UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C.  20549
  FORM
10-K
  x
              ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the fiscal year ended December 31,
      2009oro
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the transition period from __________ to
  ___________
 
 Commission
File Number 001-31341
  Platinum
Underwriters Holdings, Ltd.
 (Exact
name of registrant as specified in its charter)
  Bermuda
                (State
      or other jurisdiction of incorporation or organization)
              
              98-0416483
                (I.R.S.
      Employer Identification No.)
  The
Belvedere Building
 69
Pitts Bay Road
 Pembroke
HM 08, Bermuda
 (Address
of principal executive offices, including postal code)
  Registrant’s
telephone number, including area code:  (441) 295-7195
  Securities
registered pursuant to Section 12(b) of the Act:
  Title of each class
              Name of each exchange on which
      registeredCommon
      Shares, par value $0.01 per share
              New
      York Stock Exchange
 
 Securities
registered pursuant to Section 12(g) of the Act:None
  Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.  Yes x   No o
  Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.  Yes o   No x
  Indicate
by check mark whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  Yes x   No o
  Indicate
by a check mark whether the registrant has submitted electronically and posted
on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).  Yes o   No o
  Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. x
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
 Large
      accelerated filer x
              Accelerated
      filer oNon-accelerated
      filer (Do not check if a
      smaller reporting company) o
              Smaller
      reporting company o
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  Yes o   No x
  The
aggregate market value of common shares held by non-affiliates of the registrant
as of June 30, 2009, the last business day of our most recently completed second
fiscal quarter, was $1,410,534,423 based on the closing sale price of $28.59 per
common share on the New York Stock Exchange on that date.  For
purposes of this computation only, all executive officers, directors, and 10%
beneficial owners of the registrant are deemed to be affiliates.
  The
registrant had 45,743,361 common shares, par value $0.01 per share, outstanding
as of February 15, 2010
  DOCUMENTS
INCORPORATED BY REFERENCE
  Portions
of the registrant’s definitive proxy statement for the 2010 Annual General
Meeting of Shareholders are incorporated by reference into Part III of this
report.
 
 
 
 PLATINUM
UNDERWRITERS HOLDINGS, LTD.
 
 TABLE
OF CONTENTS
 PagePART
      IItem
      1.
                Business
                1Item
      1A.
                Risk
      Factors
                16Item
      1B.
                Unresolved
      Staff Comments
                24Item
      2.
                Properties
                24Item
      3.
                Legal
      Proceedings
                24Item
      4.
                Submission
      of Matters to a Vote of Security Holders
                24PART
      IIItem
      5.
                Market
      For Registrant’s Common Equity, Related Shareholder Matters and Issuer
      Purchases of Equity Securities
                24Item
      6.
                Selected
      Financial Data
                26Item
      7.
                Management’s
      Discussion and Analysis of Financial Condition andResults
      of Operations
                27Item
      7A.
                Quantitative
      and Qualitative Disclosures About Market Risk
                49Item
      8.
                Financial
      Statements and Supplementary Data
                50Item
      9.
                Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure
                50Item
      9A.
                Controls
      and Procedures
                50Independent
      Registered Public Accounting Firm’s Report on Internal Control over
      Financial Reporting
                51Item
      9B.
                Other
      Information
                52PART
      IIIItem
      10.
                Directors,
      Executive Officers and Corporate Governance
                52Item
      11.
                Executive
      Compensation
                52Item
      12.
                Security
      Ownership of Certain Beneficial Owners and Management and Related
      Shareholder Matters
                52Item
      13.
                Certain
      Relationships and Related Transactions, and Director
      Independence
                53Item
      14.
                Principal
      Accountant Fees and Services
                53PART
      IVItem
      15.
                Exhibits
      and Financial Statement Schedules
                53Signatures
                57Platinum
      Underwriters Holdings, Ltd. and Subsidiaries Consolidated Financial
      Statements
                F-1Index
      to Schedules to Consolidated Financial Statements
                S-1Exhibits
 
 Note
On Forward-Looking Statements
  This
Annual Report on Form 10-K for the year ended December 31, 2009 (this “Form
10-K”) contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 (the “Securities Act”) and Section 21E of the
Securities Exchange Act of 1934 (the “Exchange Act”).  Forward-looking
statements are based on our current plans or expectations that are inherently
subject to significant business, economic and competitive uncertainties and
contingencies.  These uncertainties and contingencies can affect
actual results and could cause actual results to differ materially from those
expressed in any forward-looking statements made by, or on behalf of,
us.  In particular, statements using words such as “may,” “should,”
“estimate,” “expect,” “anticipate,” “intend,” “believe,” “predict,” “potential,”
or words of similar import generally involve forward-looking
statements.
  The
inclusion of forward-looking statements in this Form 10-K should not be
considered as a representation by us or any other person that our current plans
or expectations will be achieved.  Numerous factors could cause our
actual results to differ materially from those in forward-looking statements,
including the following:
  •
              severe
      catastrophic events over which we have no
  control;
  •
              the
      effectiveness of our loss limitation methods and pricing
      models;
  •
              the
      adequacy of our liability for unpaid losses and loss adjustment
      expenses;
  •
              our
      ability to maintain our A.M. Best Company, Inc. (“A.M. Best”) and Standard
      and Poor’s (“S&P”) ratings;
  •
              our
      ability to raise capital on acceptable terms if
  necessary;
  •
              the
      cyclicality of the property and casualty reinsurance
    business;
  •
              the
      highly competitive nature of the property and casualty reinsurance
      industry;
  •
              our
      ability to maintain our business relationships with reinsurance
      brokers;
  •
              the
      availability of retrocessional reinsurance on acceptable
      terms;
  •
              market
      volatility and interest rate and currency exchange rate
      fluctuation;
  •
              tax,
      regulatory or legal restrictions or limitations applicable to us or the
      property and casualty reinsurance business
  generally;
  •
              general
      political and economic conditions, including the effects of civil unrest,
      acts of terrorism, war or a prolonged United States or global economic
      downturn or recession; and
  •
              changes
      in our plans, strategies, objectives, expectations or intentions, which
      may happen at any time at our
discretion.
  As a
consequence, our future financial condition and results may differ from those
expressed in any forward-looking statements made by or on behalf of
us.  The foregoing factors, which are discussed in more detail in Item
1A, “Risk Factors,” should not be construed as
exhaustive.  Additionally, forward-looking statements speak only as of
the date they are made, and we undertake no obligation to revise or update
forward-looking statements to reflect new information or circumstances after the
date hereof or to reflect the occurrence of future events.
  PART
I
  Item 1.
              Business
  General
Overview
  Platinum
Underwriters Holdings, Ltd. (“Platinum Holdings”) is a holding company domiciled
in Bermuda.  Through our reinsurance subsidiaries, we provide property
and marine, casualty and finite risk reinsurance coverages, through reinsurance
intermediaries, to a diverse clientele of commercial and personal lines insurers
and select reinsurers on a worldwide basis.  For the year ended
December 31, 2009, our Property and Marine, Casualty and Finite Risk
operating segments accounted for approximately 58%, 39% and 3%, respectively, of
our total net written premiums of $897.8 million.  As of
December 31, 2009, we had total investments and cash and cash equivalents
of $4.4 billion and $2.1 billion of shareholders’ equity.  Our
reinsurance subsidiaries currently have a financial strength rating of “A”
(Excellent; 3rd of 16 categories) from A.M. Best and a financial strength rating
of “A” (Strong; 6th of
21 categories) from S&P.
  - 1
-
  Platinum
Holdings was organized in 2002.  We operate through two licensed
reinsurance subsidiaries, Platinum Underwriters Bermuda, Ltd. (“Platinum
Bermuda”), a Bermuda reinsurance company, and Platinum Underwriters Reinsurance,
Inc. (“Platinum US”), a U.S. reinsurance company.  Platinum Bermuda is
a wholly owned subsidiary of Platinum Holdings and Platinum US is a wholly owned
subsidiary of Platinum Underwriters Finance, Inc. (“Platinum
Finance”).  Platinum Finance is an intermediate holding company
domiciled in the United States and a wholly owned subsidiary of Platinum Regency
Holdings (“Platinum Regency”), an intermediate holding company domiciled in
Ireland and a wholly owned subsidiary of Platinum Holdings.  From 2003
through 2006, we also underwrote business in Platinum Re (UK) Limited (“Platinum
UK”), a reinsurance company domiciled in the United Kingdom and a wholly owned
subsidiary of Platinum Regency.  In 2007, we ceased underwriting
reinsurance business in Platinum UK.  In 2009 we completed the
novation of Platinum UK’s reinsurance contracts to Platinum Bermuda and the
Financial Services Authority (the “FSA”) granted our application to withdraw
Platinum UK’s insurance company license.  Prior to November 1,
2002, Platinum US was an inactive licensed insurance company with no
underwriting activity.  Platinum Bermuda and Platinum UK were formed
in 2002.
  Platinum
Holdings and its consolidated subsidiaries are collectively referred to in this
Form 10-K as the “Company,” “we,” “us,” and “our,” unless the context otherwise
indicates.
  Our
Strategy
  We seek
to achieve attractive long-term returns for our shareholders through disciplined
risk management and market leadership in selected classes of property and
marine, casualty and finite risk reinsurance by employing the following
strategy:
  ●
              Operate as a multi-class
      reinsurer.  We seek to offer a broad range of reinsurance
      coverages to our ceding companies.  We believe that this
      approach enables us to more effectively serve our clients, diversify our
      risk and leverage our capital.
  ●
              Focus on profitability, not
      market share.  Our management team pursues a strategy
      that emphasizes profitability rather than market share.  Key
      elements of this strategy are prudent risk selection, appropriate pricing
      and adjustment of our business mix to respond to changing market
      conditions.
  ●
              Exercise disciplined
      underwriting and risk management.  We exercise
      underwriting and risk management discipline by: (i) maintaining a
      diverse spread of risk in our book of business across product lines and
      geographic zones, (ii) emphasizing excess-of-loss contracts over
      proportional contracts, (iii) managing our aggregate property
      catastrophe exposure through the application of sophisticated modeling
      tools and (iv) monitoring our accumulating exposures on non-property
      catastrophe exposed coverages.
  ●
              Operate from a position of
      financial strength.  Our capital is unencumbered by any
      potential adverse development of unpaid losses for business written prior
      to January 1, 2002.  Our investment strategy focuses on
      security and stability in our investment portfolio by maintaining a
      portfolio that consists primarily of diversified, high quality,
      predominantly publicly-traded fixed maturity
  securities.
  We
believe this strategy allows us to maintain our strong financial position and to
be opportunistic when market conditions are most attractive.
  Operating
Segments
  We have
organized our worldwide reinsurance business into the following three operating
segments:  Property and Marine, Casualty and Finite
Risk.  We generally write reinsurance in each of our operating
segments on either an excess-of-loss basis or a proportional basis (which is
also referred to as pro-rata or quota share).
  In the
case of excess-of-loss reinsurance, we assume all or a specified portion of the
ceding company’s risks in excess of a specified claim amount, referred to as the
ceding company’s retention or our attachment point, subject to a negotiated
reinsurance contract limit.  We manage our underwriting risk from
excess-of-loss contracts by charging reinsurance premiums at specific retention
levels, independent of the premiums charged by ceding companies, and based upon
our own underwriting assumptions.  Because ceding companies typically
retain a larger loss exposure under excess-of-loss contracts, we believe that
they typically have a strong incentive to underwrite risks and adjust losses in
a prudent manner.
  In the
case of proportional reinsurance, we assume a predetermined portion of the
ceding company’s risks under the covered primary insurance contract or
contracts.  The frequency of claims under a proportional contract is
usually greater than under an excess-of-loss contract, since we share
proportionally in all losses.  Premiums for proportional reinsurance
are typically a predetermined portion of the premiums the ceding company
receives from its insureds.
  Substantially
all of the reinsurance that we underwrite is on a treaty basis, which covers a
type or category of insurance policies issued by the ceding company, and which
could be written on either an excess-of-loss or proportional
basis.  In limited and opportunistic circumstances, we underwrite
facultative reinsurance, where we assume all or a part of a specific insurance
policy or policies, which again could be written on either an excess-of-loss or
proportional basis.
  - 2
-
  The
following table sets forth our net premiums written for the years ended
December 31, 2009, 2008 and 2007 by operating segment and by type of
reinsurance ($ in thousands):
 
 Net
Premiums Written by Operating Segment
 
 Years
      Ended December 31,2009
              
              
              2008
              
              
              2007Net
      Premiums Written
              
              
              Percentage
      of Net Premiums Written
              
              
              Net
      Premiums Written
              
              
              Percentage
      of Net Premiums Written
              
              
              Net
      Premiums Written
              
              
              Percentage
      of Net Premiums WrittenProperty
      and MarineExcess-of-loss
              
              $
              348,363
              
              
              
              39
              %
              
              
              436,951
              
              
              
              42
              %
              
              $
              427,230
              
              
              
              38
              %Proportional
              
              
              168,648
              
              
              
              19
              %
              
              
              156,136
              
              
              
              15
              %
              
              
              77,780
              
              
              
              7
              %Subtotal
      Property and Marine
              
              
              517,011
              
              
              
              58
              %
              
              
              593,087
              
              
              
              57
              %
              
              
              505,010
              
              
              
              45
              %CasualtyExcess-of-loss
              
              
              308,054
              
              
              
              34
              %
              
              
              373,307
              
              
              
              36
              %
              
              
              522,812
              
              
              
              47
              %Proportional
              
              
              48,434
              
              
              
              5
              %
              
              
              56,777
              
              
              
              6
              %
              
              
              61,793
              
              
              
              6
              %Subtotal
      Casualty
              
              
              356,488
              
              
              
              39
              %
              
              
              430,084
              
              
              
              42
              %
              
              
              584,605
              
              
              
              53
              %Finite
      RiskExcess-of-loss
              
              
              –
              
              
              
              0
              %
              
              
              3,277
              
              
              
              0
              %
              
              
              26,140
              
              
              
              2
              %Proportional
              
              
              24,335
              
              
              
              3
              %
              
              
              11,117
              
              
              
              1
              %
              
              
              4,052
              
              
              
              0
              %Subtotal
      Finite Risk
              
              
              24,335
              
              
              
              3
              %
              
              
              14,394
              
              
              
              1
              %
              
              
              30,192
              
              
              
              2
              %Combined
      SegmentsExcess-of-loss
              
              
              656,417
              
              
              
              73
              %
              
              
              813,535
              
              
              
              78
              %
              
              
              976,182
              
              
              
              87
              %Proportional
              
              
              241,417
              
              
              
              27
              %
              
              
              224,030
              
              
              
              22
              %
              
              
              143,625
              
              
              
              13
              %Total
              
              $
              897,834
              
              
              
              100
              %
              
              
              1,037,565
              
              
              
              100
              %
              
              $
              1,119,807
              
              
              
              100
              %
  The
following table sets forth our net premiums written for the years ended
December 31, 2009, 2008 and 2007 by operating segment and by geographic
location of the ceding company ($ in thousands):
 
 Net
Premiums Written by Geographic Location of the Ceding Company
 
 Years
      Ended December 31,2009
              
              
              2008
              
              
              2007Net
      Premiums Written
              
              
              Percentage
      of Net Premiums Written
              
              
              Net
      Premiums Written
              
              
              Percentage
      of Net Premiums Written
              
              
              Net
      Premiums Written
              
              
              Percentage
      of Net Premiums WrittenProperty
      and MarineUnited
      States
              
              $
              350,726
              
              
              
              39
              %
              
              
              377,328
              
              
              
              36
              %
              
              $
              294,975
              
              
              
              26
              %International
              
              
              166,285
              
              
              
              19
              %
              
              
              215,759
              
              
              
              21
              %
              
              
              210,035
              
              
              
              19
              %Subtotal
      Property and Marine
              
              
              517,011
              
              
              
              58
              %
              
              
              593,087
              
              
              
              57
              %
              
              
              505,010
              
              
              
              45
              %CasualtyUnited
      States
              
              
              315,422
              
              
              
              35
              %
              
              
              366,444
              
              
              
              36
              %
              
              
              510,552
              
              
              
              45
              %International
              
              
              41,066
              
              
              
              4
              %
              
              
              63,640
              
              
              
              6
              %
              
              
              74,053
              
              
              
              7
              %Subtotal
      Casualty
              
              
              356,488
              
              
              
              39
              %
              
              
              430,084
              
              
              
              42
              %
              
              
              584,605
              
              
              
              52
              %Finite
      RiskUnited
      States
              
              
              24,335
              
              
              
              3
              %
              
              
              13,161
              
              
              
              1
              %
              
              
              29,932
              
              
              
              3
              %International
              
              
              –
              
              
              
              0
              %
              
              
              1,233
              
              
              
              0
              %
              
              
              260
              
              
              
              0
              %Subtotal
      Finite Risk
              
              
              24,335
              
              
              
              3
              %
              
              
              14,394
              
              
              
              1
              %
              
              
              30,192
              
              
              
              3
              %Combined
      SegmentsUnited
      States
              
              
              690,483
              
              
              
              77
              %
              
              
              756,933
              
              
              
              73
              %
              
              
              835,459
              
              
              
              74
              %International
              
              
              207,351
              
              
              
              23
              %
              
              
              280,632
              
              
              
              27
              %
              
              
              284,348
              
              
              
              26
              %Total
              
              $
              897,834
              
              
              
              100
              %
              
              
              1,037,565
              
              
              
              100
              %
              
              $
              1,119,807
              
              
              
              100
              %
  Additional
financial information about our operating segments is set forth in Item 7,
“Management’s Discussion and Analysis of Financial Condition and Results of
Operation,” in this Form 10-K.
  - 3
-
  Property and
Marine
  Property
reinsurance protects a ceding company against financial loss arising out of
damage to property or loss of its use caused by an insured
peril.  Property catastrophe reinsurance protects a ceding company
against losses arising out of multiple claims for a single event while property
per-risk reinsurance protects a ceding company against loss arising out of a
single claim for a single event.  Our Property and Marine operating
segment includes principally property (including crop) and marine coverages that
cover risks located in the United States and select international
markets.  This business includes property catastrophe excess-of-loss
reinsurance contracts, property per-risk excess-of-loss reinsurance contracts
and property proportional reinsurance contracts.  We write a limited
amount of property facultative reinsurance.  Marine reinsurance
treaties include excess-of-loss as well as proportional treaties.  We
employ underwriters and actuaries with expertise in each of the following
areas:
  ●
              Property.  We
      provide reinsurance coverage for damage to property and
      crops.  Our catastrophe excess-of-loss reinsurance contracts
      provide defined limits of liability, permitting us to quantify our
      aggregate maximum loss exposure for various catastrophic
      events.  Quantification of loss exposure is fundamental to our
      ability to manage our loss exposure through geographical zone limits and
      program limits.
   ●
              Marine.  We
      provide reinsurance coverage for marine and offshore energy insurance
      programs.  Coverages reinsured include hull damage, protection
      and indemnity, cargo damage, satellite damage, aviation hull, aviation
      liability, and general marine
liability.
  Casualty
  Casualty
reinsurance protects a ceding company against financial loss arising out of the
obligation to others for loss or damage to persons or property.  Our
Casualty operating segment principally includes reinsurance contracts that cover
general and product liability, professional liability, accident and health,
umbrella liability, workers' compensation, casualty clash, automobile liability,
surety, trade credit, and political risk.  We generally seek to write
casualty reinsurance on an excess-of-loss basis.  We write
proportional casualtyreinsurance contracts on
an opportunistic basis.
  We seek
to write casualty reinsurance contracts covering established books of insurance
products where we believe that past experience provides a reasonable basis to
price the reinsurance adequately.  We underwrite new exposures
selectively and generally perform a comprehensive evaluation of the risk and
ceding company being reinsured.  We generally employ underwriters and
actuaries that have expertise in one or more of the following
areas:
  ●
              General and Product
      Liability.  We provide reinsurance of various third party
      liability coverages to both small and large insureds in both commercial
      and personal lines predominantly on an excess-of-loss
      basis.  This business includes coverage of commercial,
      farmowners and homeowners policies as well as third party liability
      coverages such as product
liability.
   ●
              Professional
      Liability.  We write reinsurance contracts covering
      professional liability programs, including directors and officers,
      employment practices, and errors and omissions for professionals such as
      accountants, lawyers, medical professionals, architects and
      engineers.  The underlying insurance products for these lines of
      business are generally written on a claims made basis, which requires
      notification of claims related to the liabilities insured under the policy
      to be submitted to the insurer during a specified coverage
      period.
   ●
              Accident and
      Health.We provide accident and health reinsurance, most
      often covering employer self-insured or fully insured health plans, on a
      quota share and excess-of-loss basis.  We also write reinsurance
      of student health insurance, sports disability, Medicare and Medicare
      supplement and other forms of accident and health
    insurance.
   ●
              Umbrella
      Liability.  We provide reinsurance of umbrella policies,
      which are excess insurance policies that provide coverage, typically for
      general liability or automobile liability, when claims, individually or in
      the aggregate, exceed the limit of the original policy underlying the
      excess policy.
   ●
              Workers’
      Compensation.  We reinsure workers’ compensation on a
      catastrophic basis as well as on a per-claimant basis.  We may
      provide full statutory coverage or coverage that is subject to specific
      carve-outs.  Our exposure to workers’ compensation would
      generally arise from a single occurrence, such as a factory explosion or
      earthquake, involving claims from more than one
  employer.
   ●
              Casualty
      Clash.  We provide casualty clash reinsurance, which
      covers losses arising from a single event insured under more than one
      policy or where there are multiple claimants under one
      policy.  This type of reinsurance is analogous to property
      catastrophe reinsurance, but written for casualty lines of
      business.
   ●
              Automobile
      Liability.  We provide automobile liability reinsurance,
      which relates to the risks associated with our insured’s vehicle and third
      party coverage for an insured’s liability to other parties for injuries,
      for damage to an insured’s property due to the use of the insured vehicle
      and coverage for uninsured motorists and medical
  payments.
  - 4
-
  ●
              Surety.  We
      reinsure risks associated with commercial and contract surety bonds issued
      to third parties to guarantee the performance of an obligation by the
      principal under the bond.  Commercial bonds guarantee compliance
      with obligations arising out of regulatory or statutory
      requirements.  Contract bonds guarantee the performance of
      contractual obligations between two parties and include payment and
      performance bonds.
   ●
              Trade
      Credit.  Trade credit insurance is purchased by companies
      to ensure that invoices for goods and services provided to their customers
      are paid on time.  We provide trade credit reinsurance for
      financial losses sustained through the failure of an insured’s customers
      to pay for goods or services supplied to
them.
   ●
              Political
      Risk.  Political risk reinsurance covers the impairment
      of assets as a result of expropriation, political violence, currency
      inconvertibility, and the failure by sovereign countries to honor their
      obligations.  The locations of risks that we reinsure include
      Asia, Central and Eastern Europe, Latin America, Africa and the Middle
      East.
  Finite
Risk
  Finite
reinsurance, often referred to as non-traditional reinsurance, includes
principally structured reinsurance contracts with ceding companies whose needs
may not be met efficiently through traditional reinsurance
products.  Reinsurance contracts classified as finite are typically
structured to include loss limitation or loss mitigation features.  In
exchange for contractual features that limit our risk, reinsurance contracts we
include in our Finite Risk segment typically provide the potential for a
significant profit commission to the ceding company.  The classes of
risks that we would consider for our Finite Risk segment are generally
consistent with the classes covered by our traditional products.  The
finite risk reinsurance contracts that we underwrite generally provide
prospective protection, meaning coverage is provided for losses that are
incurred after inception of the contract, as contrasted with retrospective
coverage, which covers losses that are incurred prior to inception of the
contract.  The three main categories of our finite risk reinsurance
contracts are quota share, multi-year excess-of-loss and whole account aggregate
stop loss:
 ●
                Finite quota
      share.  Under finite quota share reinsurance contracts,
      the reinsurer agrees to indemnify a ceding company for a percentage of its
      losses up to an aggregate maximum or cap in return for a percentage of the
      ceding company’s premium, less a ceding commission.  The
      expected benefit to the ceding company provided by finite quota share
      reinsurance is increased underwriting capacity of the ceding company and a
      sharing of premiums and losses with the reinsurer.  These
      reinsurance contracts often provide broad protection and may cover
      multiple classes of a ceding company's business.  Unlike
      traditional quota share reinsurance agreements, these contracts often
      provide for profit commissions which take into account investment income
      for purposes of calculating the reinsurer's profit on business
      ceded.  Additionally, finite quota share reinsurance contracts
      are often written on a funds withheld basis, meaning the parties agree
      that funds that would normally be remitted to a reinsurer are withheld by
      the ceding company.  The funds withheld are generally credited
      with interest at a negotiated rate and the net balances are settled
      generally after expiration at a date established in the
      contract.
   ●
                Multi-year
      excess-of-loss.  These reinsurance contracts often
      complement ceding companies’ traditional excess-of-loss reinsurance
      programs.  This type of contract often carries an up-front
      premium plus additional premiums which are dependent on the magnitude of
      losses claimed by the ceding company under the contract.  The
      expected benefit to the ceding company on multi-year excess-of-loss
      reinsurance is that the ceding company has the ability to negotiate
      specific terms and conditions that remain applicable over multiple years
      of coverage.  These reinsurance contracts may cover multiple
      classes of a ceding company's business and typically provide the benefit
      of reducing the impact of large or catastrophic losses on a ceding
      company's underwriting results.  In general, these reinsurance
      contracts are designed so that the ceding company funds the expected level
      of loss activity over the multi-year period.  The reinsurer
      incorporates a profit margin to cover its costs and a charge for the risk
      that actual losses assumed may be worse than expected.  The
      payment of premiums based on the magnitude of losses claimed is intended
      to benefit the ceding company by linking its own loss experience to the
      actual cost of reinsurance over time.  The multiple year term
      and premium structure of multi-year excess-of-loss reinsurance contracts
      are not typically found in traditional reinsurance
    contracts.
   ●
                Whole account aggregate stop
      loss.  Aggregate stop loss reinsurance contracts provide
      broad protection against a wide range of contingencies that are difficult
      to address with traditional reinsurance, including inadequate pricing by a
      ceding company or higher frequency of claims than the ceding company
      expected.  The reinsurer on a whole account aggregate stop loss
      contract agrees to indemnify a ceding company for aggregate losses in
      excess of a deductible specified in the contract.  These
      contracts can be offered on a single or multi-year basis, and may provide
      catastrophic and attritional loss protection.  The benefit of
      whole account aggregate stop loss contracts to ceding companies is that
      such contracts provide the broadest possible protection of a ceding
      company's underwriting results which is not generally available in the
      traditional reinsurance market.  Unlike traditional reinsurance
      contracts, these contracts often contain sub-limits of coverage for losses
      on certain classes of business or exposures.  These reinsurance
      contracts are often written on a funds withheld basis.  In
      addition, these reinsurance contracts often include provisions for profit
      commissions which take into account investment income for purposes of
      calculating the reinsurer's profit on business
  ceded.
 Marketing
  We market
our reinsurance products worldwide primarily through non-exclusive relationships
with leading reinsurance brokers, as we believe that the use of reinsurance
brokers enables us to operate on a more cost-effective basis and to maintain the
flexibility to enter and exit reinsurance lines in a quick and efficient
manner.  We also believe that brokers are particularly useful in
assisting with placements of excess-of-loss reinsurance programs.  In
addition to their role as intermediaries in placing risk, brokers perform data
collection, contract preparation and other administrative tasks.  We
believe that by doing business largely through reinsurance brokers we are able
to avoid the expense and regulatory complications of a worldwide network of
offices and thereby minimize fixed costs associated with marketing
activities.
  - 5
-
  Based on
in-force premiums written by us as of December 31, 2009, the brokers from
which we derived the largest portions of our business (with the approximate
percentage of business derived from each of such brokers and its affiliates)
were: Aon Benfield (39.4%), Marsh & McLennan Companies (35.4%), and Willis
Group Holdings (13.6%).  The loss of business relationships with any
of these brokers could have a material adverse effect on our
business.
  Underwriting
and Risk Management
  Overview
  Our
approach to underwriting and risk management emphasizes discipline and
profitability rather than premium volume or market share.  We seek to
limit our overall exposure to risk by limiting the amount of reinsurance we
write by geographic zone, peril and type of program or contract.  Our
risk management practices include evaluating the quality of the ceding company
in connection with our review of any program proposal and using contract terms,
diversification criteria, probability analysis and analysis of comparable
historical loss experience.  We estimate the impact of catastrophic
events using catastrophe modeling software and reinsurance contract information
to evaluate our exposure to losses from individual contracts and in the
aggregate.
  Ceding Company Selection and
Evaluation
  Before
entering into a reinsurance contract, we consider the quality of the ceding
company, including the experience and reputation of its management, its capital,
its risk management and underwriting strategy and practices and its claims
settlement practices and procedures.  In addition, we seek to obtain
information on the nature of the perils to be covered and, in the case of
natural peril catastrophe exposures, aggregate information as to the location or
locations of the risks covered under the reinsurance contract.  We
request information on the ceding company’s loss history for the perils proposed
to be covered, together with relevant underwriting considerations, which would
impact our exposures.  If the program meets all these initial
underwriting criteria, we then evaluate the proposal’s risk/reward profile to
assess the adequacy of the proposed pricing and its potential impact on our
overall return on capital.
  We also
evaluate the financial condition of our retrocessionaires and monitor
concentrations of credit risk arising from similar geographic regions,
activities, or economic characteristics of the retrocessionaires to minimize our
exposure to significant losses from retrocessionaire insolvencies.
  Aggregate Loss
Limits
  Many of
our reinsurance contracts do not contain an aggregate loss limit or a loss ratio
limit, which means that there is no contractual limit to the number of claims
that we may be required to pay pursuant to such reinsurance
contracts.  However, our property reinsurance contracts with natural
catastrophe exposure generally have occurrence limits.  In addition,
our high layer property, casualty and marine excess-of-loss reinsurance
contracts generally contain aggregate loss limits, with limited reinstatements
of an occurrence limit, which restore the original limit under the contract
after the limit has been depleted by losses incurred on that
treaty.  Our actuaries and underwriters work together to establish
appropriate pricing models for these purposes.
  Loss
Modeling
  For
catastrophe coverages exposed to natural perils, we measure our exposure to
aggregate catastrophic claims using catastrophe models that analyze the effect
of wind speed and earthquakes on the exposed property values within our
portfolio.  We seek to limit the amount of capital that we expect to
lose from a severe catastrophic event; however, there can be no assurance that
we will successfully limit actual losses from such a catastrophic
event.  We also monitor our exposures to man-made peril catastrophe
exposed accumulating risks, including surety, umbrella liability, directors and
officers liability, trade credit and terrorism risks.
  We use
sophisticated modeling techniques to measure and estimate loss exposure under
both simulated and actual loss scenarios.  We also use these models to
assess the impact of both single and multiple events.  We evaluate the
commercial catastrophe exposure models that form the basis for our own
proprietary pricing models.  These computer-based loss modeling
systems primarily utilize direct exposure information obtained from our clients
and data compiled by A.M. Best to assess each client’s potential for catastrophe
losses.  We believe that loss modeling is an important part of the
underwriting process for catastrophe exposure pricing.
  Diversification
  We seek
to diversify our property catastrophe exposure across geographic zones and type
of peril around the world in order to manage the concentration of
risk.  We attempt to limit our coverage for risks located in a
particular zone to a predetermined level.  Currently, our largest
property exposures are in Florida and other coastal states in the United States,
and in the Caribbean, Japan and northern Europe.  We maintain a
database of our exposures in each geographic zone and estimate our probable
maximum loss for each zone and for each peril (e.g., earthquakes and hurricanes)
to which that zone is subject based on catastrophe models and underwriting
assessments.  We also use catastrophe loss modeling to review
exposures from events that cross country borders, such as wind events that may
affect the Caribbean and Florida or the United Kingdom and continental
Europe.  Our largest exposures are in the United States for hurricane
and earthquake, in Europe for flood and wind, and in Japan for earthquake and
typhoons.
  In our
property catastrophe exposure, we seek to limit our estimated probable maximum
loss to a specific level for severe catastrophic events.  We currently
expect to limit the probable maximum pre-tax loss for 2010 to no more than 22.5%
of total capital for a severe catastrophic event in any geographic zone that
could be expected to occur once in every 250 years, although we may change this
threshold at any time.  The estimated probable maximum loss for a
catastrophic event in any geographic zone arising from a 1-in-250 year event was
approximately $469.0 million and $293.0 million as of January 1, 2010 and
January 1, 2009, respectively.
  We seek
to diversify our casualty exposure by writing casualty business throughout the
United States and internationally.  In addition, we seek to diversify
our casualty exposure by writing casualty reinsurance across a broad range of
product lines.
  - 6
-
  Retrocessional Reinsurance
and Derivative Instruments
  We buy
retrocessional reinsurance, which is insurance for our own account, to reduce
liability on individual risks, protect against catastrophic losses and obtain
additional underwriting capacity.  The major types of retrocessional
coverage that we purchase include specific coverage for certain property and
casualty exposures.  We may purchase other retrocessional coverage on
a selective basis.  Our decisions with respect to purchasing
retrocessional coverage take into account both the potential coverage and market
conditions such as pricing, terms, conditions and availability of such coverage,
with the aim of securing cost-effective protection.  We expect that
the type and level of retrocessional coverage we purchasewill vary over time,
reflecting our view of the changing dynamics of both the underlying exposure and
the reinsurance markets.  For example, we may purchase industry loss
warranty reinsurance, which provides retrocessional coverage when insurance
industry losses for a defined event exceed a certain level.  There can
be no assurance that retrocessional coverage will be available on terms we find
acceptable.
  Retrocessional
agreements do not relieve us from our obligations to the insurers and reinsurers
from whom we assume business.  The failure of retrocessionaires to
honor their obligations would result in losses to us.  Consequently,
we consider the financial strength of retrocessionaires when determining whether
to purchase retrocessional coverage from them.  We generally obtain
retrocessional coverage from companies rated “A-” or better by A.M. Best unless
the retrocessionaire’s obligations are collateralized.  For exposures
where losses become known and are paid in a relatively short period of time, we
may obtain retrocessional coverage from companies that may not be rated but that
provide adequate collateral.  We routinely monitor the financial
performance and rating status of all material retrocessionaires.
  We also
use derivative instruments to reduce our exposure to catastrophe losses as an
alternative to traditional retrocession.  The posting of collateral
may enhance the financial security of the derivative counterparty.
  Claims
Administration
  Our
claims personnel administer claims arising from our reinsurance contracts,
including validating and monitoring claims, posting case reserves and approving
payments.  Authority for establishing reserves and payment of claims
is based upon the level and experience of claims personnel.
  Our
claims personnel, or consultants engaged by us, conduct periodic audits of
specific claims and the overall claims procedures of our ceding companies at
their offices.  We rely on our ability to effectively monitor the
claims handling and claims reserving practices of ceding companies in order to
help establish the proper reinsurance premium for reinsurance contracts and to
establish proper loss estimates and liabilities.  Moreover, prior to
accepting or renewing certain risks, our underwriters may request that our
claims personnel conduct pre-underwriting claims audits of ceding
companies.
  Unpaid
Losses and Loss Adjustment Expenses
  Unpaid
losses and loss adjustment expenses on our consolidated balance sheets represent
our best estimates, at a given point in time, of our liability to pay losses and
loss adjustment expenses (“LAE”) for reinsured claims for events that have
occurred on or before the balance sheet date.  We do not establish
liabilities for unpaid losses and LAE until the occurrence of an event that may
give rise to a loss.
  Estimates
of losses are established after extensive consultation with individual
underwriters, actuarial review of loss development patterns and comparison with
industry and our own loss information.  These estimates are based on
predictions of future developments and trends, including predictions of claim
severity and frequency.  Consequently, estimates of ultimate losses
and LAE, and our unpaid liability for losses and LAE, may differ materially from
our initial estimates.  We report changes in estimates of prior years’
unpaid losses and LAE in our consolidated statement of operations in the same
calendar year in which we make the change.
  The
following table sets forth the changes in our unpaid losses and LAE for 2009,
2008 and 2007 ($ in thousands):
 
 2009
              
              
              2008
              
              
              2007Net
      unpaid losses and LAE as of January 1,
              
              $
              2,452,045
              
              
              
              2,342,185
              
              
              $
              2,326,227Net
      incurred losses and LAE related to:Current
      year
              
              
              579,304
              
              
              
              878,169
              
              
              
              745,865Prior
      years
              
              
              (100,962)
              
              
              
              (159,936
              )
              
              
              (90,378
              )Net
      incurred losses and LAE
              
              
              478,342
              
              
              
              718,233
              
              
              
              655,487Net
      paid losses and LAE:Current
      year
              
              
              67,693
              
              
              
              148,355
              
              
              
              73,402Prior
      years
              
              
              539,517
              
              
              
              433,961
              
              
              
              578,611Net
      paid losses and LAE
              
              
              607,210
              
              
              
              582,316
              
              
              
              652,013Net
      effects of foreign currency exchange rate changes
              
              
              11,831
              
              
              
              (26,057
              )
              
              
              12,484Net
      unpaid losses and LAE as of December 31,
              
              
              2,335,008
              
              
              
              2,452,045
              
              
              
              2,342,185Reinsurance
      recoverable on unpaid losses and LAE
              
              
              14,328
              
              
              
              11,461
              
              
              
              18,853Gross
      unpaid losses and LAE as of December 31,
              
              $
              2,349,336
              
              
              
              2,463,506
              
              
              $
              2,361,038
  - 7
-
  Net incurred losses and LAE related to
prior years included net favorable loss development of $100.8 million, $167.2
million and $81.2 million for the years ended December 31, 2009, 2008 and 2007,
respectively.  Net favorable loss development was primarily the result
of favorable adjustments in ultimate loss ratios.  Additionally, prior
years’ incurred losses and LAE included losses associated with changes in
estimates of premiums and the patterns of their earnings.  The
incurred losses and LAE related to prior years arising from changes in premium
estimates were a decrease of $0.2 million in 2009, an increase of $7.3 million
in 2008 and a decrease of $9.2 million in 2007.  The effect on net
income of changes in premium estimates, after considering corresponding changes
in related losses, LAE and acquisition expenses, was not
significant.
  The net favorable loss development in
2009 emerged primarily from the Property and Marine and Casualty segments and
was related to non-catastrophe losses.  The Property and Marine
segment had $14.2 million of net favorable loss development, including $17.7
million of net favorable loss development related to non-catastrophe events in
prior years and net unfavorable loss development of $3.5 million related to
major catastrophes.  The Casualty segment had $73.6 million of net
favorable loss development, of which $68.2 million was attributable to the
long-tailed casualty classes.  The majority of the long-tailed
casualty net favorable loss development was attributable to the umbrella, claims
made and casualty excess-of-loss occurrence classes.  The Finite Risk
segment experienced net favorable loss development of $12.9 million, which was
substantially offset by adjustments relating to profit commissions on these
contracts.
  There was net favorable loss
development in 2008 in all segments.  The Property and Marine segment
had $71.2 million of net favorable loss development, of which $18.8 million
related to major catastrophes in prior years.  The remainder of the
net favorable loss development was attributable to non-major catastrophe,
property risk and crop classes of business.  The Casualty segment had
$73.2 million of net favorable loss development, of which $63.3 million was
attributable to certain long-tailed casualty classes.  The majority of
the long-tailed casualty net favorable loss development was attributable to the
claims made classes.  The Finite Risk segment experienced net
favorable loss development of $22.8 million, which was substantially offset by
adjustments relating to profit commissions on these contracts.
  The most
significant portion of net favorable loss development in 2007 was in the
Property and Marine segment and in certain classes in the Casualty
segment.  Net favorable loss development in the Property and Marine
segment had $48.5 million of net favorable loss development, of which $17.2
million related to prior years’ major catastrophes.  The remainder of
the net favorable loss development was attributable to non-major catastrophe,
property risk and crop classes of business.  The Casualty segment had
$19.5 million of net favorable loss development, of which $15.5 million was
attributable to certain long-tailed casualty classes.  The Finite Risk
segment experienced net favorable loss development of $13.2 million, which was
partially offset by adjustments relating to profit commissions on these
contracts.
  The net
favorable loss development in 2009, 2008 and 2007 resulted primarily from
reported loss experience that was less than expected and that gained sufficient
credibility in the current period to reduce estimated ultimate
losses.  See “Critical Accounting Estimates - Variability of Outcomes”
in Item 7, “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” in this Form 10-K.
  The
following table shows the development of liability for net unpaid losses and LAE
from December 31, 2002 through December 31, 2009.  The top
line of the table shows the liability for unpaid losses and LAE, net of
retrocessional reinsurance recoverables, at the balance sheet date for each of
the indicated years.  This represents our estimate of our gross and
net liability for losses and LAE arising in all prior years that are unpaid at
the balance sheet date, including our estimate of the cost of claims incurred
but not yet reported, generally referred to as “IBNR.”  We re-estimate
the liability to reflect additional information regarding claims incurred prior
to the end of each year.  Changes in our estimate of our liability for
unpaid losses and LAE recorded at the end of the prior year are reflected in the
consolidated statement of operations of the year during which the liabilities
are re-estimated and result in a redundancy or deficiency of our unpaid losses
and LAE.  A cumulative redundancy or deficiency reflects the
cumulative difference between the original estimate of our liability for unpaid
losses and LAE and the current re-estimated liability.  The table also
shows the cumulative amounts paid as of successive years with respect to that
liability.  Unpaid losses and LAE denominated in foreign currencies
are restated at the foreign exchange rates in effect as of December 31,
2009 and the resulting cumulative foreign exchange effect is shown as an
adjustment to the cumulative redundancy.  Each amount in the table
includes the effects of all changes in amounts for the prior
years.  The table does not present accident year or underwriting year
development data nor does it include any corresponding adjustments that may
accompany loss redundancies or deficiencies such as premium or commission
adjustments.  Conditions and trends that have affected the development
of liabilities in the past may not necessarily exist in the
future.  Therefore, it would not be appropriate to extrapolate future
deficiencies or redundancies based on the following table ($ in
thousands):
  - 8
-
 
 2002
              
              
              2003
              
              
              2004
              
              
              2005
              
              
              2006
              
              
              2007
              
              
              2008
              
              
              2009Net
      unpaid losses and LAE as of December 31,
              
              $
              281,659
              
              
              
              731,918
              
              
              
              1,379,227
              
              
              
              2,268,655
              
              
              
              2,326,227
              
              
              
              2,342,185
              
              
              
              2,452,045
              
              
              $
              2,335,008Net
      unpaid losses and LAE re-estimated as of:One
      year later
              
              
              224,693
              
              
              
              649,902
              
              
              
              1,306,708
              
              
              
              2,215,635
              
              
              
              2,235,849
              
              
              
              2,182,249
              
              
              
              2,351,083Two
      years later
              
              
              194,422
              
              
              
              604,891
              
              
              
              1,277,627
              
              
              
              2,149,153
              
              
              
              2,129,932
              
              
              
              2,076,330Three
      years later
              
              
              176,884
              
              
              
              603,293
              
              
              
              1,254,213
              
              
              
              2,072,604
              
              
              
              2,032,074Four
      years later
              
              
              175,683
              
              
              
              601,719
              
              
              
              1,210,091
              
              
              
              1,999,484Five
      years later
              
              
              173,546
              
              
              
              589,028
              
              
              
              1,170,602Six
      years later
              
              
              173,601
              
              
              
              586,747Seven
      years later
              
              
              180,929Net
      cumulative redundancy
              
              
              100,730
              
              
              
              145,171
              
              
              
              208,625
              
              
              
              269,171
              
              
              
              294,153
              
              
              
              265,855
              
              
              
              100,962Adjustment
      for foreign currency exchange
              
              
              12,752
              
              
              
              3,297
              
              
              
              (12,139
              )
              
              
              1,124
              
              
              
              (3,587
              )
              
              
              (1,340
              )
              
              
              (9,137
              )Cumulative
      redundancy excluding foreign currency exchange
              
              
              113,482
              
              
              
              148,468
              
              
              
              196,486
              
              
              
              270,295
              
              
              
              290,566
              
              
              
              264,515
              
              
              
              91,825Net
      cumulative paid losses and LAE as of:One
      year later
              
              
              41,709
              
              
              
              205,889
              
              
              
              388,700
              
              
              
              624,006
              
              
              
              577,739
              
              
              
              433,961
              
              
              
              539,514Two
      years later
              
              
              62,604
              
              
              
              265,376
              
              
              
              536,351
              
              
              
              1,065,607
              
              
              
              873,487
              
              
              
              725,689Three
      years later
              
              
              73,908
              
              
              
              320,399
              
              
              
              696,809
              
              
              
              1,285,151
              
              
              
              1,096,071Four
      years later
              
              
              90,982
              
              
              
              373,081
              
              
              
              799,763
              
              
              
              1,440,075Five
      years later
              
              
              107,425
              
              
              
              416,902
              
              
              
              869,188Six
      years later
              
              
              125,264
              
              
              
              456,040Seven
      years later
              
              
              146,278Gross
      liability-end of year
              
              
              281,659
              
              
              
              736,934
              
              
              
              1,380,955
              
              
              
              2,323,990
              
              
              
              2,368,482
              
              
              
              2,361,038
              
              
              
              2,463,506
              
              
              
              2,349,336Reinsurance
      recoverable on unpaid losses and LAE
              
              
              –
              
              
              
              5,016
              
              
              
              1,728
              
              
              
              55,335
              
              
              
              42,255
              
              
              
              18,853
              
              
              
              11,461
              
              
              
              14,328Net
      liability-end of year
              
              $
              281,659
              
              
              
              731,918
              
              
              
              1,379,227
              
              
              
              2,268,655
              
              
              
              2,326,227
              
              
              
              2,342,185
              
              
              
              2,452,045
              
              
              $
              2,335,008Gross
      liability-re-estimated
              
              $
              180,929
              
              
              
              593,243
              
              
              
              1,174,572
              
              
              
              2,053,683
              
              
              
              2,066,093
              
              
              
              2,087,895
              
              
              $
              2,352,430Gross
      cumulative redundancy
              
              
              100,730
              
              
              
              143,691
              
              
              
              206,383
              
              
              
              270,307
              
              
              
              302,389
              
              
              
              273,143
              
              
              
              111,076
 
 - 9
-
  Investments
  As of
December 31, 2009, our investments and cash and cash equivalents totaled
$4.4 billion, consisting of $3.7 billion of fixed maturity securities, $682.8
million of cash and cash equivalents and $30.2 million of short-term investments
and preferred stocks.  See Item 7, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” in this Form
10-K.
  The
primary objective of our investment strategy is to generate investment income by
maintaining a portfolio that consists primarily of diversified, high quality,
predominantly publicly-traded fixed maturity securities.  We do not
invest in instruments such as credit default swaps or collateralized debt
obligations.  We may invest in common and preferred stocks and
securities denominated in non-U.S. dollars.  In addition, we may use
financial futures and options and foreign currency exchange contracts as part of
a defensive hedging strategy.  From time to time, we may make
investments of a strategic or opportunistic nature.  We evaluate the
expected rate of return of various investment classes over the current risk-free
rate of return when determining investment allocations.
  Our
investment guidelines contain limits on the portion of our investment portfolio
that may be invested in various investment classes and in the securities of any
single issue or issuer, with the exception of U.S. government securities or
securities guaranteed by the U.S. Government.  We review our
investment guidelines periodically.
  Our
investments are subject to market risks.  The principal risks that
influence the fair value of our investment portfolio are interest rate risk,
credit risk and liquidity risk.  See Item 7A, “Quantitative and
Qualitative Disclosures about Market Risk” in this Form 10-K.
  The
following table summarizes the fair value of our investments and cash and cash
equivalents as of December 31, 2009 and 2008 ($ in
thousands):
 
 December 31,2009
              
              
              2008U.S.
      Government
              
              $
              608,697
              
              
              $
              201,024U.S.
      Government agencies
              
              
              117,505
              
              
              
              811,489Corporate
      bonds
              
              
              477,063
              
              
              
              694,653Commerical
      mortgage-backed securities
              
              
              215,020
              
              
              
              372,806Residential
      mortgage-backed securities
              
              
              714,703
              
              
              
              577,907Asset-backed
      securities
              
              
              59,699
              
              
              
              134,245Municipal
      bonds
              
              
              759,501
              
              
              
              393,484Non-U.S.
      governments
              
              
              678,748
              
              
              
              183,433Insurance-linked
      securities
              
              
              25,682
              
              
              
              –Total
      fixed maturity securities
              
              
              3,656,618
              
              
              
              3,369,041Preferred
      stocks
              
              
              3,897
              
              
              
              2,845Short-term
      investments
              
              
              26,350
              
              
              
              75,036Total
      investments
              
              
              3,686,865
              
              
              
              3,446,922Cash
      and cash equivalents
              
              
              682,784
              
              
              
              813,017Total
      investments and cash and cash equivalents
              
              $
              4,369,649
              
              
              $
              4,259,939
  U.S.
Government agencies include securities issued by the Federal National Mortgage
Association, the Federal Home Loan Mortgage Corporation and other U.S.
Government agencies, including securities issued by financial institutions under
the Temporary Liquidity Guarantee Program guaranteed by the Federal Deposit
Insurance Corporation.
  As of
December 31, 2009 and 2008, our portfolio of fixed maturity securities and
preferred stocks had a dollar weighted average rating of Aa2 and Aa1,
respectively, as measured by Moody’s Investors Service
(“Moody’s”).  The following table summarizes the fair values of our
fixed maturity and preferred stock portfolios as of December 31, 2009 and
2008 by Moody’s rating ($ in thousands):
  December 312009
                  
                  
                  2008Moody’s Rating
                  
                  
                  Fair
      Value
                  
                  
                  %
      of Total
                  
                  
                  Fair
      Value
                  
                  
                  %
      of TotalAaa
                  
                  
                  $
                  2,341,963
                  
                  
                  
                  64.0
                  %
                  
                  $
                  2,299,184
                  
                  
                  
                  68.2
                  %Aa
                  
                  
                  
                  517,404
                  
                  
                  
                  14.1
                  %
                  
                  
                  486,582
                  
                  
                  
                  14.4
                  %A
                  
                  
                  
                  
                  404,711
                  
                  
                  
                  11.1
                  %
                  
                  
                  439,255
                  
                  
                  
                  13.0
                  %Baa
                  
                  
                  
                  315,275
                  
                  
                  
                  8.6
                  %
                  
                  
                  143,518
                  
                  
                  
                  4.3
                  %Below
      Baa
                  
                  
                  
                  81,162
                  
                  
                  
                  2.2
                  %
                  
                  
                  3,347
                  
                  
                  
                  0.1
                  %Total
                  
                  
                  $
                  3,660,515
                  
                  
                  
                  100.0
                  %
                  
                  $
                  3,371,886
                  
                  
                  
