    
    $
    19,076
    
    
    $
    11,773
    
    
    $
    7,814
    
    
    $
    
    
    
    $
    91,386Reinsurance
    
    
    46,731
    
    
    
    110,996
    
    
    
    131,622
    
    
    
    8,085
    
    
    
    229,288
    
    
    
    119,562
    
    
    
    77,551
    
    
    
    
    
    
    
    284,839Insurance Services
    
    
    13
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,237
    
    
    
    
    
    
    
    Total
    
    $
    73,073
    
    
    $
    121,426
    
    
    $
    217,518
    
    
    $
    8,527
    
    
    $
    248,364
    
    
    $
    131,335
    
    
    $
    91,602
    
    
    $
    
    
    
    $
    376,2252006Segments:Insurance
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Reinsurance
    
    
    30,363
    
    
    
    34,192
    
    
    
    86,181
    
    
    
    3,496
    
    
    
    78,970
    
    
    
    40,958
    
    
    
    27,717
    
    
    
    
    
    
    
    165,151Insurance Services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,688
    
    
    
    
    
    
    
    Total
    
    $
    30,363
    
    
    $
    34,192
    
    
    $
    86,181
    
    
    $
    3,496
    
    
    $
    78,970
    
    
    $
    40,958
    
    
    $
    29,405
    
    
    $
    
    
    
    $
    165,151
 
 *
    
    Note: The Company commenced operations in 2006 thus there were no operations in 2005.
 S-5




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##### Table of Contents



CASTLEPOINT HOLDINGS, LTD.
 
 SCHEDULE IV  REINSURANCE
($ in thousands)
 Percentage ofCeded to
    
    Assumed from
    
    
    
    
    
    AmountDirect
    
    Other
    
    Other
    
    Net
    
    Assumed toAmount
    
    Companies
    
    Companies
    
    Amount
    
    NetYear ended December 31, 2007PremiumsProperty and Casualty Insurance
    
    $
    14,705
    
    
    $
    3,944
    
    
    $
    237,603
    
    
    $
    248,364
    
    
    
    95.7
    %Accident and Health Insurance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.0
    %Total Premiums
    
    $
    14,705
    
    
    $
    3,944
    
    
    $
    237,603
    
    
    $
    248,364
    
    
    
    95.7
    %Year ended December 31, 2006PremiumsProperty and Casualty Insurance
    
    $
    
    
    
    $
    
    
    
    $
    78,970
    
    
    $
    78,970
    
    
    
    100.0
    %Accident and Health Insurance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.0
    %Total Premiums
    
    $
    
    
    
    $
    
    
    
    $
    78,970
    
    
    $
    78,970
    
    
    
    100.0
    %
 *
    
    Note: The Company commenced operations in 2006 thus there were no operations in 2005.
 S-6




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##### Table of Contents



CASTLEPOINT HOLDINGS, LTD.
 
 SCHEDULE VI  SUPPLEMENTAL INFORMATION CONCERNING PROPERTY AND CASUALTY OPERATIONS
($ in thousands)
 Claims and ClaimsReserves
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Adjustmentfor Unpaid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expenses
    
    
    
    
    
    PaidClaims
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Incurred and
    
    
    
    
    
    ClaimsDeferred
    
    and Claim
    
    Discount
    
    
    
    
    
    
    
    
    
    Net
    
    Related to
    
    
    
    
    
    and Claim
    
    NetAcquisition
    
    Adjustment
    
    of
    
    Unearned
    
    Earned
    
    Invesment
    
    Current
    
    Prior
    
    Amortization
    
    Adjustment
    
    PremiumsCost
    
    Expenses
    
    Reserves
    
    Premium
    
    Premium
    
    Income
    
    Year
    
    Year
    
    of DAC
    
    Expenses
    
    Written2007
    
    $
    73,073
    
    
    $
    121,426
    
    
    $
    
    
    
    $
    214,043
    
    
    $
    248,364
    
    
    $
    29,506
    
    
    $
    132,585
    
    
    $
    (1,250
    )
    
    $
    (91,602
    )
    
    $
    44,101
    
    
    $
    376,2252006
    
    $
    30,363
    
    
    $
    34,192
    
    
    $
    
    
    
    $
    86,181
    
    
    $
    78,970
    
    
    $
    11,184
    
    
    $
    40,958
    
    
    $
    
    
    
    $
    (29,405
    )
    
    $
    6,787
    
    
    $
    165,151
 *
    
    Note: The Company commenced operations in 2006 thus there were no operations in 2005.
 S-7