                  100.0
                  %
  
 - 10
-
  We
consider the estimated duration of our reinsurance liabilities and other
contractual liabilities when establishing the target duration of our investment
portfolio.  As of December 31, 2009 and 2008, our fixed maturity
portfolio had a weighted average duration of 4.3 years and 3.2 years,
respectively.
  Valuation
  The
investment valuation process requires significant judgment and involves
analyzing factors specific to each security.  Determining the fair
value of a security may require obtaining fair value estimates from several
sources and establishing a hierarchy based on the reliability of
information.  The determination of whether unrealized losses represent
temporary changes in fair value or were the result of other-than-temporary
impairments also involves significant judgment.  See “Critical
Accounting Estimates - Valuation of Investments” in Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
this Form 10-K.
  Competition
  The
property and casualty reinsurance industry is highly
competitive.  Some of our competitors are large financial institutions
that have reinsurance operations, while others are specialty reinsurance
companies.  Many of our competitors have greater financial, marketing
and management resources than we do.  We compete with reinsurers
worldwide on the basis of many factors, including premium charges and other
terms and conditions offered, services provided, ratings assigned by independent
rating agencies, speed of claims payment, claims experience, perceived financial
strength and experience and reputation of the reinsurer in the line of
reinsurance to be underwritten.
  Our
principal competitors vary by type of business.  Bermuda-based
reinsurers are significant competitors on property catastrophe
business.  Lloyd’s of London syndicates are significant competitors on
marine business.  On international business, large European reinsurers
are significant competitors.  Large U.S. direct reinsurers, as well as
lead U.S.-based broker market reinsurers, are significant competitors on U.S.
casualty business.  Our competitors include Arch Capital Group Ltd.,
Aspen Insurance Holdings Limited, Axis Capital Holdings Limited, Endurance
Specialty Holdings Ltd., Everest Re Group, Ltd., Flagstone Reinsurance Holdings
Limited, Max Capital Group Ltd., Montpelier Re Holdings Ltd., PartnerRe Ltd.,
RenaissanceRe, Transatlantic Holdings, Inc. and Validus Holdings,
Ltd.
  Traditional
as well as new capital market participants from time to time produce alternative
products (such as reinsurance securitizations, catastrophe bonds and various
derivative instruments) that may compete with certain types of reinsurance, such
as property catastrophe.  Over time, these initiatives could
significantly affect supply, pricing and competition in our industry and
partially displace our traditional reinsurance products.
  Ratings
  Financial
strength ratings are used by ceding companies and reinsurance intermediaries to
assess the financial strength and quality of reinsurers, and thus are an
important factor in evaluating and establishing their competitive
positions.  A.M. Best and S&P are generally considered to be
significant rating agencies for the evaluation of insurance and reinsurance
companies.  A.M. Best’s ratings are based on a quantitative evaluation
of performance with respect to profitability, capital adequacy and liquidity and
a qualitative evaluation of risk management, competitive position, investments,
unpaid losses and company management.  S&P’s insurer financial
strength rating is a current opinion of the financial security characteristics
of an insurance organization with respect to its ability to pay under its
insurance policies and contracts in accordance with their
terms.  S&P’s ratings are based on information furnished by rated
organizations or obtained by S&P from other sources it considers
reliable.
  A.M. Best
has assigned a financial strength rating of “A” (Excellent) with a stable
outlook to each of our reinsurance subsidiaries.  This rating is the
third highest of sixteen rating levels.  According to A.M. Best, a
rating of “A” indicates A.M. Best’s opinion that a company has an excellent
ability to meet its ongoing obligations to policyholders.  S&P has
assigned a financial strength rating of “A” (Strong) with a stable outlook to
each of our reinsurance subsidiaries.  This rating is the sixth
highest of twenty-one levels.  According to S&P, a rating of “A”
indicates S&P’s opinion that an insurer has strong financial security
characteristics, but is somewhat more likely to be affected by adverse business
conditions than are insurers with higher ratings.
  In
addition to our financial strength ratings, A.M. Best has assigned an issuer
credit rating of “bbb” to the debt obligations of Platinum Holdings and Platinum
Finance.  S&P has also assigned counterparty credit ratings of
“BBB+” to Platinum Holdings and “A” to Platinum Bermuda and Platinum US, and an
issuer credit rating of “BBB+” to the debt obligations of Platinum
Finance.
  These
ratings are subject to periodic review by A.M. Best and S&P and may be
revised downward or revoked at the sole discretion of A.M. Best or
S&P.  A.M. Best and S&P may increase their scrutiny of rated
companies, revise their rating standards or take other action that could lead to
changes in our ratings.
  Employees
  As of
December 31, 2009, we employed 146 people.
  Regulation
  The
business of reinsurance is regulated in most countries, although the degree and
type of regulation varies significantly from one jurisdiction to
another.  Reinsurers are generally subject to less direct regulation
than primary insurers.  Platinum Bermuda is registered with and
regulated by the Bermuda Monetary Authority (the “Authority”).  In the
United States, licensed reinsurers must comply with financial supervision
standards comparable to those governing primary insurers, and regulatory,
supervisory and administrative powers are generally held by state insurance
commissioners.  Accordingly, Platinum US is subject to regulation by
the various U.S. states in which it is licensed and writes
business.
  - 11
-
  Bermuda
Regulation
  Platinum
Holdings and Platinum Bermuda are incorporated in Bermuda.  As a
holding company, Platinum Holdings is not subject to Bermuda insurance
regulations.
  The
Insurance Act 1978 of Bermuda and related regulations, as amended (the
“Insurance Act”), which regulates the insurance business of Platinum Bermuda,
provides that no person may carry on any insurance business in or from within
Bermuda unless registered as an insurer under the Insurance Act by the
Authority, which is responsible for the day-to-day supervision of
insurers.  Under the Insurance Act, insurance business includes
reinsurance business.  The Insurance Act also grants to the Authority
powers to supervise, investigate and intervene in the affairs of insurance
companies.
  An
Insurance Advisory Committee appointed by the Bermuda Minister of Finance
advises the Authority on matters connected with the discharge of the Authority’s
functions, and subcommittees thereof supervise, investigate and review the law
and practice of insurance in Bermuda, including reviews of accounting and
administrative procedures.
  An
insurer’s registration may be canceled by the Authority on grounds specified in
the Insurance Act, including failure of the insurer to comply with its
obligations under the Insurance Act or if, in the opinion of the Authority, the
insurer has not been carrying on business in accordance with sound insurance
principles.  The Insurance Act also imposes solvency and liquidity
standards and auditing and reporting requirements on Bermuda insurance companies
and grants to the Authority powers to supervise, investigate and intervene in
the affairs of insurance companies.  Certain significant aspects of
the Bermuda insurance regulatory framework are set forth below.
  The
Insurance Act distinguishes between long-term business and general
business.  Long-term business consists of life, annuity, accident and
disability contracts in effect for not less than five years and certain other
types of contracts.  General business is any insurance business that
is not long-term business.  There are six classifications of insurers
carrying on general business, with Class 4 insurers subject to the strictest
regulation.  A company can be registered as a Class 4 insurer when:
(a) it has at the time of its application for registration, or will have before
it carries on insurance business, a total statutory capital and surplus of not
less than $100 million; and (b) it intends to carry on insurance business
including excess liability business or property catastrophe reinsurance
business.  A company which is both a Class 4 insurer and an insurer
carrying on long-term business is referred to herein as a “composite
insurer.”  Platinum Bermuda is registered as both a Class 4 and
long-term insurer and is regulated as such under the Insurance Act.
  Principal
Representative.  Platinum Bermuda is required to maintain a
principal office in Bermuda and to appoint and maintain a principal
representative in Bermuda.  For the purpose of the Insurance Act, the
principal office of Platinum Bermuda is at our principal executive offices in
Bermuda, and Platinum Bermuda’s principal representative is Allan C. Decleir,
the Chief Financial Officer of Platinum Bermuda.  Without a reason
acceptable to the Authority, an insurer may not terminate the appointment of its
principal representative, and the principal representative may not cease to act
as such, unless 30 days’ notice in writing is given to the Authority of the
intention to do so.  It is the duty of the principal representative,
upon reaching the view that there is a likelihood of the insurer for which the
principal representative acts becoming insolvent or that a reportable “event”
has, to the principal representative’s knowledge, occurred or is believed to
have occurred, to immediately notify the Authority and to make a report in
writing to the Authority within 14 days setting out all the particulars of the
case that are available to the principal representative.  Examples of
such a reportable “event” include failure by the insurer to comply substantially
with a condition imposed upon the insurer by the Authority relating to a
solvency margin or liquidity or other ratio.
  Independent Approved
Auditor.  Platinum Bermuda must appoint an independent auditor
who will annually audit and report on Platinum Bermuda’s financial statements
prepared under generally accepted accounting principles or international
financial reporting standards (“GAAP financial statements”), statutory financial
statements and the statutory financial return of the insurer, each of which, are
required to be filed annually with the Authority.  The independent
auditor of Platinum Bermuda must be approved by the Authority.  No
person having an interest in Platinum Bermuda other than as an insured, and no
officer, servant or agent of Platinum Bermuda, shall be eligible for appointment
as an approved auditor for Platinum Bermuda and any person appointed as an
approved auditor to Platinum Bermuda who subsequently acquires such interest or
becomes an officer, servant or agent of that insurer shall cease to be an
approved auditor.  If Platinum Bermuda fails to appoint an approved
auditor or at any time fails to fill a vacancy for such auditor, the Authority
may appoint an approved auditor for Platinum Bermuda and shall fix the
remuneration to be paid to the approved auditor within 14 days, if not agreed
sooner by the insurer and the auditor.  Platinum Bermuda’s independent
auditor is KPMG in Bermuda.
  Loss Reserve
Specialist.  Platinum Bermuda is required to submit an opinion
of its approved loss reserve specialist with its statutory financial return in
respect of its loss and LAE provisions.  The loss reserve specialist,
who will normally be a qualified casualty actuary, must be approved by the
Authority.  Platinum Bermuda’s loss reserve specialist is Neal J.
Schmidt, our Chief Actuary.  Mr. Schmidt is a Fellow of the Casualty
Actuarial Society and a Member of the American Academy of
Actuaries.
  Approved
Actuary.  Platinum Bermuda is required to submit an annual
actuary's certificate when filing its statutory financial return.  The
actuary's certificate must state whether or not (in the opinion of the insurer's
approved actuary) the aggregate amount of the liabilities of the insurer in
relation to long-term business at the end of the relevant year, exceeds the
aggregate amount of those liabilities as shown in the insurer's statutory
balance sheet.  The actuary must be approved by the Authority and will
normally be a qualified life actuary.  Platinum Bermuda's approved
actuary is William Hines.  Mr. Hines is a Fellow of the Society of
Actuaries and a Member of the American Academy of Actuaries.
  Annual Financial
Statements.  Platinum Bermuda, as a Class 4 insurer, must
prepare annual GAAP financial statements and statutory financial
statements.  The Insurance Act prescribes rules for the preparation
and substance of such statutory financial statements (which include, in
statutory form, a balance sheet, an income statement, a statement of capital and
surplus and notes thereto).  The statutory financial statements
include information and analysis regarding premiums, claims, reinsurance and
investments of the insurer.  Platinum Bermuda is required to file with
the Authority the annual GAAP financial statements and statutory financial
statements within four months from the end of the relevant financial year
(unless specifically extended).  The statutory financial statements do
not form part of the public records maintained by the Authority but the GAAP
financial statements are available for public inspection.
  Annual Statutory Financial
Return.  Platinum Bermuda is required to file with the
Authority a statutory financial return no later than four months after its
financial year-end (unless specifically extended).  The statutory
financial return for an insurer registered as a Class 4 general business and
long-term insurer includes, among other matters, a report of the approved
independent auditor on the statutory financial statements of such insurer, a
general business solvency certificate, a long-term business solvency
certificate, the statutory financial statements themselves, the opinion of the
loss reserve specialist, an actuary’s certificate and a schedule of reinsurance
ceded.  The solvency certificates must be signed by the principal
representative and at least two directors of the insurer who are required to
certify, among other matters, whether the minimum solvency margin has been met
and whether the insurer complied with the conditions attached to its certificate
of registration.  The independent approved auditor is required to
state whether in its opinion it was reasonable for the directors to so
certify.  Where an insurer’s accounts have been audited for any
purpose other than compliance with the Insurance Act, a statement to that effect
must be filed with the statutory financial return.  The statutory
financial return is not available for public inspection.
  - 12
-
  Minimum Solvency Margin and
Restrictions on Dividends and Distributions.  Platinum Bermuda
must at all times maintain a solvency margin and an enhanced capital requirement
in accordance with the provisions of the Insurance Act.  Each year
Platinum Bermuda is required to file with the Authority a capital and solvency
return within four months of its relevant financial year end (unless
specifically extended).  The prescribed form of capital and solvency
return, which was revised under legislation adopted in 2008, comprises the
insurer’s Bermuda Solvency Capital Requirement (“BSCR”) model, a schedule of
fixed income investments by rating category, a schedule of net loss and loss
expense provision by line of business, a schedule of premiums written by line of
business, a schedule of risk management and a schedule of fixed income
securities.
  The
legislation adopted in 2008 also introduced, among other things, prescribed
prudential standards in relation to solvency requirements to be observed by
insurers.  This included the introduction of a new risk-based capital
approach, the BSCR, in determining the insurer solvency capital requirements of
Class 4 insurers.  The BSCR is a standardized model used to measure
the risk associated with an insurer’s assets, liabilities and premiums, and a
formula to take account of catastrophe risk exposure.  The model
offers some degree of credit to the capital requirement calculations of insurers
that diversify their underlying risk in the form of different business
lines.  The Authority has provided for the use of pre-approved
internally developed company models in lieu of the standardized
BSCR.  The Authority requires all Class 4 insurers to maintain their
capital at a target level which is 120% of the minimum amount calculated in
accordance with the BSCR or the company’s approved in-house model (the “Enhanced
Capital Requirement” or “ECR”).  In circumstances where the Authority
concludes that the company’s risk profile deviates significantly from the
assumptions underlying the ECR or the company’s assessment of its management
policies and practices, it may issue an order requiring that the company adjust
its ECR.
  The BSCR
increases the capital requirements of Platinum Bermuda and adds an additional
constraint on the amount of dividends that Platinum Bermuda is able to pay
without regulatory approval.
  The
Insurance Act mandates certain actions and filings with the Authority if
Platinum Bermuda fails to meet and maintain its ECR or solvency margin,
including the filing of a written report detailing the circumstances giving rise
to the failure and the manner and time within which the insurer intends to
rectify the failure.  Platinum Bermuda is prohibited from declaring or
paying a dividend if it is in breach of its ECR, solvency margin or minimum
liquidity ratio or if the declaration or payment of such dividend would cause
such breach.  Where Platinum Bermuda fails to meet its solvency margin
or minimum liquidity ratio on the last day of any financial year, it is
prohibited from declaring or paying any dividends during the next financial year
without the approval of the Authority.  Further, Platinum Bermuda, as
a Class 4 insurer, is prohibited from declaring or paying in any financial year
dividends of more than 25% of its total statutory capital and surplus (as shown
on its previous financial year’s statutory balance sheet) unless it files (at
least seven days before payment of such dividends) with the Authority an
affidavit stating that it will continue to meet its solvency margin or minimum
liquidity ratio.  Platinum Bermuda must obtain the Authority’s prior
approval for a reduction by 15% or more of the total statutory capital as set
forth in its previous year’s financial statements.  These restrictions
on declaring or paying dividends and distributions under the Insurance Act are
in addition to those under the Companies Act 1981, which apply to all Bermuda
companies.
  All
Bermuda companies must comply with the provisions of the Companies Act 1981
regulating the payment of dividends and making distributions from contributed
surplus.  A company may not declare or pay a dividend, or make a
distribution out of contributed surplus, if there are reasonable grounds for
believing that:  (a) the company is, or would after the payment
be, unable to pay its liabilities as they become due; or (b) the realizable
value of the company’s assets would thereby be less than the aggregate of its
liabilities and its issued share capital and share premium
accounts.
  Minimum Liquidity
Ratio.  The Insurance Act provides a minimum liquidity ratio
for general business insurers.  An insurer engaged in general business
is required to maintain the value of its relevant assets at not less than 75% of
the amount of its relevant liabilities.  Relevant assets include cash
and time deposits, quoted investments, unquoted bonds and debentures, first
liens on real estate, investment income due and accrued, accounts and premiums
receivable and reinsurance balances receivable.  There are certain
categories of assets which, unless specifically permitted by the Authority, do
not automatically qualify as relevant assets, such as unquoted equity
securities, investments in and advances to affiliates and real estate and
collateral loans.  The relevant liabilities are total general business
insurance reserves and total other liabilities less deferred income tax and
sundry liabilities (by interpretation, those not specifically
defined).
  Long-term Business
Fund.  An insurer carrying on long-term business is required to
keep its accounts in respect of its long-term business separate from any
accounts kept in respect of any other business.  All receipts of its
long-term business form part of its long-term business fund.  No
payment may be made directly or indirectly from an insurer’s long-term business
fund for any purpose other than a purpose related to the insurer’s long-term
business, unless such payment can be made out of any surplus (certified by the
insurer’s approved actuary) to be available for distribution otherwise than to
policyholders.  Platinum Bermuda may not declare or pay a dividend to
any person other than a policyholder unless the value of the assets in its
long-term business fund (as certified by its approved actuary) exceeds the
liabilities of the insurer’s long-term business (as certified by the insurer’s
approved actuary) by the amount of the dividend and at least the $250,000
minimum solvency margin prescribed by the Insurance Act, and the amount of any
such dividend may not exceed the aggregate of that excess (excluding the said
$250,000) and any other funds properly available for payment of dividends, such
as funds arising out of business of the insurer other than long-term
business.
  Restrictions on Transfer of Business
and Winding-Up.  As a long-term insurer, Platinum Bermuda is
subject to the following provisions of the Insurance Act:
  (1)
              all
      or any part of the long-term business, other than long-term business that
      is reinsurance business, may be transferred only with and in accordance
      with the sanction of the applicable Bermuda court;
  and
  (2)
              an
      insurer or reinsurer carrying on long-term business may only be wound-up
      or liquidated by order of the applicable Bermuda court, and this may
      increase the length of time and costs incurred in the winding-up of
      Platinum Bermuda when compared with a voluntary winding-up or
      liquidation.
  Supervision and
Intervention.  The Authority may appoint an inspector with
powers to investigate the affairs of an insurer if the Authority believes that
an investigation is required in the interest of the insurer’s policyholders or
potential policyholders.  In order to verify or supplement information
otherwise provided to the inspector, the Authority may direct an insurer to
produce documents or information relating to matters connected with the
insurer’s business.
  - 13
-
  An
inspector may examine on oath any past or present officer, employee or insurance
manager of the insurer under investigation in relation to its business and apply
to the court in Bermuda for an order that other persons may also be examined on
any matter relevant to the investigation.  It shall be the duty of any
insurer in relation to whose affairs an inspector has been appointed and of any
past or present officer, employee or insurance manager of such insurer, to
produce to the inspector on request all books, records and documents relating to
the insurer under investigation which are in its or his custody or control and
otherwise to give to the inspector all assistance in connection with the
investigation which it or he is reasonably able to give.
  If it
appears to the Authority that there is a risk of the insurer becoming insolvent,
or that it is in breach of the Insurance Act or any conditions imposed upon its
registration, the Authority may, among other things, direct the insurer
(i) not to take on any new insurance business, (ii) not to vary any
insurance contract if the effect would be to increase the insurer’s liabilities,
(iii) not to make certain investments, (iv) to realize certain
investments, (v) to maintain, or transfer to the custody of a specified
bank, certain assets, (vi) not to declare or pay any dividends or other
distributions or to restrict the making of such payments, (vii) to limit
its premium income, (viii) not to enter into any specified transaction with
any specified persons or persons of a specified class, (ix) to provide such
written particulars relating to the financial circumstances of the insurer as
the Authority thinks fit, (x) to obtain the opinion of a loss reserve
specialist and to submit it to the Authority and (xi) to remove a
controller or officer.
  In
addition to powers under the Insurance Act to investigate the affairs of an
insurer, the Authority may require certain information from an insurer (or
certain other persons) to be produced to the Authority.  Further, the
Authority has been given powers to assist other regulatory authorities,
including foreign insurance regulatory authorities, with their investigations
involving insurance and reinsurance companies in Bermuda but subject to
restrictions.  For example, the Authority must be satisfied that the
assistance being requested is in connection with the discharge of regulatory
responsibilities of the foreign regulatory authority.  Further, the
Authority must consider whether cooperation is in the public
interest.  The grounds for disclosure are limited and the Insurance
Act provides for sanctions for breach of the statutory duty of
confidentiality.
  Certain Other Bermuda Law
Considerations.  All Bermuda “exempted companies” are exempt
from certain Bermuda laws restricting the percentage of share capital that may
be held by non-Bermudians.  However,  exempted companies may
not participate in certain business transactions, including (i) the
acquisition or holding of land in Bermuda except that required for their
business and held by way of lease or tenancy for terms of not more than 50 years
or, with the consent of the Minister of Finance (the “Minister”), land which is
used to provide accommodation or recreational facilities for officers and
employees of the Company for a term not exceeding 21 years, (ii) the taking
of mortgages on land in Bermuda to secure an amount in excess of $50,000 without
the consent of the Minister, (iii) the acquisition of any bonds or
debentures secured by any land in Bermuda, other than certain types of Bermuda
government securities or securities issued by Bermuda public authorities or,
(iv) the carrying on of business of any kind in Bermuda, except in
furtherance of our business carried on outside Bermuda or under license granted
by the Minister.  Generally it is not permitted without a special
license granted by the Minister to insure Bermuda domestic risks or risks of
persons of, in or based in Bermuda although the reinsurance of risks undertaken
by any company incorporated in Bermuda and permitted to engage in insurance and
reinsurance business is permitted.
  Although
Platinum Bermuda is incorporated in Bermuda, it is classified as a non-resident
of Bermuda for exchange control purposes by the Authority.  Pursuant
to its non-resident status, Platinum Bermuda may hold any currency other than
Bermuda dollars and convert that currency into any other currency (other than
Bermuda dollars) without restriction.  Platinum Bermuda is permitted
to hold Bermuda dollars to the extent necessary to pay its expenses in
Bermuda.
  The
Bermuda government actively encourages foreign investment in “exempted” entities
like Platinum Holdings that are based in Bermuda, but do not operate in
competition with local businesses.  As well as having no restrictions
on the degree of foreign ownership, Platinum Holdings and Platinum Bermuda are
not currently subject to taxes on income or dividends or to any foreign exchange
controls in Bermuda.  In addition, currently there is no capital gains
tax in Bermuda.
  U.S.
Regulation
  Platinum
US is organized and domiciled in the State of Maryland, is licensed in Maryland
as a property and casualty insurer, and is licensed, authorized or accredited to
write reinsurance in all 50 states of the United States and the District of
Columbia.  Although Platinum US is regulated by state insurance
departments and applicable state insurance laws in each state where it is
licensed, authorized or accredited, the principal insurance regulatory authority
of Platinum US is the Maryland Insurance Administration.
  U.S. Insurance Holding Company
Regulation of Platinum Holdings, Platinum Regency and Platinum
Finance.  Platinum Holdings and Platinum Regency as the
indirect parent companies of Platinum US, and Platinum Finance as the direct
parent company of Platinum US, are subject to the insurance holding company laws
of Maryland.  These laws generally require an authorized insurer that
is a member of a holding company system to register with the Maryland Insurance
Administration and to furnish annually financial and other information about the
operations of companies within the holding company system.  Generally,
all transactions between Platinum US and another company in the holding company
system, including sales, loans, reinsurance agreements and service agreements,
must be fair and reasonable and, if material or of a specified category, require
prior notice and approval or non-disapproval by the Maryland Insurance
Commissioner (the “Commissioner”).
  The
insurance laws of Maryland prohibit any person from acquiring control of
Platinum Holdings, Platinum Regency, Platinum Finance or Platinum US unless that
person has filed a notification with specified information with the Commissioner
and has obtained the Commissioner’s prior approval.  Under the
Maryland statutes, acquiring 10% or more of the voting stock of an insurance
company or its parent company is presumptively considered a change of control,
although such presumption may be rebutted.  Accordingly, any person or
entity that acquires, directly or indirectly, 10% or more of the voting
securities of Platinum Holdings without the prior approval of the Commissioner
will be in violation of these laws and may be subject to injunctive action
requiring the disposition or seizure of those securities by the Commissioner or
prohibiting the voting of those securities, or to other actions that may be
taken by the Commissioner.  In addition, many U.S. state insurance
laws require prior notification to state insurance departments of a change in
control of a non-domiciliary insurance company doing business in that
state.  While these pre-notification statutes do not authorize the
state insurance departments to disapprove the change in control, they authorize
regulatory action in the affected state if particular conditions exist, such as
undue market concentration.  In addition, any transactions that would
constitute a change in control of Platinum Holdings, Platinum Regency or
Platinum Finance may require prior notification in those states that have
adopted pre-acquisition notification laws.  These laws may discourage
potential acquisition proposals and may delay, deter or prevent a change of
control of Platinum Holdings, including through transactions, and in particular
unsolicited transactions, that some or all of the shareholders of Platinum
Holdings might consider to be desirable.
  - 14
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  U.S. Insurance Regulation of
Platinum US.  The rates, forms, terms and conditions of our
reinsurance agreements generally are not subject to regulation by any state
insurance department in the United States.  This contrasts with
primary insurance where the policy forms and premium rates are generally closely
regulated by state insurance departments.
  State
insurance authorities have broad administrative powers with respect to various
aspects of the reinsurance business, including licensing to transact business,
admittance of assets, establishing reserve requirements and solvency standards,
and regulating investments and dividends.  State insurance laws and
regulations require Platinum US to file statutory basis financial statements
with insurance departments in each state where it is licensed, authorized or
accredited to do business.  The operations of Platinum US are subject
to examination by those state insurance departments at any
time.  Platinum US prepares and files statutory basis financial
statements in accordance with accounting practices prescribed or permitted by
these insurance departments.  State insurance departments conduct
periodic examinations of the books and records of insurance companies domiciled
in their states as well as perform market conduct examinations of insurance
companies doing business in their states.  State insurance departments
generally conduct their various examinations at least once every three to five
years.  Examinations are generally carried out in cooperation with the
insurance departments of other states under guidelines promulgated by the
National Association of Insurance Commissioners (“NAIC”).  During
2009, the Maryland Insurance Administration conducted an examination of the
statutory basis financial statements of Platinum US as of December 31,
2008.
  Under
Maryland insurance law, Platinum US must give ten days’ prior notice to the
Commissioner of its intention to pay any dividend or make any distribution other
than an extraordinary dividend or extraordinary distribution.  The
Commissioner has the right to prevent payment of such a dividend or such a
distribution if the Commissioner determines, in the Commissioner’s discretion,
that after the payment thereof, the policyholders’ surplus of Platinum US would
be inadequate or could cause Platinum US to be in a hazardous financial
condition.  Platinum US must give at least 30 days prior notice to the
Commissioner before paying an extraordinary dividend or making an extraordinary
distribution out of earned surplus.  Extraordinary dividends and
extraordinary distributions are dividends or distributions which, together with
any other dividends and distributions paid during the immediately preceding
twelve-month period, would exceed the lesser of:
  (1)
              10%
      of statutory policyholders’ surplus (as determined under statutory
      accounting principles) as of December 31 of the prior year;
      or
  (2)
              net
      investment income excluding realized capital gains (as determined under
      statutory accounting principles) for the twelve-month period ending on
      December 31 of the prior year and pro rata distribution of any class
      of securities of Platinum US, plus any amounts of net investment income
      (excluding realized capital gains) in the three calendar years prior to
      the preceding year which have not been
  distributed.
  The NAIC
uses a risk-based capital (“RBC”) model to monitor and regulate the solvency of
licensed life, health, and property and casualty insurance and reinsurance
companies.  Maryland has adopted the NAIC’s model law.  The
RBC calculation is used to measure an insurer’s capital adequacy with respect
to: the risk characteristics of the insurer’s premiums written and unpaid losses
and LAE, rate of growth and quality of assets, among other
measures.  Depending on the results of the RBC calculation, insurers
may be subject to varying degrees of regulatory action depending upon the level
of their capital inadequacy.  The statutory capital of Platinum US is
above the level that would require any regulatory or corrective action or
reporting.
  The
ability of a primary insurer to take credit for the reinsurance purchased from
reinsurance companies is a significant component of reinsurance
regulation.  Typically, a primary insurer will only enter into a
reinsurance agreement if it can obtain credit to its reserves on its statutory
basis financial statements for the reinsurance ceded to the
reinsurer.  With respect to U.S. domiciled reinsurers that reinsure
U.S. insurers, credit is usually granted when the reinsurer is licensed or
accredited in a state where the primary insurer is domiciled or, in some
instances, in a state in which the primary insurer is
licensed.  States also generally permit primary insurers to take
credit for reinsurance if the reinsurer is (i) domiciled in a state with a
credit for reinsurance law that is substantially similar to the standards in the
primary insurer’s state of domicile, and (ii) meets certain financial
requirements.  Credit for reinsurance purchased from a reinsurer that
does not meet the foregoing conditions is generally allowed to the extent that
such reinsurer secures its obligations with qualified
collateral.  Some states impose requirements that make it difficult to
become licensed or accredited as a reinsurer.
  Platinum
Bermuda provides reinsurance to Platinum US in the normal course of
business.  Platinum Bermuda is not licensed, accredited or approved in
any state in the United States and, consequently, Platinum Bermuda must
collateralize its obligations to Platinum US in order for Platinum US to obtain
credit to its reserves on its statutory basis financial statements.
  In
December 2008, the NAIC formally adopted the NAIC Reinsurance Regulatory
Modernization Framework proposal (the “Framework”) which provides for the
formation of a new office to be called the NAIC Reinsurance Supervision Review
Department (“RSRD”).  The purpose of the RSRD will be to evaluate and
approve systems of reinsurance regulation in place both in U.S. and non-U.S.
jurisdictions to determine whether reinsurers domiciled in those jurisdictions
would be permitted to participate in the Framework.  Under the
Framework, credit for reinsurance determinations would be governed by the state
that is the primary U.S. regulator of the reinsurer rather than by the domestic
regulators of all of the ceding insurers, as is currently the
case.  The level of required collateral for a participating reinsurer
would depend upon the reinsurer’s security rating and would range from 0% to
100% of gross assumed liabilities.  It is likely that U.S. federal
enabling legislation will be necessary to implement the Framework.  If
the Framework ultimately leads to a reduction of the collateral requirements for
non-U.S. insurers, such changes could be beneficial to Platinum Bermuda by
permitting Platinum Bermuda to post less collateral to secure its reinsurance
obligations to its U.S. ceding companies.  At this time, we are unable
to determine whether any changes in the U.S. reinsurance regulatory framework
will be implemented based on the NAIC proposal and the effect, if any, such
changes would have on our operations or financial condition.
  Government
involvement in the insurance and reinsurance markets, both in the United States
and worldwide, continues to evolve.  For example, Florida has enacted
legislation that, among other things, increased the access of primary Florida
insurers to the Florida Hurricane Catastrophe Fund (“FHCF”).  The
purpose of the FHCF is to maintain insurance capacity in Florida by providing
below market rate reinsurance to insurers for a portion of their catastrophic
hurricane losses.  The legislation may have the effect of reducing the
role of the private reinsurance market in Florida-based risks.  The
Florida legislation and any similar state or U.S. federal legislation could have
a material adverse impact on our business, financial condition or results of
operations.
  - 15
-
  The U.S.
federal government generally does not directly regulate the insurance industry
except for certain areas of the market, such as insurance for crop, flood,
nuclear and terrorism risks.  However, the federal government has
undertaken initiatives or considered legislation in several areas that may
impact the reinsurance industry, including tort reform, corporate governance and
the taxation of reinsurance companies.  In addition, legislation has
been introduced from time to time in recent years that, if enacted, could result
in the federal government assuming a more direct role in the regulation of the
reinsurance industry, including federal licensing in addition to, or in lieu of,
state licensing and reinsurance for natural catastrophes.  We are
unable to predict whether any legislation will be enacted or any regulations
will be adopted, or the effect these developments could have on our business,
financial condition or results of operations.
  U.K.
Regulation
  Prior to
October 2009, Platinum UK was authorized and regulated by the FSA, the statutory
regulator responsible for regulating insurance activities in the United Kingdom,
including reinsurance activities.
  In 2006,
we began to renew business previously written by Platinum UK in Platinum
Bermuda.  After successfully renewing substantially all of the
reinsurance business written by Platinum UK in Platinum Bermuda, we ceased
underwriting reinsurance business in Platinum UK in 2007.  Platinum UK
filed a Scheme of Operation with the FSA which included actions to be taken in
2007 for its transition to a non-underwriting operation and to allow the release
of substantially all of its capital to Platinum Holdings.  These
actions included a 100% loss portfolio transfer of Platinum UK’s reinsurance
business to Platinum Bermuda, which effectively replaced a previous 55% quota
share agreement, and a plan for the administration of in force contracts and
related claims.  During 2008, Platinum UK received approval from the
FSA to implement a novation program.  The novation (or termination by
other means) of Platinum UK’s reinsurance contracts to Platinum Bermuda was
completed in 2009 and Platinum UK ceased to be authorized by the FSA on October
22, 2009 and, therefore, is no longer subject to FSA rules.  As
Platinum UK no longer carries on any business, we plan to release the remainder
of Platinum UK’s capital to Platinum Holdings and to wind up the remaining
operations of Platinum UK.
  While
Platinum UK is no longer subject to UK insurance regulation, English law
prohibits Platinum UK from declaring a dividend to its shareholders unless it
has “profits available for distribution.”  The determination of
whether a company has profits available for distribution is based on its
accumulated realized profits less its accumulated realized losses.
  Ireland
Regulation
  Platinum
Regency is incorporated in Ireland.  As a holding company, Platinum
Regency is not subject to Irish insurance regulation.  Irish law
prohibits Platinum Regency from declaring a dividend to its shareholders unless
it has “profits available for distribution.”  The determination of
whether a company has profits available for distribution is based on its
accumulated realized profits less its accumulated realized losses.
  Available
Information
  Our
annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, and any amendments to those reports, are available free of charge on
our Internet website at www.platinumre.com as
soon as reasonably practicable after such reports are electronically filed with
the Securities and Exchange Commission (the “SEC”).  We also post on
our website the charters of our Audit, Compensation, Governance and Executive
Committees, our Corporate Governance Guidelines, our Code of Business Conduct
and Ethics and any amendments or waivers thereto, and any other corporate
governance materials required to be posted by SEC or New York Stock Exchange
(“NYSE”) regulations.  These documents are also available in print to
any shareholder requesting a copy from our corporate secretary at our principal
executive offices.  Information contained on the Platinum Holdings
website is not part of this Form 10-K.
  Item 1A.
              Risk
      Factors
  Numerous
factors could cause our actual results to differ materially from those in the
forward-looking statements set forth in this Form 10-K and in other documents
that we file with the SEC.  Those factors include the
following:
  Risks Related to Our
Business
  The
occurrence of severe catastrophic events could have a material adverse effect on
our financial condition or results of operations.
  We
underwrite property and casualty reinsurance and have large aggregate exposures
to natural and man-made disasters and, consequently, we expect that our loss
experience generally will include infrequent events of great
severity.  The frequency and severity of catastrophe losses are
inherently difficult to predict.  Consequently, the occurrence of
losses from a severe catastrophe or series of catastrophes could have a material
adverse effect on our results of operations and financial
condition.  In addition, catastrophes are an inherent risk of our
business and a severe catastrophe or series of catastrophes could have a
material adverse effect on our ability to write new business and our financial
condition and results of operations, possibly to the extent of eliminating our
shareholders' equity.  Increases in the values and geographic
concentrations of insured property and the effects of inflation have
historically resulted in increased severity of industry losses in recent years
and, although we seek to limit our overall exposure to risk by limiting the
amount of reinsurance we write by geographic zone, we expect that those factors
will increase the severity of catastrophe losses in the
future.  Global climate change may increase the frequency and
severity of losses from hurricanes, tornadoes, windstorms, hailstorms, freezes,
floods and other weather-related disasters.
  - 16
-
  If
the loss limitation methods and loss and pricing models we employ are not
effective, our financial condition or results of operations could be materially
adversely affected.
  Our
property and casualty reinsurance contracts cover unpredictable events such as
hurricanes, windstorms, hailstorms, earthquakes, volcanic eruptions, fires,
industrial explosions, freezes, riots, floods and other natural or man-made
disasters.  Underwriting requires significant judgment, involving
assumptions about matters that are inherently difficult to predict and beyond
our control, and for which historical experience and probability analysis may
not provide sufficient guidance.  Many of our reinsurance contracts do
not contain an aggregate loss limit or a loss ratio limit, which means that
there is no contractual limit to the amount of losses that we may be required to
pay pursuant to such reinsurance contracts.  However, our property
reinsurance contracts with natural catastrophe exposure generally have
occurrence limits that limit our exposure.  In addition, our high
layer property, casualty and marine excess-of-loss contracts generally contain
aggregate loss limits, with limited reinstatements of an occurrence limit, which
restore the original limit under the contract after the limit has been depleted
by losses incurred on that treaty.  We seek to manage our risk by
limiting our estimated probable maximum loss from a catastrophic event in any
geographic zone that could be expected to occur once in every 250 years to a
specified percentage of total capital.  One or more catastrophic or
other events could result in claims that substantially exceed our expectations
and could have a material adverse effect on our financial condition or our
results of operations, possibly to the extent of eliminating our shareholders'
equity.
  We
believe that the computer-based loss and pricing models we use to assess each
ceding company’s potential for catastrophe losses is an important part of the
underwriting process for catastrophe exposure pricing.  However, these
models depend on the quality of the information obtained from our ceding
companies and the independent data we obtain from third parties and may prove
inadequate for determining the pricing for certain catastrophe
exposures.  Our models may not accurately predict changes in weather
patterns related to climate change.  Our models may not accurately
reflect the impact of climate change on weather patterns.  If climate
change causes more severe or frequent weather-related disasters than we
anticipate, our losses may exceed our expectations, which could have a material
adverse effect on our financial condition and results of
operations.
  For
our property and casualty reinsurance underwriting, we depend on the policies,
procedures and expertise of ceding companies; these companies may fail to
accurately assess the risks they underwrite, which may lead us to inaccurately
assess the risks we assume.
  Because
we participate in property and casualty reinsurance markets, the success of our
underwriting efforts depends, in part, upon the policies, procedures and
expertise of the ceding companies making the original underwriting
decisions.  As is common among reinsurers, we do not separately
evaluate each of the individual risks assumed under reinsurance
treaties.  We face the risk that these ceding companies may fail to
accurately assess the risks that they assume initially, which, in turn, may lead
us to inaccurately assess the risks we assume.  If we fail to
establish and receive appropriate premium rates or fail to contractually limit
our exposure to such risks, we could face significant losses on these
contracts.
  If
we are required to increase our liabilities for losses and loss adjustment
expenses, our operating results may be adversely affected.
  We
establish liabilities for losses and LAE that we are or will be liable to pay
for reinsured claims for events that have occurred on or before the balance
sheet date.  At any time, these liabilities may prove to be inadequate
to cover our actual losses and LAE.  To the extent these liabilities
are determined to be insufficient to cover actual losses or LAE, we will have to
increase these liabilities and incur a charge to our earnings, which could have
a material adverse effect on our financial condition and results of
operations.  In accordance with laws, regulations and accounting
principles generally accepted in the United States (“U.S. GAAP”), we do not
establish liabilities until an event occurs which may give rise to a
loss.  Once such an event occurs, liabilities are established based
upon estimates of the total losses incurred by the ceding companies and an
estimate of the portion of such loss we have reinsured.
  The
liabilities established on our consolidated balance sheet do not represent an
exact calculation of liability, but rather are estimates of the expected cost of
the ultimate settlement of losses.  We do not separately evaluate each
of the individual insurance or reinsurance contracts assumed under our treaties
and we are largely dependent on the original underwriting decisions made by
ceding companies.  All of our liability estimates are based on
actuarial and statistical projections at a given time, facts and circumstances
known at that time and estimates of trends in loss severity and other variable
factors, including new concepts of liability and general economic
conditions.  Changes in these trends or other variable factors could
result in claims in excess of the liabilities that we have
established.
  The
effects of emerging claim and coverage issues on our business are
uncertain.
  As
industry practices and legal, judicial, social and other environmental
conditions change, unexpected and unintended issues related to claims and
coverage may emerge.  Various provisions of our contracts, such as
limitations or exclusions from coverage or choice of forum, may be difficult to
enforce in the manner we intend, due to, among other things, disputes relating
to coverage and choice of legal forum.  These issues may adversely
affect our business by either extending coverage beyond our underwriting intent
or by increasing the number or size of claims.  In some instances,
these changes may not become apparent until some time after we have issued
reinsurance contracts that are affected by the changes.  As a result,
the full extent of liability under our reinsurance contracts may not be known
for many years after a contract is issued.  The effects of unforeseen
developments or substantial government intervention could adversely impact our
ability to achieve our goals.  Examples of emerging coverage and
claims issues include larger settlements and jury awards against professionals
and corporate directors and officers covered by professional liability and
directors’ and officers’ liability insurance and whether the substantial losses
from hurricanes in 2005, including Hurricane Katrina, were the result of storm
surge, which is sometimes covered by insurance, or flood, which generally is not
covered.
  Losses
from operations may deplete our capital base and create a need to obtain
additional capital that may not be readily available in the capital markets or
may only be available on unfavorable terms.
  Losses
from operations, including severe catastrophic events, could cause a material
decline in our shareholders’ equity.  We are dependent on our
financial strength and ratings, as evaluated by independent rating agencies, to
underwrite reinsurance.  A material decline in our existing capital
below a level necessary to maintain our ratings would require that we raise
additional capital through private financings or the capital
markets.  To the extent that our existing capital is insufficient to
fund our future operating requirements, we may need to raise additional funds
through financings or limit our growth.  Any equity or debt financing,
if available at all, may be on terms that are unfavorable to
us.  Equity financings could result in dilution to our
shareholders.  We may issue securities that have rights, preferences
and privileges that are senior to those of our outstanding
securities.  If we are not able to obtain adequate capital, our
business, results of operations, financial condition and financial strength and
credit ratings could be adversely affected.
  - 17
-
  A
downgrade in our financial strength ratings could adversely affect our ability
to write new business.
  Financial
strength ratings are used by ceding companies and reinsurance intermediaries to
assess the financial strength and quality of reinsurers.  In addition,
a ceding company’s own rating may be adversely affected by a downgrade in the
rating of its reinsurer.  Therefore, a downgrade of our financial
strength rating may dissuade a ceding company from reinsuring with us and may
influence a ceding company to reinsure with a competitor that has a higher
rating.
  A.M. Best
has assigned a financial strength rating of “A” (Excellent) with a stable
outlook to each of our reinsurance subsidiaries.  This rating is the
third highest of sixteen rating levels.  According to A.M. Best, a
rating of “A” indicates A.M. Best’s opinion that a company has an excellent
ability to meet its ongoing obligations to policyholders.  S&P has
assigned a financial strength rating of “A” (Strong) with a stable outlook to
each of our reinsurance subsidiaries.  This rating is the sixth
highest of twenty-one levels.  According to S&P, a rating of “A”
indicates S&P’s opinion that an insurer has strong financial security
characteristics, but is somewhat more likely to be affected by adverse business
conditions than are insurers with higher ratings.  These ratings are
subject to periodic review by A.M. Best and S&P and may be revised downward
or revoked at the sole discretion of A.M. Best or S&P.  A.M. Best
and S&P may increase their scrutiny of rated companies, revise their rating
standards or take other action that could lead to changes in our
ratings.  If A.M. Best or S&P revise their rating standards
associated with our current rating, our rating may be downgraded or we may need
to raise additional capital to maintain our rating.
  Our
reinsurance contracts commonly contain terms that would allow a ceding company
to cancel the contract or require us to collateralize all or part of our
obligation if our financial strength rating was downgraded below a certain
rating level.  Whether a client would exercise a cancellation right
would depend on, among other factors, the reason for such downgrade, the extent
of the downgrade, the prevailing market conditions and the pricing and
availability of replacement reinsurance coverage.  Any such
cancellation could have a material adverse effect on our financial condition or
results of operations.
  We
have exposure to credit loss from counterparties in the normal course of
business.
  We may
from time to time collateralize our obligations under our various reinsurance
contracts by delivering letters of credit to the ceding company, depositing
assets into trust for the benefit of the ceding company or permitting the ceding
company to withhold funds that would otherwise be delivered to us under the
reinsurance contract.  We have entered into reinsurance contracts with
several ceding companies that require us to provide varying levels of collateral
for our obligations under certain circumstances, including when our obligations
to these ceding companies exceed negotiated amounts.  These amounts
may vary depending on our rating from A.M. Best, S&P or other rating
agencies.  The amount of collateral we are required to provide
typically represents a portion of the obligations we may owe the ceding company,
often including estimates of unpaid losses made by the ceding
company.  Since we may be required to provide collateral based on the
ceding company’s estimate, we may be obligated to provide collateral that
exceeds our estimates of the ultimate liability to the ceding
company.  It is also unclear what, if any, the impact would be in the
event of the liquidation of a ceding company with whom we have a collateral
arrangement.
  We also
have credit exposure with respect to retrocessionaires and derivative
counterparties.  Our retrocessionaires and counterparties to our
derivative contracts may be affected by economic events which could adversely
affect their ability to meet their obligations to us.
  The
availability and cost of security arrangements for reinsurance transactions may
materially impact our ability to provide reinsurance from Bermuda to insurers
domiciled in the United States.
  Platinum
Bermuda is not licensed, approved or accredited as a reinsurer anywhere in the
United States and, therefore, under the terms of most of its contracts with U.S.
ceding companies, it is required to provide collateral to its ceding companies
for unpaid ceded liabilities in a form acceptable to state insurance
commissioners.  Typically, this type of collateral takes the form of
letters of credit issued by a bank, the establishment of a trust, or funds
withheld.  We have the ability to issue up to $400.0 million in
letters of credit that consists of a $150.0 million senior unsecured credit
facility available for revolving borrowings and letters of credit and a $250.0
million senior secured credit facility available for letters of credit that
expires on September 13, 2011.  If this facility is not sufficient or
if we are unable to renew this facility or to arrange for other types of
security on commercially acceptable terms, Platinum Bermuda’s ability to provide
reinsurance to U.S. based clients may be severely limited.
  The
property and casualty reinsurance business is historically cyclical, and we
expect to experience periods with excess underwriting capacity and unfavorable
pricing.
  Historically,
property and casualty reinsurers have experienced significant fluctuations in
operating results.  Demand for reinsurance is influenced significantly
by underwriting results of primary insurers and prevailing general economic and
market conditions, all of which affect ceding companies' decisions as to the
amount or portion of risk that they retain for their own accounts and
consequently reinsurance premium rates.  The supply of reinsurance is
related to prevailing prices, the levels of insured losses and levels of
industry surplus which, in turn, may fluctuate in response to changes in rates
of return on investments being earned in the reinsurance industry.  As
a result, the property and casualty reinsurance business historically has been a
cyclical industry, characterized by periods of intense price competition due to
excessive underwriting capacity as well as periods when shortages of capacity
have permitted favorable pricing.  We can expect to experience the
effects of such cyclicality.
  The
cyclical trends in the industry and the industry's profitability can also be
affected significantly by volatile and unpredictable developments, including
what management believes to be a trend of courts to grant increasingly larger
awards for certain damages, natural disasters (such as catastrophic hurricanes,
windstorms, tornadoes, earthquakes and floods), acts of terrorism, fluctuations
in interest rates, changes in the investment environment that affect market
prices of and income and returns on investments and inflationary pressures that
may tend to affect the size of losses experienced by primary
insurers.  Unfavorable market conditions may affect our ability to
write reinsurance at rates that we consider appropriate relative to the risk
assumed.  If we cannot write property and casualty reinsurance at
appropriate rates, our business would be significantly and adversely
affected.
  - 18
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  Increased
competition could adversely affect our profitability.
  The
property and casualty reinsurance industry is highly
competitive.  Some of our competitors are large financial institutions
that have reinsurance operations, while others are specialty reinsurance
companies.  Many of our competitors have greater financial, marketing
and management resources than we do.  We compete with reinsurers
worldwide on the basis of many factors, including premium charges and other
terms and conditions offered, services provided, ratings assigned by independent
rating agencies, speed of claims payment, claims experience, perceived financial
strength and experience and reputation of the reinsurer in the line of
reinsurance to be underwritten.  We may not be successful in competing
with others on any of these bases, and the intensity of competition in our
industry may erode profitability and result in less favorable policy terms and
conditions for insurance and reinsurance companies generally, including
us.
  Traditional
as well as new capital market participants from time to time produce alternative
products (such as reinsurance securitizations, catastrophe bonds and various
derivatives such as swaps) that may compete with certain types of reinsurance,
such as property catastrophe.  Over time, these numerous initiatives
could significantly affect supply, pricing and competition in our industry and
partially displace our traditional reinsurance products.
  We
could face losses from terrorism, political unrest and war.
  We have
exposure to losses resulting from acts of terrorism, political unrest and acts
of war.  It is difficult to predict the occurrence of these events or
to estimate the amount of loss an occurrence will
generate.  Accordingly, it is possible that our unpaid losses and LAE
will be inadequate to cover these risks.  We closely monitor the
amount and types of coverage we provide for terrorism risk under reinsurance
treaties.  We generally seek to exclude terrorism when we cannot
reasonably evaluate the risk of loss or charge an appropriate premium for such
risk.  Even in cases where we have deliberately sought to exclude
coverage, we may not be able to eliminate completely our exposure to terrorist
acts, and thus it is possible that these acts will have a material adverse
effect on us.
  We
are dependent on the business provided to us by reinsurance brokers and we may
be exposed to liability for brokers' failure to make premium payments to us or
claim payments to our clients.
  We market
substantially all of our reinsurance products through reinsurance
brokers.  The reinsurance brokerage industry generally, and our
sources of business specifically, are concentrated.  The loss of
business relationships with any of our top brokers could have a material adverse
effect on our business.
  In
accordance with industry practice, we frequently pay amounts in respect of
claims under contracts to reinsurance brokers for payment over to the ceding
companies.  In the event that a broker fails to make such a payment,
we may remain liable to the ceding company for the payment.  When
ceding companies remit premiums to reinsurance brokers, such premiums may be
deemed to have been paid to us and the ceding company may no longer be liable to
us for those amounts whether or not we actually receive the
funds.  Consequently, we assume a degree of credit risk associated
with our brokers during the premium and loss settlement process which varies by
jurisdiction.
  Catastrophic
loss protection may become unavailable to us on acceptable terms.
  We buy
retrocessional reinsurance and use derivative instruments to reduce liability on
individual risks, protect against catastrophic losses and obtain additional
underwriting capacity.  Catastrophic loss protection capacity may be
limited or unavailable or may be available only on terms that we find
unacceptable.  If we are unable or unwilling to obtain such protection
on acceptable terms, our financial position and results of operations may be
materially adversely affected, especially by catastrophic
losses.  Elimination of all or portions of our catastrophic loss
protection could subject us to increased, and possibly material, exposure to
losses or could cause us to underwrite less business.
  Our
retrocessions subject us to credit risk because the ceding of risk to
retrocessionaires does not relieve a reinsurer of its liability to the ceding
companies.  Therefore, a retrocessionaire’s insolvency or its
inability or unwillingness to make payments under the terms of its reinsurance
contract with us could have a material adverse effect on
us.  Likewise, counterparties to our derivative contracts may be
affected by economic events which could adversely affect their ability to meet
their obligations to us.
  Foreign
currency exchange rate fluctuation may adversely affect our financial
results.
  We write
business on a worldwide basis, and our results of operations may be affected by
fluctuations in the value of currencies other than the U.S.
dollar.  Our principal exposure to foreign currency risk is our
obligation to settle claims in foreign currencies.  We may incur
foreign currency exchange gains or losses as we ultimately settle claims
required to be paid in foreign currencies.  To the extent we do not
seek to hedge our foreign currency risk or our hedges prove ineffective, the
resulting impact of a movement in foreign currency exchange rate could
materially adversely affect our financial condition and results of
operations.
  We
could be adversely affected by the loss of one or more key executives, by an
inability to retain or replace qualified senior management or by an inability to
renew the Bermuda work permits of any of our key executives or other key
personnel.
  Our
success depends on our ability to retain the services of key executives and to
attract and retain additional qualified personnel in the
future.  Under Bermuda law, non-Bermudians (other than spouses of
Bermudians) may not engage in any gainful occupation in Bermuda without the
specific permission of the appropriate governmental authority.  None
of our executive officers is a Bermudian, and all such officers employed in
Bermuda, including our Chief Executive Officer, Chief Financial Officer and
Chief Administrative Officer and General Counsel and the Chief Executive Officer
of Platinum Bermuda, are employed pursuant to work permits granted by Bermuda
authorities.  These permits expire at various times during the next
several years.  The Bermuda government limits the term of work permits
to six years, subject to certain exceptions for key employees.  The
loss of the services of our key executives or the inability to hire and retain
other highly qualified personnel in the future, including as a result of our
inability to renew the Bermudian work permits of such individuals, could
adversely affect our business plans and strategies or cause us to lose
clients.
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  Risks Related to Our
Investments
  Our
investment performance may adversely affect our results of operations, financial
position and ability to conduct business.
  Our
operating results depend in part on the performance of our investment
portfolio.  Our investments are subject to market-wide risks and
fluctuations.  In addition, we are subject to risks inherent in
particular securities or types of securities, such as the ability of issuers to
repay their debt.  Adverse developments in the financial markets, such
as disruptions, uncertainty or volatility in the capital and credit markets, may
result in realized and unrealized capital losses that could have a material
adverse effect on our results of operations, financial position and ability to
conduct business, and may also limit our access to capital required to operate
our business.  Severe disruptions in the public debt and equity
markets, including, among other things, widening of credit spreads, lack of
liquidity and bankruptcies, may result in significant realized and unrealized
losses in our investment portfolio.  Depending on market conditions,
we could incur additional realized and unrealized losses on our investment
portfolio in future periods, which could have a material adverse effect on our
results of operations, financial condition and ability to conduct
business.
  Fluctuations
in the mortgage-backed and asset-backed securities markets could result in
decreases in the fair value of our commercial mortgage-backed, non-agency
residential mortgage-backed and asset-backed securities.
  The
commercial mortgage-backed, non-agency residential mortgage-backed and
asset-backed securities markets have experienced reductions in liquidity as a
result of the current financial crisis.  When financial markets
experience a reduction in liquidity, the ability to conduct orderly transactions
may be limited and may result in declines in fair values.  We have
significant investments in these asset classes.  As of December 31,
2009, approximately 10% of our total investments were invested in commercial
mortgage-backed, non-agency residential mortgage-backed and asset-backed
securities.  The fair value, unrealized gain or loss and average
rating of our investments in commercial mortgage-backed, non-agency residential
mortgage-backed and asset-backed securities is set forth in Item 7,
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations” under “Financial Condition” in this Form 10-K.  Decreases
in the fair value of our commercial mortgage-backed, non-agency residential
mortgage-backed and asset-backed securities could have a material adverse effect
on our financial condition and results of operations.
  Changes
in market interest rates could have a material adverse effect on our investment
portfolio, investment income and results of operations.
  Our
principal invested assets are fixed maturity securities.  Increasing
market interest rates reduce the value of our fixed maturity securities, and we
may realize a loss if we sell fixed maturity securities whose value has fallen
below their acquisition cost prior to maturity.  Declining market
interest rates can have the effect of reducing our investment income, as we
invest proceeds from positive cash flows from operations and reinvest proceeds
from maturing and called investments in new lower-yielding
investments.  Interest rates are highly sensitive to many factors,
including governmental monetary policies, domestic and international economic
and political conditions and other factors beyond our control.  Any
measures we take that are intended to manage the risks of operating in a
changing interest rate environment may not effectively mitigate such interest
rate sensitivity.  Accordingly, changes in interest rates could have a
material adverse effect on our investment portfolio, investment income and
results of operations.
  Risks Related to
Taxation
  We
may become subject to taxes in Bermuda after 2016.
  We have
received a standard assurance from the Bermuda Minister of Finance, under
Bermuda's Exempted Undertakings Tax Protection Act 1966, that if any legislation
is enacted in Bermuda that would impose tax computed on profits or income, or
computed on any capital asset, gain or appreciation, or any tax in the nature of
estate duty or inheritance tax, then the imposition of any such tax will not be
applicable to us or to any of our operations or our shares, debentures or other
obligations until March 28, 2016.  Consequently, if our Bermuda tax
exemption is not extended past March 28, 2016, we may be subject to any Bermuda
tax after that date.
  The
imposition of U.S. corporate income tax on Platinum Holdings and its non-U.S.
subsidiaries could adversely affect our results of operations.
  We
believe that Platinum Holdings, Platinum Bermuda, Platinum UK Services Company
Limited, Platinum UK, and Platinum Regency each operate in such a manner that
none of these companies should be subject to U.S. corporate income tax because
they are not engaged in a trade or business in the United
States.  Nevertheless, because definitive identification of activities
which constitute being engaged in a trade or business in the United States has
not been established by the tax authorities, the U.S. Internal Revenue Service
(the “IRS”) may successfully assert that any of these companies is engaged in a
trade or business in the United States, or, if applicable, engaged in a trade or
business in the United States through a permanent establishment.  If
any of these companies were characterized as being so engaged, such company
would be subject to U.S. tax at regular corporate rates on its income that is
effectively connected (“ECI”) with its U.S. trade or business, plus an
additional 30% “branch profits” tax on its dividend equivalent amount (generally
ECI with certain adjustments) deemed withdrawn from the United
States.  Any such tax could materially adversely affect our results of
operations.
  The
federal insurance excise tax may apply on a cascading basis.
  The IRS,
in Revenue Ruling 2008-15, has formally announced its position that, absent a
U.S. income tax treaty exception, the U.S. federal insurance excise tax (“FET”)
is applicable (at a 1% rate on premiums) to all reinsurance cessions or
retrocessions of risks by non-U.S. insurers or reinsurers to non-U.S. reinsurers
where the underlying risks are either (i) risks of a U.S. entity or
individual located wholly or partly within the United States or (ii) risks
of a non-U.S. entity or individual engaged in a trade or business in the United
States which are located within the United States (“U.S. Situs Risks”), even if
the FET has been paid on prior cessions of the same risks.  Absent a
U.S. income tax treaty exception, cascading FET is applied to premiums paid to,
or by, one of our non-U.S. insurance subsidiaries, at a 1% rate, even though the
FET also applies on prior premium payments with respect to such
risks.  The legal and jurisdictional basis for, the method of
enforcement of, and the position of the IRS relating to the application and
calculation of FET remains unclear at this time.
  - 20
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  U.S.
Persons who hold our shares will be subject to adverse U.S. federal income tax
consequences if we are considered to be a passive foreign investment company for
U.S. federal income tax purposes.
  The term
“U.S. Person” means:  (i) an individual citizen or resident of
the United States, (ii) a partnership or corporation, created or organized
in or under the laws of the United States, or organized under the laws of any
State thereof (including the District of Columbia), (iii) an estate, the
income of which is subject to U.S. federal income taxation regardless of its
source, (iv) a trust if either a court within the United States is able to
exercise primary supervision over the administration of such trust and one or
more U.S. Persons have the authority to control all substantial decisions of
such trust, or the trust has a valid election in effect to be treated as a U.S.
Person for U.S. federal income tax purposes or (v) any other person or
entity that is treated for U.S. federal income tax purposes as if it were one of
the foregoing.
  If
Platinum Holdings is considered a passive foreign investment company (“PFIC”)
for U.S. federal income tax purposes, a U.S. Person who owns directly or, in
some cases, indirectly (e.g., through a non-U.S. partnership) any of our shares
will be subject to adverse U.S. federal income tax consequences including
subjecting the investor to a greater tax liability than might otherwise apply
and subjecting the investor to tax on amounts in advance of when tax would
otherwise be imposed.  In addition, if we were considered a PFIC, upon
the death of any U.S. individual owning shares, such individual's heirs or
estate would not be entitled to a “step-up” in the basis of the shares that
might otherwise be available under U.S. federal income tax
laws.  Although there is an exception for purposes of the PFIC rules
for non-U.S. insurance companies predominantly engaged in the active conduct of
an insurance business, there are currently no regulations regarding the
application of the PFIC provisions to an insurance company and there is no other
guidance to explain what constitutes the “active conduct of an insurance
business for U.S. federal income tax purposes.”  New regulations or
pronouncements interpreting or clarifying these rules may be
forthcoming.  We believe we should not be characterized as a PFIC;
however, we cannot assure you that we will not be characterized as a PFIC for
U.S. federal income tax purposes.  If we are considered a PFIC, it
could have material adverse tax consequences for an investor that is subject to
U.S. federal income taxation.
  Under
certain circumstances, you may be required to pay taxes on your pro rata share
of the related person insurance income of Platinum Bermuda.
  If
(i) U.S. Persons are treated as owning 25% or more of our shares,
(ii) the related person insurance income (“RPII”) of Platinum Bermuda were
to equal or exceed 20% of the gross insurance income of Platinum Bermuda in any
taxable year, and (iii) direct or indirect insureds (and persons related to
such insureds) own (or are treated as owning) 20% or more of the voting power or
value of the shares of Platinum Bermuda, a U.S. Person who owns our shares
directly or indirectly through non-U.S. entities on the last day of the taxable
year would be required to include in its income for U.S. federal income tax
purposes the shareholder's pro rata share of the RPII of Platinum Bermuda for
the entire taxable year, determined as if such RPII were distributed
proportionately to such U.S. Persons at that date regardless of whether such
income is distributed.  RPII generally represents premium and related
investment income from the direct or indirect insurance or reinsurance of any
direct or indirect U.S. holder of our shares or any person related to such
holder.  In addition, any RPII that is includible in the income of a
U.S. tax-exempt organization generally will be treated as unrelated business
taxable income.  The amount of RPII earned by Platinum Bermuda will
depend on a number of factors, including the geographic distribution of the
business of Platinum Bermuda and the identity of persons directly or indirectly
insured or reinsured by Platinum Bermuda.  Some of the factors which
determine the extent of RPII in any period may be beyond the control of Platinum
Bermuda.  Although we expect that either (i) the gross RPII of
Platinum Bermuda will not exceed 20% of its gross insurance income for the
taxable year or (ii) direct or indirect insureds (and persons related to
those insureds) will not own directly or indirectly through entities 20% or more
of the voting power or value of our shares for the foreseeable future, we cannot
be certain that this will be the case because some of the factors which
determine the extent of RPII may be beyond our control.
  U.S.
Persons who dispose of our shares may be subject to U.S. federal income taxation
at the rates applicable to dividends on all or a portion of their gains, if
any.
  The RPII
rules provide that if a U.S. Person disposes of shares in a non-U.S. insurance
corporation in which U.S. Persons own 25% or more of the shares (even if the
amount of gross RPII is less than 20% of the corporation's gross insurance
income and the ownership of its shares by direct or indirect insureds and
related persons is less than the 20% threshold), any gain from the disposition
will generally be treated as a dividend to the extent of the shareholder's share
of the corporation's undistributed earnings and profits that were accumulated
during the period that the shareholder owned the shares (whether or not such
earnings and profits are attributable to RPII).  In addition, such a
shareholder will be required to comply with certain reporting requirements,
regardless of the amount of shares owned by the shareholder.  These
RPII rules should not apply to dispositions of our shares because Platinum
Holdings will not be directly engaged in the insurance business.  The
RPII provisions, however, have never been interpreted by the courts or the U.S.
Treasury Department in the form of final regulations.  Regulations
interpreting the RPII provisions of the U.S. Internal Revenue Code of 1986, as
amended (the “Code”), exist only in proposed form.  It is not certain
whether these proposed regulations will be adopted in their present form or what
changes or clarifications might ultimately be made thereto or whether any such
changes, as well as any interpretation or application of the RPII rules by the
IRS, the courts, or otherwise, might have retroactive effect.
  Holders
of 10% or more of our shares may be subject to U.S. income taxation under the
“controlled foreign corporation” rules.
  A U.S.
Person that is a “10% U.S. Shareholder” of a non-U.S. corporation (defined as a
U.S. Person who owns or is treated as owning at least 10% of the total combined
voting power of all classes of stock entitled to vote of the non-U.S.
corporation) that is a controlled foreign corporation (“CFC”) for an
uninterrupted period of 30 days or more during a taxable year, that owns shares
in the CFC directly or indirectly through non-U.S. entities on the last day of
the CFC's taxable year, must include in its gross income for U.S. federal income
tax purposes its pro rata share of the CFC's “subpart F income,” even if the
subpart F income is not distributed.  “Subpart F income” of a non-U.S.
insurance corporation typically includes foreign personal holding company income
(such as interest, dividends and other types of passive income), as well as
insurance and reinsurance income (including underwriting and investment
income).  A non-U.S. corporation is considered a CFC if “10% U.S.
Shareholders” own (directly, indirectly through non-U.S. entities or by
attribution by application of the constructive ownership rules of section 958(b)
of the Code (i.e., “constructively”)) more than 50% of the total combined voting
power of all classes of stock of that foreign corporation, or the total value of
all stock of that foreign corporation.
  For
purposes of taking into account insurance income, a CFC also includes a non-U.S.
insurance company in which more than 25% of the total combined voting power of
all classes of stock (or more than 25% of the total value of the stock) is owned
directly, indirectly through non-U.S. entities or constructively by 10% U.S.
Shareholders on any day during the taxable year of such corporation, if the
gross amount of premiums or other consideration for the reinsurance or the
issuing of insurance or annuity contracts (other than certain insurance or
reinsurance related to same country risks written by certain insurance companies
not applicable here) exceeds 75% of the gross amount of all premiums or other
consideration in respect of all risks.
  We
believe that because of the anticipated dispersion of our share ownership, and
provisions in our organizational documents that limit voting power, no U.S.
Person should be treated as owning (directly, indirectly through non-U.S.
entities or constructively) 10% or more of the total voting power of all classes
of our shares.  However, the IRS could successfully challenge the
effectiveness of these provisions in our organizational
documents.  Accordingly, no assurance can be given that a U.S. Person
who owns our shares will not be characterized as a 10% U.S.
Shareholder.
  - 21
-
  Changes
in U.S. federal income tax law could materially adversely affect an investment
in our shares.
  Legislation
has been introduced in the U.S. Congress intended to eliminate certain perceived
tax advantages of companies (including insurance companies) that have legal
domiciles outside the United States but have certain U.S.
connections.  For example, legislation has been introduced in Congress
to limit the deductibility of reinsurance premiums paid by U.S. companies to
foreign affiliates.  It is possible that this or similar legislation
could be introduced in and enacted by the current Congress or future Congresses
that could have an adverse impact on us or our shareholders.
  Also, in
this regard, a bill was introduced in Congress on December 7, 2009 that may
require our non-U.S. companies to obtain information about our direct or
indirect shareholders and to disclose information about certain of their direct
or indirect U.S. shareholders and would appear to impose a 30% withholding tax
on certain payments of U.S. source income to such companies, including proceeds
from the sale of property and insurance and reinsurance premiums, if our
non-U.S. companies do not disclose such information or are unable to obtain such
information about our U.S. shareholders.  If this or similar
legislation is enacted, shareholders may be required to provide any information
that we determine necessary to avoid the imposition of such withholding tax in
order to allow our non-U.S. companies to satisfy such obligations.  If
our non-U.S. companies cannot satisfy these obligations, the currently proposed
legislation, if enacted, may subject payments of U.S. source income made after
December 31, 2012 to our non-U.S. companies to such withholding
tax.  In the event such a tax is imposed, our results of operations
could be materially adversely affected.  We cannot be certain whether
the proposed legislation will be enacted or whether it will be enacted in its
currently proposed form.
  The
impact of Bermuda's commitment to the Organization for Economic Cooperation and
Development (the “OECD”) to eliminate harmful tax practices is uncertain and
could adversely affect our tax status in Bermuda.
  The OECD
has published reports and launched a global dialogue among member and non-member
countries on measures to limit harmful tax competition.  These
measures are largely directed at counteracting the effects of tax havens and
preferential tax regimes in countries around the world.  In response
to a number of measures taken and commitments by the government of Bermuda in
June 2009, Bermuda was listed as a jurisdiction that has substantially
implemented these measures.  We are not able to predict what changes
will arise from the commitment or whether such changes will subject us to
additional taxes.
  Risks Related to Laws and
Regulations
  The
regulatory system under which we operate and potential changes thereto could
significantly and adversely affect our business.
  The
business of reinsurance is regulated in most countries, although the degree and
type of regulation varies significantly from one jurisdiction to
another.  Reinsurers are generally subject to less direct regulation
than primary insurers.  In the United States, licensed reinsurers are
highly regulated and must comply with financial supervision standards comparable
to those governing primary insurers.  For additional discussion of the
regulatory requirements to which Platinum Holdings, as a holding company, and
its subsidiaries are subject, see Item 1 “Business – Regulation” in this Form
10-K.  Any failure to comply with applicable laws could result in the
imposition of significant restrictions on our ability to do business, and could
also result in fines and other sanctions, any or all of which could materially
adversely affect our financial condition and results of
operations.  In addition, these statutes and regulations may, in
effect, restrict the ability of our subsidiaries to write new business or, as
indicated below, distribute funds to Platinum Holdings.  In recent
years, some U.S. state legislatures have considered or enacted laws that may
alter or increase state authority to regulate insurance companies and insurance
holding companies.  Moreover, the NAIC and state insurance regulators
regularly re-examine existing laws and regulations and interpretations of
existing laws and develop new laws.  The new interpretations or laws
may be more restrictive or may result in higher costs to us than current
statutory requirements.  In addition, the federal government has
undertaken initiatives or considered legislation in several areas that may
impact the reinsurance industry, including tort reform, corporate governance and
the taxation of reinsurance companies.
  Platinum
Bermuda is not licensed as an insurance company in any jurisdiction outside
Bermuda.  Platinum Bermuda conducts its business solely through its
offices in Bermuda and does not maintain an office, and its personnel do not
conduct any insurance activities, outside Bermuda.  Although Platinum
Bermuda does not believe it is in violation of insurance laws of any
jurisdiction outside Bermuda, inquiries into or challenges to Platinum Bermuda's
insurance activities may still be raised in the future.
  The
European Union is introducing a new regulatory regime for the regulation of the
insurance and reinsurance sector known as “Solvency II.”  Solvency II
is a principles-based regulatory regime which seeks to promote financial
stability, enhance transparency and facilitate harmonization among insurance and
reinsurance companies within the European Community (“EC”).  Solvency
II employs a risk-based approach to setting capital requirements for insurers
and reinsurers.  One aspect of Solvency II (the details of which
are currently being developed) concerns the treatment of reinsurance ceded by EC
insurers to reinsurers headquartered in a state outside the EC.  For
example, consideration is being given as to whether reinsurance ceded to a
non-EC reinsurer should be treated in the same way as reinsurance ceded to an EC
reinsurer, and whether EC cedants should require their non-EC reinsurers to
provide collateral to cover unearned premium and outstanding claims
provisions.  The Solvency II directive proposes that EC and non-EC
reinsurers shall be treated in the same way provided that the non-EC
jurisdiction is found to have a regulatory regime “equivalent” to that of
Solvency II.  Our reinsurance subsidiaries are headquartered in non-EC
countries.  If the regulatory regimes of such countries are found not
to be equivalent to that of Solvency II and if our reinsurance subsidiaries fall
below a certain minimum credit rating, then cedants in the EC may be prevented
from recognizing the reinsurance provided to them by our reinsurance
subsidiaries for the purpose of meeting their capital requirements or we may be
required to provide collateral for our obligations to EC
insurers.  This could have a material adverse impact on our ability to
conduct our business.  Solvency II is scheduled to be fully
implemented by the end of October 2012.
  The
insurance and reinsurance regulatory framework has become subject to increased
scrutiny in many jurisdictions, including the U.S. federal and various state
jurisdictions.  In the past, there have been congressional and other
proposals in the United States regarding increased supervision and regulation of
the insurance industry, including proposals to supervise and regulate reinsurers
domiciled outside the United States.  For example, if Platinum Bermuda
were to become subject to any insurance laws and regulations of the United
States or any U.S. state, which are generally more restrictive than those
applicable to it in Bermuda, Platinum Bermuda might be required to post deposits
or maintain minimum surplus levels and might be prohibited from engaging in
lines of business or from writing specified types of policies or
contracts.  Complying with those laws could have a material adverse
effect on our ability to conduct our business.
  - 22
-
  Platinum
Holdings is a holding company and, consequently, its cash flow is dependent on
dividends, interest and other permissible payments from its
subsidiaries.
  Platinum
Holdings is a holding company that conducts no reinsurance operations of its
own.  All operations are conducted by its wholly owned reinsurance
subsidiaries, Platinum Bermuda and Platinum US.  As a holding company,
Platinum Holdings' cash flow consists primarily of dividends, interest and other
permissible payments from its subsidiaries.  Platinum Holdings depends
on such payments for general corporate purposes and to meet its obligations,
including capital management activities and the payment of any dividends to its
common shareholders.
  Additionally,
under the Companies Act, Platinum Holdings may declare or pay a dividend out of
distributable reserves only if it has reasonable grounds for believing that it
is, or after the payment would be, able to pay its liabilities as they become
due and if the realizable value of its assets would thereby not be less than the
aggregate of its liabilities and issued share capital and share premium
accounts.
  As
a shareholder of our Company, you may have greater difficulty in protecting your
interests than as a shareholder of a U.S. corporation.
  The
Companies Act differs in certain material respects from laws generally
applicable to U.S. corporations and their shareholders.  These
differences include the manner in which directors must disclose transactions in
which they have an interest, the rights of shareholders to bring class action
and derivative lawsuits and the scope of indemnification available to directors
and officers.
  In
addition, a substantial portion of our assets and certain of our officers and
directors are or may be located in jurisdictions outside the United
States.  It may be difficult for investors to effect service of
process within the United States on our directors and officers who reside
outside the United States or to enforce against us or our directors and officers
judgments of U.S. courts predicated upon civil liability provisions of the U.S.
federal securities laws.
  There
are limitations on the ownership, transfer and voting rights of our common
shares.
  Under our
Bye-laws, our directors are required to decline to issue, or register any
transfer of shares that would result in a person owning, directly or
beneficially, and in some cases indirectly through non-U.S. entities or
constructively, 10% or more of the voting shares, or in the case of our two
former principal shareholders owning, directly or beneficially, and in some
cases indirectly through non-U.S. entities or constructively, 25% or more of
such shares or of the total combined value of our issued shares.  The
directors also may, in their discretion, repurchase shares and decline to
register the transfer of any shares if they have reason to believe that the
transfer may lead to adverse tax or regulatory consequences among other
reasons.  We are authorized to request information from any holder or
prospective acquirer of common shares as necessary to give effect to the
issuance, transfer and repurchase restrictions referred to above, and may
decline to effect any transaction if complete and accurate information is not
received as requested.
  In
addition, our Bye-laws generally provide that any person owning, directly or
beneficially, and in some cases indirectly through non-U.S. entities or
constructively, common shares carrying 10% or more of the total voting rights
attached to all of our outstanding common shares, will have the voting rights
attached to such shares reduced so that it may not exercise 10% or more of such
total voting rights of the common shares.  Because of the attribution
provisions of the Code and the rules of the SEC regarding determination of
beneficial ownership, this requirement may have the effect of reducing the
voting rights of a shareholder whether or not such shareholder directly holds
10% or more of our common shares while other shareholders may have their voting
rights increased.  Further, the directors have the authority to
require from any shareholder certain information for the purpose of determining
whether that shareholder's voting rights are to be reduced.  Failure
to respond to such a notice, or submitting incomplete or inaccurate information,
gives the directors discretion to disregard all votes attached to that
shareholder's common shares.
  
 The
insurance law of Maryland prevents any person from acquiring control of us or of
Platinum US unless that person has filed a notification with specified
information with the Maryland Insurance Commissioner and has obtained the
Maryland Insurance Commissioner’s prior approval.  Under the Maryland
statute, acquiring 10% or more of the voting stock of an insurance company or
its parent company is presumptively considered a change of control, although
such presumption may be rebutted.  Accordingly, any person who
acquires, directly or indirectly, 10% or more of the voting securities of
Platinum Holdings without the prior approval of the Maryland Insurance
Commissioner will be in violation of this law and may be subject to injunctive
action requiring the disposition or seizure of those securities by the Maryland
Insurance Commissioner or prohibiting the voting of those securities and to
other actions determined by the Maryland Insurance Commissioner.  In
addition, many U.S. state insurance laws require prior notification of state
insurance departments of a change in control of a non-domiciliary insurance
company doing business in that state.  While these pre-notification
statutes do not authorize the state insurance departments to disapprove the
change in control, they authorize regulatory action in the affected state if
particular conditions exist such as undue market concentration.  Any
future transactions that would constitute a change in control of Platinum
Holdings may require prior notification in those states that have adopted
pre-acquisition notification laws.
  Common
shares may be offered or sold in Bermuda only in compliance with the provisions
of the Investment Business Act 2003 of Bermuda.  In addition, sales of
common shares by the company to persons resident in Bermuda for Bermuda exchange
control purposes may require the prior approval of the
Authority.  Consent under the Exchange Control Act 1972 (and its
related regulations) has been obtained from the Authority for the issue and
transfer of the common shares between non-residents of Bermuda for exchange
control purposes, provided our shares remain listed on an appointed stock
exchange, which includes the NYSE.  In giving such consent, neither
the Authority nor the Registrar of Companies accepts any responsibility for the
financial soundness of any proposal or for the correctness of any of the
statements made or opinions expressed herein or therein.
  The
foregoing provisions of our Bye-laws and legal restrictions will have the effect
of rendering more difficult or discouraging unsolicited takeover bids from third
parties or the removal of incumbent management.
  - 23
-
 
 The
current investigations into finite risk reinsurance products could have a
material adverse effect on our financial condition or results of
operations.
  In
November and December 2004, we received subpoenas from the SEC and the Office of
the Attorney General for the State of New York for documents and information
relating to certain non-traditional, or loss mitigation, insurance
products.  On June 14, 2005, we received a grand jury subpoena from
the U.S. Attorney for the Southern District of New York requesting documents
relating to our finite risk reinsurance products.  We have fully
cooperated in responding to all such requests.  Other reinsurance
companies reported receiving similar subpoenas and requests.  We have
not had any contact with offices of the SEC, the New York Attorney General or
the U.S. Attorney for the Southern District of New York with respect to these
investigations since November 2005.  We believe these investigations
have significantly diminished the demand for finite risk products.
  Item 1B.
              Unresolved
      Staff Comments
  None.
  Item 2.
              Properties
  Platinum
Holdings and Platinum Bermuda lease office space in Pembroke, Bermuda, where our
principal executive office is located.  Platinum US and all other
U.S.-based subsidiaries are located in office space we lease in New
York.  Platinum US also leases office space in
Chicago.  Platinum UK Services Company Limited leases office space in
London.  We renew and enter into new leases in the ordinary course of
business and anticipate no difficulty in extending our leases or obtaining
comparable office facilities in suitable locations.  We consider our
facilities to be adequate for our current needs.
  Item 3.
              Legal
      Proceedings
  In the
normal course of business, we may become involved in various claims and legal
proceedings.  We are not currently aware of any pending or threatened
material litigation.
  As
previously disclosed, in November and December 2004 we received subpoenas from
the SEC and the Office of the Attorney General for the State of New York for
documents and information relating to certain non-traditional, or loss
mitigation, insuranceproducts.  On
June 14, 2005, we received a grand jury subpoena from the U.S. Attorney for the
Southern District of New York requesting documents relating to our finite
reinsurance products.  We have fully cooperated in responding to all
such requests.  Other reinsurance companies reported receiving similar
subpoenas and requests.  In 2005, we retained the law firm of
Dewey & LeBoeuf LLP to conduct a review of our finite reinsurance
practices.  They informed us that they identified no evidence of
improprieties.  We have not had any contact with the SEC, the New York
Attorney General’s Office or the U.S. Attorney for the Southern District of New
York with respect to these investigations since November 2005.
  Item 4.
              Submission
      of Matters to a Vote of Security
Holders
  None.
  PART
II
  Item 5.
              Market
      For Registrant’s Common Equity, Related Shareholder Matters and Issuer
      Purchases of Equity Securities
  Market
Information, Holders and Dividends
  At
January 30, 2010, there were approximately 47 holders of record of our
common shares, which are listed on the NYSE under the symbol
“PTP.”  On February 12, 2010, the last reported sale price for
our common shares on the NYSE was $35.75 per share.  The following
table shows the high and low per share trading prices of our common shares, as
reported on the NYSE for the periods indicated:
 
 Price
      Range ofCommon
      SharesYear
              
              High
              
              
              Low2009:First
      Quarter
              
              $
              36.12
              
              
              $
              25.18Second
      Quarter
              
              
              30.67
              
              
              
              27.12Third
      Quarter
              
              
              36.87
              
              
              
              28.07Fourth
      Quarter
              
              
              39.45
              
              
              
              34.632008:First
      Quarter
              
              $
              36.60
              
              
              $
              31.70Second
      Quarter
              
              
              37.00
              
              
              
              32.58Third
      Quarter
              
              
              38.76
              
              
              
              31.02Fourth
      Quarter
              
              
              36.16
              
              
              
              21.38
  - 24
-
  During
the years ended December 31, 2009 and 2008 we paid quarterly cash dividends
of $0.08 per common share.  Our Board of Directors has declared a
dividend for the first quarter of 2010 of $0.08 per common share, payable on
March 31, 2010 to shareholders of record at the close of business on March 1,
2010.  The declaration and payment of common share dividends is at the
discretion of the Board of Directors and depends upon our results of operations,
cash flows, the financial positions and capital requirements of Platinum Bermuda
and Platinum US, general business conditions, legal, tax and regulatory
restrictions on the payment of dividends and other factors the Board of
Directors deems relevant.
  The laws
of the various jurisdictions in which our subsidiaries are organized restrict
the ability of our subsidiaries to pay dividends to Platinum
Holdings.  See Item 1, “Business – Regulation.”
  Purchases
of Equity Securities by Us
  The
following table summarizes our purchases of our common shares during the three
months ended December 31, 2009:
 Period
              
              Total
      Number of Shares Purchased
              
              
              Average
      Price paid per Share
              
              
              Total
      Number of Shares Purchased as Part of a Publicly Announced Program
      *
              
              
              Maximum
      Dollar Value of Shares that May Yet Be Purchased Under the
      ProgramOctober
      1, 2009 – October 31, 2009
              
              
              496,500
              
              
              $
              36.47
              
              
              
              496,500
              
              
              $
              231,893,000November
      1, 2009 – November 30, 2009
              
              
              1,796,086
              
              
              
              36.17
              
              
              
              1,796,086
              
              
              
              166,924,000December
      1, 2009 – December 31, 2009
              
              
              1,824,624
              
              
              
              37.18
              
              
              
              1,824,624
              
              
              
              99,087,000Total
              
              
              4,117,210
              
              
              $
              36.65
              
              
              
              4,117,210
              
              
              $
              99,087,000
  * On
August 4, 2004, our Board of Directors established a program authorizing the
repurchase of our common shares.  Since that date, our Board of
Directors has approved increases in the repurchase program from time to time,
most recently on February 22, 2010, to result in authority as of such date to
repurchase up to a total of $250.0 million of our common shares.
  Performance
Graph
  The
following graph compares cumulative total return on our common shares with the
cumulative total return on the S&P 500 Composite Stock Price Index (the
“S&P 500 Index”) and the S&P Property-Casualty Industry Group Stock
Price Index (the “S&P Property-Casualty Index”), for the period that
commenced December 31, 2004 and ended on December 31,
2009.  The graph shows the value as of December 31 of each
calendar year of $100 invested on December 31, 2004 in our common shares,
the S&P 500 Index, and the S&P Property-Casualty Index as measured by
the last sale price on the last trading day of each such period.
  Total
Return to Shareholders
 Comparison
of Cumulative Five Year Total Return
 
 
  - 25
-
  Indexed
      Returns *
                Years
      Ended December 31,2005
              2006
              2007
              2008
              2009Platinum
              
              100.94
              101.63
              117.90
              120.75
              129.46S&P
      500 Index
              
              104.91
              121.48
              128.15
              80.74
              102.11S&P
      500 Property & Casualty Index
              
              115.11
              129.89
              112.75
              79.59
              89.41
  *  Index
value as of December 31, 2004 – 100.00
  The
foregoing performance graph shall not be deemed to be “soliciting material” or
“filed” with the SEC or incorporated by reference in any previous or future
document filed by the Company with the SEC under the Securities Act or the
Exchange Act, except to the extent that the Company specifically incorporates
such Performance Graph by reference in any such document.
  Item 6.
              Selected
      Financial Data
  The
following table sets forth certain of our selected financial data as of and for
the years ended December 31, 2009, 2008, 2007, 2006 and
2005.  Our data as of December 31, 2009 and 2008, and for the
years ended December 31, 2009, 2008 and 2007 were derived from our
consolidated financial statements beginning on page F-1 of this Form
10-K.  Our data as of December 31, 2007, 2006 and 2005, and for
the years ended December 31, 2006 and 2005 were derived from our audited
consolidated financial statements not included in this Form 10-K.  You
should read the selected financial data in conjunction with our consolidated
financial statements as of December 31, 2009 and 2008 and for each of the
years in the three year period ended December 31, 2009 beginning on page
F-1 of this Form 10-K, and the related “Management's Discussion and Analysis of
Financial Condition and Results of Operations” beginning on page 27 of this
Form 10-K.
  Five-Year Summary of Selected
Financial Data
 ($ in
thousands, except per share amounts)
 
 As
      of and for the years ended December 31,2009
              
              
              2008
              
              
              2007
              
              
              2006
              
              
              2005Statement of Operations
    Data:Net
      premiums written
              
              $
              897,834
              
              
              
              1,037,565
              
              
              
              1,119,807
              
              
              
              1,176,613
              
              
              $
              1,717,722Net
      premiums earned
              
              
              937,336
              
              
              
              1,114,796
              
              
              
              1,173,088
              
              
              
              1,336,701
              
              
              
              1,714,723Net
      investment income
              
              
              163,941
              
              
              
              186,574
              
              
              
              214,222
              
              
              
              187,987
              
              
              
              129,445Net
      realized gains (losses) on investments
              
              
              78,630
              
              
              
              57,254
              
              
              
              (413
              )
              
              
              (1,131
              )
              
              
              (3,144
              )Net
      impairment losses on investments
              
              
              (17,603
              )
              
              
              (30,686
              )
              
              
              (809
              )
              
              
              –
              
              
              
              –Net
      losses and LAE
              
              
              478,342
              
              
              
              718,233
              
              
              
              655,487
              
              
              
              760,602
              
              
              
              1,505,425Underwriting
      expenses
              
              
              240,806
              
              
              
              306,459
              
              
              
              294,642
              
              
              
              357,219
              
              
              
              458,804Net
      income (loss)
              
              
              383,291
              
              
              
              226,240
              
              
              
              356,978
              
              
              
              329,657
              
              
              
              (137,487
              )Basic
      earnings (loss) per common share
              
              
              7.71
              
              
              
              4.38
              
              
              
              5.91
              
              
              
              5.38
              
              
              
              (3.01
              )Diluted
      earnings (loss) per common share
              
              
              7.33
              
              
              
              3.98
              
              
              
              5.38
              
              
              
              4.96
              
              
              
              (3.01
              )Dividends
      declared per common share
              
              $
              0.32
              
              
              
              0.32
              
              
              
              0.32
              
              
              
              0.32
              
              
              $
              0.32Balance Sheet Data:Total
      investments and cash
              
              $
              4,369,649
              
              
              
              4,259,939
              
              
              
              4,461,503
              
              
              
              4,228,937
              
              
              $
              3,830,428Premiums
      receivable
              
              
              269,912
              
              
              
              307,539
              
              
              
              244,360
              
              
              
              377,183
              
              
              
              567,449Total
      assets
              
              
              5,021,578
              
              
              
              4,927,163
              
              
              
              5,078,750
              
              
              
              5,093,567
              
              
              
              5,154,375Unpaid
      losses and LAE
              
              
              2,349,336
              
              
              
              2,463,506
              
              
              
              2,361,038
              
              
              
              2,368,482
              
              
              
              2,323,990Unearned
      premiums
              
              
              180,609
              
              
              
              218,890
              
              
              
              298,498
              
              
              
              349,792
              
              
              
              502,018Debt
      obligations
              
              
              250,000
              
              
              
              250,000
              
              
              
              250,000
              
              
              
              292,840
              
              
              
              292,840Shareholders’
      equity
              
              
              2,077,731
              
              
              
              1,809,397
              
              
              
              1,998,377
              
              
              
              1,858,061
              
              
              
              1,540,249Book
      value per common share
              
              $
              45.22
              
              
              
              34.58
              
              
              
              34.04
              
              
              
              28.33
              
              
              $
              23.22
 
 - 26
-
  Item 7.
              Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
  The
following discussion and analysis should be read in conjunction with the
consolidated financial statements and related notes thereto included in this
Form 10-K.  This Form 10-K contains forward-looking statements that
involve risks and uncertainties.  Please see the “Note on
Forward-Looking Statements” on page 1 of this Form 10-K.  Our
consolidated financial statements have been prepared in accordance with U.S.
GAAP.
  Overview
  We had
$2.3 billion in capital resources as of December 31, 2009 as compared with
$2.1 billion as of December 31, 2008.  Our net income was $383.3
million, $226.2 million and $357.0 million for the years ended December 31,
2009, 2008 and 2007, respectively.  Net income for the year ended
December 31, 2009 reflects disciplined underwriting, lower than expected
catastrophe activity, strong investment results and net favorable
development.  Our net premiums written for the years ended
December 31, 2009, 2008 and 2007 were $897.8 million, $1.0 billion, and
$1.1 billion, respectively.  The decreases in net premiums written
were primarily due to the non-renewal of business that fell below our minimum
pricing standards.
  Economic
Conditions
  Periods
of moderate economic growth or recession tend not to adversely affect our
operations.  Periods of moderate inflation or deflation also tend not
to adversely affect our operations.  However, periods of severe
inflation or deflation or prolonged periods of recession may adversely impact
our results of operations or financial condition.  Management
considers the potential impact of economic trends in the estimation process for
establishing unpaid losses and LAE and in determining our investment
strategies.
  Reinsurance
Industry Conditions and Trends
  The
reinsurance industry historically has been cyclical, characterized by periods of
price competition due to excessive underwriting capacity as well as periods of
favorable pricing due to shortages of underwriting capacity.  Cyclical
trends in the industry and the industry's profitability can also be
significantly affected by volatile developments, including natural and other
catastrophes.  Property and casualty reinsurance rates often rise in
the aftermath of significant catastrophe losses.  To the extent that
actual claim liabilities are higher than anticipated, the industry's capacity to
write new business diminishes.  The reinsurance industry is also
affected by changes in the propensity of courts to expand insurance coverage and
grant large liability awards, as well as fluctuations in interest rates,
inflation and other changes in the economic environment that affect the fair
values of investments.
  In 2005
an unprecedented level of hurricane losses caused many reinsurers to report
significant net losses after which rating agencies imposed higher capital
requirements.  Both reinsurers and their clients reassessed their
catastrophe pricing parameters and procedures.  The result was an
increase in catastrophe pricing, particularly for wind exposures in the United
States, in 2006 and the beginning of 2007.  A number of new companies
were formed to take advantage of the improved pricing.  The
combination of additional capacity and a lack of major catastrophe activity in
2006 and 2007 led to a decline in pricing for catastrophe exposed reinsurance in
the second half of 2007.  After initially stabilizing, non-catastrophe
pricing weakened in late 2006 and continued to decline through the first half of
2008.  During the second half of 2008, the financial markets
experienced significant adverse credit events and a loss of liquidity and the
2008 hurricane season resulted in substantial losses to the insurance and
reinsurance industry, which reduced the amount of capital in the insurance
industry.  Many reinsurance companies reported strong financial
results for 2009 reflecting the absence of major catastrophes and the favorable
performance of their investment portfolios during the year.
  Current
Outlook
  We
anticipate that 2010 will be characterized by ample capacity for insurance risk
and that risk adjusted pricing will come under downward pressure in all lines of
business that have not recently experienced significant losses.
  Despite
this pressure, we generally expect that reinsurance rates for business in our
Property and Marine segment will remain attractive for 2010.  Assuming
only modest rate declines, we expect to write a similar amount of property and
marine business during 2010 compared with the amount we wrote in
2009.  We expect that property and marine business will continue to
represent a large proportion of our overall book of business, which could result
in volatility in our results of operations.
  For our
Casualty segment, we believe that underlying primary insurance rate increases
are generally lower than the trend in loss costs would indicate is appropriate
and that capacity for casualty insurance and reinsurance will remain abundant
during 2010.  However, we believe that select casualty reinsurance
treaties will offer adequate returns during 2010.  Under these
conditions, we expect the amount of business we write in our Casualty segment
will remain stable or decrease during 2010 compared with the amount we wrote in
2009.
  We expect
a relatively low level of demand for products in our Finite Risk segment in
2010.
  Critical
Accounting Estimates
  The
preparation of consolidated financial statements in accordance with U.S. GAAP
requires us to make many estimates and assumptions that affect the reported
amounts of assets, liabilities (including unpaid losses and LAE), revenues and
expenses, and related disclosures of contingent liabilities.  Certain
of these estimates and assumptions result from judgments that are necessarily
subjective.  Actual results may differ materially from these
estimates.  Our critical accounting estimates include premiums written
and earned, unpaid losses and LAE, valuation of investments and evaluation of
risk transfer.
  - 27
-
  Premiums Written and
Earned
  Assumed
reinsurance premiums are recognized as revenues, net of any related ceded
retrocessional coverage purchased.  Both assumed and ceded premiums
are recognized as earned and included in revenues generally on a basis
proportionate with the coverage period.  Assumed premiums written not
yet recognized as revenue are recorded on the consolidated balance sheet as
reinsurance premiums receivable and unearned premiums; ceded premiums written
not yet earned are recorded on the consolidated balance sheet as prepaid
reinsurance premiums.
  Due to
the nature of reinsurance, ceding companies routinely report and remit premiums
subsequent to the contract coverage period.  Consequently, reinsurance
premiums written include amounts reported by the ceding companies, supplemented
by estimates of premiums that are written but not reported
("WBNR").  In addition to estimating WBNR, we estimate the portion of
premiums earned but not reported ("EBNR").  The premium estimation
process considers the terms and conditions of the reinsurance contracts and
assumes that the contracts will remain in force until expiration.  The
estimation of written premiums could be affected by early cancellation, election
of contract provisions for cut-off and return of unearned premiums or other
contract disruptions.  The potential net impact on the results of
operations of changes in estimated premiums earned is reduced by the accrual of
losses and acquisition expenses related to such estimated premiums
earned.  The time lag involved in the process of reporting premiums is
shorter than the lag in reporting losses.  Premiums are generally
reported within two years from the inception of the contract.
  Premiums
receivable include premiums billed and in the course of collection as well as
WBNR.  WBNR is the component of premiums receivable that is subject to
judgment and uncertainty.  Premiums receivable as of December 31,
2009 was $269.9 million and included $221.1 million of WBNR that is based upon
estimates.  We evaluate the appropriateness of WBNR in light of the
actual premium reported by the ceding companies.  Any adjustments to
WBNR that represent premiums earned are accounted for as changes in estimates
and are reflected in results of operations in the period in which they are
made.
  When
estimating premiums written and earned, we segregate the business into classes
by reinsurance subsidiary, by type of coverage and by type of contract
(resulting in approximately 116 classes).  Within each class, business
is further segregated by the year in which the contract incepted (the
“Underwriting Year”), starting with 2002, our first year of
operations.  Classes that are similar in both the nature of their
business and estimation process may be grouped for purposes of estimating
premiums.  Estimates are made for each class or group of classes and
Underwriting Year.  Premiums are estimated based on ceding company
estimates and our own judgment after considering factors such
as:  (1) the ceding company’s historical premium versus projected
premium, (2) the ceding company’s history of providing accurate estimates,
(3) anticipated changes in the marketplace and the ceding company’s
competitive position therein, (4) reported premiums to date and
(5) the anticipated impact of proposed underwriting
changes.  Estimates of ultimate premium are made by our underwriters
for each contract and Underwriting Year.  Management reviews these
estimates with our underwriters and actuaries and selects an ultimate premium
estimate.  Estimates of written premium and earned premium are then
based on the selected ultimate premium estimate and the structure of the
reinsurance contracts.  The WBNR and EBNR are determined by
subtracting the written and earned premium reported by the ceding companies from
the estimated written and earned premium.  As of December 31,
2009 WBNR was $221.1 million and EBNR was $186.4 million.  The
selected estimates of WBNR and EBNR were lower than the initial estimates made
by our underwriters by $26.7 million or 12%, and $18.1 million or 10%,
respectively.  We believe that we reasonably could have made an
adjustment of between $0 and $26.7 million for WBNR and between $0 and $18.1
million for EBNR.  Key factors that were considered by management in
selecting premium estimates lower than the estimates provided by our
underwriters include:  (1) the increased competition and lower
rate level in classes of business with little or no North American catastrophe
exposure that make it difficult for ceding companies to achieve their premium
targets, and (2) the lack of a historical track record for some ceding
companies writing new programs.  The actual premium ultimately
recorded may differ materially from the estimates discussed above.
  The
following table sets forth our estimated and reported premiums receivable as of
December 31, 2009 and 2008 ($ in thousands):
 
 December 31,2009
              
              
              2008Estimated
      premiums receivable
              
              $
              221,078
              
              
              $
              269,714Reported
      premiums receivable
              
              
              48,834
              
              
              
              37,825Total
      premiums receivable
              
              $
              269,912
              
              
              $
              307,539
  Estimated
premiums receivable at December 31, 2009 was lower than at
December 31, 2008 due to a decrease in both the property and marine and
casualty business written in 2009 as compared with 2008.
  An
allowance for uncollectible premiums is established for possible non-payment of
premiums receivable, as deemed necessary.  As of December 31,
2009, based on our historical experience, the general profile of our ceding
companies and our ability in most cases to contractually offset premiums
receivable against losses and LAE and commission amounts payable to the same
parties, we did not establish an allowance for uncollectible premiums
receivable.
  Certain
of our reinsurance contracts include provisions that adjust premiums based upon
the loss experience under the contracts.  We take these into account
when determining our WBNR and EBNR.  Reinstatement premiums are the
premiums charged for the restoration of the reinsurance limit of a reinsurance
contract to its full amount, generally coinciding with the payment by the
reinsurer of losses.  These premiums relate to and are earned over the
future coverage obtained for the remainder of the contract
term.  Additional premiums are those premiums that are a function of
losses and not related to reinstatement of limits.  WBNR and EBNR
include estimates of reinstatement premiums and additional premiums based on
reinsurance contract provisions and loss experience and rely on the estimates of
unpaid losses and LAE.
  - 28
-
  Unpaid Losses and Loss
Adjustment Expenses
  Overview
  One of
the most significant estimates made by management in the preparation of our
consolidated financial statements is our liability for unpaid losses and LAE,
also referred to as “loss reserves.”  Unpaid losses and LAE are
estimates of future amounts required to pay losses and LAE for claims under our
assumed reinsurance contracts that have occurred at or before the balance sheet
date.  Unpaid losses and LAE include estimates of the cost of reported
claims not yet paid, generally referred to as “case reserves.”  Unpaid
losses and LAE also include estimates of the cost of claims incurred but not yet
reported, generally referred to as “IBNR.”
  Our
actuaries prepare estimates of our ultimate liability for unpaid losses and LAE
based on various actuarial methods including the loss ratio method, the
Bornhuetter-Ferguson method and the chain ladder method, which are discussed
below.  We believe that the quantitative actuarial methods used to
estimate our liabilities are enhanced by management’s professional
judgment.  We review the actuarial estimates of our liability and
determine our best estimate of the liabilities to record as unpaid losses and
LAE in our consolidated financial statements.  We use the same
processes and procedures for estimating unpaid losses and LAE for annual and
interim periods.
  We do not
establish liabilities for unpaid losses and LAE until the occurrence of an event
that may give rise to a loss.  If an event has occurred that we
believe will lead to significant losses to us but has not resulted in reported
losses before the balance sheet date, we will generally estimate the impact of
the event and consider it when estimating our liability for unpaid losses and
LAE.  When an event of significant magnitude occurs, such as a
property catastrophe event that affects many of our ceding companies, we may
establish liabilities specific to such an event.  Estimated ultimate
losses related to a catastrophe event may be based on our estimated exposure to
an industry loss and may rely on the use of catastrophe modeling
software.
  We
receive information from ceding companies regarding our liability for unpaid
losses and LAE.  This information varies but typically includes
information regarding the ceding company’s paid losses and case reserves and may
include a ceding company’s estimate of IBNR.  We may increase or
decrease case reserves based on receipt of additional information from the
ceding companies.  Adjustments that we make to reported case reserves
are generally referred to as “additional case reserves.”
  Unpaid
losses and LAE represent our best estimate of the costs of claims incurred, and
it is possible that our ultimate liability may differ materially from such
estimate.  We review our estimate of unpaid losses and LAE
quarterly.  Any adjustments of prior years’ estimates of unpaid losses
and LAE are accounted for as changes in estimates and are reflected in our
results of operations in the period in which they are made.
  The
liabilities recorded on our consolidated balance sheets as of December 31,
2009 and 2008 for unpaid losses and LAE were $2.3 billion and $2.5 billion,
respectively.  These amounts exclude any amounts we may recover from
our retrocessionaires under coverage we purchased for such losses.  We
record estimates of amounts we expect to recover from retrocessionaires as
assets on the consolidated balance sheet.  The following table sets
forth our case reserves, additional case reserves and IBNR by segment as of
December 31, 2009 and 2008 ($ in thousands):
 
 Property
                and
      Marine
              
              
              Casualty
              
              
              Finite
      Risk
              
              
              TotalDecember 31, 2009Case
      reserves
              
              $
              238,996
              
              
              
              387,319
              
              
              
              42,887
              
              
              $
              669,202Additional
      case reserves
              
              
              (1,124
              )
              
              
              12,409
              
              
              
              –
              
              
              
              11,285IBNR
              
              
              246,645
              
              
              
              1,353,531
              
              
              
              68,673
              
              
              
              1,668,849Total
      unpaid losses and LAE
              
              $
              484,517
              
              
              
              1,753,259
              
              
              
              111,560
              
              
              $
              2,349,336December 31, 2008Case
      reserves
              
              $
              255,468
              
              
              
              364,321
              
              
              
              56,638
              
              
              $
              676,427Additional
      case reserves
              
              
              4,591
              
              
              
              25,600
              
              
              
              –
              
              
              
              30,191IBNR
              
              
              281,573
              
              
              
              1,378,000
              
              
              
              97,315
              
              
              
              1,756,888Total
      unpaid losses and LAE
              
              $
              541,632
              
              
              
              1,767,921
              
              
              
              153,953
              
              
              $
              2,463,506
  Since we
rely on information regarding paid losses, case reserves and sometimes IBNR
provided by ceding companies in estimating our ultimate liability for unpaid
losses and LAE, we perform certain procedures in order to help determine the
completeness and accuracy of such information.  Periodically,
management assesses the reporting activities of these ceding companies on the
basis of qualitative and quantitative criteria.  These procedures
include conferring with ceding companies or brokers on claims
matters.  Our claims personnel, or consultants engaged by us, may also
conduct periodic audits of our ceding companies to:  (1) review
and establish validity of specific claims, (2) determine that case reserves
established by the ceding company are reasonable, (3) assure that there is
consistency in claim reporting from period to period, and (4) assess the
overall claims practices and procedures of the ceding company.  We
also monitor the claims handling and reserving practices of ceding companies in
order to help establish the proper reinsurance premium for reinsurance contracts
with such ceding companies.
  - 29
-
  Non-Catastrophe
Reserves
  Non-catastrophe
reserves were $2.2 billion as of December 31, 2009, representing 93% of our
unpaid losses and LAE.  When estimating unpaid losses and LAE, we
segregate the business into classes by reinsurance subsidiary, by type of
coverage and by type of contract (resulting in approximately 116
classes).  Within each class, the business is further segregated by
Underwriting Year, starting with 2002, our first year of
operations.
  Our
actuaries calculate multiple point estimates of our liability for losses and LAE
using a variety of actuarial methods for many, but not all, of our classes for
each Underwriting Year.  We do not believe that these multiple point
estimates are or should be considered a range.  Our actuaries consider
each class and determine the most appropriate point estimate for each
Underwriting Year based on the characteristics of the particular class
including:  (1) loss development patterns derived from historical
data, (2) the credibility of the selected loss development pattern,
(3) the stability of the loss development patterns and (4) the
observed loss development of other underwriting years for the same
class.  Our actuaries also consider other relevant factors,
including:  (1) historical ultimate loss ratios, (2) the
presence of individual large losses and (3) known occurrences that have not
yet resulted in reported losses.
  We
believe that a review of individual contract information improves the loss
estimates for some classes of business.  Our actuaries make their
determinations of the most appropriate point estimate of loss for each class
based on an evaluation of relevant information and do not ascribe any particular
portion of the estimate to a particular factor or
consideration.  These estimates are aggregated for review by
management and, after approval, are the basis for our liability for unpaid
losses and LAE.
  Generally,
estimates of ultimate losses that are not related to a specific event are
initially determined based on the loss ratio method applied to each Underwriting
Year and to each class of business.  The selected ultimate losses are
determined by multiplying the initial expected loss ratio by the earned
premium.  The initial expected loss ratios are key inputs that involve
management judgment and are based on a variety of factors,
including:  (1) contract by contract expected loss ratios
developed during our pricing process, (2) our historical loss ratios and
combined ratios (loss plus acquisition cost ratios), and (3) when
available, updated and appropriately adjusted, the historical loss ratios of The
Travelers Companies, Inc., formerly The St. Paul Companies, Inc.
(“Travelers”), for the reasons described below.  These judgments take
into account management’s view of past, current and future factors that may
influence ultimate losses, including:  (1) market conditions,
(2) changes in the business underwritten, (3) changes in timing of the
emergence of claims and (4) other factors that may influence ultimate loss
ratios and losses.
  Over
time, as a greater number of claims are reported, actuarial estimates of IBNR
are based on the Bornhuetter-Ferguson and the chain ladder
techniques.  The loss development pattern is a key input to these
techniques.  The Bornhuetter-Ferguson technique utilizes actual
reported losses, a loss development pattern and the initial expected loss ratio
to determine an estimate of ultimate losses.  We believe this
technique is most appropriate when there are few reported claims and a
relatively less stable loss development pattern.  The chain ladder
technique utilizes actual reported losses and a loss development pattern to
determine an estimate of ultimate losses that is independent of the initial
expected ultimate loss ratio and earned premium.  We believe this
technique is most appropriate when there are a large number of reported losses
with significant statistical credibility and a relatively stable pattern of
reported losses.  The determination of when reported losses are
sufficient and credible to warrant selection of an ultimate loss ratio different
from initial expected loss ratio also requires judgment.  We generally
make adjustments for reported loss experience indicating unfavorable variances
from initial expected loss ratios sooner than reported loss experience
indicating favorable variances.  This is because the reporting of
losses in excess of expectations tends to have greater credibility than an
absence or lower than expected level of reported losses.
  While we
commenced operations in 2002, the business we write is sufficiently similar to
the historical reinsurance business of Travelers such that we review the
historical loss experience of this business when we estimate our own initial
expected loss ratios and loss development patterns.  This historical
loss experience was made available to us in connection with our initial public
offering.  Loss development patterns can span more than a decade,
therefore, the Travelers data is a valuable supplement to our own and industry
data.
  Loss
development patterns are determined utilizing actuarial analysis, including
management’s judgment, and are based on loss development patterns of paid losses
and reporting of case reserves to us, as well as industry loss development
patterns.  Information that may cause future loss development patterns
to differ from historical loss development patterns is considered and reflected
in our selected loss development patterns as appropriate.  For
property and health coverages these patterns indicate that a substantial portion
of the ultimate losses are reported within two to three years after the contract
is effective.  Casualty loss development patterns can vary from three
years to over twenty years depending on the type of business.
  In
property lines, the loss development patterns are based on historical reported
loss data.  For all lines, historical data by effective date and
business type is used to determine loss development patterns that reflect each
year’s reinsurance contract inception date distribution and the distribution of
underlying business written on a losses occurring basis versus on a risk
attaching basis.  In marine lines, the loss development patterns are
primarily based on historical reported loss data.  Loss development
patterns are analyzed for various reinsurance sub-classes and an overall pattern
is determined by the mix of business within each Underwriting Year.
  In the
North American casualty excess of loss classes, the loss development patterns
are primarily based on our historical reported loss data and that of Travelers,
both of which are supplemented by industry data from the Reinsurance Association
of America (“RAA”) and Insurance Services Offices, Inc. (“ISO”).  Due
to the long loss development pattern in general liability, various sources are
used to estimate the end of the loss development pattern referred to as the
“tail”.  To estimate the tail, we supplement our historical data and
the available Travelers data, with industry data, generally from the
RAA.
  We
analyze historical loss development patterns and may adjust them for observed
anomalies.  For example, we observed that loss development patterns
were much slower in Underwriting Years that were characterized by especially
intense competition, known as the “soft market,” particularly in the North
American excess-of-loss claims made class.  We believe this is due to
multiple year policies written by ceding companies and the deterioration in
underwriting standards during these periods.  In determining our loss
development patterns for certain classes, we may exclude certain historical data
from the soft market years because none of our business was written in these
soft market periods.  However, one of the risks of excluding some of
the years is that we could be obscuring trends in loss development
patterns.  Our actuaries consider this when determining the
credibility of indications that use these patterns.  For a small
number of reinsurance contracts, appropriate historical loss development
patterns must be developed from ceding company data or other
sources.
  - 30
-
  Catastrophe
Reserves
  Generally,
an event must cause more than $1 billion of property losses to the insurance
industry or $10 million of property losses to the Company to be considered and
tracked as a major catastrophe.  Unpaid losses and LAE related to
major catastrophes were $173.3 million, which represented 7% of our total unpaid
losses and LAE as of December 31, 2009.
  Our
underwriters will typically prepare an initial estimate of our ultimate losses
for a catastrophe event on a contract-by-contract basis.  This
estimate is typically based on estimates of losses for the insurance industry as
a whole, estimates of losses prepared by ceding companies, estimates of market
share of our ceding companies and, in certain cases, output from catastrophe
models.  Information is typically updated as it becomes
available.  Our actuaries and underwriters will also consider a
variety of factors, including:  (1) the credibility of ceding
company estimates, (2) whether the ceding company estimates include IBNR
and (3) whether the ceding company information is current.  After
reviewing loss estimates and other information with our underwriters, our
actuaries make an estimate of ultimate loss.
  As losses
from catastrophes mature, our actuaries consider losses reported to us relative
to loss development patterns from prior catastrophe events.  Our
estimate of ultimate liability for losses and LAE related to a catastrophe event
will generally be based on these development patterns after approximately twelve
months following the event.  However, since loss development patterns
may be inconsistent between events, for very large catastrophes, such as
Hurricane Katrina in 2005, we will generally review information on a
contract-by-contract basis for a longer period.  Ultimate losses for a
catastrophe event are typically reasonably well known within 12 to 24 months
following the event, although ultimate losses from an earthquake may take longer
to develop.
  During
2009, we established specific reserves for major catastrophes that included
floods in Ireland (“Irish Floods”), Hailstorm Wolfgang, Winterstorm Klaus and
three U.S. catastrophe events referred to by Property Claim Services, a division
of ISO, as Catastrophes 63, 68 and 78.  In 2008, we established
specific reserves for major catastrophes including Winterstorm Emma, Hurricane
Gustav, Hurricane Ike and two U.S. catastrophe events referred to by Property
Claim Services as Catastrophes 42 and 43.  We also have established
specific reserves for catastrophe events in prior years, which include Hurricane
Katrina.
  Uncertainty
of Estimates
  The
ultimate liability for unpaid losses and LAE may vary materially from our
current estimates for several reasons.  Our estimates are inherently
uncertain because they are affected by factors that are highly dependent on
judgment.  There are numerous other factors that add uncertainty to
our estimates of losses, the more significant of which
include:  (1) our estimates are based on predictions of future
developments and estimates of future trends in claim severity and frequency,
(2) the reliance that we necessarily place on ceding companies for claims
reporting, (3) the associated time lag in reporting losses, (4) the
need to estimate an initial expected loss ratio before significant loss
experience is reported, (5) the low frequency/high severity nature of some
of our business and (6) the varying reserving practices among ceding
companies.
  Our
estimates are based on assumptions that historical loss development and trends
are reasonably predictive of how losses will develop in the future when
reported.  New or updated information or loss data may impact our
selection of ultimate loss ratios in subsequent periods.  There are
various elements of updated loss data and related information that may result in
a materially different estimate of ultimate losses.  The four most
significant inputs to our loss estimation process are:  (1) reported
losses to date, (2) the initial expected loss ratio, (3) the loss
development patterns and (4) earned premiums.
  The
frequency and severity of reported losses relative to anticipated frequency and
severity of losses is one of the most influential factors and is largely
dependent on the loss experience of our ceding companies.  Reported
loss experience is a key input to our loss estimation process and, if loss
experience reported in periods subsequent to estimating the ultimate losses are
materially greater or less than anticipated, we may adjust the ultimate loss
ratio accordingly.  Adjustments to increase or decrease a prior year’s
ultimate loss ratio are generally referred to as unfavorable or favorable loss
development.
  The
initial expected loss ratios are key inputs to our loss estimation process, are
derived from historical data and involve a high degree of
judgment.  The selection of the initial expected loss ratios also
takes into account management’s view of past, current and future factors that
may influence expected ultimate losses.  Because of the high degree of
judgment required in establishing initial expected loss ratios, there is
uncertainty in the resulting estimates.
  The loss
development patterns are also key inputs to our loss estimation
process.  Loss development patterns reflect the time lag between the
occurrence and settlement of a loss.  The time lag in reporting can be
several years in some cases and may be attributed to a number of reasons,
including the time it takes to investigate a claim, delays associated with the
litigation process, and the deterioration, in connection with health related
claims, in a claimant’s physical condition many years after an accident
occurs.  As a predominantly broker market reinsurer for both
excess-of-loss and proportional contracts, we are subject to potential
additional time lags in the receipt of information as the primary insurer
reports to the broker who in turn reports to us.  As of
December 31, 2009, we did not have any significant back-log related to our
processing of assumed reinsurance information.  All of the foregoing
factors can impact the loss development patterns.  A key assumption
that our estimates are based on is that past loss development patterns are
reasonably predictive of future loss development patterns.  However,
it may be difficult to identify differences in business reinsured from
Underwriting Year to Underwriting Year and how such differences can affect loss
development patterns.  This difficulty adds to uncertainty in
estimates that use these patterns.
  In
property classes, there can be additional uncertainty in loss estimation related
to large catastrophe events.  With wind events, such as hurricanes,
the damage assessment process may take more than a year.  The cost of
rebuilding may increase due to supply shortages for construction materials and
labor.  In the case of earthquakes, the damage assessment process may
take several years to discover structural weaknesses not initially detected in
buildings.  The uncertainty inherent in loss estimation is
particularly pronounced for casualty coverages, such as umbrella liability,
general and product liability, professional liability and automobile liability,
where information, such as required medical treatment and costs for bodily
injury claims, emerges over time.  In the overall loss estimation
process, provisions for economic inflation and changes in the social and legal
environment are considered.
  - 31
-
  Changes
in estimates of prior years’ earned premiums can also affect prior years’
ultimate losses.  Our actuaries consider factors affecting all key
inputs to actuarial techniques when determining the credibility of
indications.
  The
current estimate of unpaid losses and LAE is a central estimate that reflects
many reasonable possible outcomes.  The range of reasonable
alternative estimates is necessarily smaller than a range of reasonably possible
outcomes.  In the following two sections, we discuss two types of
uncertainty with respect to loss estimation.  Under Variability of
Outcomes, we discuss how estimates change over time as new information or loss
data develops.  Under Sensitivity of Estimates, we demonstrate that
alternative reasonable estimates can be made with current
information.
  Variability of
Outcomes
  The
liability for unpaid losses and LAE as of the balance sheet date represents
management’s best estimate of the ultimate liabilities as of that
date.  The actuarial techniques used by our actuaries in estimating
our liabilities produces a central estimate of ultimate losses and LAE for each
class and underwriting year.  These techniques do not produce a range
of reasonably possible outcomes.  For some classes, the ultimate value
of the liability for unpaid losses and LAE will not be known for many
decades.  We expect that the ultimate value will differ from current
estimates as losses are reported and paid and that difference could be material
as reported losses reflect the actual emergence of factors that influence claim
costs.  We believe, however, that as a greater percentage of losses
are reported, the likelihood of material changes to ultimate losses
declines.  Each quarter, we re-estimate ultimate losses and LAE and
reflect updated information in those estimates.
  During
the years ended December 31, 2009, 2008 and 2007, we experienced net
favorable loss development of $100.8 million, $167.2 million, and $81.2 million,
respectively.  This net favorable loss development was attributable
primarily to a level of losses reported to us by our ceding companies that was
lower than expected and that, in our judgment, resulted in sufficient
credibility in the cumulative loss experience to adjust our previously selected
ultimate loss ratios.  During 2009, 2008 and 2007, approximately $94.9
million, $154.4 million, and $84.7 million, respectively, of the total net
favorable development was attributable to lower reported loss experience than we
expected.  During the years ended December 31, 2009, 2008 and
2007, changes in the initial expected loss ratio and the loss development
patterns resulted in net favorable loss development of $5.9 million and $12.8
million for 2009 and 2008, respectively, and net unfavorable loss development of
$3.5 million in 2007.  Conditions and trends that have affected
development of reserves in the past may not necessarily occur in the
future.  The factors that may result in differences between our
current estimates of loss liability and our ultimate loss liability are set
forth above under “Uncertainty of Estimates” in this Form 10-K.
  Sensitivity of
Estimates
  Initial
expected loss ratios and loss development patterns are key inputs to our loss
estimation process.  We exercise judgment in establishing key inputs
at the beginning of an underwriting year and also as we modify the key inputs,
as appropriate, throughout the loss development period.  We have
selected the initial expected loss ratio and the loss development patterns for
sensitivity analysis.  Ultimate loss estimates for the North American
casualty excess of loss classes of business, which generally have the longest
loss development patterns, have a higher degree of uncertainty than other
reserving classes.  IBNR for these classes as of December 31,
2009 was $1.1 billion, which was 66% of the total IBNR at that
date.  The estimates of unpaid losses and LAE related to North
American casualty excess of loss classes of business have a higher degree of
uncertainty and, consequently, reasonable alternatives to our selected initial
expected loss ratios and loss development patterns could vary
significantly.  For example, if we increased the initial expected loss
ratio for these classes by 5% from 68% to 73%, we would increase the IBNR for
these classes by $88.8 million , which represents approximately 6% of unpaid
losses and LAE for these classes as of December 31, 2009, or if we
increased the initial expected loss ratio for these classes by 10% from 68% to
78%, we would increase the IBNR for these classes by $141.6 million , which
represents approximately 10% of unpaid losses and LAE for these classes as of
December 31, 2009.
  As
another example of key assumption sensitivity, if we accelerated the estimated
loss development patterns related to North American casualty excess of loss
classes by 5%, we would decrease the IBNR for these classes by $36.8 million,
which is less than 3% of unpaid losses and LAE for these classes as of
December 31, 2009, or if we accelerated the loss development patterns by
10%, we would decrease the IBNR for these classes by $73.7 million, which is 5%
of unpaid losses and LAE for these classes as of December 31,
2009.
  The
sensitivity analysis illustrates how a reasonable alternative assumption could
affect the current estimate of our ultimate loss liability.  The
sensitivity analysis is not intended to present a range of reasonable possible
settlement values in the future.  Actual settlement values could be
materially different from the current estimates.  Over time, changes
to the initial expected loss ratio and loss development patterns may vary by
more than the sensitivity analysis above as new loss information and data
emerges.
  Reinsurance
Recoverable
  In order
to limit the effect on our financial condition of large and multiple losses, we
may buy retrocessional reinsurance, which is reinsurance for our own
account.  Reinsurance recoverable, also referred to as “ceded loss
reserves,” includes estimates of the recoveries from our retrocessional
reinsurance that arise from claims from our reinsurance
business.  These assets are estimates of future amounts recoverable
from retrocessionaires for claims that have occurred at or before the balance
sheet date.  Each quarter, after estimating the amount of gross loss
reserves, our actuaries review all retrocessional contracts.  Based on
the structure of each retrocessional contract and the gross incurred loss, a
recovery amount is estimated.
  Valuation of
Investments
  Fixed
maturity securities for which we may not have the intent to hold until maturity
are classified as available-for-sale and reported at fair
value.  Unrealized gains and losses are included in other
comprehensive income in the consolidated statement of operations and in
accumulated other comprehensive income in the consolidated statement of
shareholders' equity, net of deferred taxes.  Fixed maturity
securities for which we have the intent to sell prior to maturity or for which
we have elected the fair value measurement attributes of the Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification 825,
“Financial Instruments” (“ASC 825”) are classified as trading securities and
reported at fair value, with mark-to-market adjustments included in net realized
gains or losses on investments in the consolidated statement of operations and
the related deferred income tax included in income tax expense.
  - 32
-
  We obtain
prices for all of our fixed maturity securities, preferred stocks and short-term
investments from pricing services, which include index providers, pricing
vendors and broker-dealers.  As of December 31, 2009, we valued
approximately 58% of our investment securities using prices obtained from index
providers, 34% using prices obtained from pricing vendors, and 8% using prices
obtained from broker-dealers.  The number of prices we obtain per
instrument varies based on the type of asset class and particular reporting
period.  Prices are generally obtained from multiple sources when a
new security is purchased and a pricing source is assigned to the particular
security.  A hierarchy is maintained that prioritizes pricing sources
based on availability and reliability of information, with preference given to
prices provided by independent pricing vendors and index
providers.  Pricing providers may be assigned to a particular security
based upon the provider’s expertise.  Generally, the initial pricing
source selected is consistently used for each reporting period.  We
have not adjusted any prices that we have obtained from pricing
services.  However, if we determine that a price appears unreasonable,
we investigate and assess whether the price should be adjusted.
  We
periodically receive pricing documentation that describes the methodologies used
by various pricing services.  The prices we obtain from pricing
providers are validated by conducting price comparisons against multiple pricing
sources for certain securities as may be available, performing an in-depth
review of specific securities when evaluating potential other-than-temporary
impairments, periodic back-testing of sales to the previously reported fair
value, and continuous monitoring of market data including specific data that
relates to our investment portfolio.
  Pricing
services determine prices by maximizing the use of observable inputs and we do
not believe there are any unobservable inputs significant to the fair value
measurement.  The inputs used in index pricing may include, but are
not limited to, benchmark yields, transactional data, broker-dealer quotes,
security cash flows and structures, credit ratings, prepayment speeds, loss
severities, credit risks and default rates.  The inputs used by
pricing vendors may include, but are not limited to; benchmark yields, reported
trades, broker-dealer quotes, issuer spreads, bids, offers and industry and
economic events.  Broker-dealers value securities through trading
desks primarily based on observable inputs.
  We
routinely review our available-for-sale investments to determine whether
unrealized losses represent temporary changes in fair value or are the result of
other than temporary impairment (“OTTI”).  The process of determining
whether a security is other-than-temporarily impaired requires judgment and
involves analyzing many factors.  These factors include the overall
financial condition of the issuer, the length and magnitude of an unrealized
loss, specific credit events, the collateral structure and the credit support
that may be applicable.  The amount of the credit loss is the
difference between the present value of expected future cash flows from an
impaired debt security and the amortized cost of the security.  The
portion of the impairment related to the credit loss and portion of OTTI related
to all other factors is recognized in the consolidated statement of
operations.  The portion of OTTI related to all other factors is also
recognized in accumulated other comprehensive income, net of deferred taxes, in
the consolidated statement of shareholders’ equity.  In evaluating the
potential for OTTI, we also consider our intent to sell a security and the
likelihood that we will be required to sell a security before the unrealized
loss is recovered.  Our intent to sell a security is based, in part,
on adverse changes in the credit worthiness of a debt issuer, pricing and other
market conditions, and our anticipated net cash flows.  If we
determine that we intend to sell a security that is in an unrealized loss
position, then the unrealized loss related to such security, representing the
difference between the security’s amortized cost and its fair value, is
recognized as a realized loss in our consolidated statement of operations at the
time we determine our intent to sell.
  Risk
Transfer
  We use
reinsurance accounting for assumed and ceded transactions when risk transfer
requirements have been met.  Risk transfer analysis evaluates
significant assumptions relating to the amount and timing of expected cash
flows, as well as the interpretation of underlying contract terms that may
include loss limits or loss mitigation provisions.  Reinsurance
contracts that do not transfer sufficient insurance risk are accounted for as
reinsurance deposit liabilities with interest expense charged to other income
and credited to the liability.
  Results
of Operations
  Year Ended December 31,
2009 as Compared with the Year Ended December 31, 2008
  Net
income and diluted earnings per common share for the years ended
December 31, 2009 and 2008 were as follows ($ in thousands, except earnings
per share):
 
 2009
              
              
              2008
              
              
              Increase
                (decrease)Net
      income
              
              $
              383,291
              
              
              
              226,240
              
              
              $
              157,051Weighted
      average shares outstanding for diluted earnings per common
      share
              
              
              52,315
              
              
              
              56,855
              
              
              
              (4,540
              )Diluted
      earnings per common share
              
              $
              7.33
              
              
              
              3.98
              
              
              $
              3.35
  The
increase in net income in 2009 as compared to 2008 was primarily due to an
increase in net underwriting income of $128.1 million.  Net
underwriting income consists of net premiums earned, less net losses and LAE,
net acquisition expenses and operating costs related to underwriting
operations.  The increase in net underwriting income was primarily due
to the decrease in net underwriting losses arising from major catastrophes in
2009 as compared with 2008.
  - 33
-
  The
increase in diluted earnings per common share in the year ended
December 31, 2009 as compared with the year ended December 31, 2008
was primarily due to the increase in net income.  Diluted earnings per
common share also reflected the decrease in weighted average shares
outstanding.  The weighted average shares outstanding decreased
primarily due to the weighted average effect of the repurchase of 7,852,498 of
our common shares in 2009.
  We
conduct our worldwide reinsurance business through three operating
segments:  Property and Marine, Casualty and Finite
Risk.  In managing our operating segments, management uses measures
such as net underwriting income and underwriting ratios to evaluate segment
performance.  We do not allocate assets or certain income and expenses
such as investment income, interest expense and corporate expenses by
segment.  Segment net underwriting income is reconciled to the U.S.
GAAP measure of income before income taxes in Note 13 to the Consolidated
Financial Statements contained elsewhere in this Form 10-K.  The
measures we used in evaluating our operating segments should not be used as a
substitute for measures determined under U.S. GAAP.
  Underwriting
Results
  Net
underwriting income was $218.2 million and $90.1 million for the years ended
December 31, 2009 and 2008, respectively.  The increase in net
underwriting income in 2009 as compared with 2008 was primarily due to a
decrease in net underwriting losses arising from major catastrophes, partially
offset by a decrease in net favorable development.  Net underwriting
losses arising from major catastrophes were $35.5 million and $198.0 million in
2009 and 2008, respectively.
  Net
favorable or unfavorable development is the development of prior years’ unpaid
losses and LAE and the related impact on premiums and
commissions.  Net favorable development was $101.0 million and $147.6
million in the years ended December 31, 2009 and 2008,
respectively.  The net favorable development in 2009 relating to prior
years was in both the Property and Marine and Casualty segments.  The
decrease in net premiums earned in the Property and Marine segment in 2009
reduced net underwriting income.  In addition net underwriting income
was favorably impacted in 2009 by improved loss experience relating to a
reinsurance contract in the Casualty segment covering leased private passenger
automobile residual values (the “RVI Contract”).
  Property and
Marine
  The
Property and Marine operating segment generated 57.6% and 57.1% of our net
premiums written in 2009 and 2008, respectively.  The following table
summarizes underwriting activity and ratios for the Property and Marine segment
for the years ended December 31, 2009 and 2008 ($ in
thousands):
 
 2009
              
              
              2008
              
              
              Increase
                (decrease)Gross
      premiums written
              
              $
              543,851
              
              
              
              622,171
              
              
              $
              (78,320
              )Ceded
      premiums written
              
              
              26,840
              
              
              
              29,084
              
              
              
              (2,244
              )Net
      premiums written
              
              
              517,011
              
              
              
              593,087
              
              
              
              (76,076
              )Net
      premiums earned
              
              
              528,488
              
              
              
              599,110
              
              
              
              (70,622
              )Net
      losses and LAE
              
              
              250,646
              
              
              
              397,200
              
              
              
              (146,554
              )Net
      acquisition expenses
              
              
              66,992
              
              
              
              90,816
              
              
              
              (23,824
              )Other
      underwriting expenses
              
              
              37,331
              
              
              
              38,492
              
              
              
              (1,161
              )Property
      and Marine segment net underwriting income
              
              $
              173,519
              
              
              
              72,602
              
              
              $
              100,917Ratios:Net
      loss and LAE
              
              
              47.4
              %
              
              
              66.3
              %
              
              (18.9)
      pointsNet
      acquisition expense
              
              
              12.7
              %
              
              
              15.2
              %
              
              (2.5)
      pointsOther
      underwriting expense
              
              
              7.1
              %
              
              
              6.4
              %
              
              0.7
      pointsCombined
              
              
              67.2
              %
              
              
              87.9
              %
              
              (20.7)
      points
  Net
underwriting income increased by $100.9 million for the year ended
December 31, 2009 as compared with the year ended December 31, 2008,
which was primarily due to a decrease in net underwriting losses arising from
major catastrophes.  This increase was partially offset by a decrease
in net favorable development and net premiums earned.  We had $35.5
million of net underwriting losses arising from major catastrophes in 2009 as
compared with $198.0 million in 2008.  Net underwriting losses arising
from major catastrophes in 2009 were primarily attributable to the Irish Floods,
Hailstorm Wolfgang and Winterstorm Klaus.  In 2008 losses arising from
major catastrophes were primarily attributable to Hurricanes Gustav and Ike and
Winterstorm Emma.  Net favorable development was $25.1 million and
$77.6 million in 2009 and 2008, respectively.
  - 34
-
  Gross
premiums written decreased by $78.3 million in the year ended December 31,
2009 as compared with the year ended December 31, 2008 as we reduced our
exposure to catastrophe events, most significantly in the renewal of contracts
effective January 1, 2009.  Additionally, reinstatement premiums
in 2008 relating to major catastrophes contributed to the decrease in gross
premiums written in 2009 as compared with 2008.  Reinstatement
premiums related to major catastrophes were $7.2 million and $28.3 million in
2009 and 2008, respectively.  The decrease in net premiums earned in
2009 as compared with 2008 is consistent with the decrease in net premiums
written and reflects changes in the mix of business.
  Net
losses and LAE decreased by $146.6 million in the year ended December 31,
2009 as compared with the year ended December 31, 2008, which was primarily
due to the decrease in losses arising from major catastrophes in
2009.  Net losses arising from major catastrophes were $42.6 million
in 2009 and $224.9 million in 2008.  The decrease in losses from major
catastrophes was partially offset by the decrease in net favorable loss
development in 2009.  Net losses arising from major catastrophes, with
related premium adjustments, increased the net loss and LAE ratio by 7.5 points
and 36.1 points in 2009 and 2008, respectively.  Net favorable loss
development and related premium adjustments decreased the net loss and LAE ratio
by 3.2 and 13.4 points in 2009 and 2008, respectively.  Net favorable
loss development in both 2009 and 2008 was primarily attributable to a level of
cumulative losses reported by our ceding companies that was lower than expected
and that, in our judgment, resulted in sufficient credibility in the loss
experience to change our previously selected loss ratios.  The net
loss and LAE ratios were also affected by changes in the mix of
business.
  The
following table sets forth the net favorable (unfavorable) development for the
year ended December 31, 2009 by class of business ($ in
thousands):
 Class
      of Business
              
              Net
      Losses and LAE
              
              
              Net
      Acquisition Expense
              
              
              Net
      Premiums
              
              
              Net
      DevelopmentProperty
      excess-of-loss per risk
              
              $
              11,932
              
              
              
              (181
              )
              
              
              2,125
              
              
              $
              13,876Catastrophe
      excess-of-loss (non-major events)
              
              
              13,877
              
              
              
              1,284
              
              
              
              217
              
              
              
              15,378Major
      catastrophes
              
              
              (3,474
              )
              
              
              –
              
              
              
              349
              
              
              
              (3,125
              )Crop
              
              
              (8,783
              )
              
              
              5,102
              
              
              
              –
              
              
              
              (3,681
              )Marine,
      aviation and satellite
              
              
              (4,294
              )
              
              
              330
              
              
              
              2,027
              
              
              
              (1,937
              )Property
      proportional
              
              
              5,001
              
              
              
              (391
              )
              
              
              –
              
              
              
              4,610Total
              
              $
              14,259
              
              
              
              6,144
              
              
              
              4,718
              
              
              $
              25,121
  Net
favorable development in the property excess-of-loss per risk class related
primarily to the 2006 through 2008 underwriting years.  Net favorable
development in the catastrophe excess-of-loss (non-major events) class related
primarily to the 2008 underwriting year.  Net unfavorable development
in major catastrophes related primarily to marine losses related to Hurricane
Rita in the 2005 underwriting year.  Net unfavorable development in
the crop class related primarily to the North American business in the 2008
underwriting year.  Net unfavorable development in the marine,
aviation and satellite class related primarily to the marine business in the
2007 underwriting year.  Net favorable development in the property
proportional class related primarily to the 2005 through 2007 underwriting
years.
  The
following table sets forth the net favorable (unfavorable) development for the
year ended December 31, 2008 by class of business ($ in
thousands):
 Class
      of Business
              
              Net
      Losses and LAE
              
              
              Net
      Acquisition Expense
              
              
              Net
      Premiums
              
              
              Net
      DevelopmentProperty
      excess-of-loss per risk
              
              $
              8,065
              
              
              
              579
              
              
              
              3,539
              
              
              $
              12,183Catastrophe
      excess-of-loss (non-major events)
              
              
              24,005
              
              
              
              (1,365
              )
              
              
              1,697
              
              
              
              24,337Major
      catastrophes
              
              
              18,833
              
              
              
              –
              
              
              
              (951
              )
              
              
              17,882Crop
              
              
              11,603
              
              
              
              (2,734
              )
              
              
              –
              
              
              
              8,869Marine,
      aviation and satellite
              
              
              686
              
              
              
              (1,541
              )
              
              
              7,195
              
              
              
              6,340Property
      proportional
              
              
              8,028
              
              
              
              (18
              )
              
              
              –
              
              
              
              8,010Total
              
              $
              71,220
              
              
              
              (5,079
              )
              
              
              11,480
              
              
              $
              77,621
  - 35
-
  Net
favorable development in the property excess-of-loss per risk class related
primarily to the 2006 and 2007 underwriting years.  The net favorable
development included improved experience in business with smaller regional
cedants where loss ratios had been increased from initial expected loss ratios
in prior years.  A change in the loss development patterns in our
North American business resulted in $1.9 million of the net favorable
development.  Net favorable development in the catastrophe
excess-of-loss (non-major events) class related primarily to the 2007
underwriting year.  Following a study of our historical experience and
an updated exposure analysis, we decreased our initial expected loss ratio of
our non-U.S. catastrophe excess-of-loss (non-major events) class resulting in
$0.6 million of the net favorable development.  Net favorable
development in major catastrophes related primarily to events occurring in 2005
and 2007, with the most significant net favorable development related to
Hurricanes Ivan and Katrina, Winterstorm Kyrill and the 2007 summer floods in
the UK.  Net favorable development in the crop class related primarily
to the 2007 underwriting year.  Net favorable development in the
marine, aviation and satellite class related primarily to an increase in
reinstatement premiums resulting from adverse loss experience of several
years.  The net favorable development was partially offset by net
unfavorable development in the 2006 and 2007 underwriting years of $0.8 million
related to changes in the loss development pattern and initial expected loss
ratio assumptions.  Net favorable development in the property
proportional class related primarily to the 2002 through 2007 underwriting
years, with a change to the loss development patterns resulting in approximately
$1.8 million of net favorable development.
  Net
acquisition expenses and related net acquisition expense ratios were $67.0
million and 12.7% for the year ended December 31, 2009 and $90.8 million
and 15.2% for the year ended December 31, 2008.  The decrease in
net acquisition expenses in 2009 as compared with 2008 was primarily due to a
decrease in net premiums earned.  The decrease in the acquisition
expense ratio was due to a decrease in commissions related to prior years’
losses of $6.1 million, which, with related premium adjustments, represented
1.3% of net earned premiums in 2009 as compared with an increase in commissions
related to prior years’ losses of $5.1 million in 2008 which, with related
premium adjustments, represented 0.6% of net premiums earned.  Net
acquisition expense ratios were also impacted by changes in the mix of
business.
  Other
underwriting expenses were $37.3 million and $38.5 million for the years ended
December 31, 2009 and 2008, respectively.  The decrease in 2009
as compared with 2008 was due to $4.3 million of one-time fees and expenses
incurred in 2008 when we entered into a derivative contract with Topiary Capital
Limited (“Topiary”) that provides us with annual second event catastrophe loss
protection, see “Financial Condition - Liquidity” below for additional
discussion of Topiary, partially offset by an increase in performance-based
compensation accruals in 2009.
  Casualty
  The
Casualty operating segment generated 39.7% and 41.5% of our net premiums written
for the years ended December 31, 2009 and 2008,
respectively.  The following table summarizes underwriting activity
and ratios for the Casualty segment for the years ended December 31, 2009
and 2008 ($ in thousands):
 
 2009
              
              
              2008
              
              
              Increase
      (decrease)Net
      premiums written
              
              $
              356,488
              
              
              
              430,084
              
              
              $
              (73,596
              )Net
      premiums earned
              
              
              388,901
              
              
              
              503,300
              
              
              
              (114,399
              )Net
      losses and LAE
              
              
              226,511
              
              
              
              337,051
              
              
              
              (110,540
              )Net
      acquisition expenses
              
              
              88,841
              
              
              
              125,934
              
              
              
              (37,093
              )Other
      underwriting expenses
              
              
              25,644
              
              
              
              23,982
              
              
              
              1,662Casualty
      segment net underwriting income
              
              $
              47,905
              
              
              
              16,333
              
              
              $
              31,572Ratios:Net
      loss and LAE
              
              
              58.2
              %
              
              
              67.0
              %
              
              (8.8)
      pointsNet
      acquisition expense
              
              
              22.8
              %
              
              
              25.0
              %
              
              (2.2)
      pointsOther
      underwriting expense
              
              
              6.6
              %
              
              
              4.8
              %
              
              1.8
      pointsCombined
              
              
              87.6
              %
              
              
              96.8
              %
              
              (9.2)
      points
  Net
underwriting income increased by $31.6 million in the year ended
December 31, 2009 as compared with the year ended December 31, 2008,
which was primarily the result of improved loss experience relating to the RVI
Contract.  In 2008, we recorded net underwriting losses on the RVI
Contract of $28.1 million, which exhausted the aggregate loss limit on the
contract.  In 2009, we decreased net underwriting losses related to
the RVI Contract by $12.6 million as a result of the improved loss
experience.  Partially offsetting the difference in net underwriting
losses related to the RVI Contract in 2009 as compared with 2008 were net
underwriting losses in 2009 of $9.2 million on an accident and health contract
and incurred losses of $8.9 million on an international casualty contract
related to liability arising from Australian wildfires.
  Net
premiums written decreased by $73.6 million in the year ended December 31, 2009
as compared with the year ended December 31, 2008.  The decrease was
primarily due to decreases in business underwritten in 2008 and 2009 across most
casualty classes and was the result of fewer opportunities that met our
underwriting standards in 2009 than in 2008.  The decrease in net
premiums earned was the result of the decrease in net premiums written in
current and prior years.  Net premiums written and earned were also
affected by changes in the mix of business and the structure of the underlying
reinsurance contracts.
  - 36
-
  Net
losses and LAE decreased by $110.5 million in the year ended December 31, 2009
as compared with the year ended December 31, 2008, which was primarily due to a
decrease in net premiums earned and the effects of the contracts discussed
above.  Net favorable loss development was $73.6 million and $73.2
million in 2009 and 2008, respectively.  Net favorable loss
development and related premium adjustments decreased the net loss and LAE
ratios by 19.0 points and 14.7 points in the years ended December 31, 2009
and 2008, respectively.  Net favorable loss development was primarily
attributable to a level of cumulative losses reported by our ceding companies
that was lower than expected and that, in our judgment, resulted in sufficient
credibility in the loss experience to change our previously selected loss
ratios.  The net loss and LAE ratios were also affected by changes in
the mix of business.
  The
following table sets forth the net favorable (unfavorable) development for the
year ended December 31, 2009 by class of business ($ in
thousands):
 Class
      of Business
              
              Net
      Losses and LAE
              
              
              Net
      Acquisition Expense
              
              
              Net
      Premiums
              
              
              Net
      DevelopmentNorth
      American claims made
              
              $
              19,039
              
              
              
              (705
              )
              
              
              –
              
              
              $
              18,334North
      American clash
              
              
              1,882
              
              
              
              46
              
              
              
              368
              
              
              
              2,296North
      American excess-of-loss occurrence
              
              
              15,613
              
              
              
              (261
              )
              
              
              84
              
              
              
              15,436North
      American umbrella
              
              
              26,349
              
              
              
              4,684
              
              
              
              –
              
              
              
              31,033Accident
      and health
              
              
              (4,714
              )
              
              
              678
              
              
              
              –
              
              
              
              (4,036
              )Financial
      lines
              
              
              9,586
              
              
              
              (157
              )
              
              
              (577
              )
              
              
              8,852International
      casualty
              
              
              6,238
              
              
              
              (258
              )
              
              
              192
              
              
              
              6,172Other
              
              
              (404
              )
              
              
              414
              
              
              
              –
              
              
              
              10Total
              
              $
              73,589
              
              
              
              4,441
              
              
              
              67
              
              
              $
              78,097
  Net
favorable development in the North American claims made class related primarily
to the 2003 and 2005 underwriting years.  Changes in loss development
patterns and initial expected loss ratios contributed approximately $2.8 million
to this net favorable development.  The net favorable development was
partially offset by net unfavorable development in the 2007 underwriting year
arising from claims related to the utilities sector.  Net favorable
development in the North American clash class related primarily to a specific
loss resulting from an explosion in 2005.  Net favorable development
in the North American excess-of-loss occurrence class related primarily to the
2003, 2005 and 2007 underwriting years partially offset by net unfavorable
development in the 2002 and 2008 underwriting years.  The net
favorable development in the 2003 and 2007 underwriting years resulted from
improved loss experience in the current year after adverse experience led us to
increase the selected loss ratio from the initial expected loss ratio in prior
years.  Changes in loss development patterns and initial expected loss
ratios contributed approximately $1.2 million to the net favorable
development.  Net favorable development in the North American umbrella
class related primarily to the 2003 through 2005 underwriting years and included
$0.6 million related to changes in the initial expected loss ratio for the 2008
underwriting year.  The net unfavorable development in the accident
and health class related primarily to the 2007 and 2008 underwriting years and
was partially offset by net favorable development in the 2004 and 2005
underwriting years.  In the financial lines class, net favorable
development related primarily to the 2004 through 2007 underwriting years
partially offset by net unfavorable development in the 2008 underwriting
year.  Net favorable development in the international casualty class
related primarily to the 2006 and prior underwriting years, partially offset by
net unfavorable development in the 2007 and 2008 underwriting
years.
  The
following table sets forth the net favorable (unfavorable) development in the
year ended December 31, 2008 by class of business ($ in
thousands):
 Class
      of Business
              
              Net
      Losses and LAE
              
              
              Net
      Acquisition Expense
              
              
              Net
      Premiums
              
              
              Net
      DevelopmentNorth
      American excess-of-loss claims made
              
              $
              47,014
              
              
              
              (5,505
              )
              
              
              –
              
              
              $
              41,509North
      American umbrella
              
              
              7,290
              
              
              
              (20
              )
              
              
              –
              
              
              
              7,270Financial
      lines
              
              
              10,734
              
              
              
              230
              
              
              
              572
              
              
              
              11,536International
      casualty
              
              
              8,521
              
              
              
              487
              
              
              
              126
              
              
              
              9,134Other
              
              
              (317
              )
              
              
              38
              
              
              
              419
              
              
              
              140Total
              
              $
              73,242
              
              
              
              (4,770
              )
              
              
              1,117
              
              
              $
              69,589
  Net
favorable development in the North American excess-of-loss claims made class
related primarily to the 2003 through 2006 underwriting years.  During
the year an analysis of our medical malpractice business resulted in changes to
the loss development pattern and initial expected loss ratios for the 2004 and
later underwriting years which resulted in $9.2 million of the net favorable
development.  The 2007 underwriting year experienced net unfavorable
development due to exposure to claims relating to the financial
crisis.  Net favorable development in the North American umbrella
class related primarily to the 2004 and 2005 underwriting years.  Net
favorable development in the financial lines class related primarily to the 2004
through 2007 underwriting years’ credit and surety excess-of-loss
classes.  Net favorable development in the international casualty
class related primarily to the 2002 through 2004 underwriting years’ motor
excess of loss and claims made classes partially offset by net unfavorable
development in the 2006 underwriting year.
  - 37
-
  Net
acquisition expenses and related net acquisition expense ratios were $88.8
million and 22.8% for the year ended December 31, 2009 and $125.9 million
and 25.0%, for the year ended December 31, 2008.  The decrease in
net acquisition expenses in 2009 as compared with 2008 was due to the decrease
in net premiums earned.  The decrease in the acquisition expense ratio
was due to a decrease in commissions related to prior years’ losses of $4.4
million, which, with related premium adjustments, represented 1.2% of net earned
premiums in 2009 as compared with an increase of $4.8 million in commissions
which, with related premium adjustments, represented 0.3% of net premiums earned
in 2008.  Net acquisition expense ratios were also impacted by changes
in the mix of business.
  Other
underwriting expenses were $25.6 million and $24.0 million for the years ended
December 31, 2009 and 2008, respectively.  The increase in other
underwriting expenses in 2009 as compared with 2008 was primarily due to an
increase in performance-based compensation accruals.
  Finite
Risk
  The
Finite Risk segment generated 2.7% and 1.4% of our net premiums written for the
years ended December 31, 2009 and 2008, respectively.  Due to the
inverse relationship between losses and commissions for this segment, we believe
it is important to evaluate the overall combined ratio, rather than its
component parts of net loss and LAE ratio and net acquisition expense
ratio.  The following table summarizes underwriting activity and
ratios for the Finite Risk segment for the years ended December 31, 2009
and 2008 ($ in thousands):
 
 2009
              
              
              2008
              
              
              Increase
      (decrease)Net
      premiums written
              
              $
              24,335
              
              
              
              14,394
              
              
              $
              9,941Net
      premiums earned
              
              
              19,947
              
              
              
              12,386
              
              
              
              7,561Net
      losses and LAE
              
              
              1,185
              
              
              
              (16,018
              )Net
      acquisition expenses
              
              
              20,586
              
              
              
              25,965Net
      losses, LAE and acquisition expenses
              
              
              21,771
              
              
              
              9,947
              
              
              
              11,824Other
      underwriting expenses
              
              
              1,412
              
              
              
              1,270
              
              
              
              142Finite
      Risk segment net underwriting income (loss)
              
              $
              (3,236
              )
              
              
              1,169
              
              
              $
              (4,405
              )Ratios:Net
      loss and LAE
              
              
              5.9
              %
              
              
              (129.3
              %)Net
      acquisition expense
              
              
              103.2
              %
              
              
              209.6
              %Net
      loss, LAE and acquisition expense ratios
              
              
              109.1
              %
              
              
              80.3
              %
              
              28.8 pointsOther
      underwriting expense
              
              
              7.1
              %
              
              
              10.3
              %
              
              (3.2)
      pointsCombined
              
              
              116.2
              %
              
              
              90.6
              %
              
              25.6 points
  During
the years ended December 31, 2009 and 2008, the Finite Risk portfolio
consisted of one finite risk contract in force and we expect little or no new
activity in this segment in the foreseeable future due to the relatively low
level of demand expected for finite risk products.  Due to the decline
in the premium volume in recent years, current year ratios may be significantly
impacted by relatively insignificant adjustments of prior years’
business.  The increases in net premiums written and net premiums
earned in 2009 as compared with 2008 were attributable to an increase in our
share of one contract.
  Net
losses, LAE and acquisition expenses increased by $11.8 million in the year
ended December 31, 2009 as compared with the year ended December 31, 2008 which
was primarily due to the increase in net premiums earned and the difference in
net favorable development in 2009 as compared with 2008.  Net
unfavorable development was $2.3 million in 2009 as compared with net favorable
development of $0.4 million in 2008.  Net unfavorable development in
2009 resulted from commission adjustments that were affected by interest income
on funds held by the ceding companies in the year.  Interest income on
funds held that affected commissions was $2.2 million and $1.5 million in 2009
and 2008, respectively.  The net unfavorable development increased the
net loss and LAE and acquisition expense ratio by 11.3 points in 2009 and the
net favorable development decreased the net loss and LAE and acquisition expense
ratio by 3.4 points in 2008.  The net loss, LAE and acquisition
expense ratio was also favorably impacted as a result of premiums recognized in
2008 for which there were no related losses.
  Other
underwriting expenses were $1.4 million and $1.3 million for the years ended
December 31, 2009 and 2008, respectively.  The increase in other
underwriting expenses in 2009 as compared with 2008 was due to an increase in
performance-based compensation accruals.
  - 38
-
  Non-Underwriting
Results
  Net
investment income was $163.9 million and $186.6 million for the years ended
December 31, 2009 and 2008, respectively.  Net investment income
decreased in 2009 as compared with 2008 primarily due to a decrease in yields on
invested assets and cash and cash equivalents.  Net investment income
decreased by $4.2 million and $1.3 million in 2009 and 2008, respectively, for
adjustments related to our U.S. Treasury Inflation-Protected Securities
(“TIPS”), reflecting changes in the consumer price index.
  Net
realized gains on investments were $78.6 million and $57.3 million for the years
ended December 31, 2009 and 2008, respectively.  The following table
sets forth the components of our net realized gains and losses on investments
for the years ended December 31, 2009 and 2008 ($ in
thousands):
 
 2009
              
              
              2008
              
              
              Net
      changeNet
      gains on the sale of investments
              
              $
              80,924
              
              
              
              47,573
              
              
              $
              33,351Net
      gains (losses) from mark-to-market adjustments on trading
      securities
              
              
              (2,294
              )
              
              
              9,681
              
              
              
              (11,975
              )Net
      realized gains on investments
              
              $
              78,630
              
              
              
              57,254
              
              
              $
              21,376
  Sales of
investments for the year ended December 31, 2009 resulted in realized net gains
of $82.2 million primarily from TIPS, U.S. Government agency securities,
corporate bonds, residential mortgage-backed securities (“RMBS”), asset-backed
securities, and non-U.S. government securities and realized net losses of $1.0
million from commercial mortgage-backed securities (“CMBS”).  The U.S.
Government agency securities that we sold consisted of securities issued by
financial institutions under the Temporary Liquidity Guarantee Program and that
are guaranteed by the Federal Deposit Insurance Corporation.  The net
losses from mark-to-market adjustments on trading securities in 2009 were
comprised of net losses of $2.1 million related to non-U.S. dollar denominated
securities and $1.2 million related to TIPS, which were partially offset by net
gains of $1.0 million related to insurance-linked securities.  Sales
of investments for the year ended December 31, 2008 resulted in realized net
gains of $52.0 million primarily from TIPS, U.S. Government securities, U.S.
Government agencies, and RMBS and realized net losses of $4.2 million from
corporate bonds.  The net gains from mark-to-market adjustments on
trading securities in 2008 were comprised of $8.4 million related to non-U.S.
dollar denominated securities and $1.2 million of changes in the fair value of
TIPS.
  Net
impairment losses on investments were $17.6 million and $30.7 million for the
years ended December 31, 2009 and 2008, respectively.  The net
impairment losses in 2009 reflect the portion of other-than-temporary
impairments attributed to the credit losses for the impaired securities in
accordance with FASB Accounting Standards Codification 320, “Investments – Debt
and Equity Securities” (“ASC 320”), which we adopted as of the interim period
ending March 31, 2009.  The net impairment losses in 2008
reflect the entire difference between the amortized cost basis and fair value of
the impaired securities at the balance sheet date.  The net impairment
losses in 2009 included $8.4 million related to non-agency RMBS, $5.3 million
related to sub-prime asset-backed securities, $2.8 million related to CMBS, and
$1.2 million related to perpetual preferred stocks.  The net
impairment losses in 2008 included $10.9 million related to non-agency
residential mortgage-backed securities, $7.6 million related to corporate bonds,
$6.5 million related to Alt-A residential mortgage-backed securities and
sub-prime asset-backed securities, and $5.6 million related to perpetual
preferred stocks.
  The net
changes in the fair value of derivatives were $9.7 million and $14.1 million for
the years ended December 31, 2009 and 2008, respectively.  The
decrease in expense in 2009 as compared with 2008 was due to the expiration of
three derivative contracts that were in effect in 2008.  In 2008, in
addition to the derivative contract with Topiary, we had an additional contract
that provided second event catastrophe protection along with two derivative
contracts that were options to purchase industry loss warranty retrocessional
protection.  See “Financial Condition - Liquidity” below for
additional discussion of Topiary.
  Operating
expenses were $94.7 million and $88.2 million for the years ended
December 31, 2009 and 2008, respectively.  Operating expenses
include $64.4 million and $63.7 million for 2009 and 2008, respectively,
relating to other underwriting expenses.  The remaining $30.3 million
and $24.5 million in 2009 and 2008, respectively, related to costs such as
compensation and other corporate expenses associated with operating as a
publicly-traded company.  The increase in operating expenses was
primarily attributable to an increase in performance-based compensation accruals
in 2009, partially offset by a decrease of $4.3 million in expenses related to
entering into the agreement with Topiary in 2008.
  Net
foreign currency exchange gains for the year ended December 31, 2009 were
$0.4 million compared to net foreign currency exchange losses of $6.8 million
for the year ended December 31, 2008.  We routinely transact
business in currencies other than the U.S. dollar.  The net foreign
currency exchange losses in 2008 were the result of holding more non-U.S. dollar
denominated assets than non-U.S. dollar denominated liabilities, primarily the
Euro and the British pound sterling, as the U.S. dollar strengthened against
those currencies.  In 2009 we held non-U.S. dollar denominated assets
and liabilities in approximately equivalent amounts.
  Interest
expense was $19.0 million for each of the years ended December 31, 2009 and
2008 and was related to our $250.0 million of Series B 7.5% Notes due June 1,
2017 (the "Series B Notes").
  Income
tax expense was $4.3 million and $13.0 million for the years ended
December 31, 2009 and 2008, respectively.  The decrease in income
tax expense for the year ended December 31, 2009 was primarily due to the
decrease in taxable income generated by our subsidiaries that operate in taxable
jurisdictions, which resulted in an effective tax rate of 1.1% in 2009 as
compared to 5.4% in 2008.  The decrease in taxable income was
partially attributable to an increase in in the proportion of assets in Platinum
US that was invested in tax-advantaged municipal bonds.  The effective
tax rate in any given period is primarily driven by the composition of income
before income tax expense from our subsidiaries.  The decrease in the
effective tax rate in 2009 as compared with 2008 was the result of a greater
portion of income before income tax expense being generated by Platinum Holdings
and Platinum Bermuda, which are not subject to corporate income
tax.  In 2009, the percentage of income before income tax expense
derived from Platinum Holdings and Platinum Bermuda was 94.3% as compared with
84.4% in 2008.
  - 39
-
  Year Ended December 31,
2008 as Compared with the Year Ended December 31, 2007
  Net
income and diluted earnings per common share for the years ended
December 31, 2008 and 2007 was as follows ($ in thousands, except earnings
per share):
 
 2008
              
              
              2007
              
              
              Increase
      (decrease)Net
      income
              
              $
              226,240
              
              
              
              356,978
              
              
              $
              (130,738
              )Weighted
      average shares outstanding for diluted earnings per common
      share
              
              
              56,855
              
              
              
              66,404
              
              
              
              (9,549
              )Diluted
      earnings per common share
              
              $
              3.98
              
              
              
              5.38
              
              
              $
              (1.40
              )
  Net
income decreased by $130.7 million for the year ended December 31, 2008 as
compared with 2007.  The decrease was primarily due to a decrease in
net underwriting income of $132.9 million and a decrease in net investment
income of $27.6 million.  These decreases were offset by an increase
in net realized gains on investments of $57.7 million.  Net
underwriting income consists of net premiums earned, less net losses and LAE,
net acquisition expenses and operating costs related to underwriting
operations.
  Diluted
earnings per common share decreased due primarily to the decrease in net
income.  Diluted earnings per common share was also favorably impacted
by the decrease in weighted average shares outstanding.  The weighted
average shares outstanding decreased as a result of repurchasing 7,763,292
common shares during 2008.
  Underwriting
Results
  Net
underwriting income was $90.1 million and $223.0 million for the years ended
December 31, 2008 and 2007, respectively.  The decrease in net
underwriting income was primarily due to an increase in net underwriting losses
arising from major catastrophes in 2008 as compared with 2007.  Net
underwriting losses arising from major catastrophes were $198.0 million and
$38.7 million in 2008 and 2007, respectively.  Net premiums earned
decreased in 2008 as compared with 2007 primarily due to decreases in net
premiums earned across most classes in the Casualty segment, partially offset by
an increase in net premiums earned in the Property and Marine
segment.  The decrease in net underwriting income was partially offset
by an increase in net favorable development.  Net favorable
development was $147.6 million and $77.8 million in 2008 and 2007,
respectively.
  The net
favorable loss development related to prior years emerged from all segments and
was related to both catastrophe and non-catastrophe losses.  The most
significant portion of net favorable development was in the Property and Marine
segment and certain classes in the Casualty segment.  Actual reported
losses in these classes were significantly less than expected and gained
sufficient credibility in the current period to reduce estimated ultimate
losses.
  Property and
Marine
  The
Property and Marine operating segment generated 57.1% and 45.1% of our net
premiums written in 2008 and 2007, respectively.  The following table
summarizes underwriting activity and ratios for the Property and Marine segment
for the years ended December 31, 2008 and 2007 ($ in
thousands):
 
 2008
              
              
              2007
              
              
              Increase
                (decrease)Gross
      premiums written
              
              $
              622,171
              
              
              
              527,142
              
              
              $
              95,029Ceded
      premiums written
              
              
              29,084
              
              
              
              22,132
              
              
              
              6,952Net
      premiums written
              
              
              593,087
              
              
              
              505,010
              
              
              
              88,077Net
      premiums earned
              
              
              599,110
              
              
              
              502,291
              
              
              
              96,819Net
      losses and LAE
              
              
              397,200
              
              
              
              195,398
              
              
              
              201,802Net
      acquisition expenses
              
              
              90,816
              
              
              
              68,351
              
              
              
              22,465Other
      underwriting expenses
              
              
              38,492
              
              
              
              42,422
              
              
              
              (3,930
              )Property
      and Marine segment net underwriting income
              
              $
              72,602
              
              
              
              196,120
              
              
              $
              (123,518
              )Ratios:Net
      loss and LAE
              
              
              66.3
              %
              
              
              38.9
              %
              
              27.4
      pointsNet
      acquisition expense
              
              
              15.2
              %
              
              
              13.6
              %
              
              1.6
      pointsOther
      underwriting expense
              
              
              6.4
              %
              
              
              8.4
              %
              
              (2.0)
      pointsCombined
              
              
              87.9
              %
              
              
              60.9
              %
              
              27.0
      points
  - 40
-
  Net
underwriting income decreased by $123.5 million for the year ended December 31,
2008 as compared with December 31, 2007, which was primarily due to an increase
in net underwriting losses arising from major catastrophes, partially offset by
an increase in net favorable development.  The net underwriting losses
in 2008 arising from major catastrophes, including Hurricanes Gustav and Ike and
Winterstorm Emma, were $198.0 million as compared with $38.7 million in 2007,
which reflects losses from Winterstorm Kyrill and floods in the United
Kingdom.
  Gross
premiums written increased by $95.0 million for the year ended December 31, 2008
as compared with December 31, 2007 primarily due to an increase in North
American crop and excess catastrophe business.  Net premiums written
and net premiums earned in 2008 also included reinstatement premiums of $31.9
million and $28.3 million, respectively, relating to reinsurance contracts that
incurred losses arising from the major catastrophes in 2008.  Net
premiums written and net premiums earned in 2007 included reinstatement premiums
of $5.9 million for net written and earned premiums.  The increase in
ceded premiums written was attributable to the purchase of additional
retrocession protection for our North American property catastrophe
business.
  Net
losses and LAE increased by $201.8 million for the year ended December 31, 2008
as compared with December 31, 2007 due to an increase in losses arising from
major catastrophes, partially offset by an increase in net favorable loss
development.  We had net losses arising from major catastrophes of
$224.9 million in 2008 and $44.6 million in 2007.  The net losses
arising from major catastrophes, with related premium adjustments, increased the
net loss and LAE ratio in 2008 and 2007 by 36.1 points and 8.5 points,
respectively.  Net losses and LAE and the resulting net loss and LAE
ratios were also impacted by net favorable loss development of $71.2 million in
2008 as compared with $48.5 million in 2007.  Net favorable loss
development in 2008 included $21.2 million related to prior years’ major
catastrophes, primarily hurricane losses.  Net favorable loss
development and premium adjustments related to prior years’ losses decreased the
net loss and LAE ratios in 2008 and 2007 by 13.4 and 9.6 points,
respectively.  Exclusive of losses arising from major catastrophes,
net favorable loss development and related premiums, the net loss and LAE ratio
increased by approximately 3.4 points in 2008 as compared with 2007 primarily
due to an increase in crop quota share business that had a higher expected loss
ratio in 2008 than in 2007 as well as a higher loss ratio than the remainder of
the segment.  The net loss and LAE ratios were also affected by other
changes in the mix of business.
  The net
favorable development was $77.6 million for the year ended December 31,
2008.  See “Results of Operations – Year Ended December 31, 2009 as
Compared with the Year Ended December 31, 2008 – Underwriting Results – Property
and Marine” above for discussion of net favorable development by class of
business for the year ended December 31, 2008.
  The
following table sets forth the net favorable (unfavorable) development for the
year ended December 31, 2007 by class of business ($ in
thousands):
 Class
      of Business
              
              Net
      Losses and LAE
              
              
              Net
      Acquisition Expense
              
              
              Net
      Premiums
              
              
              Net
      DevelopmentProperty
      excess-of-loss per risk
              
              $
              7,421
              
              
              
              1,129
              
              
              
              –
              
              
              $
              8,550Catastrophe
      excess-of-loss (non-major events)
              
              
              12,015
              
              
              
              80
              
              
              
              –
              
              
              
              12,095Major
      catastrophes
              
              
              17,164
              
              
              
              –
              
              
              
              (178
              )
              
              
              16,986Crop
              
              
              6,303
              
              
              
              (178
              )
              
              
              –
              
              
              
              6,125Marine,
      aviation and satellite
              
              
              (1,427
              )
              
              
              471
              
              
              
              –
              
              
              
              (956
              )Property
      proportional
              
              
              7,032
              
              
              
              (3,179
              )
              
              
              –
              
              
              
              3,853Total
              
              $
              48,508
              
              
              
              (1,677
              )
              
              
              (178
              )
              
              $
              46,653
  Net
favorable development in the property excess-of-loss per risk class was
primarily related to the North American risk business in the 2004 through 2006
underwriting years.  Net favorable development in the catastrophe
excess-of-loss (non-major events) class was primarily related to the 2005 and
2006 underwriting years.  Net favorable development in major
catastrophes was primarily related to Hurricanes Katrina, Rita and
Wilma.  Net favorable development in the crop class was primarily
related to the 2004 through 2006 underwriting years.  Net unfavorable
development in the marine, aviation and satellite class was primarily related to
marine business in the 2003 and 2005 underwriting years, partially offset by
favorable experience in 2004 underwriting year.  Net favorable
development in the property proportional class was primarily related to the 2005
and prior underwriting years.
  Net
acquisition expenses and related ratios were $90.8 million and 15.2% for the
year ended December 31, 2008 and $68.4 million and 13.6% for the year ended
December 31, 2007.  The increase in net acquisition expenses in
2008 as compared with 2007 was primarily due to an increase in net premiums
earned.  The increase in the net acquisition expense ratio in 2008 as
compared with 2007 was due in part to higher commission rates in the crop and
marine classes in the 2008 underwriting year as compared with
2007.  Net acquisition expenses and the related net acquisition
expense ratio were also affected by commissions related to prior
years.  The increase in the acquisition expense ratio was due to an
increase in commissions related to prior years were $5.1 million in 2008 which,
with related premium adjustments, represented 0.6% of net premiums earned and
net decrease of $1.7 million in 2007 which, with related premium adjustments,
represented 0.3% of net premiums earned.  Net acquisition expense
ratios were also impacted by changes in the mix of business.
  Other
underwriting expenses were $38.5 million and $42.4 million for the years ended
December 31, 2008 and 2007, respectively.  The decrease in 2008
as compared with 2007 was primarily due to a decrease in performance-based
compensation accruals in 2008 and the expiration on September 30, 2007 of a
five-year Services and Capacity Reservation Agreement with Renaissance Re
pursuant to which Renaissance Re provided consulting services to us in
connection with our property catastrophe book of business (the “RenRe
Agreement”).  In 2007, we incurred fees of $7.8 million pursuant to
RenRe Agreement.  Partially offsetting this decrease in 2008 was $4.3
million of fees and expenses related to a derivative contract we entered into
with Topiary that provides us with catastrophe loss protection.  See
“Financial Condition – Liquidity” for additional discussion of
Topiary.
  - 41
-
  Casualty
  The
Casualty operating segment generated 41.5% and 52.2% of our net premiums written
for the years ended December 31, 2008 and 2007,
respectively.  The following table summarizes underwriting activity
and ratios for the Casualty segment for the years ended December 31, 2008
and 2007 ($ in thousands):
 
 2008
              
              
              2007
              
              
              Increase
                (decrease)Net
      premiums written
              
              $
              430,084
              
              
              
              584,605
              
              
              $
              (154,521
              )Net
      premiums earned
              
              
              503,300
              
              
              
              637,856
              
              
              
              (134,556
              )Net
      losses and LAE
              
              
              337,051
              
              
              
              444,701
              
              
              
              (107,650
              )Net
      acquisition expenses
              
              
              125,934
              
              
              
              145,969
              
              
              
              (20,035
              )Other
      underwriting expenses
              
              
              23,982
              
              
              
              29,194
              
              
              
              (5,212
              )Casualty
      segment net underwriting income
              
              $
              16,333
              
              
              
              17,992
              
              
              $
              (1,659
              )Ratios:Net
      loss and LAE
              
              
              67.0
              %
              
              
              69.7
              %
              
              (2.7)
      pointsNet
      acquisition expense
              
              
              25.0
              %
              
              
              22.9
              %
              
              2.1
      pointsOther
      underwriting expense
              
              
              4.8
              %
              
              
              4.6
              %
              
              0.2
      pointsCombined
              
              
              96.8
              %
              
              
              97.2
              %
              
              (0.4)
      points
  Net
premiums written decreased by $154.5 million for the year ended December 31,
2008 as compared with December 31, 2007.  The decrease was primarily
due to decreases in business underwritten in 2008 and 2007 across most North
American casualty classes, with the most significant decreases in the umbrella,
occurrence based excess-of-loss and accident and health classes.  The
decrease in business written was the result of fewer opportunities that met our
underwriting standards.  The decrease in net premiums earned was the
result of the decrease in net premiums written in current and prior
years.  Net premiums written and earned were also affected by changes
in the mix of business and the structure of the underlying reinsurance
contracts.
  Net
losses and LAE decreased by $107.7 million for the year ended December 31, 2008
as compared with December 31, 2007 which was primarily due to a decrease in net
premiums earned and an increase in net favorable loss
development.  Net favorable loss development was $73.2 million in 2008
and $19.5 million in 2007.  Net favorable loss development in 2008
included $58.4 million from certain long-tailed casualty classes.  Net
favorable loss development and related premium adjustments decreased the net
loss and LAE ratios by 14.7 and 3.1 points in 2008 and 2007,
respectively.  Additionally, the net loss and LAE ratio increased by
5.8% in 2008 as compared with 2007 due to $35.8 million of losses in 2008
related to the RVI Contract.  Exclusive of net favorable loss
development and the RVI Contract, the net loss and LAE ratio increased in 2008
as compared with 2007 due to higher initial expected loss ratios in certain
significant classes reflecting a decline in price adequacy.  The net
loss and LAE ratios were also affected by changes in the mix of
business.
  The net
favorable development was $69.6 million for the year ended December 31,
2008.  See “Results of Operations – Year Ended December 31, 2009 as
Compared with the Year Ended December 31, 2008 – Underwriting Results –
Casualty” above for discussion of net favorable development by class of business
for the year ended December 31, 2008.
  The
following table sets forth the net favorable (unfavorable) development in the
year ended December 31, 2007 by class of business ($ in
thousands):
 Class
      of Business
              
              Net
      Losses and LAE
              
              
              Net
      Acquisition Expense
              
              
              Net
      Premiums
              
              
              Net
      DevelopmentNorth
      American claims made
              
              $
              18,327
              
              
              
              5,510
              
              
              
              –
              
              
              $
              23,837North
      American clash
              
              
              (5,025
              )
              
              
              319
              
              
              
              –
              
              
              
              (4,706
              )North
      American excess-of-loss occurrence
              
              
              (23,009
              )
              
              
              (1,079
              )
              
              
              –
              
              
              
              (24,088
              )North
      American umbrella
              
              
              11,303
              
              
              
              31
              
              
              
              –
              
              
              
              11,334Financial
      lines
              
              
              8,016
              
              
              
              743
              
              
              
              –
              
              
              
              8,759International
      casualty
              
              
              9,364
              
              
              
              (383
              )
              
              
              –
              
              
              
              8,981Other
              
              
              498
              
              
              
              (229
              )
              
              
              –
              
              
              
              269Total
              
              $
              19,474
              
              
              
              4,912
              
              
              
              –
              
              
              $
              24,386
  - 42
-
  Net
favorable development in the North American claims made class was primarily
related to the 2003 underwriting year.  Net unfavorable development in
the North American clash class was primarily related to two large claims in the
2005 underwriting year.  Net unfavorable development in North American
excess-of-loss occurrence class was primarily related to construction related
exposures in the 2003 through 2005 underwriting years.  Changes to
initial expected loss ratios in the construction related exposures amounted to
$17.3 million of the net unfavorable development.  Net favorable
development in the North American umbrella class was related to changes in
initial expected loss ratio on the 2003 through 2005 underwriting
years.  Net favorable development in the financial lines class was
primarily related to the political risk and surety business in the 2004 and 2005
underwriting years.  Net favorable development in the international
casualty class was primarily related to 2002 through 2004 underwriting
years.  Changes in loss development patterns and initial expected loss
ratios in the motor excess and excess claims made business contributed
approximately $2.3 million to net favorable development.
  Net
acquisition expenses and related ratios were $125.9 million and 25.0% for the
year ended December 31, 2008 and $146.0 million and 22.9% for the year ended
December 31, 2007.  The decrease in net acquisition expenses in
2008 as compared with 2007 was due to the decrease in net premiums
earned.  The increase in the net acquisition expense ratio in 2008 as
compared with 2007 was due to differences in commissions relating to prior years
and to deteriorating terms and conditions that generally resulted in higher
commission and brokerage rates.  Net acquisition expenses in 2008
included an increase in commissions relating to prior years of $4.8 million,
representing 0.9% of net premiums earned as compared with a decrease of $4.9
million in 2007, representing 0.8% of net premiums earned.  Net
acquisition expense ratios were also impacted by changes in the mix of
business.
  Other
underwriting expenses were $24.0 million and $29.2 million for the years ended
December 31, 2008 and 2007, respectively.  The decrease in other
underwriting expenses in 2008 as compared with 2007 was primarily due to a
decrease in performance-based compensation accruals.
  Finite
Risk
  The
Finite Risk segment generated 1.4% and 2.7% of our net premiums written for the
years ended December 31, 2008 and 2007, respectively.  The
following table summarizes underwriting activity and ratios for the Finite Risk
segment for the years ended December 31, 2008 and 2007 ($ in
thousands):
 
 2008
              
              
              2007
              
              
              Increase
      (decrease)Net
      premiums written
              
              $
              14,394
              
              
              
              30,192
              
              
              $
              (15,798
              )Net
      premiums earned
              
              
              12,386
              
              
              
              32,941
              
              
              
              (20,555
              )Net
      losses and LAE
              
              
              (16,018
              )
              
              
              15,388Net
      acquisition expenses
              
              
              25,965
              
              
              
              6,010Net
      losses, LAE and acquisition expenses
              
              
              9,947
              
              
              
              21,398
              
              
              
              (11,451
              )Other
      underwriting expenses
              
              
              1,270
              
              
              
              2,696
              
              
              
              (1,426
              )Finite
      Risk segment net underwriting income
              
              $
              1,169
              
              
              
              8,847
              
              
              $
              (7,678
              )Ratios:Net
      loss and LAE
              
              
              (129.3
              %)
              
              
              46.7
              %Net
      acquisition expense
              
              
              209.6
              %
              
              
              18.2
              %Net
      loss, LAE and acquisition expense ratios
              
              
              80.3
              %
              
              
              65.0
              %
              
              15.3
      pointsOther
      underwriting expense
              
              
              10.3
              %
              
              
              8.2
              %
              
              2.1
      pointsCombined
              
              
              90.6
              %
              
              
              73.2
              %
              
              17.4
      points
  The
Finite Risk portfolio consists of one finite risk contract in force for 2008 and
two contracts in force for 2007 and we expect little or no new activity in this
segment in the foreseeable future due to the relatively low level of demand
expected for finite risk products.  The decreases in net premiums
written and net premiums earned in 2008 as compared with 2007 reflect the
continuing reduction in the demand for finite business.
  Net
losses, LAE and acquisition expenses decreased by $11.5 million for the year
ended December 31, 2008 as compared with December 31, 2007 which was primarily
due to the decrease in net premiums earned.  The increase in the net
loss, LAE and acquisition expense ratio was primarily due to the decrease in net
favorable development in 2008 as compared with 2007.  Net favorable
development was $0.4 million and $6.7 million in 2008 and 2007,
respectively.  Net favorable development and related premium
adjustments decreased the net loss and LAE ratios in 2008 and 2007 by 3.4 points
and 20.5 points, respectively.  Net favorable development in 2008
included $20.2 million in negative losses and LAE, which was substantially
offset by increased acquisition expenses relating to prior years.  Net
favorable development in 2007 was primarily related to surety and accident and
health business in the 2004 and 2005 underwriting years.  Exclusive of
net favorable development, the decrease in the net loss, LAE and acquisition
expense ratio was the result of the expiration of a contract that experienced
greater than expected loss activity in 2007 and premium adjustments relating to
prior years for which there were no related losses.
  - 43
-
  Other
underwriting expenses were $1.3 million and $2.7 million for the years ended
December 31, 2008 and 2007, respectively.  The decrease in other
underwriting expenses in 2008 as compared with 2007 was due to a decline in
underwriting activity in the segment and a lower percentage of underwriting
expenses allocated to the segment.
  Non-Underwriting
Results
  Net
investment income was $186.6 million and $214.2 million for the years ended
December 31, 2008 and 2007, respectively.  Net investment income
decreased in 2008 as compared with 2007 primarily due to a decrease in yields on
invested assets and cash and cash equivalents.  Net investment income
included interest earned on funds held of $3.5 million and $5.3 million in 2008
and 2007, respectively.
  Net
realized gains on investments were $57.3 milllion for the year ended December
31, 2008 and net realized losses on investments were $0.4 million for the year
ended December 31, 2007.  The following table sets forth the
components of our net realized gains and losses on investments for the years
ended December 31, 2008 and 2007 ($ in thousands):
  2008
              
              
              2007
              
              
              Net
      changeNet
      gains (losses) on the sale of investments
              
              $
              47,573
              
              
              
              (1,806
              )
              
              $
              49,379Net
      gains from mark-to-market adjustments on trading
securities
              
              
              9,681
              
              
              
              1,393
              
              
              
              8,288Net
      realized gains (losses) on investments
              
              $
              57,254
              
              
              
              (413
              )
              
              $
              57,667
  Sales of
investments for the year ended December 31, 2008 resulted in realized net gains
of $52.0 million primarily from TIPS, U.S. Government securities, U.S.
Government agencies, and RMBS, and realized net losses of $4.2 million for
corporate bonds.  The net gains from mark-to-market adjustments on
trading securities in 2008 were comprised of $8.5 million related to non-U.S.
dollar denominated securities and $1.2 million related to TIPS.  The
non-U.S. dollar denominated securities in our trading portfolio included
primarily European government and U.K. government bonds where yields decreased
resulting in an increase in fair value.
  Net
impairment losses on investments were $30.7 million and $0.8 million for the
years ended December 31, 2008 and 2007, respectively.  The net
impairment losses in 2008 included $10.9 million related to non-agency
residential mortgage-backed securities, $7.6 million related to corporate bonds,
$6.5 million related to Alt-A residential mortgage-backed securities and
sub-prime asset-backed securities, and $5.6 million related to perpetual
preferred stocks.  The net impairment losses of $0.8 million in 2007
related to corporate bonds.
  The net
changes in the fair value of derivatives were $14.1 million and $5.0 million for
the years ended December 31, 2008 and 2007, respectively.  The
net changes in fair value of derivatives in 2008 were due to four derivative
contracts in place during 2008 compared with two derivative contracts during
2007.
  Operating
expenses were $88.2 million and $103.6 million for the years ended
December 31, 2008 and 2007, respectively.  Operating expenses
include $63.7 million and $74.3 million for 2008 and 2007, respectively,
relating to other underwriting expenses.  The remaining $24.5 million
and $29.3 million in 2008 and 2007, respectively, related to costs such as
compensation and other corporate expenses associated with operating as a
publicly traded company.  The decrease in 2008 as compared with 2007
was due, in part, to the RenRe Agreement, under which we incurred fees of $7.8
million in 2007.  Additionally, performance-based compensation
decreased in 2008 by $8.5 million as compared with 2007.  Offsetting
these decreases in 2008 were one-time fees and expenses of $4.3 million related
to the derivative agreement with Topiary.
  Net
foreign currency exchange losses for the year ended December 31, 2008 were
$6.8 million compared to net foreign currency exchange gains of $2.8 million for
the year ended December 31, 2007.  The net foreign currency
exchange losses in 2008 were the result of holding more non-U.S. dollar
denominated assets than non-U.S. dollar denominated liabilities, primarily the
Euro and the British pound sterling, as the U.S. dollar strengthened against
those currencies.
  Interest
expense was $19.0 million and $21.5 million for the years ended
December 31, 2008 and 2007, respectively, and was primarily related to our
$250.0 million of Series B Notes.  The decrease in interest expense
was the result of a reduction in our debt obligations outstanding in 2008 as
compared with 2007.  Interest expense for 2007 also included interest
related to $42.8 million of Series B 6.371% Senior Guaranteed Notes due
November 16, 2007, which were repaid when they came due in November
2007.
  Income
tax expense was $13.0 million and $23.8 million for the years ended
December 31, 2008 and 2007, respectively.  The decrease in
taxable income in 2008 as compared with 2007 was due to the decrease in taxable
income generated by our subsidiaries that operate in taxable jurisdictions,
which resulted in an effective tax rate of 5.4% in 2008 as compared with 6.3% in
2007.  The decrease in the effective tax rate was the result of a
greater portion of income, in 2008 as compared with 2007, being generated by
Platinum Holdings and Platinum Bermuda, which are not subject to corporate
income tax.  In 2008, the percentage of income before income tax
expense derived from Platinum Holdings and Platinum Bermuda was 84.4% as
compared with 79.8% in 2007.
  - 44
-
  Financial
Condition
  Liquidity
  Liquidity
Requirements
  Our
principal cash requirements are the payment of losses and LAE, commissions,
brokerage, operating expenses, taxes and dividends to our common shareholders,
the servicing of debt, and the purchase of retrocessional
contracts.  We expect that our liquidity needs for the next twelve
months will be met by our cash and cash equivalents, short-term investments,
cash flows from operations, investment income and proceeds from the sale,
redemption or maturity of our investments.
  Platinum
Holdings is a holding company, the assets of which consist primarily of shares
of its subsidiaries.  Platinum Holdings depends primarily on its
available cash resources and liquid investments, and dividends, interest and
other distributions from its subsidiaries, to meet its
obligations.  Such obligations may include operating expenses, debt
service obligations, dividends on its common shares and repurchases of common
shares or other securities.  Applicable laws and statutory
requirements of the jurisdictions in which our regulated reinsurance
subsidiaries operate, including Bermuda and the United States, limit the payment
of dividends and other distributions from these subsidiaries.  Based
on the regulatory restrictions of the applicable jurisdictions, we estimate the
maximum amount available for payment of dividends or other distributions by our
reinsurance subsidiaries without prior regulatory approval in 2010 to be $431.0
million.  The ability of our reinsurance subsidiaries to pay dividends
is also constrained by our dependence on the financial strength ratings by A.M.
Best and S&P of our reinsurance subsidiaries, which depend to a large extent
on the capitalization levels of the reinsurance subsidiaries.  We
believe that Platinum Holdings has sufficient cash resources and its
subsidiaries have available dividend capacity to service our current outstanding
obligations.  Platinum Holdings received dividends from its
subsidiaries of $255.0 million during the year ended December 31,
2009.
  Platinum
Holdings has unconditionally guaranteed the outstanding $250.0 million aggregate
principal amount of the Series B Notes due June 1, 2017, issued by Platinum
Finance.  Platinum Finance pays interest at a rate of 7.5% per annum
on the Series B Notes on each June 1 and December 1.
  Platinum
Bermuda is not licensed, approved or accredited as a reinsurer anywhere in the
United States and, therefore, under the terms of most of its contracts with U.S.
ceding companies, it is required to provide collateral to its ceding companies
for unpaid ceded liabilities in a form acceptable to state insurance
commissioners.  Typically, this type of collateral takes the form of
letters of credit issued by a bank, the establishment of a trust, or funds
withheld.  Platinum Bermuda provides letters of credit through our
credit facility and may be required to provide the banks with a security
interest in certain investments of Platinum Bermuda.
  Platinum
Bermuda and Platinum US have reinsurance and other contracts that also require
them to provide collateral to ceding companies should certain events occur, such
as a decline in our rating by A.M. Best below specified levels or a decline in
statutory equity below specified amounts, or when certain levels of ceded
liabilities are attained.  Some reinsurance contracts also have
special termination provisions that permit early termination should certain
events occur.  As of December 31, 2009 and 2008, we held
investments with a carrying value of $275.5 million and $155.4 million,
respectively, and cash and cash equivalents of $26.8 million and $224.8 million,
respectively, in trust to collateralize obligations under our reinsurance
contracts.  As of December 31, 2009 and 2008, we held investments
with a carrying value of $206.5 million and $140.3 million, respectively, and
cash and cash equivalents of $17.0 million and $83.4 million, respectively, to
collateralize letters of credit issued under our credit facility.  The
letters of credit were issued primarily to collateralize obligations under
various reinsurance contracts.
  In August
2008, we entered into a derivative agreement with Topiary that provides us with
the ability to recover up to $200.0 million should two catastrophic events
involving U.S. wind, U.S. earthquake, European wind or Japanese earthquake occur
that meet specified loss criteria during any of three annual periods commencing
August 1, 2008.  Both the initial activation event and the
qualifying second event must occur in the same annual period.  The
maximum amount that we can recover over the three-year period is $200.0
million.  Any recovery we make under this contract is based on insured
property industry loss estimates for U.S. perils and European wind and a
parametric index for Japanese earthquake events.  Recovery is based on
both a physical and financial variable and is not based on actual losses we may
incur.  Consequently, the transaction is accounted for as a derivative
and the derivative is carried at the estimated net fair value.
  Under the
terms of the agreement, we pay to Topiary approximately $9.7 million during each
of the three annual periods.  The net derivative liability of $4.7
million was included in other liabilities on our consolidated balance
sheet.  The net change in fair value of $9.7 million was included in
the change in fair value of derivatives in our consolidated statement of
operations.
  Topiary’s
limit of loss is collateralized with high quality investment grade securities in
a secured collateral account.  The performance of the securities in
the collateral account is guaranteed under a total swap agreement with Goldman
Sachs International whose obligations under the swap agreement are guaranteed by
Goldman Sachs Group, Inc.
  Sources
of Liquidity
  Our
sources of funds consist primarily of cash from operations, proceeds from sales,
redemption and maturity of investments, issuance of securities and cash and cash
equivalents held by us.  Net cash flows provided by operations
excluding trading security activities for the year ended December 31, 2009 were
$269.0 million as compared with $276.0 million for the year ended December 31,
2008.  In addition, we have a $400.0 million credit facility with a
syndicate of lenders that consists of a $150.0 million senior unsecured credit
facility available for revolving borrowings and letters of credit and a $250.0
million senior secured credit facility available for letters of
credit.  As of December 31, 2009, $150.0 million was available
for borrowing and letters of credit on an unsecured basis and $105.9 million was
available for letters of credit on a secured basis under the credit
facility.  As of December 31, 2008, $150.0 million was available
for borrowing on letters of credit on an unsecured basis and $68.7 million was
available for letters of credit on a secured basis under the credit
facility.
  - 45
-
  On a
consolidated basis, our aggregate cash and invested assets totaled $4.4 billion
and $4.3 billion at December 31, 2009 and 2008,
respectively.  Additionally, we had net balances due from brokers
related to the sale of securities of $123.3 million and $20.3 million at
December 31, 2009 and December 31, 2008, respectively, which are included in
other assets and other liabilities.  Our investment portfolio consists
primarily of diversified, high quality, predominantly publicly-traded fixed
maturity securities.  The investment portfolio, excluding cash and
cash equivalents and short term investments, had a duration of 4.3 years and 3.2
years as of December 31, 2009 and 2008, respectively.
  As part
of our investment strategy, we seek to establish a level of cash and liquid
short-term and intermediate-term securities which, combined with expected cash
flow from our subsidiaries, we believe to be adequate to meet our foreseeable
payment obligations.  Our reinsurance subsidiaries have liquidity from
premiums, which are generally received in advance of the time losses are
paid.  The period of time from the occurrence of a claim through the
settlement of the liability may extend many years into the
future.  However, due to the nature of our reinsurance operations,
cash flows are affected by claim payments that can fluctuate from year to
year.  The amount and timing of actual claim payments can vary based
on many factors, including the severity of individual losses, changes in the
legal environment, and general market conditions.  The ultimate amount
and timing of the claim payments could differ materially from our estimates and
create significant variations in cash flows from operations between periods,
which may cause us to make payments from other sources of liquidity, such as
sales of investments, borrowings from credit facilities or proceeds from capital
market transactions.  If we need to sell investments to meet liquidity
requirements, the sale of such investments may be at a material
loss.
  As of
December 31, 2009, the fair value of our available-for-sale securities was
$3.5 billion with a net unrealized loss of $74.0 million.  The
following table sets forth the fair values, net unrealized gains and losses and
average credit quality of our fixed maturity securities as of December 31,
2009 ($ in thousands):
 
 Fair
      Value
              
              
              Net
      Unrealized Gain (Loss)
              
              
              Average
      Credit QualityAvailable-for-sale
    securities:U.S.
      Government
              
              $
              608,697
              
              
              $
              (5,527
              )
              
              AaaU.S.
      Government agencies
              
              
              101,082
              
              
              
              1,082
              
              
              AaaCorporate:Industrial
              
              
              286,580
              
              
              
              11,560
              
              
              
              A3Finance
              
              
              42,947
              
              
              
              (1,280
              )
              
              
              A3Utilities
              
              
              50,343
              
              
              
              1,377
              
              
              
              A3Insurance
              
              
              52,301
              
              
              
              1,877
              
              
              
              A3Preferreds
      with maturity date
              
              
              27,760
              
              
              
              (3,913
              )
              
              Baa1Hybrid
      trust preferreds
              
              
              17,055
              
              
              
              (275
              )
              
              
              A1Mortgage-backed
      and asset-backed securities:Commercial
      mortgage-backed securities
              
              
              215,020
              
              
              
              (28,156
              )
              
              Aa1U.S.
      Government agency residential mortgage-backed securities
              
              
              613,182
              
              
              
              339
              
              
              AaaNon-agency
      residential mortgage-backed securities
              
              
              93,744
              
              
              
              (44,962
              )
              
              
              A3Alt-A
      residential mortgage-backed securities
              
              
              7,777
              
              
              
              (8,012
              )
              
              
              B1Asset-backed
      securities
              
              
              50,024
              
              
              
              1,024
              
              
              AaaSub-prime
      asset-backed securities
              
              
              9,675
              
              
              
              (25,721
              )
              
              Ba3Municipal
      bonds
              
              
              759,501
              
              
              
              14,824
              
              
              Aa3Non-U.S.
      governments
              
              
              578,364
              
              
              
              9,734
              
              
              AaaTotal
      fixed maturity available-for-sale securities
              
              
              3,514,052
              
              
              
              (76,029
              )
              
              Aa2Preferred
      stocks
              
              
              3,897
              
              
              
              2,018
              
              
              
              B3Total
      available-for-sale securities
              
              
              3,517,949
              
              
              
              (74,011
              )
              
              Aa2Trading securities:U.S.
      Government agencies
              
              
              16,423
              
              
              
              n/a
              
              
              AaaInsurance-linked
      securities
              
              
              25,682
              
              
              
              n/a
              
              
              Ba3Non-U.S.
      dollar denominated corporate bonds
              
              
              77
              
              
              
              n/a
              
              
              Baa2Non-U.S.
      dollar denominated, non-U.S. governments
              
              
              100,384
              
              
              
              n/a
              
              
              Aa1Total
      trading securities
              
              
              142,566
              
              
              
              
              
              
              Aa3Total
              
              $
              3,660,515
              
              
              $
              (74,011
              )
              
              Aa2
  - 46
-
  The net
unrealized loss position of our portfolio of CMBS was $28.2 million as of
December 31, 2009 as compared with $105.5 million as of December 31,
2008.  This decrease in unrealized loss was primarily attributable to
a narrowing of interest rate spreads during 2009.  We analyze our CMBS
on a periodic basis using default loss models based on the performance of the
underlying loans.  Performance metrics include delinquencies,
defaults, foreclosures, debt-service-coverage ratios and cumulative losses
incurred.  The expected losses for a mortgage pool are compared to the
current level of subordination, which generally represents the point at which
our security would experience losses.  We evaluate projected cash
flows as well as other factors in order to determine if a credit impairment has
occurred.  Our portfolio consists primarily of senior tranches of CMBS
with high credit ratings, strong subordination and low loan-to-value
ratios.
  The net
unrealized loss position of our portfolio of RMBS was $52.6 million as of
December 31, 2009 as compared with $51.7 million as of December 31,
2008.  Approximately 86% of the RMBS in our investment portfolio are
issued or guaranteed by the Government National Mortgage Association, the
Federal National Mortgage Association, or the Federal Home Loan Mortgage
Corporation and are referred to as U.S. Government agency RMBS.  The
remaining 14% of our RMBS were issued by non-agency institutions and include
securities with underlying Alt-A mortgages.  The net unrealized loss
position of our portfolio of sub-prime asset-backed securities was $25.7 million
as of December 31, 2009 as compared with $25.9 million as of
December 31, 2008.  We analyze our RMBS and sub-prime
asset-backed securities on a periodic basis using default loss models based on
the performance of the underlying loans.  Performance metrics include
delinquencies, defaults, foreclosures, prepayment speeds and cumulative losses
incurred.  The expected losses for a mortgage pool are compared to the
current level of subordination, which generally represents the point at which
our security would experience losses.  We evaluate projected cash
flows as well as other factors in order to determine if a credit impairment has
occurred.
  Overall,
we believe that the gross unrealized loss in our available-for-sale portfolio
represents temporary declines in fair value and is not necessarily predictive of
ultimate performance.  We also believe that the provisions we have
made for other-than-temporary impairments are adequate.  However,
economic conditions may deteriorate more than expected and may adversely affect
the expected cash flows of our securities, which in turn may lead to impairment
losses recorded in future periods.
  Fair
Values
  Our
derivative instruments, which are included in other liabilities in the
consolidated balance sheets, are priced at fair value, primarily using
unobservable inputs through the application of our own assumptions and internal
valuation pricing models.  Our debt obligations are priced at fair
value from independent sources for those or similar securities.
  The
following table presents the carrying amounts and estimated fair values of our
financial instruments as of December 31, 2009 ($ in
thousands):
 
 Carrying
                Amount
              
              
              Fair
      ValueFinancial assets:Fixed
      maturity securities
              
              $
              3,656,618
              
              
              $
              3,656,618Preferred
      stocks
              
              
              3,897
              
              
              
              3,897Short-term
      investments
              
              
              26,350
              
              
              
              26,350Financial liabilities:Debt
      obligations
              
              $
              250,000
              
              
              $
              245,000Derivative
      instruments
              
              
              4,677
              
              
              
              4,677
  Capital
Resources
  At
December 31, 2009, our capital resources of $2.3 billion consisted of
common shareholders’ equity of $2.1 billion and $250.0 million of the Series B
Notes.  At December 31, 2008, our capital resources of $2.1
billion consisted of common shareholders’ equity of $1.6 billion, $250.0 million
of the Series B Notes, and $167.5 million of preferred share
equity.  The increase in capital during year ended December 31, 2009
was primarily attributable to net income from operations and an increase in the
fair value of our investment portfolio, offset by share repurchase
activity.  On February 17, 2009, our 5,750,000 outstanding 6% Series A
Mandatory Convertible Preferred Shares converted into 5,750,000 common shares at
a ratio of one-to-one, based on the volume-weighted average price of $29.90 of
our common shares from January 14, 2009 through February 11, 2009.
  We
monitor our capital adequacy on a regular basis and seek to adjust our capital
according to the needs of our business.  In particular, we require
capital sufficient to meet or exceed: (1) the capital adequacy ratios
established by rating agencies for maintenance of appropriate financial strength
ratings, (2) the surplus requirements established by our ceding companies, and
(3) the capital adequacy tests performed by regulatory
authorities.  We actively manage our capital and may seek to raise
additional capital or return capital to our shareholders through common share
repurchases and cash dividends (or a combination of such methods).  We
may also seek to manage our capital through repurchases of our outstanding debt
in open market purchases, privately negotiated transactions or
otherwise.  Such repurchases, if any, will depend on prevailing market
conditions, our liquidity requirements, contractual restrictions or other
factors.
  - 47
-
  To the
extent that our existing capital is insufficient to fund our future operating
requirements or maintain our financial strength or debt ratings, we may need to
raise additional capital through financings, which may be in the form of debt
securities, preferred shares, common equity, bank credit facilities providing
loans and/or letters of credit, or any combination of these
sources.  Any equity or debt financing, if available at all, may be on
terms that are unfavorable to us.  In the case of equity financings,
dilution to our shareholders could result, and such securities may have rights,
preferences and privileges that are senior to those of our outstanding
securities.  If we are not able to obtain adequate capital, our
business, results of operations and financial condition could be adversely
affected, which could include, among other things, the following possible
outcomes: (1) potential downgrades in the financial strength ratings assigned by
ratings agencies to our reinsurance subsidiaries, which could place those
reinsurance subsidiaries at a competitive disadvantage compared to higher-rated
competitors, (2) reductions in the amount of business that our reinsurance
subsidiaries are able to write in order to meet capital adequacy-based tests
enforced by regulatory authorities, and (3) increases in the cost of bank credit
and letters of credit.  We can provide no assurance that, if needed,
we would be able to obtain additional funds through financing on satisfactory
terms or at all.
  In
accordance with the share repurchase program authorized by our board of
directors, we purchased 7,852,498 of our common shares
in the open market at an aggregate amount of $252.3 million at a
weighted average cost including commissions of $32.13 per share during
the year ended December 31, 2009.  Our board of directors has
authorized the repurchase of up to $250.0 million of our common shares through
the share repurchase program.  Since the program was established in
2004, our board has monitored the level of share repurchase activity and
periodically restored the repurchase authority under the program to $250.0
million, most recently on February 22, 2010.  Our board of directors
has also authorized the repurchase of up to $250.0 million of our outstanding
Series B Notes issued by Platinum Finance in open market purchases, privately
negotiated transactions or otherwise.  We did not repurchase any
Series B Notes.  The timing and amount of the repurchase transactions
under these programs depends on a variety of factors, including market
conditions, our liquidity requirements, contractual restrictions, corporate and
regulatory considerations and other factors.
  We do not
have any material commitments for capital expenditures as of December 31,
2009.
  Off-Balance Sheet
Arrangements
  We do not
have any off-balance sheet arrangements, as defined for purposes of SEC rules,
which are not accounted for or disclosed in the consolidated financial
statements as of December 31, 2009.
  Contractual
Obligations
  Our
contractual obligations as of December 31, 2009 by estimated maturity are
presented below ($ in thousands):
 
 Contractual
      Obligations
              
              Total
              
              
              Less
      than 1 year
              
              
              1 –
      3years
              
              
              3 –
      5Years
              
              
              More
      than 5 yearsSeries
      B Notes due
                June 1,
      2017 (1)
              
              $
              250,000
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              $
              250,000Scheduled
      interest payments
              
              
              140,625
              
              
              
              18,750
              
              
              
              37,500
              
              
              
              37,500
              
              
              
              46,875Subtotal
      – Debt Obligations
              
              
              390,625
              
              
              
              18,750
              
              
              
              37,500
              
              
              
              37,500
              
              
              
              296,875Operating
      Leases (2)
              
              
              8,878
              
              
              
              2,818
              
              
              
              4,609
              
              
              
              1,451
              
              
              
              –Gross
      unpaid losses and LAE (3)
              
              $
              2,349,336
              
              
              
              672,334
              
              
              
              683,992
              
              
              
              390,260
              
              
              $
              602,750
 
 (1)
              See
      Note 7 of the Notes to the Consolidated Financial
    Statements.
 (2)
              See
      Note 14 of the Notes to the Consolidated Financial
    Statements.
 (3)
              There
      are generally no notional or stated amounts related to unpaid losses and
      LAE.  Both the amounts and timing of future loss and LAE
      payments are estimates and subject to the inherent variability of legal
      and market conditions affecting the obligations and make the timing of
      cash outflows uncertain.  The ultimate amount and timing of
      unpaid losses and LAE could differ materially from the amounts in the
      table above.  Further, the gross unpaid losses and LAE do not
      represent all of the obligations that will arise under the contracts, but
      rather only the estimated liability incurred through December 31,
      2009.  There are reinsurance contracts that have terms extending
      into 2010 under which additional obligations will be
    incurred.
  Recently
Issued Accounting Standards
  See Note
1 to the Consolidated Financial Statements contained elsewhere in this Form 10-K
for a discussion of recently issued accounting standards.
  - 48
-
  Item 7A.
              Quantitative
      and Qualitative Disclosures about Market
Risk
  We
believe that we are principally exposed to the following types of market
risk:  interest rate risk, credit risk, liquidity risk and foreign
currency exchange rate risk.
  Interest
Rate Risk
  We are
exposed to fluctuations in interest rates.  Changes in overall
interest rates, generally measured by changes in the yield on risk free
investments such as U.S. Treasury securities, will influence the fair values of
our fixed maturity securities portfolio.  Rising interest rates
generally result in a decrease in the fair value of our fixed maturity
securities portfolio.  Conversely, a decline in interest rates will
generally result in an increase in the fair value of our fixed maturity
securities portfolio.  Interest rate changes can also impact the
timing of receipt of principal payments from mortgage-backed
securities.
  The
following table shows the aggregate hypothetical impact on the fair value of our
fixed maturity securities portfolio as of December 31, 2009, resulting from
an immediate parallel shift in the treasury yield curve ($ in
thousands):
 
 Interest
      Rate Shift in Basis Points-
      100bp
              
              
              
              -
      50bp
              
              
              Current
              
              
              
              +
      50bp
              
              
              
              +
      100bpTotal
      market value
              
              $
              3,807,027
              
              
              
              3,734,812
              
              
              
              3,656,618
              
              
              
              3,576,524
              
              
              $
              3,496,696Percent
      change in market value
              
              
              4.1
              %
              
              
              2.1
              %
              
              
              –
              
              
              
              (2.2
              %)
              
              
              (4.4
              %)Resulting
      unrealized appreciation (depreciation)
              
              $
              80,520
              
              
              
              8,305
              
              
              
              (69,889
              )
              
              
              (149,983
              )
              
              $
              (229,811
              )
  Credit
Risk
  Fixed Maturity
Securities
  Our
principal invested assets are fixed maturity securities, which are subject to
the risk of potential losses from adverse changes in market rates and prices and
credit risk resulting from adverse changes in the borrower’s ability to meet its
debt service obligations.  Credit risk is often measured by interest
rate spreads representing the difference between the yield of a debt instrument
and that of a U.S. Treasury security of similar maturity.  As the
credit worthiness of a debt issuer declines, the interest rate spreads increase
which has the same effect on fair value as an increase in overall interest
rates.  An increase or widening of interest rate spreads generally
results in a decrease in the fair value of our fixed maturity securities
portfolio.
  We manage
credit risk by the selection of securities within our fixed maturity securities
portfolio.  Changes in credit spreads directly affect the market value
of certain fixed maturity securities, but do not necessarily result in a change
in the future expected cash flows associated with holding individual
securities.  Other factors, including liquidity, supply and demand,
and changing risk preferences of investors, may affect market credit spreads
without any change in the underlying credit quality of the
security.
  Reinsurance Premiums
Receivable
  Reinsurance
premiums receivable from ceding companies are subject to credit
risk.  To mitigate credit risk related to reinsurance premiums
receivable, we have established standards for ceding companies and, in most
cases, have a contractual right of offset thereby allowing us to settle claims
net of any such reinsurance premiums receivable.  We also have
reinsurance recoverable amounts from our retrocessionaires.  To
mitigate credit risk related to our reinsurance recoverable amounts, we consider
the financial strength of our retrocessionaires when determining whether to
purchase coverage from them.  Retrocessional coverage is obtained from
companies with a financial strength rating of “A-“ or better by A.M. Best or
from retrocessionaires whose obligations are fully collateralized for exposures
where losses become known and are paid in a relatively short period of
time.  The financial performance and rating status of all material
retrocessionnaires are routinely monitored.
  Reinsurance
Brokers
  In
accordance with industry practice, we frequently pay amounts in respect of
claims under contracts to reinsurance brokers for payment over to the ceding
companies.  In the event that a broker fails to make such a payment,
depending on the jurisdiction, we may remain liable to the ceding company for
the payment.  Conversely, in certain jurisdictions, when ceding
companies remit premiums to reinsurance brokers, such premiums are deemed to
have been paid to us and the ceding company is no longer liable to us for those
amounts whether or not we actually receive the funds.  Consequently,
we assume a degree of credit risk associated with our brokers during the premium
and loss settlement process.  To mitigate credit risk related to
reinsurance brokers, we have established guidelines for brokers.
  Liquidity
Risk
  When
financial markets experience a reduction in liquidity, our ability to conduct
orderly investment transactions may be limited and may result in declines in
fair values of the securities in our investment portfolio.  In
addition, if we require significant amounts of cash on short notice in excess of
normal cash requirements (which could include claims on a major catastrophic
event) in a period of market illiquidity, we may have difficulty selling our
investments in a timely manner and may have to dispose of our investments for
less than what may otherwise have been possible under other
conditions.
  - 49
-
  Foreign
Currency Exchange Rate Risk
  We
operate on a worldwide basis and routinely transact business in various
currencies other than the U.S. dollar, our financial reporting
currency.  Consequently, our principal exposure to foreign currency
exchange rate risk is the transaction of business in foreign
currencies.  Changes in foreign currency exchange rates can impact
revenues, costs, receivables and liabilities, as measured in the U.S.
dollar.  We manage our exposure to large foreign currency risks by
holding invested assets denominated in non-U.S. dollar currencies in amounts
that generally offset liabilities denominated in the same non-U.S. dollar
currencies, thereby reducing our net exposure to foreign exchange
volatility.  We may, from time to time, hold more or less non-U.S.
dollar denominated assets than non-U.S. dollar liabilities.  As of
December 31, 2009 and 2008, 3.9% and 3.7%, respectively, of our total
investments and cash and cash equivalents were denominated in currencies other
than the U.S. dollar.  Of our business written in the years ended
December 31, 2009 and 2008, approximately 13.2% and 13.5%, respectively, of
premiums were written in currencies other than the U.S. dollar.
  Item 8.
              Financial
      Statements and Supplementary Data
  Our
consolidated financial statements as of December 31, 2009 and 2008 and for
each of the three years in the period ended December 31, 2009, together
with the reports thereon by KPMG, our independent registered public accounting
firm for the year ended December 31, 2009 and KPMG LLP, our independent
registered public accounting firm for the years ended December 31, 2008 and
2007, are set forth on pages F-1 through F-35 hereto.
  Item 9.
              Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure
  None.
  Item 9A.
              Controls
      and Procedures
  Disclosure
Controls and Procedures
  Our
management, including the Chief Executive Officer and Chief Financial Officer,
carried out an evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures (as such term is defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period
covered by this Form 10-K.  Based on that evaluation, our management,
including the Chief Executive Officer and Chief Financial Officer, concluded
that our disclosure controls and procedures are effective to provide reasonable
assurance that information required to be disclosed by us in reports that we
file or submit under the Exchange Act is recorded, processed, summarized and
timely reported as specified in the SEC’s rules and forms.
  Management’s
Annual Report on Internal Control Over Financial Reporting
  Our
management, including the Chief Executive Officer and Chief Financial Officer,
is responsible for establishing and maintaining adequate internal control over
financial reporting (as such term is defined in Rules 13a-15(f) and 15(d)-15(f)
under the Exchange Act).  Our management, under the supervision and
with the participation of the Chief Executive Officer and Chief Financial
Officer, conducted an evaluation of the effectiveness of our internal control
over financial reporting as of December 31, 2009 based on the integrated
framework published in September 1992 by the Committee of Sponsoring
Organizations of the Treadway Commission.  Based on this evaluation,
our management, including the Chief Executive Officer and Chief Financial
Officer, concluded that our internal control over financial reporting was
effective in that it provides reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with accounting principles generally accepted in the
United States of America and includes those policies and procedures that provide
reasonable assurance that transactions are recorded as necessary and that
expenditures are being made only with proper authorization.  KPMG, the
independent registered public accounting firm that audited our consolidated
financial statements included in this Form 10-K, has issued an attestation
report on our internal control over financial reporting, which appears
below.
  Our
management, including the Chief Executive Officer and Chief Financial Officer,
does not expect that our disclosure controls and procedures or our internal
control over financial reporting will prevent all error and all
fraud.  A control system, no matter how well conceived and operated,
can provide only reasonable, not absolute, assurance that the objectives of the
control system are met.  Further, the design of a control system must
reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs.  Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within the Company have been detected.
  Changes
in Internal Control over Financial Reporting
  No
changes occurred during the quarter ended December 31, 2009 in our internal
control over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
 
 - 50
-
 
 REPORT
OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
 
 The Board
of Directors and Shareholders
 Platinum
Underwriters Holdings, Ltd.:
 
 We have
audited Platinum Underwriters Holdings, Ltd. and subsidiaries’ internal control
over financial reporting as of December 31, 2009, based on criteria
established in Internal
Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).  The Company’s
management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal
control over financial reporting, included in the accompanying December 31,
2009 annual report on Form 10-K.  Our responsibility is to express an
opinion on the Company’s internal control over financial reporting based on our
audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects.  Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk.  Our
audit also included performing such other procedures as we considered necessary
in the circumstances.  We believe that our audit provides a reasonable
basis for our opinion.
 
 A
company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.  A company's internal
control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial
statements.
 
 Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
 
 In our
opinion, Platinum Underwriters Holdings, Ltd. maintained, in all material
respects, effective internal control over financial reporting as of
December 31, 2009, based on criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
 
 We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheet of Platinum
Underwriters Holdings, Ltd. and subsidiaries as of December 31, 2009, and
the related consolidated statements of operations and comprehensive income,
shareholders’ equity and cash flows for the year ended December 31, 2009
and our report dated February 24, 2010 expressed an unqualified opinion on
those consolidated financial statements.
 
 
 /s/
KPMG
 
 Hamilton,
Bermuda
 February 24,
2010
  - 51
-
  Item 9B.
              Other
      Information
  None.
  PART
III
  Item 10.
              Directors,
      Executive Officers and Corporate
Governance
  The
information required by this Item relating to our directors, executive officers
and corporate governance is incorporated herein by reference to information
included under the headings “Proposal 1 – Election of Directors – Information
Concerning Nominees,” “Corporate Governance – Standing Committees of the Board
of Directors – Governance Committee-Director Nomination Process,” “Information
Concerning Executive Officers,” “Corporate Governance – Standing Committees of
the Board of Directors – Audit Committee,” and “Section 16(a) Beneficial
Ownership Reporting Compliance” of our definitive proxy statement to be filed
pursuant to Regulation 14A of the Exchange Act for our 2010 Annual General
Meeting of Shareholders (our “Proxy Statement”).  We intend to file
the Proxy Statement prior to April 30, 2010.
  Code
of Ethics
  We have
adopted a written Code of Ethics within the meaning of Item 406 of Regulation
S-K of the Exchange Act.  Our Code of Ethics applies to all of our
directors and employees including, without limitation, our principal executive
officer, our principal financial officer, our principal accounting officer and
all of our employees performing financial or accounting functions.  A
copy of our Code of Ethics is posted on our website at www.platinumre.com
and may be found under the “Investor Relations” section by clicking on
“Corporate Governance.”  In the event that we make any amendment to,
or grant any waiver from, a provision of our Code of Ethics that requires
disclosure under Item 5.05 of Form 8-K, in addition to filing a Form 8-K we will
post such information on our website at the location specified
above.  We will provide, without charge, a copy of our Code of Ethics
to any person submitting such request to our corporate secretary at our
principal executive offices.
  Item 11.
              Executive
      Compensation
  The
information required by this Item relating to executive compensation is
incorporated herein by reference to information included under the headings
“Executive Compensation,” “Corporate Governance – Compensation Committee
Interlocks and Insider Participation,” and “Compensation Committee Report” of
our Proxy Statement.
  Item 12.
              Security
      Ownership of Certain Beneficial Owners and Management and Related
      Shareholder Matters
  The
information required by this Item relating to security ownership of certain
beneficial owners and management and related shareholder matters is incorporated
herein by reference to information included under the heading “Security
Ownership of Certain Beneficial Owners and Management” of our Proxy
Statement.
  Equity
Based Compensation Information
  The
following table summarizes information as of December 31, 2009 relating to
our equity based compensation plans pursuant to which grants of options,
restricted shares, share appreciation rights, share units or other rights to
acquire shares may be granted from time to time.
 
 Plan
      Category
              
              (a)
                Number
      of Securities to be Issued upon Exercise of Outstanding Options, Warrants
      and Rights (2)
              
              
              (b)
                Weighted
      Average Exercise Price of Outstanding Options, Warrants and Rights
      (3)
              
              
              (c)
                Number
      of Securities Remaining Available for Future Issuance under Equity
      Compensation Plans (excluding securities reflected in column
      (a))Equity
      compensation plans approved by security holders (1)
              
              
              3,251,054
              
              
              $
              31.12
              
              
              
              1,221,479Equity
      compensation plans not approved by security holders
              
              
              —
              
              
              
              —
              
              
              
              —Total
              
              
              3,251,054
              
              
              $
              31.12
              
              
              
              1,221,479
  (1)
              These
      plans consist of the 2002 Share Incentive Plan, which was approved by our
      shareholders at the 2004 Annual General Meeting of Shareholders; the 2006
      Share Incentive Plan, which was approved by our shareholders at the 2006
      Annual General Meeting of Shareholders; and the Share Unit Plan for
      Nonemployee Directors, which was approved by our sole shareholder prior to
      our initial public offering in 2002.  The 2006 Share Incentive
      Plan replaced the 2002 Share Incentive Plan and no shares remain available
      for issuance under the 2002 Share Incentive
  Plan.
  (2)
              Column
      (a) includes outstanding options, restricted share units, and equity
      accounted performance share awards.  Performance share awards
      are reflected at the maximum potential payout.  In addition, a
      total of 229,017 unvested restricted shares are excluded from column (a)
      as those shares are considered issued at the time of
      grant.  Unvested restricted shares are also excluded from column
      (c) as they are no longer available for future
  issuance.
  (3)
              Restricted
      share units and performance share awards are excluded from column (b) as
      there is no consideration due upon vesting of these
  awards.
  - 52
-
  Item 13.
              Certain
      Relationships and Related Transactions, and Director
      Independence
  The
information required by this Item relating to certain relationships and related
transactions and director independence is incorporated by reference to
information contained under the headings “Transactions with Related Persons” and
“Corporate Governance – Independence of Directors” of our Proxy
Statement.
  Item 14.
              Principal
      Accountant Fees and Services
  The
information required by this Item relating to principal accountant fees and
services is incorporated herein by reference to information contained under the
heading “Proposal 5 – Approval of Independent Registered Public Accounting Firm
for the 2010 Fiscal Year” of our Proxy Statement.
  PART
IV
  Item 15.
              Exhibits
      and Financial Statement Schedules
  Financial
Statements
  Our
consolidated financial statements as of December 31, 2009 and 2008 and for
each of the years in the three-year period ended December 31, 2009,
together with the reports thereon by KPMG our independent registered public
accounting firm for the year ended December 31, 2009 and KPMG LLP, our
independent registered public accounting firm for the years ended December 31,
2008 and 2007, are set forth on pages F-1 through F-35 hereto.
  Schedules
Supporting Financial Statements
  The
schedules relating to our consolidated financial statements as of
December 31, 2009 and 2008 and for each of the three years in the period
ended December 31, 2009, together with the independent registered public
accounting firms’ reports thereon, are set forth on pages S-1 through S-9
hereto.  Schedules not referred to have been omitted as inapplicable
or not required by Regulation S-X or information required is provided elsewhere
in the consolidated financial statements.
  Exhibits
 
 Exhibit
      Number
              
              Description2.1
              
              Formation
      and Separation Agreement dated October 28, 2002 between The St. Paul
      Companies, Inc. and Platinum Holdings. (2)3(i).1
              
              Memorandum
      of Association of Platinum Holdings. (1)3(ii).1
              
              Bye-Laws
      of Platinum Holdings. (26)3(ii).2
              
              Certificate
      of Designation of 6% Series A Mandatory Convertible Preferred Shares of
      Platinum Holdings dated December 1, 2005. (21)4.1
              
              Form
      of Certificate of the Common Shares of Platinum Holdings. (2)4.2
              
              Indenture
      dated October 10, 2002 among Platinum Holdings, Platinum Finance and
      JP Morgan Chase. (2)4.3
              
              Indenture
      Supplement dated November 1, 2002 among Platinum Holdings, Platinum
      Finance and JP Morgan Chase. (2)4.4
              
              Second
      Supplemental Indenture dated August 16, 2005 between Platinum Holdings,
      Platinum Finance and JP Morgan Chase. (17)4.5
              
              Indenture
      dated May 26, 2005 between Platinum Holdings, Platinum Finance and JP
      Morgan Chase. (15)4.6
              
              First
      Supplemental Indenture dated May 26, 2005 between Platinum Holdings,
      Platinum Finance and JP Morgan Chase. (15)4.7
              
              Second
      Supplemental Indenture dated as of November 2, 2005 among Platinum
      Finance, Platinum Holdings and JP Morgan Chase. (19)4.8
              
              Purchase
      Contract Agreement dated November 1, 2002 between Platinum Holdings
      and JP Morgan Chase. (2)4.9
              
              Form
      of Senior Note of Platinum Finance. (2)4.10
              
              Form
      of Guarantee of Platinum Holdings. (2)4.11
              
              Exchange
      and Registration Rights Agreement dated May 26, 2005 among
      Platinum  Holdings, Platinum Finance and Goldman, Sachs &
      Co. (15)4.12
              
              Exchange
      and Registration Rights Agreement dated August 16, 2005 between Platinum
      Holdings, Platinum Finance, and Goldman, Sachs & Co. and Merrill
      Lynch. (17)4.13
              
              Transfer
      Restrictions, Registration Rights and Standstill Agreement dated
      November 1, 2002 between Platinum Holdings and RenaissanceRe. (2)4.14
              
              Amendment
      No. 1 dated December 5, 2005 to the Transfer Restrictions,
      Registration Rights and Standstill Agreement dated November 1, 2002
      between Platinum Holdings and RenaissanceRe. (21)4.15
              
              Assignment
      and Assumption Agreement dated October 23, 2008 of the Transfer
      Restrictions, Registration Rights and Standstill Agreement dated November
      1, 2002 as amended December 5, 2005 between Platinum Holdings and
      RenaissanceRe. (40)10.1*
              
              Amended
      and Restated Share Unit Plan for Nonemployee Directors. (42)10.2*
              
              Amendment
      of Amended and Restated Share Unit Plan for Nonemployee Directors. (41)10.3*
              
              Form
      of Nonemployee Director Share Unit Award Agreement. (22)10.4*
              
              Summary
      of Platinum Holdings’ Nonemployee Director Compensation Program. (41)  - 53
-
  10.5*
              
              2002
      Share Incentive Plan (2004 Update). (5)10.6*
              
              2002
      Share Incentive Plan (UK Sub-Plan) (included in Exhibit 10.3). (5)10.7*
              
              2006
      Share Incentive Plan. (28)10.8
      *
              
              Amended
      and Restated Annual Incentive Plan. (25)10.9*
              
              Form
      of AIP Restricted Share Unit Award Agreement. (33)10.10*
              
              Section
      162(m) Performance Incentive Plan.10.11*
              
              Executive
      Retirement Savings Plan. (5)10.12*
              
              Amendment
      of Executive Retirement Savings Plan. (41)10.13*
              
              Arrangement
      for Compensation in Lieu of Participation in Executive Retirement Savings
      Plan. (41)10.14*
              
              Amended
      and Restated Executive Bonus Deferral Plan. (38)10.15*
              
              Executive
      Incentive Plan (for awards for 2005 – 2009 performance cycle). (5)10.16*
              
              First
      Amendment to the Executive Incentive Plan (for awards for 2005 – 2009
      performance cycle). (7)10.17*
              
              Form
      of Amendment to EIP Award Agreement for 2005 – 2009 performance cycle.
      (38)10.18*
              
              Amended
      and Restated Executive Incentive Plan. (38)10.19*
              
              Form
      of EIP Share Unit Award Agreement (for awards for 2006 – 2008 and
      2007-2009 performance cycles). (22)10.20*
              
              Form
      of EIP Share Unit Award Agreement (for awards for 2008 – 2010 performance
      cycle). (34)10.21*
              
              Form
      of EIP Share Unit Award Agreement. (39)10.22*
              
              Capital
      Accumulation Plan. (2)10.23*
              
              Form
      of Nonqualified Share Option Agreement (Employee) (for awards made prior
      to July 23, 2008). (10)10.24*
              
              Form
      of Nonqualified Share Option Agreement (Employee). (39)10.25*
              
              Form
      of Nonqualified Share Option Agreement (New Nonemployee Director). (10)10.26*
              
              Form
      of Nonqualified Share Option Agreement (Annual Nonemployee Director).
      (10)10.27*
              
              Form
      of Time-Based Share Unit Award Agreement (for awards made prior to July
      23, 2008). (10)10.28*
              
              Form
      of Time-Based Share Unit Award Agreement. (39)10.29*
              
              Form
      of Special Share Unit Award Agreement. (10)10.30*
              
              Form
      of Restricted Share Award Agreement (for awards made prior to July 23,
      2008). (10)10.31*
              
              Form
      of Restricted Share Award Agreement. (38)10.32*
              
              Amended
      and Restated Change in Control Severance Plan. (38)10.33*
              
              Retention
      Bonus Plan. (35)10.34*
              
              Amended
      and Restated Employee Severance Plan. (38)10.35*
              
              Employment
      Agreement dated November 1, 2005 between Platinum Holdings and
      Michael E. Lombardozzi. (20)10.36*
              
              Letter
      Agreement dated March 3, 2008 between Platinum Holdings, Steven H. Newman,
      SHN Enterprises, Inc. and Platinum US, and exhibits thereto. (36)10.37*
              
              Employment
      Agreement dated July 24, 2008 between Michael D. Price and Platinum
      Holdings. (38)10.38*
              
              Amendment,
      dated October 29, 2009, to Employment Agreement dated July 24, 2008
      between Michael D. Price and Platinum Holdings. (43)10.39*
              
              Separation
      Agreement dated June 1, 2007 between Joseph F. Fisher and Platinum
      Holdings. (31)10.40*
              
              Employment
      Agreement dated February 26, 2006 between Platinum Bermuda and Robert
      S. Porter. (22)10.41*
              
              Letter
      Agreement dated July 25, 2006 between H. Elizabeth Mitchell and Platinum
      US. (23)10.42*
              
              Employment
      Agreement dated June 1, 2007 between Platinum Holdings and James A.
      Krantz. (31)10.43
              
              Capital
      Support Agreement dated November 26, 2002 between Platinum Holdings
      and Platinum US. (2)10.44
              
              Amended
      and Restated Option Agreement dated January 10, 2005 among St. Paul
      Reinsurance Company Limited, Platinum Holdings and St. Paul. (9)10.45
              
              Assignment,
      effective April 1, 2008, among Platinum Holdings, The Travelers Companies,
      Inc. (formerly St. Paul) and Unionamerica Insurance Company Limited of
      Amended and Restated Option Agreement dated January 10, 2005 among St.
      Paul Reinsurance Company Limited, Platinum Holdings, and St. Paul. (37)10.46
              
              Amended
      and Restated Option Agreement dated January 10, 2005 between St. Paul and
      Platinum Holdings. (9)10.47
              
              Investment  Management
      Agreement dated May 12, 2005 between Platinum US and Hyperion Capital
      Management, Inc. (12)10.48
              
              Investment  Management
      Agreement dated May 12, 2005 between Platinum Bermuda and Hyperion
      Capital Management, Inc. (12)10.49
              
              Investment
      Management Agreement dated May 12, 2005 between Platinum Holdings,
      Platinum Bermuda, Platinum Regency and BlackRock Financial Management,
      Inc. (12)10.50
              
              Investment
      Management Agreement dated May 12, 2005 between Platinum UK and
      BlackRock Financial Management, Inc. (12)10.51
              
              Investment
      Management Agreement dated May 12, 2005 between Platinum US, Platinum
      Finance and BlackRock Financial Management, Inc. (12)10.52
              
              Investment
      Agreement dated September 20, 2002 among Platinum Holdings, St. Paul, and
      RenaissanceRe. (2)10.53
              
              First
      Amendment dated November 1, 2002 to the Investment Agreement dated
      September 20, 2002 among Platinum Holdings, St. Paul, and RenaissanceRe.
      (2)10.54
              
              Amended
      and Restated Option Agreement dated October 23, 2008 between Platinum
      Holdings, RenaissanceRe and Renaissance Other Investments Holdings II Ltd.
      (40)10.55
              
              Services
      and Capacity Reservation Agreement dated November 1, 2002 between
      Platinum Holdings and RenaissanceRe. (2)10.56
              
              Quota
      Share Retrocession Agreement dated November 26, 2002 between Platinum
      Bermuda and Platinum UK. (2)10.57
              
              Quota
      Share Retrocession Agreement dated March 27, 2003 between Platinum Bermuda
      and Platinum UK. (5)10.58
              
              Addendum
      No. 1 effective April 1, 2003 to the Quota Share Retrocession Agreement
      dated March 27, 2003 between Platinum Bermuda and Platinum UK. (5)10.59
              
              Addendum
      No. 2 effective March 27, 2003 to the Quota Share Retrocession Agreement
      dated March 27, 2003 between Platinum Bermuda and Platinum UK. (5)  - 54
-
  10.60
              
              Addendum
      No. 3 effective April 1, 2005 to the Quota Share Reinsurance Agreement
      dated March 27, 2003 between Platinum Bermuda and Platinum UK. (11)10.61
              
              Security
      Agreement dated November 26, 2002 between Platinum Bermuda and
      Platinum UK. (2)10.62
              
              Addendum
      No. 1 effective January 1, 2004 to the Security Agreement dated
      November 26, 2002 between Platinum Bermuda and Platinum UK. (5)10.63
              
              Control
      Agreement dated November 26, 2002 among Platinum Bermuda, Platinum UK
      and State Street Bank. (2)10.64
              
              Discretionary
      Investment Advisory Agreement dated November 26, 2002 between
      Platinum Bermuda and Platinum UK. (2)10.65
              
              Trust
      Agreement effective January 1, 2003 among Platinum Bermuda, Platinum US
      and State Street Bank. (3)10.66
              
              Amendment
      No. 1 effective October 3, 2007 to Trust Agreement effective January 1,
      2003 among Platinum Bermuda, Platinum US and State Street Bank. (32)10.67
              
              Quota
      Share Retrocession Agreement dated May 13, 2003 between Platinum
      Bermuda and Platinum US. (3)10.68
              
              Addendum
      No. 1 dated as of October 1, 2003 to the Quota Share Retrocession
      Agreement dated May 13, 2003 between Platinum Bermuda and Platinum
      US. (4)10.69
              
              Quota
      Share Retrocession Agreement dated May 6, 2004 between Platinum
      Bermuda and Platinum US. (6)10.70
              
              Addendum
      No. 2 effective as of April 1, 2005 to the Quota Share Retrocession
      Agreement between Platinum Bermuda and Platinum US. (13)10.71
              
              Amended
      and Restated Quota Share Retrocession Agreement dated January 1, 2006
      between Platinum Bermuda and Platinum US. (26)10.72
              
              Termination
      Addendum effective December 31, 2006 to Amended and Restated Quota
      Share Retrocession Agreement dated January 1, 2006 between Platinum
      Bermuda and Platinum US. (29)10.73
              
              Casualty
      and Specialty Quota Share Retrocession Agreement between Platinum Bermuda
      and Platinum US dated as of January 1, 2007. (29)10.74
              
              Termination
      Addendum effective December 31, 2007 to Casualty and Specialty Quota Share
      Retrocession Agreement between Platinum Bermuda and Platinum US dated as
      of January 1, 2007. (37)10.75
              
              Quota
      Share Retrocession Agreement by and between Platinum Bermuda and Platinum
      UK dated as of January 1, 2006. (27)10.76
              
              Excess
      of Loss Retrocession Agreement by and between Platinum Bermuda and
      Platinum US dated as of April 1, 2006. (27)10.77
              
              Addendum
      No. 1 effective as of February 15, 2007 to the Excess of Loss
      Retrocession Agreement by and between Platinum Bermuda and Platinum US
      dated as of April 1, 2006. (30)10.78
              
              Excess
      of Loss Retrocession Agreement by and between Platinum Bermuda and
      Platinum US dated January 1, 2008.(35)10.79
              
              Termination
      Addendum effective August 5, 2008 to Excess of Loss Retrocession Agreement
      by and between Platinum Bermuda and Platinum US dated January 1, 2008.
      (40)10.80
              
              Excess
      of Loss Retrocession Agreement by and between Platinum US and Platinum
      Bermuda dated August 5, 2008. (40)10.81
              
              Excess
      of Loss Retrocession Agreement by and between Platinum US and Platinum
      Bermuda dated August 5, 2009. (44)10.82
              
              Excess
      of Loss Retrocession Agreement effective as of April 1, 2005 between
      Platinum US and Platinum UK. (13)10.83
              
              Amended
      and Restated Credit Agreement, dated as of September 13, 2006, by and
      among the Company, certain subsidiaries of the Company, Wachovia Bank,
      National Association, Citibank, N.A., HSBC Bank USA, National Association,
      Bayerische Hypo-Und Vereinsbank AG and Comerica Bank as the Lenders, and
      Wachovia Bank, National Association, as Administrative Agent. (24)10.84
              
              List
      of Contents of exhibits and Schedules to the Amended and Restated Credit
      Agreement. (24)10.85
              
              First
      Amendment and Waiver dated as of April 24, 2007 to Amended and Restated
      Credit Agreement dated as of September 13, 2006. (30)10.86
              
              Second
      Amendment dated as of December 3, 2007 to Amended and Restated Credit
      Agreement dated as of September 13, 2006. (33)10.87
              
              Referral
      Agreement between Platinum Bermuda and Renaissance Underwriting Managers
      Ltd. (3)10.88
              
              Referral
      Agreement between Platinum US and Renaissance Underwriting Managers Ltd.
      (4)10.89
              
              Guaranty
      dated December 31, 2003 between Platinum Holdings and Platinum US.
      (4)10.90
              
              Amendment
      No. 1 dated January 1, 2005 to Guaranty dated December 31, 2003
      between Platinum Holdings and Platinum US. (16)10.91
              
              Guarantee
      dated December 31, 2003 between Platinum Holdings and Platinum UK.
      (4)10.92
              
              Purchase
      Agreement dated May 20, 2005 among Platinum Holdings, Platinum
      Finance and Goldman, Sachs & Co. (14)10.93
              
              Remarketing
      Agreement dated August 8, 2005 among Platinum Holdings, Platinum Finance,
      Goldman, Sachs & Co. and Merrill Lynch. (16)10.94
              
              Pledge
      Agreement dated November 1, 2002 among Platinum Holdings, State
      Street Bank and Trust Company and JP Morgan Chase. (2)14.1
              
              Code
      of Business Conduct and Ethics. (38)21.1
              
              Subsidiaries
      of Platinum Holdings.23.1
              
              Consent
      of Independent Registered Public Accounting Firm - KPMG, a Bermuda
      partnership.23.2
              
              Consent
      of Independent Registered Public Accounting Firm - KPMG
    LLP.31.1
              
              Certification
      of Michael D. Price, Chief Executive Officer of Platinum Holdings,
      pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange
      Act of 1934, as amended.31.2
              
              Certification
      of James A. Krantz, Chief Financial Officer of Platinum Holdings, pursuant
      to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of
      1934, as amended.32.1
              
              Certification
      of Michael D. Price, Chief Executive Officer of Platinum Holdings,
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of
      the Sarbanes-Oxley Act of 2002.32.2
              
              Certification
      of James A. Krantz, Chief Financial Officer of Platinum Holdings, pursuant
      to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the
      Sarbanes-Oxley Act of 2002.
 
 *  
Items denoted with an asterisk represent management contracts or compensatory
plans or arrangements.
 _______________________
 (1)
              Incorporated
      by reference from the Registration Statement on Form S-1 (Registration No.
      333-86906) of Platinum Holdings.
  (2)
              Incorporated
      by reference from Platinum Holdings’ Annual Report on Form 10-K for the
      year ended December 31, 2002, filed with the SEC on March 31,
      2003.
  (3)
              Incorporated
      by reference from Platinum Holdings’ Quarterly Report on Form 10-Q for the
      quarter ended June 30, 2003, filed with the SEC on August 14,
      2003.
  (4)
              Incorporated
      by reference from Platinum Holdings’ Annual Report on Form 10-K for the
      year ended December 31, 2003, filed with the SEC on March 15,
      2004.
  (5)
              Incorporated
      by reference from Platinum Holdings’ Quarterly Report on Form 10-Q for the
      quarter ended March 31, 2004, filed with the SEC on May 10,
      2004.
  (6)
              Incorporated
      by reference from Platinum Holdings’ Quarterly Report on Form 10-Q for the
      quarter ended June 30, 2004, filed with the SEC on August 6,
      2004.
  (7)
              Incorporated
      by reference from Platinum Holdings’ Current Report on Form 8-K filed with
      the SEC on November 9, 2004.
  (8)
              Incorporated
      by reference from Platinum Holdings’ Current Report on Form 8-K, filed
      with the SEC on November 18,
2004.
  (9)
              Incorporated
      by reference from Platinum Holdings’ Current Report on Form 8-K, filed
      with the SEC on January 11, 2005.
  (10)
              Incorporated
      by reference from Platinum Holdings’ Current Report on Form 8-K, filed
      with the SEC on February 23,
2005.
  - 55
-
  (11)
              Incorporated
      by reference from Platinum Holdings’ Current Report on Form 8-K, filed
      with the SEC on April 14, 2005.
  (12)
              Incorporated
      by reference from Platinum Holdings’ Current Report on Form 8-K, filed
      with the SEC on May 13, 2005.
  (13)
              Incorporated
      by reference from Platinum Holdings’ Current Report on Form 8-K, filed
      with the SEC on May 18, 2005.
  (14)
              Incorporated
      by reference from Platinum Holdings’ Current Report on Form 8-K, filed
      with the SEC on May 24, 2005.
  (15)
              Incorporated
      by reference from Platinum Holdings’ Current Report on Form 8-K, filed
      with the SEC on May 27, 2005.
  (16)
              Incorporated
      by reference from Platinum Holdings’ Quarterly Report on Form 10-Q for the
      quarter ended June 30, 2005, filed with the SEC on August 5,
      2005.
  (17)
              Incorporated
      by reference from Platinum Holdings’ Current Report on Form 8-K, filed
      with the SEC on August 17, 2005.
  (18)
              Incorporated
      by reference from Platinum Holdings’ Current Report on Form 8-K, filed
      with the SEC on October 28, 2005.
  (19)
              Incorporated
      by reference from Platinum Holdings’ Current Report on Form 8-K, filed
      with the SEC on November 3,
2005.
  (20)
              Incorporated
      by reference from Platinum Holdings’ Current Report on Form 8-K, filed
      with the SEC on November 21,
2005.
  (21)
              Incorporated
      by reference from Platinum Holdings’ Current Report on Form 8-K, filed
      with the SEC on December 6, 2005.
  (22)
              Incorporated
      by reference from Platinum Holdings’ Current Report on Form 8-K, filed
      with the SEC on February 27,
2006.
  (23)
              Incorporated
      by reference from Platinum Holdings’ Current Report on Form 8-K, filed
      with the SEC on July 26, 2006.
  (24)
              Incorporated
      by reference from Platinum Holdings’ Current Report on Form 8-K, filed
      with the SEC on September 18, 2006.
  (25)
              Incorporated
      by reference from Platinum Holding’s Current Report on Form 8-K, filed
      with the SEC on February 22,
2007.
  (26)
              Incorporated
      by reference from Platinum Holdings’ Quarterly Report on Form 10-Q for the
      quarter ended March 31, 2006, filed with the SEC on April 28,
      2006.
  (27)
              Incorporated
      by reference from Platinum Holdings’ Quarterly Report on Form 10-Q for the
      quarter ended June 30, 2006, filed with the SEC on July 31,
      2006.
  (28)
              Incorporated
      by reference from the Registration Statement on Form S-8 (Registration No.
      333-133521) of Platinum Holdings, filed with the SEC on April 25,
      2006.
  (29)
              Incorporated
      by reference from Platinum Holdings’ Annual Report on Form 10-K for the
      year ended December 31, 2006, filed with the SEC on February 28,
      2007.
  (30)
              Incorporated
      by reference from Platinum Holdings’ Quarterly Report on Form 10-Q for the
      quarter ended March 31, 2007, filed with the SEC on April 27,
      2007.
  (31)
              Incorporated
      by reference from Platinum Holdings’ Current Report on Form 8-K, filed
      with the SEC on June 4, 2007.
  (32)
              Incorporated
      by reference from Platinum Holdings’ Quarterly Report on Form 10-Q for the
      quarter ended September 30, 2007, filed with the SEC on November 1,
      2007.
  (33)
              Incorporated
      by reference from Platinum Holdings’ Current Report on Form 8-K, filed
      with the SEC on December 6, 2007.
  (34)
              Incorporated
      by reference from Platinum Holdings’ Current Report on Form 8-K filed with
      the SEC on February 25, 2008.
  (35)
              Incorporated
      by reference from Platinum Holdings’ Annual Report on Form 10-K for the
      year ended December 31, 2007, filed with the SEC on February 29,
      2008.
  (36)
              Incorporated
      by reference from Platinum Holdings’ Current Report on form 8-K filed with
      the SEC on March 4, 2008.
  (37)
              Incorporated
      by reference from Platinum Holdings’ Quarterly Report on Form 10-Q for the
      quarter ended March 31, 2008, filed with the SEC on April 30,
      2008.
  (38)
              Incorporated
      by reference from Platinum Holdings’ Current Report on Form 8-K filed with
      the SEC on July 25, 2008.
  (39)
              Incorporated
      by reference from Platinum Holdings’ Quarterly Report on Form 10-Q for the
      quarter ended June 30, 2008, filed with the SEC on July 30,
      2008.
  (40)
              Incorporated
      by reference from Platinum Holdings’ Quarterly Report on Form 10-Q for the
      quarter ended September 30, 2008, filed with the SEC on October 30,
      2008.
  (41)
              Incorporated
      by reference from Platinum Holdings’ Annual Report on Form 10-K for the
      year ended December 31, 2008, filed with the SEC on February 27,
      2009.
  (42)
              Incorporated
      by reference from Platinum Holdings’ Quarterly Report on Form 10-Q for the
      quarter ended March 31, 2009, filed with the SEC on May 4,
      2009.
  (43)
              Incorporated
      by reference from Platinum Holdings’ Current Report on Form 8-K filed with
      the SEC on October 29, 2009.
  (44)
              Incorporated
      by reference from Platinum Holdings’ Quarterly Report on Form 10-Q for the
      quarter ended September 30, 2009, filed with the SEC on November 11,
      2009.
  - 56
-
 
  SIGNATURES
  Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
  PLATINUM
      UNDERWRITERS HOLDINGS, LTD.Date:
      February 22,
      2010
                By:
                /s/ Michael
      D. PriceMichael
      D. PricePresident
      and Chief Executive Officer
 Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
 
 Signature
              
              Title
              
              Date/s/
      Michael D. Price
                Michael
      D. Price
              
              President,
      Chief Executive Officer and Director
                (Principal
      Executive Officer)
              
              February 22,
      2010/s/
      James A. Krantz
                James
      A. Krantz
              
              Executive
      Vice President andChief
      Financial Officer
                (Principal
      Financial andPrincipal
      Accounting Officer)
              
              February 22,
      2010/s/
      Dan R. Carmichael
                Dan
      R. Carmichael
              
              Chairman
      of the Board of Directors
              
              February 22,
      2010/s/
      H. Furlong Baldwin
                H.
      Furlong Baldwin
              
              Director
              
              February 22,
      2010/s/
      A. John Hass
                A.
      John Hass
              
              Director
              
              February 22,
      2010/s/
      Edmund R. Megna
                Edmund
      R. Megna
              
              Director
              
              February 22,
      2010/s/
      Peter T. Pruitt
                Peter
      T. Pruitt
              
              Director
              
              February 22,
      2010/s/
      James P. Slattery
                James
      P. Slattery
              
              Director
              
              February 22,
      2010
 
 
 
 - 57
-
 
 
 
 
 PLATINUM
UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES
 
 CONSOLIDATED
FINANCIAL STATEMENTS
 
 Table
of Contents
 
 PageReports
      of Independent Registered Public Accounting Firms
              F-2Consolidated
      Balance Sheets as of December 31, 2009 and 2008
              F-4Consolidated
      Statements of Operations and Comprehensive Income for the years ended
      December 31, 2009, 2008 and 2007
              F-5Consolidated
      Statements of Shareholders' Equity for the years ended December 31,
      2009, 2008 and 2007
              F-6Consolidated
      Statements of Cash Flows for the years ended December 31, 2009, 2008
      and 2007
              F-7Notes
      to Consolidated Financial Statements
              F-8
 
 
 
 F-1
 
 REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
 
 
 
 The Board
of Directors and Shareholders
 Platinum
Underwriters Holdings, Ltd.:
 
 We have
audited the accompanying consolidated balance sheet of Platinum Underwriters
Holdings, Ltd. and subsidiaries as of December 31, 2009, and the related
consolidated statements of operations and comprehensive income, shareholders’
equity and cash flows for the year ended December 31,
2009.  These consolidated financial statements are the responsibility
of the Company’s management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our
audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audit provides a reasonable basis
for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Platinum Underwriters
Holdings, Ltd. and subsidiaries as of December 31, 2009, and the results of
their operations and their cash flows for the year ended December 31, 2009,
in conformity with U.S. generally accepted accounting principles.
 
 As
discussed in note 1 to the consolidated financial statements, the Company
changed the manner in which it accounts for other-than-temporary impairments of
debt securities in 2009.
 
 We also
have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), Platinum Underwriters Holdings, Ltd. and
subsidiaries’ internal control over financial reporting as of December 31,
2009, based on criteria established inInternal Control - Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO), and our report dated February 24, 2010
expressed an unqualified opinion on the effectiveness of the Company’s internal
control over financial reporting.
 
 
 /s/
KPMG
 
 Hamilton,
Bermuda
 February 24,
2010
 
 
 
 F-2
 
 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 
 The Board
of Directors and Shareholders
 Platinum
Underwriters Holdings, Ltd.:
 
 We have
audited the accompanying consolidated balance sheet of Platinum Underwriters
Holdings, Ltd. and subsidiaries as of December 31, 2008, and the related
consolidated statements of operations and comprehensive income, shareholders’
equity and cash flows for each of the years in the two-year period ended
December 31, 2008.  These consolidated financial statements are
the responsibility of the Company’s management.  Our responsibility is
to express an opinion on these consolidated financial statements based on our
audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Platinum Underwriters
Holdings, Ltd. and subsidiaries as of December 31, 2008, and the results of
their operations and their cash flows for each of the years in the two-year
period ended December 31, 2008, in conformity with U.S. generally accepted
accounting principles.
 
 
 
 /s/ KPMG
LLP
 
 New York,
New York
 February
26, 2009
 
 
 F-3
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Consolidated Balance
Sheets
 December 31,
2009 and 2008
 (amounts
in thousands, except share data)
 
 2009
              
              
              2008ASSETSInvestments:Fixed
      maturity available-for-sale securities at fair value(amortized
      cost – $3,590,081 and $3,267,571, respectively)
              
              $
              3,514,052
              
              
              $
              3,063,804Fixed
      maturity trading securities at fair value(amortized
      cost – $136,426 and 296,837,
      respectively)
              
              
              142,566
              
              
              
              305,237Preferred
      stocks (cost – $1,879 and $3,087, respectively)
              
              
              3,897
              
              
              
              2,845Short-term
      investments
              
              
              26,350
              
              
              
              75,036Total
      investments
              
              
              3,686,865
              
              
              
              3,446,922Cash
      and cash equivalents
              
              
              682,784
              
              
              
              813,017Accrued
      investment income
              
              
              29,834
              
              
              
              29,041Reinsurance
      premiums receivable
              
              
              269,912
              
              
              
              307,539Reinsurance
      recoverable on ceded losses and loss adjustment expenses
              
              
              19,240
              
              
              
              12,413Prepaid
      reinsurance premiums
              
              
              10,470
              
              
              
              10,897Funds
      held by ceding companies
              
              
              84,478
              
              
              
              136,278Deferred
      acquisition costs
              
              
              40,427
              
              
              
              50,719Income
      tax recoverable
              
              
              –
              
              
              
              11,973Deferred
      tax assets
              
              
              63,093
              
              
              
              71,444Other
      assets
              
              
              134,475
              
              
              
              36,920Total
      assets
              
              $
              5,021,578
              
              
              $
              4,927,163LIABILITIES
      AND SHAREHOLDERS’ EQUITYLiabilitiesUnpaid
      losses and loss adjustment expenses
              
              $
              2,349,336
              
              
              $
              2,463,506Unearned
      premiums
              
              
              180,609
              
              
              
              218,890Debt
      obligations
              
              
              250,000
              
              
              
              250,000Commissions
      payable
              
              
              90,461
              
              
              
              125,551Other
      liabilities
              
              
              73,441
              
              
              
              59,819Total
      liabilities
              
              
              2,943,847
              
              
              
              3,117,766Shareholders’ EquityPreferred
      shares, $.01 par value, 25,000,000 shares authorized, none and 5,750,000
      shares issued and outstanding, respectively
              
              
              –
              
              
              
              57Common
      shares, $.01 par value, 200,000,000 shares authorized, 45,942,639 and 47,482,161 shares issued
      and outstanding, respectively
              
              
              459
              
              
              
              475Additional
      paid-in capital
              
              
              883,425
              
              
              
              1,114,135Accumulated
      other comprehensive loss
              
              
              (70,005
              )
              
              
              (188,987
              )Retained
      earnings
              
              
              1,263,852
              
              
              
              883,717Total
      shareholders' equity
              
              
              2,077,731
              
              
              
              1,809,397Total
      liabilities and shareholders' equity
              
              $
              5,021,578
              
              
              $
              4,927,163
 
 See
accompanying notes to consolidated financial statements.
  F-4
 
 Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Consolidated Statements of
Operations and Comprehensive Income
 For the
years ended December 31, 2009, 2008 and 2007
 (amounts
in thousands, except share data)
 
 2009
              
              
              2008
              
              
              2007Revenue:Net
      premiums earned
              
              $
              937,336
              
              
              
              1,114,796
              
              
              $
              1,173,088Net
      investment income
              
              
              163,941
              
              
              
              186,574
              
              
              
              214,222Net
      realized gains (losses) on investments
              
              
              78,630
              
              
              
              57,254
              
              
              
              (413
              )Total
      other-than-temporary impairment losses
              
              
              (34,010
              )
              
              
              (30,686
              )
              
              
              (809
              )Portion
      of impairment losses recognized in accumulated other comprehensive
      loss
              
              
              16,407
              
              
              
              –
              
              
              
              –Net
      impairment losses on investments
              
              
              (17,603)
              
              
              
              (30,686
              )
              
              
              (809
              )Other
      income (expense)
              
              
              3,084
              
              
              
              337
              
              
              
              (2,173
              )Total
      revenue
              
              
              1,165,388
              
              
              
              1,328,275
              
              
              
              1,383,915Expenses:Net
      losses and loss adjustment expenses
              
              
              478,342
              
              
              
              718,233
              
              
              
              655,487Net
      acquisition expenses
              
              
              176,419
              
              
              
              242,715
              
              
              
              220,330Net
      changes in fair value of derivatives
              
              
              9,741
              
              
              
              14,114
              
              
              
              5,007Operating
      expenses
              
              
              94,682
              
              
              
              88,208
              
              
              
              103,593Net
      foreign currency exchange (gains) losses
              
              
              (399)
              
              
              
              6,760
              
              
              
              (2,775
              )Interest
      expense
              
              
              19,027
              
              
              
              19,006
              
              
              
              21,470Total
      expenses
              
              
              777,812
              
              
              
              1,089,036
              
              
              
              1,003,112Income
      before income tax expense
              
              
              387,576
              
              
              
              239,239
              
              
              
              380,803Income
      tax expense
              
              
              4,285
              
              
              
              12,999
              
              
              
              23,825Net
      income
              
              
              383,291
              
              
              
              226,240
              
              
              
              356,978Preferred
      dividends
              
              
              1,301
              
              
              
              10,408
              
              
              
              10,408Net
      income attributable to common shareholders
              
              $
              381,990
              
              
              
              215,832
              
              
              $
              346,570Earnings per common share:Basic
      earnings per common share
              
              $
              7.71
              
              
              
              4.38
              
              
              $
              5.91Diluted
      earnings per common share
              
              $
              7.33
              
              
              
              3.98
              
              
              $
              5.38Comprehensive income:Net
      income
              
              $
              383,291
              
              
              
              226,240
              
              
              $
              356,978Other
      comprehensive income:Net
      change in unrealized gains and losses on available-for-sale securities,
      net of deferred tax
              
              
              133,226
              
              
              
              (164,648
              )
              
              
              20,763Cumulative
      translation adjustments, net of deferred tax
              
              
              –
              
              
              
              –
              
              
              
              (813
              )Comprehensive
      income
              
              $
              516,517
              
              
              
              61,592
              
              
              $
              376,928Shareholder dividends:Preferred
      dividends declared
              
              $
              2,602
              
              
              
              10,408
              
              
              $
              10,408Preferred
      dividends declared per share
              
              
              0.45
              
              
              
              1.81
              
              
              
              1.81Common
      shareholder dividends declared
              
              
              16,099
              
              
              
              15,770
              
              
              
              18,632Dividends
      declared per common share
              
              $
              0.32
              
              
              
              0.32
              
              
              $
              0.32
  See
accompanying notes to consolidated financial statements.
 
 F-5
 
 Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Consolidated
Statements of Shareholders'
Equity
 For the
years ended December 31, 2009, 2008 and 2007
 (amounts
in thousands)
 
 2009
              
              
              2008
              
              
              2007Preferred shares:Balances
      at beginning of year
              
              $
              57
              
              
              
              57
              
              
              $
              57Conversion
      of preferred shares
              
              
              (57
              )
              
              
              –
              
              
              
              –Balances
      at end of year
              
              
              –
              
              
              
              57
              
              
              
              57Common shares:Balances
      at beginning of year
              
              
              475
              
              
              
              538
              
              
              
              597Exercise
      of common share options
              
              
              3
              
              
              
              12
              
              
              
              9Issuance
      of common shares
              
              
              1
              
              
              
              3
              
              
              
              1Settlement
      of equity awards
              
              
              2
              
              
              
              –
              
              
              
              –Conversion
      of preferred shares
              
              
              57
              
              
              
              –
              
              
              
              –Purchase
      of common shares
              
              
              (79
              )
              
              
              (78
              )
              
              
              (69
              )Balances
      at end of year
              
              
              459
              
              
              
              475
              
              
              
              538Additional paid-in-capital:Balances
      at beginning of year
              
              
              1,114,135
              
              
              
              1,338,466
              
              
              
              1,545,979Exercise
      of common share options
              
              
              6,756
              
              
              
              25,929
              
              
              
              23,426Issuance
      of common shares
              
              
              246
              
              
              
              1,693
              
              
              
              –Share
      based compensation
              
              
              15,629
              
              
              
              14,319
              
              
              
              8,813Settlement
      of equity awards
              
              
              (1,100
              )
              
              
              (999
              )
              
              
              –Purchase
      of common shares
              
              
              (252,217
              )
              
              
              (266,483
              )
              
              
              (240,603
              )Tax
      benefit (expense) of share options
              
              
              (24
              )
              
              
              1,210
              
              
              
              851Balances
      at end of year
              
              
              883,425
              
              
              
              1,114,135
              
              
              
              1,338,466Accumulated other comprehensive
      loss:Balances
      at beginning of year
              
              
              (188,987
              )
              
              
              (24,339
              )
              
              
              (44,289
              )Cumulative
      effect of accounting change, net of deferred tax
              
              
              (14,244
              )
              
              
              –
              
              
              
              –Noncredit
      component of impairment losses on available-for-sale securities, net of
      deferred tax
              
              
              (14,768
              )
              
              
              –
              
              
              
              –Net
      change in unrealized gains and losses on available-for-sale securities,
      net of deferred tax
              
              
              147,994
              
              
              
              (164,648
              )
              
              
              20,763Net
      change in cumulative translation adjustments, net of deferred
      tax
              
              
              –
              
              
              
              –
              
              
              
              (813
              )Balances
      at end of year
              
              
              (70,005)
              
              
              
              (188,987
              )
              
              
              (24,339
              )Retained earnings:Balances
      at beginning of year
              
              
              883,717
              
              
              
              683,655
              
              
              
              355,717Cumulative
      effect of accounting change, net of deferred tax
              
              
              14,244
              
              
              
              –
              
              
              
              –Net
      income
              
              
              383,291
              
              
              
              226,240
              
              
              
              356,978Preferred
      share dividends
              
              
              (1,301)
              
              
              
              (10,408
              )
              
              
              (10,408
              )Common
      share dividends
              
              
              (16,099)
              
              
              
              (15,770
              )
              
              
              (18,632
              )Balances
      at end of year
              
              
              1,263,852
              
              
              
              883,717
              
              
              
              683,655Total
      shareholders’ equity
              
              $
              2,077,731
              
              
              
              1,809,397
              
              
              $
              1,998,377
  See
accompanying notes to consolidated financial statements.
  F-6
 
 Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Consolidated Statements of Cash
Flows
 For the
years ended December 31, 2009, 2008 and 2007
 (amounts
in thousands)
  2009
              
              
              2008
              
              
              2007Operating Activities:Net
      income
              
              $
              383,291
              
              
              
              226,240
              
              
              $
              356,978Adjustments
      to reconcile net income to cash used in operations:Depreciation
      and amortization
              
              
              16,170
              
              
              
              9,184
              
              
              
              12,182Net
      realized (gains) losses on investments
              
              
              (78,630
              )
              
              
              (57,254
              )
              
              
              413Net
      impairment losses on investments
              
              
              17,603
              
              
              
              30,686
              
              
              
              809Net
      foreign currency exchange (gains) losses
              
              
              (399
              )
              
              
              6,760
              
              
              
              (2,775
              )Share-based
      compensation
              
              
              15,629
              
              
              
              14,319
              
              
              
              9,129Deferred
      income tax benefit
              
              
              (3,523
              )
              
              
              (14,433
              )
              
              
              (13,283
              )Trading
      securities activities, net
              
              
              208,197
              
              
              
              (147,124
              )
              
              
              (46,528
              )Changes
      in assets and liabilities:(Increase)
      decrease in accrued investment income
              
              
              (471
              )
              
              
              5,655
              
              
              
              (2,014
              )(Increase)
      decrease in reinsurance premiums receivable
              
              
              37,361
              
              
              
              (67,366
              )
              
              
              136,395Decrease
      in funds held by ceding companies
              
              
              51,675
              
              
              
              29,326
              
              
              
              72,895Decrease
      in deferred acquisition costs
              
              
              10,436
              
              
              
              19,789
              
              
              
              12,102Increase
      (decrease) in net unpaid losses and
                loss
      adjustment expenses
              
              
              (132,809
              )
              
              
              144,092
              
              
              
              10,048Decrease
      in net unearned premiums
              
              
              (39,504
              )
              
              
              (81,136
              )
              
              
              (50,983
              )Increase
      (decrease) in commissions payable
              
              
              (35,235
              )
              
              
              25,347
              
              
              
              (40,631
              )(Increase)
      decrease in income tax recoverable
              
              
              14,241
              
              
              
              (7,783
              )
              
              
              5,476Changes
      in other assets and liabilities
              
              
              13,144
              
              
              
              (7,139
              )
              
              
              (17,500
              )Other
      net
              
              
              21
              
              
              
              (264
              )
              
              
              (1,158
              )Net
      cash provided by operating activities
              
              
              477,197
              
              
              
              128,899
              
              
              
              441,555Investing Activities:Proceeds
      from sale of available-for-sale securities
              
              
              1,538,633
              
              
              
              1,536,751
              
              
              
              248,341Proceeds
      from sale of preferred stocks
              
              
              –
              
              
              
              120
              
              
              
              –Proceeds
      from maturity or paydown of available-for-sale securities
              
              
              434,883
              
              
              
              962,760
              
              
              
              1,453,687Proceeds
      from sale of trading securities
              
              
              153,223
              
              
              
              –
              
              
              
              –Proceeds
      from sale of other invested asset
              
              
              –
              
              
              
              –
              
              
              
              4,745Acquisition
      of available-for-sale securities
              
              
              (2,361,313)
              
              
              
              (2,557,648
              )
              
              
              (1,650,626
              )Acquisition
      of trading securities
              
              
              (164,748)
              
              
              
              –
              
              
              
              –Net
      change in short-term investments
              
              
              49,033
              
              
              
              (59,251
              )
              
              
              14,035Net
      cash provided by (used in) investing activities
              
              
              (350,289
              )
              
              
              (117,268
              )
              
              
              70,182Financing Activities:Dividends
      paid to preferred shareholders
              
              
              (2,602
              )
              
              
              (10,408
              )
              
              
              (10,408
              )Dividends
      paid to common shareholders
              
              
              (16,099
              )
              
              
              (15,770
              )
              
              
              (18,632
              )Proceeds
      from exercise of share options
              
              
              6,759
              
              
              
              25,941
              
              
              
              23,435Purchase
      of common shares
              
              
              (252,296)
              
              
              
              (266,561
              )
              
              
              (240,672
              )Repayment
      of debt obligations
              
              
              –
              
              
              
              –
              
              
              
              (42,840
              )Net
      cash used in financing activities
              
              
              (264,238
              )
              
              
              (266,798
              )
              
              
              (289,117
              )Effect
      of foreign currency exchange rate changes on cash
              
              
              7,097
              
              
              
              (8,095
              )
              
              
              2,007Net
      increase (decrease) in cash and cash equivalents
              
              
              (130,233
              )
              
              
              (263,262
              )
              
              
              224,627Cash
      and cash equivalents at beginning of year
              
              
              813,017
              
              
              
              1,076,279
              
              
              
              851,652Cash
      and cash equivalents at end of year
              
              $
              682,784
              
              
              
              813,017
              
              
              $
              1,076,279Supplemental disclosures of cash flow
      information:Income
      taxes paid (refunded)
              
              $
              (6,851
              )
              
              
              33,561
              
              
              $
              29,160Interest
      paid
              
              $
              18,750
              
              
              
              18,750
              
              
              $
              21,479
  See
accompanying notes to consolidated financial statements.
  F-7
 
 Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Notes to
Consolidated Financial Statements
 For the
years ended December 31, 2009, 2008 and 2007
  1.
              Basis of Presentation
      and Summary of Significant Accounting
  Policies
  Basis
of Presentation and Consolidation
  Platinum
Underwriters Holdings, Ltd. ("Platinum Holdings") is a Bermuda holding company
established in 2002.  Platinum Holdings and its consolidated
subsidiaries (collectively, the "Company") operate through two licensed
reinsurance subsidiaries:  Platinum Underwriters Bermuda, Ltd.
("Platinum Bermuda") and Platinum Underwriters Reinsurance, Inc. ("Platinum
US").  The terms "we," "us," and "our" also refer to the Company,
unless the context otherwise indicates.  We provide property and
marine, casualty and finite risk reinsurance coverages, through reinsurance
intermediaries, to a diverse clientele of insurers and select reinsurers on a
worldwide basis.
  The
consolidated financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America ("U.S.
GAAP").  These consolidated financial statements include the accounts
of Platinum Holdings, Platinum Bermuda, Platinum US, Platinum Re (UK) Limited
(“Platinum UK”), Platinum Underwriters Finance, Inc. ("Platinum Finance"),
Platinum Regency Holdings ("Platinum Regency"), Platinum Administrative
Services, Inc. and Platinum UK Services Company Limited.  In 2007,
Platinum UK ceased underwriting reinsurance business and the novation (or
termination by other means) of all its contracts to Platinum Bermuda was
completed in 2009.  Platinum Regency is an intermediate holding
company based in Ireland and a wholly owned subsidiary of Platinum
Holdings.  Platinum Finance is a U.S. based intermediate holding
company and a wholly owned subsidiary of Platinum Regency.  Platinum
Administrative Services, Inc. and Platinum UK Services Company Limited are
service company subsidiaries that provide administrative support services to the
Company.  All material inter-company transactions have been eliminated
in preparing these consolidated financial statements.
  The
preparation of financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.  Actual results could materially differ from these
estimates.
  Certain
prior period amounts have been reclassified in the consolidated statement of
operations and in the consolidated statement of cash flows to conform to the
2009 presentation.
  Summary
of Significant Accounting Policies
  Investments
  Fixed
maturity securities we own that we may not have the positive intent to hold
until maturity and preferred stocks are classified as available-for-sale and
reported at fair value, with related net unrealized gains or losses excluded
from earnings and included in shareholders’ equity as a component of accumulated
other comprehensive income (loss).  Fixed maturity securities we own
and have the intent to sell prior to maturity, or securities for which we have
elected the fair value measurement attributes of the Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification 825, “Financial
Instruments” (“ASC 825”), are classified as trading
securities.  Trading securities are reported at fair value, with
mark-to-market adjustments included in net realized gains and losses on
investments and the related deferred income tax included in income tax expense
in the consolidated statement of operations.  Short-term investments
mature within one year from the purchase date.
  The fair
value of our fixed maturity securities, preferred stocks, and short-term
investments are based on prices obtained from independent sources for those or
similar investments using quoted prices in active markets and standard market
valuation pricing models.
  Premiums
and discounts on fixed maturity securities are amortized into net investment
income over the life or estimated life of the security using the effective yield
method.  Premiums and discounts on mortgage-backed and asset-backed
securities are amortized into net investment income also consider prepayment
assumptions.  These assumptions are consistent with the current
interest rate and economic environment.  The prospective adjustment
method is used to value mortgage-backed and asset-backed
securities.  Adjustments to the amortized cost of U.S. Treasury
Inflation-Protected Securities resulting from changes in the consumer price
index are recognized in net investment income.  Realized gains and
losses on the sale of securities are determined on the basis of the specific
identification method.
  In
accordance with the FASB Accounting Standards Codification 320, “Investments –
Debt and Equity Securities” (“ASC 320”), if we intend to sell a debt security or
it is more likely than not that we will be required to sell the debt security
before its anticipated recovery, we recognize a charge for other-than-temporary
impairments (“OTTI”) in the consolidated statement of operations equal to the
entire difference between the investment’s amortized cost basis and its fair
value at the time of impairment if the security is in an unrealized loss
position.  If we do not intend to sell a debt security or it is more
likely than not that we will not be required to sell a debt security before its
anticipated recovery, we must assess whether the impairment is
other-than-temporary.  If we determine a security is
other-than-temporarily impaired, the impairment is separated into the portion
related to credit loss and the portion related to all other
factors.  The amount of the credit loss is the difference between the
present value of expected future cash flows from an impaired debt security,
using the effective yield at the date of acquisition, and the amortized cost of
the security.
  When an
available-for-sale security is determined to have a credit loss, the total
impairment is separated into: (a) the portion of the impairment related to the
credit loss and (b) the portion of the impairment related to all other factors,
which is recognized in the consolidated statement of operations.  The
portion of the impairment related to all other factors is also recorded in
accumulated other comprehensive income, net of deferred taxes, in the
consolidated statement of shareholders’ equity.
  F-8
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Notes to
Consolidated Financial Statements, continued
 Cash and Cash
Equivalents
  Cash and
cash equivalents are carried at cost, which approximates fair value, and include
all securities that at their purchase date have a maturity of less than 90
days.  Cash and cash equivalents consist primarily of investments in
money market funds, time deposits and short-term obligations of the U.S.
Government and its agencies.
  Premium
Revenues
  Assumed
reinsurance premiums are recognized as revenues when premiums become earned,
which generally occurs proportionately over the coverage period.  Net
premiums earned are recorded in the consolidated statement of operations, net of
the cost of retrocession.  Net premiums written not yet recognized as
revenue are recorded in the consolidated balance sheet as unearned premiums,
gross of any ceded unearned premiums.
  Due to
the nature of reinsurance, ceding companies routinely report and remit premiums
subsequent to the contract coverage period.  Consequently, reinsurance
premiums written include estimates of premiums that are written but not reported
("WBNR").  In addition to estimating WBNR, we estimate the portion of
premium earned but not reported ("EBNR").  The estimates of WBNR and
EBNR are based on amounts reported by the ceding companies, information obtained
during audits and other information received from ceding
companies.  We also estimate the expenses associated with EBNR in the
form of losses, loss adjustment expenses ("LAE") and commissions.  As
actual premiums are reported by ceding companies, management evaluates the
appropriateness of the premium estimates and any adjustments to these estimates,
to the extent they represent earned premiums, are accounted for as changes in
estimates and are reflected in the results of operations in the period in which
they are made.  Adjustments to original premium estimates could be
material and could significantly impact earnings in the period they are
recorded.
  Certain
of our reinsurance contracts include provisions that adjust premiums or
acquisition expenses based upon the loss experience under the
contracts.  Premiums or commissions are adjusted in such instances
based on actual loss experience under the contracts.  Reinstatement
premiums are the premiums charged for the restoration of the reinsurance limit
of a reinsurance contract to its full amount, generally coinciding with the
payment by the reinsurer of losses.  These premiums relate to the
future coverage obtained for the remainder of the initial contract term and are
earned over the remaining contract term.  Any unearned premium
existing at the time a contract limit is exhausted or reinstated is immediately
earned.  Additional premiums are premiums that are triggered by losses
that are immediately earned.  Reinstatement premiums and additional
premiums are recognized in accordance with the provisions of assumed reinsurance
contracts, based on loss experience under such contracts.  An
allowance for uncollectible premiums is established for possible non-payment of
premiums receivable, as deemed necessary.  As of December 31,
2009 and 2008, based on our historical experience, the general profile of our
ceding companies and our ability in most cases to contractually offset those
premiums receivable against losses and LAE or other amounts payable to the same
parties, we did not establish an allowance for uncollectible premiums
receivable.
  Funds Held by Ceding
Companies
  We may
write business on a funds held basis from time to time.  Under these
contractual arrangements, the ceding company holds the net funds that would
otherwise be remitted to us and generally credits the funds held balance with
interest income at a negotiated rate established in the
contract.  Interest income on funds held by ceding companies is
included in net investment income.
  Deferred Acquisition
Costs
  Costs of
acquiring business, consisting primarily of commissions and other underwriting
expenses that vary with and are directly related to the production of business,
are deferred and amortized over the period that the corresponding premiums are
earned.  On a regular basis, an analysis of the recoverability of
deferred acquisition costs is performed based on the estimated profitability of
the underlying reinsurance contracts, including anticipated investment
income.  Any adjustments are reflected in the results of operations in
the period in which they are made.  A liability is established, if
necessary, to provide for losses that may exceed the related unearned
premiums.  Deferred acquisition costs amortized in 2009, 2008 and 2007
were $133.6 million, $182.6 million and $164.1 million,
respectively.
  Debt Obligations and
Deferred Debt Issuance Costs
  Costs
incurred in issuing debt are capitalized and amortized over the life of the
debt.  The amortization of these costs is included in interest expense
in the consolidated statement of operations.
  Unpaid Losses and
LAE
  Unpaid
losses and LAE are estimated based upon information received from ceding
companies regarding our liability for unpaid losses and LAE, adjusted for our
estimates of losses for which ceding company reports have not been received, our
historical experience for unreported claims and industry experience for
unreported claims.  Unpaid losses and LAE include estimates of the
cost of claims that were reported, but not yet paid, and the cost of claims
incurred but not yet reported.
  Unpaid
losses and LAE represent management’s best estimate at a given point in time and
are subject to the effects of trends in loss severity and
frequency.  These estimates are reviewed regularly and adjusted as
experience develops or new information becomes available.  Any
adjustments are accounted for as changes in estimates and are reflected in the
results of operations in the period in which they are made.  It is
possible that the ultimate liability may materially differ from such
estimates.
  F-9
 Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Notes to
Consolidated Financial Statements, continued
 Reinsurance
Ceded
  Premiums
written, premiums earned and net losses and LAE reflect the net effects of
assumed and ceded reinsurance transactions.  Reinsurance accounting is
followed for assumed and ceded transactions when risk transfer requirements have
been met.  Risk transfer analysis evaluates significant assumptions
relating to the amount and timing of expected cash flows, as well as the
interpretation of underlying contract terms.  Reinsurance contracts
that do not transfer sufficient insurance risk are accounted for as
deposits.
  Estimated
amounts recoverable from retrocessionaires on unpaid losses and LAE are
determined based on our estimate of assumed ultimate losses and LAE and the
terms and conditions of our retrocessional contracts.  The estimates
of retroceded amounts recoverable are reflected as assets.
  Reinsurance Deposit
Liabilities
  Reinsurance
contracts that we enter into which we determine do not transfer sufficient
insurance risk are accounted for as deposits and liabilities are initially
recorded for the same amount as assets received.  Interest expense
related to the deposit is recognized as incurred.  Profit margins are
earned over the settlement period of the contractual obligations.
  Earnings Per Common
Share
  Basic
earnings per common share is computed by dividing net income available to common
shareholders by the weighted average number of common shares outstanding for the
period.  Diluted earnings per common share reflects the basic earnings
per common share calculation components adjusted for the dilutive effect of
share equivalents and warrants.  Securities that are convertible into
common shares that are anti-dilutive are not included in the calculation of
diluted earnings per common share.
  Income
Taxes
  We apply
the asset and liability method of accounting for income taxes.  Under
the asset and liability method, we recognize deferred tax assets and liabilities
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases.  Deferred tax assets and liabilities are
measured using enacted tax rates applicable to taxable income in the years in
which those temporary differences are expected to be recovered or
settled.  We recognize the effect on deferred tax assets and
liabilities of a change in tax rates in income in the period the change is
enacted.  We establish a valuation allowance for deferred tax assets
where it is more likely than not that future tax benefits will not be
realized.  Interest or penalties relating to income taxes are included
in other expense.
  Share-Based
Compensation
  We
recognize share-based compensation in accordance with FASB Accounting Standards
Codification 718, “Compensation – Stock Compensation” (“ASC
718”).  ASC 718 requires that compensation costs be recognized for the
fair value of all share options over their vesting period.  The fair
value of option awards is determined on the grant date using the Black-Scholes
option pricing model and is amortized into earnings over the vesting
period.
  The fair
values of restricted share and restricted share unit awards are determined on
the grant date and are amortized into earnings over the vesting
period.  The cost of performance-based share awards is based on the
estimated number of shares or share units that are expected to be issued at the
end of the performance period, and is amortized into earnings over the
performance and vesting period.
  Foreign Currency Exchange
Gains and Losses
  Our
reporting currency is U.S. dollars.  The functional currency of our
subsidiaries is generally the currency of the local operating
environment.  Transactions conducted in other than functional and
reporting currencies are remeasured into the subsidiary's functional currency,
and the resulting foreign exchange gains and losses are included in net foreign
currency exchange gains or losses.  Functional currency based assets
and liabilities are translated into U.S. dollars using current rates of exchange
prevailing at the balance sheet date and the related translation adjustments are
recorded as a separate component of accumulated other comprehensive income and
loss, net of applicable deferred income tax.  Foreign currency
exchange gains and losses related to securities classified as trading securities
are included in foreign currency exchange gains and losses.
  Use of
Estimates
  Our
financial statements include estimates and valuation assumptions that have an
effect on the amounts reported.  The most significant estimates are
those relating to unpaid losses and LAE, written and unearned premium, valuation
of investments and evaluation of risk transfer.  These estimates are
continually reviewed and adjustments made as necessary, but actual results could
be significantly different than expected at the time such estimates are
made.  Results of changes in estimates are reflected in results of
operations in the period in which the change is made.
  Recently Issued Accounting
Standards
  In June
2009, the FASB issued Statement of Financial Accounting Standards No. 168,
“The FASB Accounting Standards Codification and the Hierarchy of Generally
Accepted Accounting Principles – a replacement of FASB Statement No. 162”
(“SFAS 168”).  SFAS 168 establishes the FASB “Accounting Standards
Codification” (“ASC”) as the single source of authoritative U.S.
GAAP.  The ASC is effective for interim and annual periods ending
after September 15, 2009.  Accordingly, we adopted the ASC effective
as of the interim period ending September 30, 2009.  As the ASC
only required changes to the way the Company refers to U.S. GAAP in its
financial statements, the adoption of the ASC had no effect on our financial
position and results of operations.
  F-10
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Notes to
Consolidated Financial Statements, continued
  In June
2009, the FASB issued additional guidance under the FASB ASC 810,
“Consolidation” (“ASC 810”), which amends the consolidation guidance applicable
to variable interest entities (“VIEs”).  The amendments will affect
the overall consolidation analysis under ASC 810, in particular, it modifies the
approach for determining the primary beneficiary of a VIE.  ASC 810 is
effective as of January 1, 2010, and early adoption is
prohibited.  We are currently evaluating the impact of the adoption of
ASC 810 and do not expect it to have an effect on our financial position and
results of operations.
  In May
2009, the FASB issued FASB ASC 855, “Subsequent Events” (“ASC
855”).  ASC 855 provides new accounting and disclosure guidance on
management’s assessment of subsequent events and establishes requirements for
recognition and disclosure of events that occur after the balance sheet date and
through the date that the financial statements are issued.  ASC 855 is
effective for interim and annual reporting periods beginning after June 15,
2009.  The adoption of ASC 855 did not have an impact on our financial
position and results of operations.
  In August
and April 2009, the FASB issued additional guidance under the FASB ASC 820,
“Fair Value Measurements and Disclosures” (“ASC 820”) for estimating fair value
when the volume and level of activity for an asset or liability has
significantly decreased, emphasizing that the fair value is the price that would
be received to sell an asset or paid to transfer a liability in an orderly
transaction (that is, not a forced liquidation or distressed sale) between
market participants at the measurement date under current market
conditions.  The guidance is effective for interim and annual
reporting periods ending after June 15, 2009, with early adoption permitted
for periods ending after March 15, 2009.  We adopted the guidance
effective as of the interim period ending March 31, 2009.  The
adoption of the guidance did not have a material impact on our financial
position and results of operations.
  In April
2009, the FASB issued additional guidance under ASC 320 that provides guidance
with respect to OTTI for debt securities.  The FASB’s objective was to
make the guidance more operational and to improve presentation and disclosure of
OTTI.  In accordance with ASC 320, we recognize the portion of the
OTTI related to the credit loss in the consolidated statement of operations and
recognize the portion related to all other factors in other comprehensive
income, net of deferred tax.  ASC 320 is effective for interim and
annual reporting periods ending after June 15, 2009, with early adoption
permitted for periods ending after March 15, 2009.  We adopted
this guidance effective as of the interim period ending
March 31, 2009.
  The
adoption of ASC 320 resulted in cumulative effect adjustments to debt securities
that were impaired prior to 2009.  The cumulative effect adjustments
increased the amortized cost of certain available-for-sale securities by $15.1
million and decreased deferred tax assets by $0.9 million.  The
cumulative effect adjustments also decreased accumulated other comprehensive
income and increased retained earnings by $14.2 million.  The
adjustments to the amortized cost of these securities represent OTTI charges not
related to credit that we recognized in earnings prior to 2009.  Under
ASC 320, the portion of the OTTI not related to the credit loss is now
recognized in other comprehensive income which resulted in increased net income
in 2009.
  In April
2009, the FASB issued additional guidance ASC 825 that increases the frequency
of the disclosures about fair value with the objective of improving the
transparency of financial reporting.  The guidance is effective for
interim reporting periods ending after June 15, 2009, with early adoption
permitted for periods ending after March 15, 2009.  We adopted
the guidance effective as of the interim period ending March 31,
2009.  The adoption of the guidance did not have a material impact on
the presentation of our consolidated financial statements.
  In March
2008, the FASB issued guidance under ASC 825 that amends and expands the
disclosure requirements in FASB Accounting Standards Codification 815,
“Derivatives and Hedging,” relating to an entity’s derivative and hedging
activities and how these activities affect an entity’s financial position,
financial performance and cash flows, with the objective of improving the
transparency of financial reporting.  The guidance is effective for
interim and annual reporting periods beginning after November 15,
2008.  The adoption of the guidance did not have a material impact on
the presentation of our consolidated financial statements.
  2.
              Investments
  Available-for-sale
Securities
  The
following table sets forth our fixed maturity available-for-sale securities and
preferred stocks as of December 31, 2009 and 2008 ($ in
thousands):
 
 Gross
      Unrealized LossesAmortized
      Cost
              
              
              Gross
                Unrealized
                Gains
              
              
              Non-OTTI
              
              
              Non-credit
      portion of OTTI
              
              
              Fair
      ValueDecember 31, 2009:U.S.
      Government
              
              $
              614,224
              
              
              
              270
              
              
              
              5,797
              
              
              
              –
              
              
              $
              608,697U.S.
      Government agencies
              
              
              100,000
              
              
              
              1,082
              
              
              
              –
              
              
              
              –
              
              
              
              101,082Corporate
      bonds
              
              
              467,640
              
              
              
              18,446
              
              
              
              9,100
              
              
              
              –
              
              
              
              476,986Commercial
      mortgage-backed securities
              
              
              243,176
              
              
              
              376
              
              
              
              26,253
              
              
              
              2,279
              
              
              
              215,020Residential
      mortgage-backed securities
              
              
              767,338
              
              
              
              3,158
              
              
              
              39,142
              
              
              
              16,651
              
              
              
              714,703Asset-backed
      securities
              
              
              84,396
              
              
              
              1,311
              
              
              
              14,606
              
              
              
              11,402
              
              
              
              59,699Municipal
      bonds
              
              
              744,677
              
              
              
              19,172
              
              
              
              4,348
              
              
              
              –
              
              
              
              759,501Non-U.S.
      governments
              
              
              568,630
              
              
              
              10,359
              
              
              
              625
              
              
              
              –
              
              
              
              578,364Total
      fixed maturity available-for-sale securities
              
              
              3,590,081
              
              
              
              54,174
              
              
              
              99,871
              
              
              
              30,332
              
              
              
              3,514,052Preferred
      stocks
              
              
              1,879
              
              
              
              2,018
              
              
              
              –
              
              
              
              –
              
              
              
              3,897Total
      available-for-sale securities
              
              $
              3,591,960
              
              
              
              56,192
              
              
              
              99,871
              
              
              
              30,332
              
              
              $
              3,517,949
  F-11
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Notes to
Consolidated Financial Statements, continued
 Amortized
      Cost
              
              
              Gross
                Unrealized
                Gains
              
              
              Gross
      Unrealized Losses
              
              
              Fair
      ValueDecember 31, 2008:U.S.
      Government
              
              $
              4,096
              
              
              
              545
              
              
              
              –
              
              
              $
              4,641U.S.
      Government agencies
              
              
              786,848
              
              
              
              24,679
              
              
              
              38
              
              
              
              811,489Corporate
      bonds
              
              
              728,792
              
              
              
              4,134
              
              
              
              42,398
              
              
              
              690,528Commercial
      mortgage-backed securities
              
              
              478,288
              
              
              
              1,147
              
              
              
              106,629
              
              
              
              372,806Residential
      mortgage-backed securities
              
              
              629,567
              
              
              
              10,415
              
              
              
              62,075
              
              
              
              577,907Asset-backed
      securities
              
              
              170,374
              
              
              
              1
              
              
              
              36,130
              
              
              
              134,245Municipal
      bonds
              
              
              390,342
              
              
              
              6,484
              
              
              
              3,342
              
              
              
              393,484Non-U.S.
      governments
              
              
              79,264
              
              
              
              1,093
              
              
              
              1,653
              
              
              
              78,704Total
      fixed maturity available-for-sale securities
              
              
              3,267,571
              
              
              
              48,498
              
              
              
              252,265
              
              
              
              3,063,804Preferred
      stocks
              
              
              3,087
              
              
              
              –
              
              
              
              242
              
              
              
              2,845Total
      available-for-sale securities
              
              $
              3,270,658
              
              
              
              48,498
              
              
              
              252,507
              
              
              $
              3,066,649
  U.S.
Government agencies consist primarily of securities issued by financial
institutions under the Temporary Liquidity Guarantee Program guaranteed by the
Federal Deposit Insurance Corporation.  Non-U.S. governments consist
primarily of securities issued by governments and financial institutions that
are explicitly guaranteed by the respective government and are U.S. dollar
denominated securities.
  Trading
Securities
  The
following table sets forth the fair value of our fixed maturity trading
securities as of December 31, 2009 and 2008 ($ in thousands):
 Fair
      Value at December 31,2009
              
              
              2008U.S.
      Government
              
              $
              –
              
              
              $
              196,383Insurance-linked
      securities
              
              
              25,682
              
              
              
              –Non-U.S.
      dollar denominated securities:U.S.
      Government agencies
              
              
              16,423
              
              
              
              –Corporate
      bonds
              
              
              77
              
              
              
              4,125Non-U.S.
      governments
              
              
              100,384
              
              
              
              104,729Total
      trading securities
              
              $
              142,566
              
              
              $
              305,237
  We
elected to apply the fair value measurement attributes of ASC 825 to our
investments in U.S. Treasury Inflation-Protected Securities (“TIPS”) and
insurance-linked securities.  Insurance-linked securities have
exposure to catastrophe loss, which we actively manage.  We believe
that the various risk elements of insurance-linked securities are more
appropriately accounted for in accordance with the fair value measurement
attributes of ASC 825.  We have included insurance-linked securities
at a fair value of $25.7 million in our fixed maturity trading securities on our
consolidated balance sheet for the year ended December 31, 2009.  Net
changes in the fair value of insurance-linked securities were $1.0 million for
the year ended December 31, 2009 and were included in net realized gains on
investments in our consolidated statements of operations.  We believe
that recognizing changes in the fair value of TIPS in net realized gains and
losses on investments in our consolidated statement of operations is a better
presentation of the total return on these securities.  We have
included TIPS at a fair value of $196.4 million in our fixed maturity trading
securities on our consolidated balance sheet as of December 31,
2008.
  F-12
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Notes to
Consolidated Financial Statements, continued
 At
acquisition, we determine our trading intent in the near term for securities
accounted for in accordance with ASC 825.  If we do not intend to sell
these securities in the near term, then the purchases and sales are included in
investing activities in our consolidated statements of cash
flows.  Accordingly, for the year ended December 31, 2009,
purchases of $164.7 million and sales of $153.2 million were classified as
investing activities and $208.2 million of net sales were classified as net
trading securities activities and included in operating activities of the cash
flow statements.  For the year ended December 31, 2008, purchases
of $196.4 million were classified as net trading securities activities and
included in operating activities of the cash flow statements.
  Unrealized
Gains and Losses
  The
following table sets forth the net changes in unrealized investment gains and
losses on our available-for-sale securities for the years ended
December 31, 2009, 2008 and 2007 ($ in thousands):
 2009
              
              
              2008
              
              
              2007Available-for-sale
      securities
              
              $
              129,999
              
              
              
              (178,318
              )
              
              $
              25,394Less
      deferred tax
              
              
              (11,017
              )
              
              
              13,670
              
              
              
              (4,631
              )Cumulative
      effect of accounting change, net of deferred tax
              
              
              14,244
              
              
              
              –
              
              
              
              –Net
      change in unrealized gains and losses
              
              $
              133,226
              
              
              
              (164,648
              )
              
              $
              20,763
  The
following table sets forth our unrealized losses on securities classified as
available-for-sale aggregated by investment category and length of time that
individual securities have been in a continuous unrealized loss position as of
December 31, 2009 and 2008 ($ in thousands):
 
 December 31,
      2009
              
              
              December 31,
      2008Fair
      Value
              
              
              Unrealized
                Loss
              
              
              Fair
      Value
              
              
              Unrealized
                LossLess than twelve months:U.S.
      Government
              
              $
              594,343
              
              
              
              5,797
              
              
              
              –
              
              
              $
              –U.S.
      Government agencies
              
              
              –
              
              
              
              –
              
              
              
              14,313
              
              
              
              38Corporate
      bonds
              
              
              34,393
              
              
              
              281
              
              
              
              316,883
              
              
              
              16,413Commercial
      mortgage-backed securities
              
              
              18,101
              
              
              
              244
              
              
              
              288,792
              
              
              
              80,549Residential
      mortgage-backed securities
              
              
              540,606
              
              
              
              10,446
              
              
              
              67,427
              
              
              
              25,764Asset-backed
      securities
              
              
              1,075
              
              
              
              445
              
              
              
              114,799
              
              
              
              13,738Municipal
      bonds
              
              
              187,159
              
              
              
              4,244
              
              
              
              77,244
              
              
              
              2,536Non-U.S.
      governments
              
              
              59,815
              
              
              
              565
              
              
              
              29,033
              
              
              
              1,396Preferred
      stocks
              
              
              –
              
              
              
              –
              
              
              
              2,845
              
              
              
              242Total
              
              $
              1,435,492
              
              
              
              22,022
              
              
              
              911,336
              
              
              $
              140,676Twelve months or more:U.S.
      Government
              
              $
              –
              
              
              
              –
              
              
              
              –
              
              
              $
              –U.S.
      Government agencies
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –Corporate
      bonds
              
              
              59,423
              
              
              
              8,819
              
              
              
              155,082
              
              
              
              25,985Commercial
      mortgage-backed securities
              
              
              160,039
              
              
              
              28,288
              
              
              
              76,247
              
              
              
              26,080Residential
      mortgage-backed securities
              
              
              94,969
              
              
              
              45,347
              
              
              
              59,467
              
              
              
              36,310Asset-backed
      securities
              
              
              28,238
              
              
              
              25,563
              
              
              
              16,235
              
              
              
              22,393Municipal
      bonds
              
              
              3,015
              
              
              
              104
              
              
              
              7,726
              
              
              
              806Non-U.S.
      governments
              
              
              1,661
              
              
              
              60
              
              
              
              1,463
              
              
              
              257Preferred
      stocks
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –Total
              
              $
              347,345
              
              
              
              108,181
              
              
              
              316,220
              
              
              $
              111,831Total unrealized losses:U.S.
      Government
              
              $
              594,343
              
              
              
              5,797
              
              
              
              –
              
              
              $
              –U.S.
      Government agencies
              
              
              –
              
              
              
              –
              
              
              
              14,313
              
              
              
              38Corporate
      bonds
              
              
              93,816
              
              
              
              9,100
              
              
              
              471,965
              
              
              
              42,398Commercial
      mortgage-backed securities
              
              
              178,140
              
              
              
              28,532
              
              
              
              365,039
              
              
              
              106,629Residential
      mortgage-backed securities
              
              
              635,575
              
              
              
              55,793
              
              
              
              126,894
              
              
              
              62,074Asset-backed
      securities
              
              
              29,313
              
              
              
              26,008
              
              
              
              131,034
              
              
              
              36,131Municipal
      bonds
              
              
              190,174
              
              
              
              4,348
              
              
              
              84,970
              
              
              
              3,342Non-U.S.
      governments
              
              
              61,476
              
              
              
              625
              
              
              
              30,496
              
              
              
              1,653Preferred
      stocks
              
              
              –
              
              
              
              –
              
              
              
              2,845
              
              
              
              242Total
              
              $
              1,782,837
              
              
              
              130,203
              
              
              
              1,227,556
              
              
              $
              252,507
  F-13
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Notes to
Consolidated Financial Statements, continued
  We
routinely review our available-for-sale investments to determine whether
unrealized losses represent temporary changes in fair value or are the result of
OTTI.  The process of determining whether a security is
other-than-temporarily impaired requires judgment and involves analyzing many
factors.  These factors include the overall financial condition of the
issuer, the length and magnitude of an unrealized loss, specific credit events,
the collateral structure and the credit support that may be
applicable.  The amount of the credit loss is the difference between
the present value of expected future cash flows from an impaired debt security
and the amortized cost of the security.  The credit loss is recognized
in the consolidated statement of operations and the portion of OTTI related to
all other factors is recognized in accumulated other comprehensive income in the
consolidated statement of shareholders’ equity.
  Investment
holdings within our corporate bond portfolio were diversified across
approximately 30 industry sectors and across many individual issuers and issues
within each sector.  As of December 31, 2009, the single largest
unrealized loss within our corporate bond portfolio was $1.7 million related to
a security with an amortized cost of $7.4 million.  We evaluate the
credit worthiness of our corporate bond portfolio by reviewing various
performance metrics of the issuer including financial condition and credit
ratings of the issuer as well as other public information.  We did not
determine that any corporate bonds were other than temporarily impaired in the
year ended December 31 2009.  Net impairment losses on
investments include $7.6 million and $0.8 million related to corporate bonds for
the years ended December 31, 2008 and December 31, 2007,
respectively.
  We
analyze our commercial mortgage-backed securities (“CMBS”) on a periodic basis
using default loss models based on the performance of the underlying
loans.  Performance metrics include delinquencies, defaults,
foreclosures, debt-service-coverage ratios and cumulative losses
incurred.  The expected losses for a mortgage pool are compared to the
current level of subordination, which generally represents the point at which
our security would experience losses.  We evaluate projected cash
flows as well as other factors in order to determine if a credit impairment has
occurred.  Net impairment losses on investments for the year ended
December 31, 2009 included $2.8 million related to CMBS.  We did
not determine that any CMBS were other-than-temporarily impaired in the years
ended December 31, 2008 or December 31, 2007.
  Our
residential mortgage-backed securities (“RMBS”) include U.S. Government
agency-backed RMBS and non-agency-backed RMBS.  Our securities with
underlying sub-prime mortgages as collateral are included in asset-backed
securities (“ABS”).  As of December 31, 2009, the single largest
unrealized loss was a sub-prime asset-backed security with an amortized cost of
$10.1 million and an unrealized loss of $8.3 million.  We analyze our
RMBS and sub-prime ABS on a periodic basis using default loss models based on
the performance of the underlying loans.  Performance metrics include
delinquencies, defaults, foreclosures, prepayment speeds and cumulative losses
incurred.  The expected losses for a mortgage pool are compared to the
current level of subordination, which generally represents the point at which
our security would experience losses.  We evaluate projected cash
flows as well as other factors in order to determine if a credit impairment has
occurred.  Net impairment losses related to non-agency RMBS include
$8.4 million and $15.8 million for the years ended December 31, 2009 and
December 31, 2008, respectively.  We did not determine that any
non-agency RMBS were other than temporarily impaired in the year ended
December 31, 2007.  The net impairment losses on investments in
2009 reflect the portion of other-than-temporary impairments attributed to the
credit losses for the impaired securities.  The net impairment losses
on investments in 2008 reflect the entire difference between the amortized cost
basis and fair value of the impaired securities at the balance sheet
date.  The adoption of ASC 320 resulted in adjustments to increase the
amortized cost and net unrealized loss of non-agency RMBS by $14.3
million.
  We also
recorded net impairment losses related to sub-prime ABS of $5.3 million and $1.6
million for the years ended December 31, 2009 and December 31, 2008,
respectively.  We did not determine that any sub-prime ABS were other
than temporarily impaired in the year ended December 31,
2007.  The net impairment losses recorded in 2009 reflect the portion
of other-than-temporary impairments attributed to the credit losses for the
impaired securities.  The net impairment losses recorded in 2008
reflect the entire difference between the amortized cost basis and fair value of
the impaired securities at the balance sheet date.  The adoption of
ASC 320 resulted in adjustments to increase the amortized cost and net
unrealized loss of sub-prime ABS by $0.8 million.
  The
following table sets forth a summary of the credit losses recognized on our
fixed maturity available-for-sale securities ($ in thousands):
 Beginning
      balance at January 1, 2009
              
              $
              –Cumulative
      effect of accounting change
              
              
              2,300Credit
      losses on securities not previously impaired
              
              
              11,133Additional
      credit losses on securities previously impaired
              
              
              5,262Ending
      balance at December 31, 2009
              
              $
              18,695
  In
evaluating the potential for OTTI, we also consider our intent to sell a
security and the likelihood that we will be required to sell a security before
the unrealized loss is recovered.  Our intent to sell a security is
based, in part, on adverse changes in the credit worthiness of a debt issuer,
pricing and other market conditions, and our anticipated net cash
flows.  If we determine that we intend to sell a security that is in
an unrealized loss position, then the unrealized loss related to such security,
representing the difference between the security’s amortized cost and its fair
value, is recognized as a charge for OTTI in our consolidated statement of
operations at the time we determine our intent is to sell.
  We
evaluate the unrealized losses of our perpetual preferred stocks by individual
issuer and determine if we can forecast a reasonable period of time by which the
fair value of the securities will increase and we will recover our
cost.  If we are unable to forecast a reasonable period of time in
which we will recover the cost of our perpetual preferred stocks, we record a
charge for OTTI in our consolidated statement of operations equivalent to the
entire unrealized loss.  Net impairment losses on investments included
$1.2 million and $5.6 million related to our perpetual preferred stocks for the
years ended December 31, 2009 and 2008, respectively.  We did not
determine that any perpetual preferred stocks were other-than-temporarily
impaired in the year ended December 31 2007.
  Overall, we believe that the gross
unrealized loss in our available-for-sale portfolio represents temporary
declines in fair value.  We believe that the unrealized loss is not
necessarily predictive of ultimate performance and that the provisions we have
made for net impairment losses are adequate.  However, economic
conditions may deteriorate more than expected and may adversely affect the
expected cash flows of our securities, which in turn may lead to impairment
losses recorded in future periods.
  F-14
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Notes to
Consolidated Financial Statements, continued
  Net
Investment Income
  The
following table sets forth our net investment income for the years ended
December 31, 2009, 2008 and 2007 ($ in thousands):
 2009
              
              
              2008
              
              
              2007Fixed
      maturity securities
              
              $
              162,786
              
              
              
              162,857
              
              
              $
              169,745Short-term
      investments and cash and cash equivalents
              
              
              1,741
              
              
              
              24,340
              
              
              
              44,480Funds
      held
              
              
              4,192
              
              
              
              3,476
              
              
              
              5,279Subtotal
              
              
              168,719
              
              
              
              190,673
              
              
              
              219,504Less
      investment expenses
              
              
              4,778
              
              
              
              4,099
              
              
              
              5,282Net
      investment income
              
              $
              163,941
              
              
              
              186,574
              
              
              $
              214,222
  Net
Realized Gains and Losses on Investments
  The
following table sets forth our net realized gains and losses on investments for
the years ended December 31, 2009, 2008 and 2007 ($ in
thousands):
 2009
              
              
              2008
              
              
              2007Net
      gains (losses) on the sale of investments:Gross
      realized gains
              
              $
              86,512
              
              
              
              53,178
              
              
              $
              52Gross
      realized losses
              
              
              (5,588
              )
              
              
              (5,605
              )
              
              
              (1,858
              )Subtotal
              
              
              80,924
              
              
              
              47,573
              
              
              
              (1,806
              )Mark-to-market
      adjustments on trading securities
              
              
              (2,294
              )
              
              
              9,681
              
              
              
              1,393Net
      realized gains (losses) on investments
              
              $
              78,630
              
              
              
              57,254
              
              
              $
              (413
              )
  Maturities
  Actual
maturities of our fixed maturity available-for-sale and trading securities could
differ from stated maturities due to call or prepayment
provisions.  The following table sets forth the amortized cost and
fair value of our fixed maturity available-for-sale and trading securities by
stated maturity as of December 31, 2009 ($ in thousands):
 Amortized
                Cost
              
              
              Fair
      ValueDue
      in one year or less
              
              $
              121,843
              
              
              $
              123,051Due
      from one to five years
              
              
              1,384,489
              
              
              
              1,413,334Due
      from five to ten years
              
              
              702,923
              
              
              
              711,266Due
      in ten or more years
              
              
              422,343
              
              
              
              419,546Mortgage-backed
      and asset-backed securities
              
              
              1,094,909
              
              
              
              989,421Total
              
              $
              3,726,507
              
              
              $
              3,656,618
  Restricted
Investments
  Investments
with a carrying value of $4.9 million were on deposit with U.S. regulatory
authorities as of December 31, 2009.  Investments with a carrying
value of $275.5 million and cash and cash equivalents of $26.8 million as of
December 31, 2009 were held in trust to collateralize obligations under
various other reinsurance contracts.  Investments with a carrying
value of $206.5 million and cash and cash equivalents of $17.0 million as of
December 31, 2009 were held in trust to collateralize letters of credit
issued under the credit facility as described in Note 7 below.
  F-15
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Notes to
Consolidated Financial Statements, continued
  3.
              Fair Value
      Measurements
  The
following table sets forth the carrying amounts and estimated fair values of our
financial instruments as of December 31, 2009 and 2008 ($ in
thousands):
 
 December 31,
      2009
              
              
              December 31,
      2008Carrying
                Amount
              
              
              Fair
                Value
              
              
              Carrying
                Amount
              
              
              Fair
                ValueFinancial assets:Fixed
      maturity securities
              
              $
              3,656,618
              
              
              
              3,656,618
              
              
              
              3,369,041
              
              
              $
              3,369,041Preferred
      stocks
              
              
              3,897
              
              
              
              3,897
              
              
              
              2,845
              
              
              
              2,845Short-term
      investments
              
              
              26,350
              
              
              
              26,350
              
              
              
              75,036
              
              
              
              75,036Financial liabilities:Debt
      obligations
              
              $
              250,000
              
              
              
              245,000
              
              
              
              250,000
              
              
              $
              200,350Derivative
      instruments
              
              
              4,677
              
              
              
              4,677
              
              
              
              4,753
              
              
              
              4,753
  We
classify our assets and liabilities in the fair value hierarchy based on the
lowest level input that is significant to the fair value
measurement.  This classification requires judgment in assessing the
market and pricing methodologies for a particular security.  We obtain
prices for all of our fixed maturity securities, preferred stocks and short-term
investments from pricing services, which include index providers, pricing
vendors and broker-dealers.
  We
consider prices for actively traded government securities and exchange traded
preferred stocks to be based on quoted prices in active markets for identical
assets (Level 1 as defined by ASC 820).  The fair values of our other
fixed maturity securities, which generally include mortgage-backed and
asset-backed securities, corporate bonds, municipal bonds, and bonds issued or
guaranteed by governmental entities, are based on prices obtained from
independent pricing vendors, index providers, or broker-dealers using observable
inputs (Level 2 as defined by ASC 820).  The inputs used by pricing
vendors may include benchmark yields, reported trades, broker-dealer quotes,
issuer spreads, bids, offers and industry and economic
indicators.  The inputs used in index pricing may include benchmark
yields, transactional data, broker-dealer quotes, security cash flows and
structures, credit ratings, prepayment speeds, loss severities, credit risks and
default rates.  Broker-dealers value securities through trading desks
primarily based on observable inputs.  The fair values of our
derivative instruments, which are included in other liabilities in our
consolidated balance sheets, are determined by management primarily using
unobservable inputs through the application of our own assumptions and internal
valuation pricing models (Level 3 as defined by ASC 820).
  The
following table presents the fair value measurement levels for all assets and
liabilities which the Company has recorded at fair value as of December 31,
2009 and December 31, 2008 ($ in thousands):
 
 Fair
      Value Measurement Using:Total
              
              
              Level
      1
              
              
              Level
      2
              
              
              Level
      3December 31, 2009:Financial assets:U.S.
      Government
              
              $
              608,697
              
              
              
              608,697
              
              
              
              –
              
              
              $
              –U.S.
      Government agencies
              
              
              117,505
              
              
              
              –
              
              
              
              117,505
              
              
              
              –Corporate
              
              
              477,063
              
              
              
              27,760
              
              
              
              449,303
              
              
              
              –Commercial
      mortgage-backed securities
              
              
              215,020
              
              
              
              –
              
              
              
              215,020
              
              
              
              –Residential
      mortgage-backed securities
              
              
              714,703
              
              
              
              –
              
              
              
              714,703
              
              
              
              –Asset-backed
      securities
              
              
              59,699
              
              
              
              –
              
              
              
              59,699
              
              
              
              –Municipal
      bonds
              
              
              759,501
              
              
              
              –
              
              
              
              759,501
              
              
              
              –Non-U.S.
      governments
              
              
              678,748
              
              
              
              35,311
              
              
              
              643,437
              
              
              
              –Insurance-linked
      securities
              
              
              25,682
              
              
              
              –
              
              
              
              25,682
              
              
              
              –Preferred
      stocks
              
              
              3,897
              
              
              
              3,897
              
              
              
              –
              
              
              
              –Short-term
      investments
              
              
              26,350
              
              
              
              –
              
              
              
              26,350
              
              
              
              –Total
              
              $
              3,686,865
              
              
              
              675,665
              
              
              
              3,011,200
              
              
              $
              –Financial liabilities:Derivative
      instruments
              
              
              4,677
              
              
              
              –
              
              
              
              –
              
              
              
              4,677Total
              
              $
              4,677
              
              
              
              –
              
              
              
              –
              
              
              $
              4,677
  F-16
 Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Notes to
Consolidated Financial Statements, continued
 Fair
      Value Measurement Using:Total
              
              
              Level
      1
              
              
              Level
      2
              
              
              Level
      3December 31, 2008:Financial assets:U.S.
      Government
              
              $
              201,024
              
              
              
              201,024
              
              
              
              –
              
              
              $
              –U.S.
      Government agencies
              
              
              811,489
              
              
              
              –
              
              
              
              811,489
              
              
              
              –Corporate
              
              
              694,653
              
              
              
              25,054
              
              
              
              669,599
              
              
              
              –Commercial
      mortgage-backed securities
              
              
              372,806
              
              
              
              –
              
              
              
              372,806
              
              
              
              –Residential
      mortgage-backed securities
              
              
              577,907
              
              
              
              –
              
              
              
              577,907
              
              
              
              –Asset-backed
      securities
              
              
              134,245
              
              
              
              –
              
              
              
              134,245
              
              
              
              –Municipal
      bonds
              
              
              393,484
              
              
              
              –
              
              
              
              393,484
              
              
              
              –Non-U.S.
      governments
              
              
              183,433
              
              
              
              33,143
              
              
              
              150,290
              
              
              
              –Insurance-linked
      securities
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              –Preferred
      stocks
              
              
              2,845
              
              
              
              2,845
              
              
              
              –
              
              
              
              –Short-term
      investments
              
              
              75,036
              
              
              
              –
              
              
              
              75,036
              
              
              
              –Total
              
              $
              3,446,922
              
              
              
              262,066
              
              
              
              3,184,856
              
              
              $
              –Financial liabilities:Derivative
      instruments
              
              
              4,753
              
              
              
              –
              
              
              
              –
              
              
              
              4,753Total
              
              $
              4,753
              
              
              
              –
              
              
              
              –
              
              
              $
              4,753
  The
following table presents the reconciliation of the beginning and ending fair
value measurements of our Level 3 liabilities, consisting of derivative
instruments, measured at fair value using significant unobservable inputs for
the twelve months ended December 31, 2009 ($ in
thousands):
 
 December
      31,2009
              
              
              2008Balance
      beginning of year
              
              $
              (4,753
              )
              
              $
              –Purchases,
      issuances, and settlements
              
              
              9,817
              
              
              
              9,361Total
      unrealized and realized losses included in earnings
              
              
              (9,741
              )
              
              
              (14,114
              )Balance
      end of year
              
              $
              (4,677
              )
              
              $
              (4,753
              )Losses
      for the period attributable to the net change in unrealized losses
      relating to liabilities outstanding
              
              $
              9,741
              
              
              $
              7,154
  The net
change in unrealized losses of $9.7 million relating to derivative instruments
represented the net change in fair value of derivatives in the consolidated
statement of operations for the year ended December 31, 2009.  We
settled balances of $9.8 million on derivatives during the year ended
December 31, 2009 and such payments were also included in the net change in
fair value of derivatives in the consolidated statement of
operations.
  4.
              Derivative
      Contracts
  In August
2008, we entered into a derivative agreement with Topiary Capital Limited
(“Topiary”), a Cayman Islands special purpose vehicle, that provides us with the
ability to recover up to $200.0 million should two catastrophic events involving
U.S. wind, U.S. earthquake, European wind or Japanese earthquake occur that meet
specified loss criteria during any of three annual periods commencing
August 1, 2008.  Both the initial activation event and the
qualifying second event must occur in the same annual period.  The
maximum amount that we can recover over the three-year period is $200.0
million.  Any recovery we make under this contract is based on insured
property industry loss estimates for the U.S. perils and European wind and a
parametric index for Japanese earthquake events.  Recovery is based on
both a physical and financial variable and is not based on actual losses we may
incur.  Consequently, the transaction is accounted for as a derivative
and the derivative is carried at the estimated net fair value.
  F-17
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Notes to
Consolidated Financial Statements, continued
  Under the
terms of the agreement, we pay Topiary approximately $9.7 million during each of
the three annual periods.  The net derivative liability of $4.7
million was included in other liabilities on our consolidated balance
sheet.  The net change in fair value of $9.7 million was included in
the change in fair value of derivatives in our consolidated statement of
operations.  One-time fees and expenses of $4.3 million related to
entering into the agreement with Topiary were included in operating expenses for
the year ended December 31, 2008.
  Topiary’s
limit of loss is collateralized with high quality investment grade securities in
a secured collateral account.  The performance of the securities in
the collateral account is guaranteed under a total swap agreement with Goldman
Sachs International whose obligations under the swap agreement are guaranteed by
Goldman Sachs Group, Inc.
  During
2008 there were four derivative contracts in place, which included two option
agreements to purchase industry loss warranty retrocessional
protection.  The related option fees of $1.5 million were included in
the net change in fair value of derivatives in the consolidated statement of
operations in 2008.  The third derivative was a contract that provided
second event catastrophe protection at a cost of $5.5 million.  The
attachment point was not reached and no recovery was recorded for
2008.  The final derivative contract entered into was with Topiary, as
described above.
  Topiary
is a variable interest entity under the provisions of ASC 810.  We
have concluded that we are not the primary beneficiary of Topiary and
accordingly we have not consolidated this entity in our consolidated financial
statements.
  5.
              Unpaid Losses and
      LAE
  The
following table sets forth the activity in the liability for unpaid losses and
LAE for the years ended December 31, 2009, 2008 and 2007 ($ in
thousands):
 
 2009
              
              
              2008
              
              
              2007Net
      unpaid losses and LAE as of January 1,
              
              $
              2,452,045
              
              
              
              2,342,185
              
              
              $
              2,326,227Net
      incurred related to:Current
      year
              
              
              579,304
              
              
              
              878,169
              
              
              
              745,865Prior
      years
              
              
              (100,962
              )
              
              
              (159,936
              )
              
              
              (90,378
              )Total
      incurred net losses and LAE
              
              
              478,342
              
              
              
              718,233
              
              
              
              655,487Net
      paid losses and LAE:Current
      year
              
              
              67,693
              
              
              
              148,355
              
              
              
              73,402Prior
      years
              
              
              539,517
              
              
              
              433,961
              
              
              
              578,611Total
      net paid losses and LAE
              
              
              607,210
              
              
              
              582,316
              
              
              
              652,013Net
      effects of foreign currency exchange rate changes
              
              
              11,831
              
              
              
              (26,057
              )
              
              
              12,484Net
      unpaid losses and LAE as of December 31,
              
              
              2,335,008
              
              
              
              2,452,045
              
              
              
              2,342,185Reinsurance
      recoverable on unpaid losses and LAE
              
              
              14,328
              
              
              
              11,461
              
              
              
              18,853Gross
      unpaid losses and LAE as of December 31,
              
              $
              2,349,336
              
              
              
              2,463,506
              
              
              $
              2,361,038
  Net
incurred losses and LAE related to prior years included net favorable loss
development of $100.8 million, $167.2 million and $81.2 million for the years
ended December 31, 2009, 2008 and 2007, respectively.  Net favorable
loss development was primarily the result of favorable adjustments in ultimate
loss ratios.  Additionally, prior years’ incurred losses and LAE
included losses associated with changes in estimates of premiums and the
patterns of their earnings.  The incurred losses and LAE related to
prior years arising from changes in premium estimates were a decrease of $0.2
million in 2009, an increase of $7.3 million in 2008 and a decrease of $9.2
million in 2007.  The effect on net income of changes in premium
estimates, after considering corresponding changes in related losses, LAE and
acquisition expenses, was not significant.
  The net
favorable loss development in 2009 emerged primarily from the Property and
Marine and Casualty segments and was related to non-catastrophe
losses.  The Property and Marine segment had $14.2 million of net
favorable loss development, including $17.7 million of net favorable loss
development related to non-catastrophe events in prior years and net unfavorable
loss development of $3.5 million related to major catastrophes.  The
Casualty segment had $73.6 million of net favorable loss development, of which
$68.2 million was attributable to the long-tailed casualty
classes.  The majority of the long-tailed casualty net favorable loss
development was attributable to the umbrella, claims made and casualty
excess-of-loss occurrence classes.  The Finite Risk segment
experienced net favorable loss development of $12.9 million, which was
substantially offset by adjustments relating to profit commissions on these
contracts.
  There was
net favorable loss development in 2008 in all segments.  The Property
and Marine segment had $71.2 million of net favorable loss development, of which
$18.8 million related to major catastrophes in prior years.  The
remainder of the net favorable loss development was attributable to non-major
catastrophe, property risk and crop classes of business.  The Casualty
segment had $73.2 million of net favorable loss development, of which $63.3
million was attributable to certain long-tailed casualty classes.  The
majority of the long-tailed casualty net favorable loss development was
attributable to the claims made classes.  The Finite Risk segment
experienced net favorable loss development of $22.8 million, which was
substantially offset by adjustments relating to profit commissions on these
contracts.
  F-18
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Notes to
Consolidated Financial Statements, continued
  The most
significant portion of net favorable loss development in 2007 was in the
Property and Marine segment and in certain classes in the Casualty
segment.  Net favorable loss development in the Property and Marine
segment had $48.5 million of net favorable loss development, of which $17.2
million related to prior years’ major catastrophes.  The remainder of
the net favorable loss development was attributable to non-major catastrophe,
property risk and crop classes of business.  The Casualty segment had
$19.5 million of net favorable loss development, of which $15.5 million was
attributable to certain long-tailed casualty classes.  The Finite Risk
segment experienced net favorable loss development of $13.2 million, which was
partially offset by adjustments relating to profit commissions on these
contracts.
  The net
favorable loss development in 2009, 2008 and 2007 resulted primarily from
reported loss experience that was less than expected and that gained sufficient
credibility in the current period to reduce estimated ultimate
losses.
  We do not
believe that the net favorable loss development in 2009 is indicative of
prospective net loss development of unpaid losses and LAE as of
December 31, 2009 because conditions and trends that affected the net
favorable loss development of prior years’ unpaid losses and LAE may not
necessarily exist in the future.
  Because
many of the reinsurance coverages we offer will likely involve claims that may
not ultimately be settled for many years after they are incurred, subjective
judgments as to ultimate exposure to losses are an integral and necessary
component of the process of estimating unpaid losses and LAE.  With
respect to reinsurers, the inherent uncertainties of estimating unpaid losses
and LAE are further exacerbated by the significant amount of time that often
elapses between the occurrence of an insured loss, the reporting of that loss to
the primary insurer and then to the reinsurer, and the primary insurer's payment
of that loss to the insured and subsequent payment by the reinsurer to the
primary insurer.  Unpaid losses and LAE are reviewed quarterly using a
variety of statistical and actuarial techniques to analyze current claim costs,
frequency and severity data and prevailing economic, social and legal
factors.  Unpaid losses and LAE established in prior years are
evaluated as loss experience develops and new information becomes
available.  Adjustments to previously estimated unpaid losses and LAE
are reflected in financial results in the periods in which they are
made.
  6.
              Retrocessional
      Reinsurance
  Reinsurance
is the transfer of risk, by contract, from an insurance company to a reinsurer
for consideration of premium.  Retrocessional reinsurance is
reinsurance ceded by a reinsurer to another reinsurer, referred to as a
retrocessionaire, to reinsure against all or a portion of its reinsurance
written.  Retrocessional reinsurance agreements provide us with
increased capacity to write larger risks, limit our maximum loss arising from
any one occurrence and maintain our exposure to loss within our capital
resources.  Retrocessional reinsurance contracts do not relieve us
from our reinsurance obligations under our reinsurance
contracts.  Failure of retrocessionaires to honor their obligations
could result in losses to us.  Consequently, we have a contingent
liability to the extent of any unpaid losses and LAE ceded to our
retrocessionaires.  We evaluate the financial condition of our
retrocessionaires and monitor concentrations of credit risk arising from similar
geographic regions, activities, or economic characteristics of the
retrocessionaires to minimize our exposure to significant losses from
retrocessionaire insolvencies.
  During
2009, Platinum Bermuda entered into various industry loss warranty reinsurance
agreements with third party retrocessionaires.  These reinsurance
contracts provided retrocessional coverage for Platinum Bermuda for catastrophic
events in North America and Europe.  During 2009, Platinum US obtained
$5.9 million of excess-of-loss retrocession limit with respect to its crop
business from third party retrocessionaires.
  The
following table sets forth the effects of retrocessional reinsurance on
premiums, losses and LAE for the years ended December 31, 2009, 2008 and
2007 ($ in thousands):
 
 Assumed
              
              
              Ceded
              
              
              NetAs of and for the year ended December 31,
      2009:Premiums
      written
              
              $
              924,674
              
              
              
              26,840
              
              
              $
              897,834Premiums
      earned
              
              
              964,677
              
              
              
              27,341
              
              
              
              937,336Losses
      and LAE
              
              
              494,312
              
              
              
              15,970
              
              
              
              478,342Unpaid
      losses and LAE
              
              
              2,349,336
              
              
              
              14,328
              
              
              
              2,335,008As of and for the year ended December 31,
      2008:Premiums
      written
              
              
              1,066,616
              
              
              
              29,051
              
              
              
              1,037,565Premiums
      earned
              
              
              1,142,305
              
              
              
              27,509
              
              
              
              1,114,796Losses
      and LAE
              
              
              723,876
              
              
              
              5,643
              
              
              
              718,233Unpaid
      losses and LAE
              
              
              2,463,506
              
              
              
              11,461
              
              
              
              2,452,045As of and for the year ended December 31,
      2007:Premiums
      written
              
              
              1,140,303
              
              
              
              20,496
              
              
              
              1,119,807Premiums
      earned
              
              
              1,193,894
              
              
              
              20,806
              
              
              
              1,173,088Losses
      and LAE
              
              
              646,992
              
              
              
              (8,495
              )
              
              
              655,487Unpaid
      losses and LAE
              
              $
              2,361,038
              
              
              
              18,853
              
              
              $
              2,342,185
  F-19
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Notes to
Consolidated Financial Statements, continued
  Inter-company
Retrocessional Reinsurance Arrangements
  In 2003,
Platinum US entered into a quota share retrocession agreement with Platinum
Bermuda on a risks-attaching basis, with various amendments made from time to
time.  Platinum US continued its participation in its agreement with
Platinum Bermuda until December 31, 2007.  Although the agreement
was terminated on December 31, 2007, premiums associated with this
agreement continued to be earned and retroceded in 2008 and
2009.  Under its quota share retrocession agreement, Platinum US
retroceded approximately 1%, 13% and 49% of its business to Platinum Bermuda
during the years ended December 31, 2009, 2008 and 2007,
respectively.
  Effective
April 1, 2006, Platinum US and Platinum Bermuda entered into an excess-of-loss
reinsurance agreement under which Platinum US provided $65.0 million of coverage
in excess of $185.0 million with respect to international property
business.  Effective January 1, 2008, Platinum US provided
Platinum Bermuda with $75.0 million of coverage in excess of $275.0 million with
respect to their European wind cover.  This agreement was terminated
on August 5, 2008 and replaced with a reinsurance contract providing Platinum US
with $50.0 million of cover per occurrence in excess of $30.0
million.  This agreement was renewed in 2009 with Platinum Bermuda
providing $45.0 million in excess of $20.0 million with respect to catastrophe
losses.
  The
following table sets forth a summary of the retroceded premiums earned and
losses ceded related to the foregoing agreements between Platinum Bermuda and
Platinum US for the years ended December 31, 2009, 2008 and 2007 ($ in
thousands):
 
 2009
              
              
              2008
              
              
              2007Retroceded by Platinum US to Platinum
      Bermuda:Premiums
      earned
              
              $
              37,433
              
              
              
              202,792
              
              
              $
              423,218Incurred
      losses and LAE
              
              
              (41,501
              )
              
              
              132,427
              
              
              
              273,418Retroceded by Platinum Bermuda to Platinum
      US:Premiums
      earned
              
              
              –
              
              
              
              1,875
              
              
              
              1,623Incurred
      losses and LAE
              
              $
              –
              
              
              
              –
              
              
              $
              –
  In 2003,
Platinum UK entered into a 55% quota share retrocession agreement with Platinum
Bermuda on a risks attaching basis with various amendments made from time to
time.
  During
2006, we expanded the scale and scope of Platinum Bermuda to become the
principal carrier for our global catastrophe and financial lines reinsurance
portfolios, and in 2007 we ceased underwriting reinsurance in Platinum
UK.  Platinum UK filed a Scheme of Operations with the U.K. Financial
Services Authority in 2007 that outlined actions for Platinum UK to become a
non-underwriting operation and to return a significant portion of its capital to
Platinum Holdings.  These actions included several agreements for the
transfer of the net underwriting liabilities and administration of in-force
contracts and related claims from Platinum UK to Platinum Bermuda as of
January 1, 2007.  Among these agreements was a 100% loss
portfolio transfer that replaced the previous 55% quota share retrocession
agreement.  Pursuant to the loss portfolio transfer agreement,
Platinum Bermuda received consideration of $80.0 million.  During
2007, after completing the loss portfolio transfer, we returned $155.0 million
of the capital of Platinum UK to Platinum Holdings.
  During
2008, Platinum UK received approval from the U.K. Financial Services Authority
to implement a novation program.  The novation program sought the
individual agreement of each of its cedants to novate the present and future
liabilities arising under all contracts of reinsurance to Platinum
Bermuda.  During 2009, Platinum UK completed the novation (or
termination by other means) of all of its contracts, and the U.K. Financial
Services Authority granted our application to withdraw Platinum UK’s insurance
company license.
  7.
              Debt and Credit
      Facility
  Debt
  At
December 31, 2009, Platinum Finance had outstanding an aggregate principal
amount of $250.0 million of Series B 7.5% Notes due June 1, 2017 (the “Series B
Notes”), unconditionally guaranteed by Platinum Holdings.  Interest is
payable on the Series B Notes at a rate of 7.5% per annum on each June 1 and
December 1.  Platinum Finance may redeem the Series B Notes, at
its option, at any time in whole, or from time to time in part, prior to
maturity, subject to a “make-whole” provision.  We have no current
expectations of redeeming the Series B Notes prior to maturity.
  Platinum
Finance fully repaid $42.8 million of Series B 6.371% Senior Guaranteed Notes in
November 2007 when they came due.
  F-20
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Notes to
Consolidated Financial Statements, continued
  Credit
Facility
  At
December 31, 2009, we had a $400.0 million facility (the “Credit Facility”)
that consisted of a $150.0 million senior unsecured credit facility available
for revolving borrowings and letters of credit and a $250.0 million senior
secured credit facility available for letters of credit.  The
unsecured line of credit generally is available for our working capital,
liquidity and general corporate requirements and those of our
subsidiaries.  The Credit Facility will expire on September 12,
2011.  Platinum Holdings and Platinum Finance guarantee the borrowings
of our reinsurance subsidiaries under the Credit Facility.  The
interest rate on borrowings under the Credit Facility is based on our election
of either:  (1) LIBOR plus 37.5 basis points or (2) the higher
of:  (a) the prime interest rate of the lead bank providing the Credit
Facility, or (b) the federal funds rate plus 37.5 basis points.  The
interest rate based on LIBOR would increase by up to 25.0 basis points should
our senior unsecured debt credit rating decrease.  The Credit Facility
requires us to satisfy various covenants, including several financial
covenants.  As of December 31, 2009, we were in compliance with
all covenants under the Credit Facility.
  We had
$144.1 million of letters of credit outstanding in favor of various ceding
companies as of December 31, 2009.  Cash and cash equivalents of
$17.0 million and investments with a fair value of $206.5 million as of
December 31, 2009 were held in trust to collateralize secured letters of
credit issued under the Credit Facility.  As of December 31,
2009, $150.0 million was available for borrowing on an unsecured basis and
$105.9 million was available for letters of credit on a secured basis under the
Credit Facility.
  8.
              Income
      Taxes
  We
provide for income tax expense or benefit based upon income reported in the
consolidated financial statements and the provisions of currently enacted tax
laws.  Platinum Holdings and Platinum Bermuda are incorporated under
the laws of Bermuda and are subject to Bermuda law with respect to
taxation.  Under current Bermuda law, they are not taxed on any
Bermuda income or capital gains and they have received an assurance from the
Bermuda Minister of Finance that if any legislation is enacted in Bermuda that
would impose tax computed on profits or income, or computed on any capital
asset, gain or appreciation, or any tax in the nature of estate duty or
inheritance tax, then the imposition of any such tax will not be applicable to
Platinum Holdings or Platinum Bermuda or any of their respective operations,
shares, debentures or other obligations until March 28,
2016.  Platinum Holdings has subsidiaries based in the United States,
the United Kingdom and Ireland that are subject to the tax laws
thereof.
  The
operations of Platinum US are subject to U.S. federal income taxes generally at
a rate of 35%.  Any of our non-U.S. subsidiaries could become subject
to U.S. federal income tax only to the extent that they derive U.S. source
income that is subject to U.S. withholding tax or income derived from activity
that is deemed to be the conduct of a trade or business within the
U.S.  We do not consider our non-U.S. subsidiaries to be engaged in a
trade or business within the U.S. and, therefore, do not believe that our
non-U.S. subsidiaries are subject to U.S. federal income
tax.  However, there is little legal precedent as to what constitutes
being engaged in a trade or business within the U.S. and, thus, there exists the
possibility that the U.S. Internal Revenue Service could assert claims that our
non-U.S. subsidiaries are engaged in a trade or business in the U.S. and attempt
to assess taxes that are not provided for.
  There is
no withholding tax on dividends distributed from Platinum UK to Platinum
Regency.  Under current Irish law, Platinum Regency is taxed at a 25%
corporate income tax rate on non-trading income and a 12.5% corporate income tax
rate on trading income.  There is no withholding tax on dividends
distributed from Platinum Regency to Platinum Holdings.  Dividends or
other distributions from Platinum Finance to Platinum Regency are subject to
U.S. withholding tax and are based upon, among other items, cumulative taxable
earnings and profits of Platinum Finance.  Certain distributions from
our U.S. subsidiaries to Platinum Holdings are subject to U.S. withholding taxes
at a rate of 30%.  We incurred U.S. withholding taxes of $0.6 million,
$0.6 million, and $0.2 million for the years ended December 31, 2009, 2008
and 2007, respectively, associated with distributions from our U.S. subsidiaries
to Platinum Regency and Platinum Holdings.
  The
income tax returns of our U.S. based subsidiaries that remain open to
examination are for calendar years 2003 and forward.  The income tax
returns of 2003 and 2004 are currently under examination by the U.S. Internal
Revenue Service.
  The
following table presents our income before income tax expense for the years
ended December 31, 2009, 2008 and 2007 by location ($ in
thousands):
 
 2009
              
              
              2008
              
              
              2007United
      States
              
              $
              15,970
              
              
              
              36,568
              
              
              $
              63,710Bermuda
              
              
              365,521
              
              
              
              201,976
              
              
              
              303,129Other
              
              
              6,085
              
              
              
              695
              
              
              
              13,964Income
      before income tax expense
              
              $
              387,576
              
              
              
              239,239
              
              
              $
              380,803
  The
following table presents our current and deferred income tax expense for the
years ended December 31, 2009, 2008 and 2007 ($ in thousands):
 
 2009
              
              
              2008
              
              
              2007Current
      tax expense
              
              $
              7,808
              
              
              
              27,432
              
              
              $
              37,037Deferred
      tax benefit
              
              
              (3,523
              )
              
              
              (14,433
              )
              
              
              (13,212
              )Total
              
              $
              4,285
              
              
              
              12,999
              
              
              $
              23,825
  F-21
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Notes to
Consolidated Financial Statements, continued
  The
following table presents a reconciliation of expected income tax expense,
computed by applying a 35% income tax rate to income before income taxes, to
income tax expense for the years ended December 31, 2009, 2008 and 2007 ($
in thousands):
 
 2009
              
              
              2008
              
              
              2007Expected
      income tax expense at 35%
              
              $
              135,652
              
              
              
              83,734
              
              
              $
              133,281Effect
      of income or loss subject to tax at rates other than 35%
              
              
              (127,579
              )
              
              
              (71,029
              )
              
              
              (112,768
              )Tax
      exempt investment income
              
              
              (6,129
              )
              
              
              (4,071
              )
              
              
              (1,460
              )U.S.
      withholding taxes
              
              
              600
              
              
              
              600
              
              
              
              175Other,
      net
              
              
              1,741
              
              
              
              3,765
              
              
              
              4,597Income
      tax expense
              
              $
              4,285
              
              
              
              12,999
              
              
              $
              23,825
  The
following table presents the tax effects of temporary differences that give rise
to the deferred tax assets and deferred tax liabilities as of December 31,
2009 and 2008 ($ in thousands):
 
 2009
              
              
              2008Deferred tax assets:Unpaid
      losses and LAE
              
              $
              53,332
              
              
              $
              51,548Temporary
      differences in recognition of expenses
              
              
              4,827
              
              
              
              3,908Unearned
      premiums
              
              
              9,362
              
              
              
              10,666Deferred
      losses on investments
              
              
              7,580
              
              
              
              17,455Other
              
              
              –
              
              
              
              1,055Total
      deferred tax assets
              
              
              75,101
              
              
              
              84,632Deferred tax liabilities:Deferred
      acquisition costs
              
              
              11,866
              
              
              
              13,188Other
              
              
              142
              
              
              
              –Total
      deferred tax liabilities
              
              
              12,008
              
              
              
              13,188Net
      deferred tax assets
              
              $
              63,093
              
              
              $
              71,444
  Income
tax assets and liabilities are recorded by offsetting assets and liabilities by
tax jurisdiction.  The deferred tax assets and liabilities as of
December 31, 2009 and 2008 were all related to U.S. income
tax.  To evaluate the recoverability of the deferred tax assets, we
consider the timing of the reversal of deferred income and expense items as well
as the likelihood that we will generate sufficient taxable income to realize the
future tax benefits.  We believe that it is more likely than not we
will generate sufficient taxable income and realize the future tax benefits in
order to recover the deferred assets and accordingly, no valuation allowance was
established as of December 31, 2009 or 2008.
  9.
              Shareholders' Equity
      and Regulation
  Platinum
Holdings is authorized to issue up to 200,000,000 common shares, $0.01 par
value, and 25,000,000 preferred shares, $0.01 par value.  We had
45,942,639 and 47,482,161 common shares outstanding as of December 31, 2009
and 2008, respectively.
  In 2002,
Platinum Holdings completed an initial public offering of common
shares.  Concurrently, Platinum Holdings sold 6,000,000 common shares
and issued options to purchase 6,000,000 common shares to The Travelers
Companies, Inc., formerly The St. Paul Companies, Inc. (“Travelers”) and
sold 3,960,000 common shares and issued options to purchase 2,500,000 common
shares to RenaissanceRe Holdings Ltd. (“RenaissanceRe”), which have a ten-year
term.  Travelers sold its 6,000,000 common shares in June 2004 and
RenaissanceRe sold its 3,960,000 common shares in December 2005, in each case in
public offerings.  The options were amended to provide that in lieu of
paying the exercise price of $27.00 per share, any option exercise will be
settled on a net share basis, which will result in Platinum Holdings issuing a
number of common shares equal to the excess of the market price per share,
determined in accordance with the amendments, over $27.00, less the par value
per share, multiplied by the number of common shares issuable upon exercise of
the option divided by that market price per share.
  F-22
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Notes to
Consolidated Financial Statements, continued
  On
December 6, 2005, Platinum Holdings completed an offering of 5,750,000 6.0%
Series A Mandatory Convertible Preferred Shares at a price to the public of
$30.15 per share, less related expenses under the unallocated shelf registration
statement.  On February 17, 2009, our 5,750,000 outstanding 6%
Series A Mandatory Convertible Preferred Shares automatically converted into
5,750,000 common shares at a ratio of 1 to 1 which was based on the volume
weighted average price of $29.90 of our common shares from January 14, 2009
through February 11, 2009.
  Our board
of directors has authorized the repurchase of our common shares through a share
repurchase program.  In accordance with the share repurchase program,
we purchased 7,852,498 of our common shares in the open market at an aggregate
amount of $252.3 million at a weighted average cost including commissions of
$32.13 per share during the year ended December 31, 2009.  During
the year ended December 31, 2008, we purchased 7,763,292 of our common
shares in the open market at an aggregate amount of $266.6 million at a weighted
average cost including commissions of $34.34 per share.  During the
year ended December 31, 2007, we purchased 6,934,655 of our common shares
in the open market at an aggregate amount of $240.7 million at a weighted
average cost including commissions of $34.71 per share.  The shares we
purchased were canceled.  Between January 1, 2010 and February 22,
2010, we purchased 428,400 of our common shares in the open market at an
aggregate amount of $16.2 million at a weighted average cost including
commissions of $37.83 per share.
  Other
Comprehensive Income (Loss)
  Accumulated
other comprehensive income (loss) is a component of shareholders’ equity and
includes net unrealized gains or losses on available-for-sale securities,
reclassification adjustments for investment gains and losses on
available-for-sale securities included in net income, cumulative effect of
accounting change and foreign currency translation adjustments.  The
components of other comprehensive income (loss) for the years ended
December 31, 2009, 2008 and 2007 are as follows ($ in
thousands):
 
 2009
              
              
              2008
              
              
              2007Before tax amounts:Net
      change in unrealized holding gains and losses arising during the
      period
              
              $
              191,432
              
              
              
              (153,089
              )
              
              $
              23,319Less
      reclassification adjustments:Net
      realized gains (losses) on investments
              
              
              48,832
              
              
              
              55,914
              
              
              
              (1,267
              )Net
      impairment losses on investments
              
              
              (17,603
              )
              
              
              (30,686
              )
              
              
              (809
              )Less:
      cumulative effect of accounting change
              
              
              15,102
              
              
              
              –
              
              
              
              –Foreign
      currency translation adjustments
              
              
              –
              
              
              
              –
              
              
              
              (1,161
              )Other
      comprehensive income (loss) before tax
              
              
              145,101
              
              
              
              (178,317
              )
              
              
              24,234Deferred income tax (expense) benefit
      on:Net
      change in unrealized holding gains and losses arising during the
      period
              
              
              (12,945
              )
              
              
              8,564
              
              
              
              (4,511
              )Less
      reclassification adjustments:Net
      realized gains (losses) on investments
              
              
              (2,395
              )
              
              
              (7,520
              )
              
              
              121Net
      impairment losses on investments
              
              
              2,183
              
              
              
              2,415
              
              
              
              –Less:
      cumulative effect of accounting change
              
              
              (858
              )
              
              
              –
              
              
              
              –Foreign
      currency translation adjustments
              
              
              –
              
              
              
              –
              
              
              
              348Deferred
      tax on other comprehensive income (loss)
              
              
              (11,875
              )
              
              
              13,669
              
              
              
              (4,284
              )Net of tax amounts:Net
      change in unrealized holding gains and losses arising during the
      period
              
              
              178,487
              
              
              
              (144,526
              )
              
              
              18,808Less
      reclassification adjustments:Net
      realized gains (losses) on investments
              
              
              46,437
              
              
              
              48,393
              
              
              
              (1,146
              )Net
      impairment losses on investments
              
              
              (15,420
              )
              
              
              (28,271
              )
              
              
              (
      809
              )Less:
      cumulative effect of accounting change
              
              
              14,244
              
              
              
              –
              
              
              
              –Foreign
      currency translation adjustments
              
              
              –
              
              
              
              –
              
              
              
              (813
              )Other
      comprehensive income (loss), net of tax
              
              $
              133,226
              
              
              
              (164,648
              )
              
              $
              19,950
  F-23
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Notes to
Consolidated Financial Statements, continued
  Statutory
Basis Equity, Income and Regulation
  Our
ability to pay dividends is subject to certain regulatory restrictions on the
payment of dividends by our subsidiaries.  The payment of dividends
from our regulated reinsurance subsidiaries is limited by applicable laws and
statutory requirements of the jurisdictions in which the subsidiaries operate,
including Bermuda and the United States.  Based on the regulatory
restrictions of the applicable jurisdictions, the maximum amount available for
payment of dividends or other distributions by our reinsurance subsidiaries in
2010 without prior regulatory approval is estimated to be approximately $431.0
million.  The maximum amount available for payment of dividends or
other distributions by Platinum US to Platinum Finance in 2010 without prior
regulatory approval is approximately $38.6 million.  During the year
ended December 31, 2009, dividends of $255.0 million were paid by Platinum
Bermuda to Platinum Holdings, and dividends of $20.0 million were paid by
Platinum US to Platinum Finance.
  Our
reinsurance subsidiaries file financial statements prepared in accordance with
statutory accounting practices prescribed or permitted by insurance regulatory
authorities.  The differences between statutory basis financial
statements and financial statements prepared in accordance with U.S. GAAP vary
between jurisdictions.  The principal differences in Bermuda are that
statutory financial statements do not reflect deferred acquisition costs,
prepaid assets or fixed assets.  Also, reinsurance assets and
liabilities are presented net of retrocessional reinsurance and there is no cash
flow statement.  The principal differences in the U.S. are that
statutory financial statements do not reflect deferred acquisition costs, bonds
are generally carried at amortized cost, deferred income tax is charged or
credited directly to equity (subject to limitations) and reinsurance assets and
liabilities are presented net of retrocessional reinsurance.  We have
not used any statutory accounting practices that are not
prescribed.  The combined statutory capital and surplus and statutory
net income as reported to relevant regulatory authorities for our reinsurance
subsidiaries were as follows ($ in thousands):
 
 (Unaudited)
                2009
              
              
              2008
              
              
              2007Statutory capital and
    surplus:Bermuda
              
              $
              1,569,596
              
              
              
              1,316,265
              
              
              $
              1,494,032United
      States
              
              
              586,269
              
              
              
              574,073
              
              
              
              547,963United
      Kingdom
              
              
              –
              
              
              
              20,880
              
              
              
              26,278Total
      statutory capital and surplus
              
              
              2,155,865
              
              
              
              1,911,218
              
              
              
              2,068,273Statutory net income:Bermuda
              
              
              390,991
              
              
              
              227,156
              
              
              
              311,401United
      States
              
              
              28,559
              
              
              
              14,955
              
              
              
              51,085United
      Kingdom
              
              
              –
              
              
              
              2,439
              
              
              
              3,826Total
      statutory net income
              
              $
              419,550
              
              
              
              244,550
              
              
              $
              366,312
  10.
              Earnings Per Common
      Share
  Following
is a reconciliation of the basic and diluted earnings per common share
computations for the years ended December 31, 2009, 2008 and 2007 ($ in
thousands, except per share data):
 
 Net
                  Income
                
                
                Weighted
                  Average
                  Shares
                  Outstanding
                
                
                Earnings
      Per
                  ShareYear Ended December 31,
      2009:Basic
      earnings per common share:Net
      income attributable to common shareholders
                
                $
                381,990
                
                
                
                49,535
                
                
                $
                7.71Effect
      of dilutive securities:Common
      share options, restricted common shares and restricted share
      units
                
                
                –
                
                
                
                2,024Conversion
      of preferred shares
                
                
                –
                
                
                
                756Preferred
      share dividends
                
                
                1,301
                
                
                
                –Adjusted
      net income for diluted earnings per common share
                
                $
                383,291
                
                
                
                52,315
                
                
                $
                7.33
  F-24
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Notes to
Consolidated Financial Statements, continued
  Net
                  Income
                
                
                
                Weighted
                  Average
                  Shares
                  Outstanding
                
                
                
                Earnings
      Per
                  ShareYear Ended December 31,
      2008:Basic
      earnings per common share:Net
      income attributable to common shareholders
                
                $
                215,832
                
                
                
                49,310
                
                
                $
                4.38Effect
      of dilutive securities:Common
      share options, restricted common shares and restricted share
      units
                
                
                –
                
                
                
                2,368Conversion
      of preferred shares
                
                
                –
                
                
                
                5,177Preferred
      share dividends
                
                
                10,408
                
                
                
                –Adjusted
      net income for diluted earnings per common share
                
                $
                226,240
                
                
                
                56,855
                
                
                $
                3.98Year Ended December 31,
      2007:Basic
      earnings per common share:Net
      income attributable to common shareholders
                
                $
                346,570
                
                
                
                58,631
                
                
                $
                5.91Effect
      of dilutive securities:Common
      share options, restricted common shares and restricted share
      units
                
                
                –
                
                
                
                2,656Conversion
      of preferred shares
                
                
                –
                
                
                
                5,117Preferred
      share dividends
                
                
                10,408
                
                
                
                –Adjusted
      net income for diluted earnings per common share
                
                $
                356,978
                
                
                
                66,404
                
                
                $
                5.38
  11.
              Share Incentive
      Compensation and Employee Benefit
Plans
  Share
Incentive Compensation
  We have a
share incentive plan under which our key employees and directors may be granted
options, restricted shares, share units, share appreciation rights, or other
rights to acquire shares.  Our 2006 share incentive plan provides for
the granting of up to an aggregate of 5,500,000 common shares to employees and
directors at a fair market value per share or exercise price equal to the
closing price of our common shares on the date immediately preceding the date of
the grant.  Share incentive plan awards are granted
periodically.  Option awards generally vest pro-rata over a four year
period.  Share unit awards granted in 2008 and prior generally vest in
equal installments on the third and fourth anniversaries of the grant date and
share unit awards granted subsequent to 2008 vest pro-rata over a four year
period.  The common shares issuable under the share incentive plan will be
made available from authorized but unissued common shares.  Option
awards generally expire ten years from the date of grant.
  The
following summary sets forth common share option activity for the years ended
December 31, 2009, 2008 and 2007 (amounts in thousands, except per share
exercise prices):
 
 As
      of and for the years endedDecember 31,
      2009
              
              
              December 31,
      2008
              
              
              December 31,
      2007Options
              
              
              Weighted
      Average Exercise Price
              
              
              Options
              
              
              Weighted
      Average Exercise Price
              
              
              Options
              
              
              Weighted
      Average Exercise PriceOutstanding
      – beginning of the year
              
              
              2,574
              
              
              $
              30.48
              
              
              
              2,926
              
              
              $
              26.22
              
              
              
              3,466
              
              
              $
              24.20Granted
              
              
              –
              
              
              
              –
              
              
              
              833
              
              
              
              35.17
              
              
              
              546
              
              
              
              34.41Exercised
              
              
              274
              
              
              
              24.63
              
              
              
              1,138
              
              
              
              22.80
              
              
              
              1,004
              
              
              
              23.34Forfeited
              
              
              62
              
              
              
              33.22
              
              
              
              47
              
              
              
              33.81
              
              
              
              82
              
              
              
              30.69Outstanding
      - end of the year
              
              
              2,238
              
              
              $
              31.12
              
              
              
              2,574
              
              
              $
              30.48
              
              
              
              2,926
              
              
              $
              26.22Options
      exercisable at year-end
              
              
              1,745
              
              
              
              
              
              
              
              1,754
              
              
              
              
              
              
              
              2,125Weighted
      average exercise price of options exercisable at year-end
              
              
              
              
              
              $
              30.33
              
              
              
              
              
              
              $
              29.01
              
              
              
              
              
              
              $
              23.63
  F-25
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Notes to
Consolidated Financial Statements, continued
  The fair
value of each option grant was estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions for the years ended December 31, 2008 and 2007:
 
 2008
              
              
              2007Dividend
      yield
              
              
              1.0
              %
              
              
              1.1
              %Risk
      free interest rate
              
              
              2.2
              %
              
              
              4.6
              %Expected
      volatility
              
              
              23.0
              %
              
              
              20.5
              %Expected
      option life
              
              2.6
      years
              
              
              5.5
      yearsWeighted
      average grant fair value
              
              $
              4.91
              
              
              $
              9.09
  There
were no options granted in 2009.
  The
weighted average remaining contractual terms of all outstanding options and
options exercisable were 4.5 years and 3.6 years, respectively, as of
December 31, 2009.  As of December 31, 2009, there was $4.1
million of unrecognized compensation cost related to outstanding options that is
expected to be recognized over a weighted-average period of 0.9
years.  The following table presents the values of the options
exercised and vested during the years ended December 31, 2009, 2008 and
2007 ($ in thousands):
 
 Years
      ended December 31,2009
              
              
              2008
              
              
              2007Intrinsic
      value of options exercised (1)
              
              $
              2,949
              
              
              
              14,702
              
              
              $
              10,962Fair
      value of options exercised (2)
              
              
              2,117
              
              
              
              8,133
              
              
              
              7,353Fair
      value of options vested (2)
              
              $
              2,544
              
              
              
              3,987
              
              
              $
              1,830
  (1)
              Represents
      the difference between the market value and exercise price on the date of
      exercise.
  (2)
              Based
      on the Black-Scholes option pricing
model.
  Our
computation of expected volatility is based on 5 years of historical volatility
using daily price observations.  Our computation of expected option
life is based on historical data analysis of exercises, forfeitures, and
post-vest cancellations.  The forfeitures are used to determine the
outstanding pool of options and do not affect the expected term calculation
(either historical or projected).  The exercises and post-vest
cancellations are used to calculate the time between grant and settlement date
(exercise date or post-vest cancel date), and then weighted by the shares
settled (options exercised or canceled).
  Upon
vesting, each restricted share unit converts to one share of common
stock.  The following summary sets forth restricted share unit
activity for the years ended December 31, 2009, 2008 and 2007 (amounts in
thousands, except grant date fair value):
 
 As
      of and for the years endedDecember 31,
      2009
              
              
              December 31,
      2008
              
              
              December 31,
      2007Restricted
      Share Units
              
              
              Weighted
      Average Grant Date Fair Value
              
              
              Restricted
      Share Units
              
              
              Weighted
      Average Grant Date Fair Value
              
              
              Restricted
      Share Units
              
              
              Weighted
      Average Grant Date Fair ValueOutstanding
      – beginning of the year
              
              
              332
              
              
              $
              33.31
              
              
              
              288
              
              
              $
              32.76
              
              
              
              181
              
              
              $
              30.66Granted
              
              
              151
              
              
              
              28.81
              
              
              
              104
              
              
              
              34.05
              
              
              
              160
              
              
              
              34.42Converted
              
              
              69
              
              
              
              31.37
              
              
              
              43
              
              
              
              31.52
              
              
              
              36
              
              
              
              30.28Forfeited
              
              
              15
              
              
              
              32.90
              
              
              
              17
              
              
              
              33.01
              
              
              
              17
              
              
              
              31.35Outstanding
      - end of the year
              
              
              399
              
              
              $
              31.96
              
              
              
              332
              
              
              $
              33.31
              
              
              
              288
              
              
              $
              32.76
  F-26
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Notes to
Consolidated Financial Statements, continued
  The total
fair value of restricted share units converted during the years ended
December 31, 2009, 2008 and 2007 was $2.2 million, $1.4 million and $1.1
million, respectively.  As of December 31, 2009, there was $12.8
million of unrecognized compensation cost related to restricted share unit
awards that is expected to be recognized over a weighted-average period of 1.2
years.
  During
2009, 2008 and 2007 we granted 119,462, 80,430 and 81,984 restricted share
units, respectively, to certain executive officers under our long-term incentive
plan.  The grant date fair value of the restricted share units was
$3.4 million, $2.7 million and $2.8 million in 2009, 2008 and 2007,
respectively.  These restricted share units are settled in common
shares at the completion of the performance period or upon termination of
employment on a prorated basis.  The performance period is generally
three years, beginning with the grant year, and the actual number of common
shares that each participant receives varies based on the average return on
equity in the performance period.  An average return on equity of 18%
or more results in a settlement of 200% of the initial award in common shares
and an average return on equity of less than 6% reduces the award to
zero.  An average return on equity between 6% and 18% results in a
settlement of 0% to 200% of the initial award in common shares determined
through straight line interpolation.  Share-based compensation expense
related to these awards was $6.5 million, $4.1 million and $3.2 million in 2009,
2008 and 2007, respectively, and was based on estimates as of December 31,
2009, 2008 and 2007 of the average return on equity for the related performance
periods.  As of December 31, 2009, there was $5.1 million of
estimated unrecognized compensation cost related to these awards which is
expected to be recognized over a weighted average period of 1.7
years.
  During
2005, we granted variable long-term incentive awards to certain executive
officers which had a grant date fair value of $1.8 million.  The
settlement values of the awards are based on a percentage of the recipients’
average salary over a five-year performance period, beginning in the grant year,
and a multiplier of 0% to 200%, based on the average return on equity in the
five-year period, determined through straight line interpolation.  The
Company recognized $0.8 million, $0.1 million, and $0.3 million of share-based
compensation expense related to these awards in 2009, 2008 and 2007,
respectively, based on the estimated settlement value as of each year
end.  As of December 31, 2009, there was no unrecognized
compensation cost related to these awards.
  We
granted 65,682 and 245,000 restricted shares in 2009 and 2008,
respectively.  There were no restricted shares granted in
2007.  The restricted shares granted in 2009 vest in equal
installments after approximately three and four years of service and restricted
shares granted in 2008 vest over a three-year period.  The fair value
of restricted shares at the grant date was $2.4 million and $8.7 million in 2009
and 2008, respectively.  During 2009, 106,549 restricted shares
vested.  As of December 31, 2009, there were 229,017 unvested
restricted shares and $8.2 million of related unrecognized compensation cost
that is expected to be recognized over a weighted-average period of 1.6
years.
  For years
prior to 2009, members of our board of directors received all or a portion of
their directors’ fees in the form of share units.  In October 2008,
the share unit plan for nonemployee directors was amended to provide that
director fees for services performed after December 31, 2008 are paid in
cash.  In 2009, 2008 and 2007, we granted 5,832, 25,255 and 22,593
restricted share units, respectively, to members of our board of directors under
our share unit plan for nonemployee directors.  The grant date fair
values of the share units were $0.2 million, $0.9 million and $0.8 million in
2009, 2008 and 2007, respectively, and we recognized the full amount as share
based compensation in the respective years.  Restricted share units
granted to nonemployee directors in 2009 related to director fees for services
performed in 2008.  These awards are fully vested at the grant date
and are settled in common shares or cash 5 years from the grant date or, if
earlier, when the participant ceases to be a member of the board of
directors.  As of December 31, 2009, there was no unrecognized
compensation cost related to the share units granted to our board of
directors.
  The
following table provides the total share-based compensation expense recognized
during the year ended December 31, 2009 ($ in thousands):
 
 Share-based
      compensation expense
              
              $
              16,463Tax
      benefit
              
              
              (2,267
              )Share-based
      compensation expense, net of tax
              
              $
              14,196
  Defined
Contribution Plan
  The
Company provides pension benefits to employees through defined contribution
plans whereby the Company contributes a portion of each employee’s gross salary
each month and the employee may make a matching contribution.  The
defined contribution plans consist of plans in the United States, Bermuda and
the UK.  Expenses related to the defined contribution plans were $2.3
million, $1.9 million and $2.3 million for the years ended December 31,
2009, 2008 and 2007, respectively.
  12.
              Related Party
      Transactions and Agreements
  Platinum
US had a consulting agreement with SHN Enterprises, Inc. (“SHN”) and Steven H.
Newman, the President of SHN, with an original term from November 1, 2005 to
November 1, 2008.  The President of SHN was the chairman of our Board
of Directors until April 23, 2008, at which time he retired from the Board of
Directors.  Simultaneously with his retirement, this consulting
agreement was terminated, and a new two year consulting agreement dated March 3,
2008 was entered between Platinum US and SHN.  SHN is engaged as a
consultant to Platinum US and performs services as are reasonably requested by
Platinum US.  Expenses incurred pursuant to the agreements with SHN in
2009, 2008 and 2007 were approximately $0.5 million, $0.6 million and $0.5
million, respectively.  Platinum Holdings entered into a nonqualified
share option agreement with the former chairman, under the terms of which he was
granted on April 23, 2008 a fully vested option for the purchase of 500,000
common shares at an exercise price of $36.00 per share.
  F-27
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Notes to
Consolidated Financial Statements, continued
  13.
              Operating Segment
      Information
  We
conduct our worldwide reinsurance business through three operating segments:
Property and Marine, Casualty and Finite Risk.  The Property and
Marine operating segment includes principally property and marine reinsurance
coverages that are written in the United States and international
markets.  This operating segment includes property reinsurance, crop
reinsurance and marine and aviation reinsurance.  The Property and
Marine operating segment includes reinsurance contracts that are either
catastrophe excess-of-loss, per-risk excess-of-loss or proportional
contracts.  The Casualty operating segment includes reinsurance
contracts that cover general and product liability, professional liability,
accident and health, umbrella liability, workers' compensation, casualty clash,
automobile liability, surety, trade credit, and political risk.  We
generally seek to write casualty reinsurance on an excess-of-loss
basis.  We write proportional casualty reinsurance contracts on an
opportunistic basis.  The Finite Risk operating segment includes
principally structured reinsurance contracts with ceding companies whose needs
may not be met efficiently through traditional reinsurance
products.  In exchange for contractual features that limit our
downside risk, reinsurance contracts that we classify as finite risk provide the
potential for significant profit commission to the ceding
company.  The classes of risks underwritten through finite risk
contracts are generally consistent with the classes covered by traditional
products.  The finite risk contracts that we underwrite generally
provide prospective protection, meaning coverage is provided for losses that are
incurred after inception of the contract, as contrasted with retrospective
coverage, which covers losses that are incurred prior to inception of the
contract.  The three main categories of finite risk contracts are
quota share, multi-year excess-of-loss and whole account aggregate stop
loss.
  In
managing our operating segments, we use measures such as net underwriting income
and underwriting ratios to evaluate segment performance.  We do not
allocate assets or certain income and expenses such as investment income, net
realized gains and losses on investments, net changes in fair value of
derivatives, net foreign currency exchange gains and losses, interest expense
and certain corporate expenses by segment.  The measures we use in
evaluating our operating segments should not be used as a substitute for
measures determined under U.S. GAAP.  The following table summarizes
underwriting activity and ratios for the three operating segments, together with
a reconciliation of underwriting income to income before income tax expense for
the years ended December 31, 2009, 2008 and 2007 ($ in
thousands):
 
 Property
                  and
      Marine
                
                
                Casualty
                
                
                Finite
      Risk
                
                
                TotalYear ended December 31,
      2009:Net
      premiums written
                
                $
                517,011
                
                
                
                356,488
                
                
                
                24,335
                
                
                $
                897,834Net
      premiums earned
                
                
                528,488
                
                
                
                388,901
                
                
                
                19,947
                
                
                
                937,336Net
      losses and LAE
                
                
                250,646
                
                
                
                226,511
                
                
                
                1,185
                
                
                
                478,342Net
      acquisition expenses
                
                
                66,992
                
                
                
                88,841
                
                
                
                20,586
                
                
                
                176,419Other
      underwriting expenses
                
                
                37,331
                
                
                
                25,644
                
                
                
                1,412
                
                
                
                64,387Segment
      net underwriting income (loss)
                
                $
                173,519
                
                
                
                47,905
                
                
                
                (3,236
                )
                
                
                218,188Net
      investment income
                
                
                
                163,941Net
      realized gains on investments
                
                
                
                78,630Net
      impairment losses
                
                
                
                (17,603
                )Net
      changes in fair value of derivatives
                
                
                
                (9,741
                )Net
      foreign currency exchange gains
                
                
                
                399Other
      income
                
                
                
                3,084Corporate
      expenses not allocated to segments
                
                
                
                (30,295
                )Interest
      expense
                
                
                
                (19,027
                )Income
      before income tax expense
                
                
                $
                387,576Ratios:Net
      loss and LAE
                
                
                47.4
                %
                
                
                58.2
                %
                
                
                5.9
                %
                
                
                51.0
                %Net
      acquisition expense
                
                
                12.7
                %
                
                
                22.8
                %
                
                
                103.2
                %
                
                
                18.8
                %Other
      underwriting expense
                
                
                7.1
                %
                
                
                6.6
                %
                
                
                7.1
                %
                
                
                6.9
                %Combined
                
                
                67.2
                %
                
                
                87.6
                %
                
                
                116.2
                %
                
                
                76.7
                %
  F-28
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Notes to
Consolidated Financial Statements, continued
  Property
                  and
      Marine
                
                
                
                Casualty
                
                
                
                Finite
      Risk
                
                
                
                TotalYear ended December 31,
      2008:Net
      premiums written
                
                $
                593,087
                
                
                
                430,084
                
                
                
                14,394
                
                
                $
                1,037,565Net
      premiums earned
                
                
                599,110
                
                
                
                503,300
                
                
                
                12,386
                
                
                
                1,114,796Net
      losses and LAE
                
                
                397,200
                
                
                
                337,051
                
                
                
                (16,018
                )
                
                
                718,233Net
      acquisition expenses
                
                
                90,816
                
                
                
                125,934
                
                
                
                25,965
                
                
                
                242,715Other
      underwriting expenses
                
                
                38,492
                
                
                
                23,982
                
                
                
                1,270
                
                
                
                63,744Segment
      net underwriting income
                
                $
                72,602
                
                
                
                16,333
                
                
                
                1,169
                
                
                
                90,104Net
      investment income
                
                
                
                186,574Net
      realized gains on investments
                
                
                
                57,254Net
      impairment losses
                
                
                
                (30,686
                )Net
      changes in fair value of derivatives
                
                
                
                (14,114
                )Net
      foreign currency exchange losses
                
                
                
                (6,760
                )Other
      income
                
                
                
                337Corporate
      expenses not allocated to segments
                
                
                
                (24,464
                )Interest
      expense
                
                
                
                (19,006
                )Income
      before income tax expense
                
                
                $
                239,239Ratios:Net
      loss and LAE
                
                
                66.3
                %
                
                
                67.0
                %
                
                
                (129.3
                %)
                
                
                64.4
                %Net
      acquisition expense
                
                
                15.2
                %
                
                
                25.0
                %
                
                
                209.6
                %
                
                
                21.8
                %Other
      underwriting expense
                
                
                6.4
                %
                
                
                4.8
                %
                
                
                10.3
                %
                
                
                5.7
                %Combined
                
                
                87.9
                %
                
                
                96.8
                %
                
                
                90.6
                %
                
                
                91.9
                %Year ended December 31,
      2007:Net
      premiums written
                
                $
                505,010
                
                
                
                584,605
                
                
                
                30,192
                
                
                $
                1,119,807Net
      premiums earned
                
                
                502,291
                
                
                
                637,856
                
                
                
                32,941
                
                
                
                1,173,088Net
      losses and LAE
                
                
                195,398
                
                
                
                444,701
                
                
                
                15,388
                
                
                
                655,487Net
      acquisition expenses
                
                
                68,351
                
                
                
                145,969
                
                
                
                6,010
                
                
                
                220,330Other
      underwriting expenses
                
                
                42,422
                
                
                
                29,194
                
                
                
                2,696
                
                
                
                74,312Segment
      net underwriting income
                
                $
                196,120
                
                
                
                17,992
                
                
                
                8,847
                
                
                
                222,959Net
      investment income
                
                
                
                214,222Net
      realized losses on investments
                
                
                
                (413
                )Net
      impairment losses
                
                
                
                (809
                )Net
      changes in fair value of derivatives
                
                
                
                (5,007
                )Net
      foreign currency exchange gains
                
                
                
                2,775Other
      expense
                
                
                
                (2,173
                )Corporate
      expenses not allocated to segments
                
                
                
                (29,281
                )Interest
      expense
                
                
                
                (21,470
                )Income
      before income tax expense
                
                
                $
                380,803Ratios:Net
      loss and LAE
                
                
                38.9
                %
                
                
                69.7
                %
                
                
                46.7
                %
                
                
                55.9
                %Net
      acquisition expense
                
                
                13.6
                %
                
                
                22.9
                %
                
                
                18.2
                %
                
                
                18.8
                %Other
      underwriting expense
                
                
                8.4
                %
                
                
                4.6
                %
                
                
                8.2
                %
                
                
                6.3
                %Combined
                
                
                60.9
                %
                
                
                97.2
                %
                
                
                73.1
                %
                
                
                81.0
                %
  F-29
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Notes to
Consolidated Financial Statements, continued
  The
following table presents our net premiums written for the years ended
December 31, 2009, 2008 and 2007 by geographic location of the ceding
company ($ in thousands):
 
 2009
              
              
              2008
              
              
              2007United
      States
              
              $
              690,483
              
              
              
              756,933
              
              
              $
              835,459International
              
              
              207,351
              
              
              
              280,632
              
              
              
              284,348Total
              
              $
              897,834
              
              
              
              1,037,565
              
              
              $
              1,119,807
  14.
              Commitments and
      Contingencies
  Lease
Commitments
  The
following table presents our future minimum annual lease commitments under
various non-cancelable operating leases for our office facilities ($ in
thousands):
 
 Years Ending
    December 31,2010
              
              $
              2,8182011
              
              
              2,6752012
              
              
              1,9342013
              
              
              1,451Total
              
              $
              8,878
  Rent
expense was $2.7 million, $2.6 million and $2.6 million for the years ended
December 31, 2009, 2008 and 2007, respectively.
  Contingencies
  In
November and December 2004, we received subpoenas from the SEC and the Office of
the Attorney General for the State of New York for documents and information
relating to certain non-traditional, or loss mitigation, insurance
products.  On June 14, 2005, we received a grand jury subpoena
from the United States Attorney for the Southern District of New York requesting
documents relating to our finite reinsurance products.  We have fully
cooperated in responding to all such requests and have not had any contact with
the SEC, the New York Attorney General’s Office or the United States Attorney
for the Southern District of New York with respect to these investigations since
November 2005.  We are unable to predict the direction the
investigation will take and the impact, if any, it may have on our
business.
  Litigation
  In the
normal course of business, we may become involved in various claims and legal
proceedings.  We are not currently aware of any pending or threatened
material litigation or arbitration other than in the ordinary course of our
reinsurance business, none of which is expected to have a material adverse
effect on our results of operations or financial condition.
  15.
              Quarterly Financial
      Data (Unaudited)
  The
following quarterly financial information for each of the three months ended
March 31, June 30, September 30 and December 31, 2009 and 2008 is
unaudited.  However, in the opinion of management, all adjustments
(consisting of normal recurring adjustments) necessary to present fairly the
results of operations for such periods, have been made for a fair presentation
of the results shown ($ in thousands, except per share data):
 
 Three
      months endedMarch
      31,
                2009
              
              
              June
      30,
                2009
              
              
              September
      30,
                2009
              
              
              December 31,
                2009Net
      premiums earned
              
              $
              247,752
              
              
              
              232,462
              
              
              
              229,538
              
              
              $
              227,584Net
      investment income
              
              
              34,246
              
              
              
              44,077
              
              
              
              44,747
              
              
              
              40,871Net
      losses and LAE
              
              
              144,164
              
              
              
              124,945
              
              
              
              99,240
              
              
              
              109,993Net
      acquisition expenses
              
              
              40,156
              
              
              
              38,338
              
              
              
              50,009
              
              
              
              47,916Operating
      expenses
              
              
              20,868
              
              
              
              22,906
              
              
              
              25,210
              
              
              
              25,698Net
      income attributable to common shareholders
              
              
              83,621
              
              
              
              98,130
              
              
              
              109,468
              
              
              
              90,771Earnings
      per common share:Basic
              
              
              1.69
              
              
              
              1.94
              
              
              
              2.20
              
              
              
              1.88Diluted
              
              $
              1.58
              
              
              
              1.90
              
              
              
              2.10
              
              
              $
              1.76Average
      common shares outstanding:Basic
              
              
              49,521
              
              
              
              50,580
              
              
              
              49,660
              
              
              
              48,294Diluted
              
              
              53,702
              
              
              
              51,594
              
              
              
              52,039
              
              
              
              51,467
  F-30
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Notes to
Consolidated Financial Statements, continued
 Three
      months endedMarch
      31,
                2008
              
              
              June
      30,
                2008
              
              
              September
      30,
                2008
              
              
              December 31,
                2008Net
      premiums earned
              
              $
              301,851
              
              
              
              257,982
              
              
              
              280,725
              
              
              $
              274,238Net
      investment income
              
              
              49,062
              
              
              
              46,932
              
              
              
              48,043
              
              
              
              42,537Net
      losses and LAE
              
              
              160,203
              
              
              
              93,392
              
              
              
              270,863
              
              
              
              193,775Net
      acquisition expenses
              
              
              60,542
              
              
              
              66,137
              
              
              
              56,320
              
              
              
              59,716Operating
      expenses
              
              
              21,690
              
              
              
              25,100
              
              
              
              21,153
              
              
              
              20,265Net
      income (loss) attributable to common shareholders
              
              
              102,569
              
              
              
              99,755
              
              
              
              (47,942
              )
              
              
              61,450Earnings
      (loss) per common share:Basic
              
              
              1.97
              
              
              
              2.06
              
              
              
              (0.99
              )
              
              
              1.30Diluted
              
              $
              1.76
              
              
              
              1.82
              
              
              
              (0.99
              )
              
              $
              1.18Average
      common shares outstanding:Basic
              
              
              52,104
              
              
              
              48,468
              
              
              
              48,260
              
              
              
              47,363Diluted
              
              
              59,874
              
              
              
              56,097
              
              
              
              48,260
              
              
              
              54,498
  16.
              Subsequent
      Events
  The
Company has evaluated subsequent events up to and including February 24, 2010,
the date of issuance of the audited consolidated financial
statements.
  17.
              Condensed
      Consolidating Financial
Information
  Platinum
Finance is a U.S. based intermediate holding company and a wholly owned
subsidiary of Platinum Regency.  The outstanding Series B Notes issued
by Platinum Finance, due June 1, 2017, are fully and unconditionally
guaranteed by Platinum Holdings.  Platinum Finance had Series B 6.371%
Notes outstanding which were due and fully repaid on November 16,
2007.
  The
tables below present the condensed consolidating balance sheets as of
December 31, 2009 and 2008, and the condensed consolidating statements of
operations and the condensed consolidating statements of cash flows for the
years ended December 31, 2009, 2008 and 2007 of Platinum Holdings, Platinum
Finance and the non-guarantor subsidiaries of Platinum Holdings ($ in
thousands):
 
 Condensed
      Consolidating Balance Sheet
                December 31,
      2009
              
              Platinum
                Holdings
              
              
              Platinum
                Finance
              
              
              Non-guarantor
      Subsidiaries
              
              
              Consolidating
                Adjustments
              
              
              ConsolidatedASSETSTotal
      investments
              
              $
              –
              
              
              
              26,426
              
              
              
              3,660,439
              
              
              
              –
              
              
              $
              3,686,865Investment
      in subsidiaries
              
              
              2,023,276
              
              
              
              546,946
              
              
              
              341,627
              
              
              
              (2,911,849
              )
              
              
              –Cash
      and cash equivalents
              
              
              49,448
              
              
              
              7,655
              
              
              
              625,681
              
              
              
              –
              
              
              
              682,784Reinsurance
      assets
              
              
              –
              
              
              
              –
              
              
              
              424,527
              
              
              
              –
              
              
              
              424,527Other
      assets
              
              
              13,649
              
              
              
              6,265
              
              
              
              210,963
              
              
              
              (3,475
              )
              
              
              227,402Total
      assets
              
              $
              2,086,373
              
              
              
              587,292
              
              
              
              5,263,237
              
              
              
              (2,915,324
              )
              
              $
              5,021,578LIABILITIES
      AND SHAREHOLDERS’ EQUITYLiabilitiesReinsurance
      liabilities
              
              $
              –
              
              
              
              –
              
              
              
              2,620,406
              
              
              
              –
              
              
              $
              2,620,406Debt
      obligations
              
              
              –
              
              
              
              250,000
              
              
              
              –
              
              
              
              –
              
              
              
              250,000Other
      liabilities
              
              
              8,642
              
              
              
              1,641
              
              
              
              66,633
              
              
              
              (3,475
              )
              
              
              73,441Total
      liabilities
              
              
              8,642
              
              
              
              251,641
              
              
              
              2,687,039
              
              
              
              (3,475
              )
              
              
              2,943,847Shareholders’ EquityCommon
      shares
              
              
              459
              
              
              
              –
              
              
              
              6,250
              
              
              
              (6,250
              )
              
              
              459Additional
      paid-in capital
              
              
              883,425
              
              
              
              212,608
              
              
              
              1,883,156
              
              
              
              (2,095,764
              )
              
              
              883,425Accumulated
      other comprehensive loss
              
              
              (70,005
              )
              
              
              (7,439
              )
              
              
              (77,490
              )
              
              
              84,929
              
              
              
              (70,005
              )Retained
      earnings
              
              
              1,263,852
              
              
              
              130,482
              
              
              
              764,282
              
              
              
              (894,764
              )
              
              
              1,263,852Total
      shareholders’ equity
              
              
              2,077,731
              
              
              
              335,651
              
              
              
              2,576,198
              
              
              
              (2,911,849
              )
              
              
              2,077,731Total
      liabilities and shareholders’ equity
              
              $
              2,086,373
              
              
              
              587,292
              
              
              
              5,263,237
              
              
              
              (2,915,324
              )
              
              $
              5,021,578
 
 F-31
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Notes to
Consolidated Financial Statements, continued
 Condensed
      Consolidating Balance Sheet
                December 31,
      2008
              
              Platinum
                Holdings
              
              
              Platinum
                Finance
              
              
              Non-guarantor
      Subsidiaries
              
              
              Consolidating
                Adjustments
              
              
              ConsolidatedASSETSTotal
      investments
              
              $
              –
              
              
              
              2,140
              
              
              
              3,444,782
              
              
              
              –
              
              
              $
              3,446,922Investment
      in subsidiaries
              
              
              1,736,321
              
              
              
              518,682
              
              
              
              302,500
              
              
              
              (2,557,503
              )
              
              
              –Cash
      and cash equivalents
              
              
              66,325
              
              
              
              10,468
              
              
              
              736,224
              
              
              
              –
              
              
              
              813,017Reinsurance
      assets
              
              
              –
              
              
              
              –
              
              
              
              517,846
              
              
              
              –
              
              
              
              517,846Other
      assets
              
              
              14,158
              
              
              
              2,652
              
              
              
              132,568
              
              
              
              –
              
              
              
              149,378Total
      assets
              
              $
              1,816,804
              
              
              
              533,942
              
              
              
              5,133,920
              
              
              
              (2,557,503
              )
              
              $
              4,927,163LIABILITIES
      AND SHAREHOLDERS’ EQUITYLiabilitiesReinsurance
      liabilities
              
              $
              –
              
              
              
              –
              
              
              
              2,807,947
              
              
              
              –
              
              
              $
              2,807,947Debt
      obligations
              
              
              –
              
              
              
              250,000
              
              
              
              –
              
              
              
              –
              
              
              
              250,000Other
      liabilities
              
              
              7,407
              
              
              
              2,412
              
              
              
              50,000
              
              
              
              –
              
              
              
              59,819Total
      liabilities
              
              
              7,407
              
              
              
              252,412
              
              
              
              2,857,947
              
              
              
              –
              
              
              
              3,117,766Shareholders’ EquityPreferred
      shares
              
              
              57
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              57Common
      shares
              
              
              475
              
              
              
              –
              
              
              
              6,250
              
              
              
              (6,250
              )
              
              
              475Additional
      paid-in capital
              
              
              1,114,135
              
              
              
              194,264
              
              
              
              1,898,582
              
              
              
              (2,092,846
              )
              
              
              1,114,135Accumulated
      other comprehensive loss
              
              
              (188,987
              )
              
              
              (27,899
              )
              
              
              (216,870
              )
              
              
              244,769
              
              
              
              (188,987
              )Retained
      earnings
              
              
              883,717
              
              
              
              115,165
              
              
              
              588,011
              
              
              
              (703,176
              )
              
              
              883,717Total
      shareholders' equity
              
              
              1,809,397
              
              
              
              281,530
              
              
              
              2,275,973
              
              
              
              (2,557,503
              )
              
              
              1,809,397Total
      liabilities and shareholders’ equity
              
              $
              1,816,804
              
              
              
              533,942
              
              
              
              5,133,920
              
              
              
              (2,557,503
              )
              
              $
              4,927,163
 Consolidating
      Statement of Operations
                    For
      the Year Ended December 31, 2009
                  
                  Platinum
      Holdings
                  
                  
                  Platinum
      Finance
                  
                  
                  Non-guarantor
      Subsidiaries
                  
                  
                  Consolidating
      Adjustments
                  
                  
                  ConsolidatedRevenue:Net
      premiums earned
                  
                  $
                  –
                  
                  
                  
                  –
                  
                  
                  
                  937,336
                  
                  
                  
                  –
                  
                  
                  $
                  937,336Net
      investment income
                  
                  
                  54
                  
                  
                  
                  141
                  
                  
                  
                  163,746
                  
                  
                  
                  –
                  
                  
                  
                  163,941Net
      realized gains on investments
                  
                  
                  –
                  
                  
                  
                  1
                  
                  
                  
                  78,629
                  
                  
                  
                  –
                  
                  
                  
                  78,630Net
      impairment losses on investments
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  (17,603
                  )
                  
                  
                  –
                  
                  
                  
                  (17,603
                  )Other
      income (expense)
                  
                  
                  4,724
                  
                  
                  
                  –
                  
                  
                  
                  (1,640
                  )
                  
                  
                  –
                  
                  
                  
                  3,084Total
      revenue
                  
                  
                  4,778
                  
                  
                  
                  142
                  
                  
                  
                  1,160,468
                  
                  
                  
                  –
                  
                  
                  
                  1,165,388Expenses:Net
      losses and loss adjustment expenses
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  478,342
                  
                  
                  
                  –
                  
                  
                  
                  478,342Net
      acquisition expenses
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  176,419
                  
                  
                  
                  –
                  
                  
                  
                  176,419Net
      changes in fair value of derivatives
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  9,741
                  
                  
                  
                  –
                  
                  
                  
                  9,741Operating
      expenses
                  
                  
                  29,640
                  
                  
                  
                  371
                  
                  
                  
                  64,671
                  
                  
                  
                  –
                  
                  
                  
                  94,682Net
      foreign currency exchange losses
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  (400
                  )
                  
                  
                  1
                  
                  
                  
                  (399
                  )Interest
      expense
                  
                  
                  –
                  
                  
                  
                  19,027
                  
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  19,027Total
      expenses
                  
                  
                  29,640
                  
                  
                  
                  19,398
                  
                  
                  
                  728,773
                  
                  
                  
                  1
                  
                  
                  
                  777,812Income
      (loss) before income tax expense (benefit)
                  
                  
                  (24,862
                  )
                  
                  
                  (19,256
                  )
                  
                  
                  431,695
                  
                  
                  
                  (1
                  )
                  
                  
                  387,576Income
      tax expense (benefit)
                  
                  
                  600
                  
                  
                  
                  (6,684
                  )
                  
                  
                  10,369
                  
                  
                  
                  –
                  
                  
                  
                  4,285Income
      (loss) before equity in earnings of subsidiaries
                  
                  
                  (25,462
                  )
                  
                  
                  (12,572
                  )
                  
                  
                  421,326
                  
                  
                  
                  (1
                  )
                  
                  
                  383,291Equity
      in earnings of subsidiaries
                  
                  
                  408,753
                  
                  
                  
                  26,295
                  
                  
                  
                  14,106
                  
                  
                  
                  (449,154
                  )
                  
                  
                  –Net
      income
                  
                  
                  383,291
                  
                  
                  
                  13,723
                  
                  
                  
                  435,432
                  
                  
                  
                  (449,155
                  )
                  
                  
                  383,291Preferred
      dividends
                  
                  
                  1,301
                  
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  –
                  
                  
                  
                  1,301Net
      income attributable to common shareholders
                  
                  $
                  381,990
                  
                  
                  
                  13,723
                  
                  
                  
                  435,432
                  
                  
                  
                  (449,155
                  )
                  
                  $
                  381,990
   
 F-32
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Notes to
Consolidated Financial Statements, continued
 Consolidating
      Statement of Operations
                For
      the Year Ended December 31, 2008
              
              Platinum
      Holdings
              
              
              Platinum
      Finance
              
              
              Non-guarantor
      Subsidiaries
              
              
              Consolidating
      Adjustments
              
              
              ConsolidatedRevenue:Net
      premiums earned
              
              $
              –
              
              
              
              –
              
              
              
              1,114,796
              
              
              
              –
              
              
              $
              1,114,796Net
      investment income
              
              
              1,644
              
              
              
              594
              
              
              
              184,336
              
              
              
              –
              
              
              
              186,574Net
      realized gains on investments
              
              
              –
              
              
              
              52
              
              
              
              57,202
              
              
              
              –
              
              
              
              57,254Net
      impairment losses on investments
              
              
              –
              
              
              
              –
              
              
              
              (30,686
              )
              
              
              –
              
              
              
              (30,686
              )Other
      income (expense)
              
              
              2,390
              
              
              
              –
              
              
              
              (2,053
              )
              
              
              –
              
              
              
              337Total
      revenue
              
              
              4,034
              
              
              
              646
              
              
              
              1,323,595
              
              
              
              –
              
              
              
              1,328,275Expenses:Net
      losses and loss adjustment expenses
              
              
              –
              
              
              
              –
              
              
              
              718,233
              
              
              
              –
              
              
              
              718,233Net
      acquisition expenses
              
              
              –
              
              
              
              –
              
              
              
              242,715
              
              
              
              –
              
              
              
              242,715Net
      changes in fair value of derivatives
              
              
              –
              
              
              
              –
              
              
              
              14,114
              
              
              
              –
              
              
              
              14,114Operating
      expenses
              
              
              23,937
              
              
              
              358
              
              
              
              63,913
              
              
              
              –
              
              
              
              88,208Net
      foreign currency exchange losses
              
              
              –
              
              
              
              –
              
              
              
              6,760
              
              
              
              –
              
              
              
              6,760Interest
      expense
              
              
              –
              
              
              
              19,006
              
              
              
              –
              
              
              
              –
              
              
              
              19,006Total
      expenses
              
              
              23,937
              
              
              
              19,364
              
              
              
              1,045,735
              
              
              
              –
              
              
              
              1,089,036Income
      (loss) before income tax expense (benefit)
              
              
              (19,903
              )
              
              
              (18,718
              )
              
              
              277,860
              
              
              
              –
              
              
              
              239,239Income
      tax expense (benefit)
              
              
              600
              
              
              
              (6,149
              )
              
              
              18,548
              
              
              
              –
              
              
              
              12,999Income
      (loss) before equity in earnings of subsidiaries
              
              
              (20,503
              )
              
              
              (12,569
              )
              
              
              259,312
              
              
              
              –
              
              
              
              226,240Equity
      in earnings of subsidiaries
              
              
              246,743
              
              
              
              38,233
              
              
              
              20,305
              
              
              
              (305,281
              )
              
              
              –Net
      income
              
              
              226,240
              
              
              
              25,664
              
              
              
              279,617
              
              
              
              (305,281
              )
              
              
              226,240Preferred
      dividends
              
              
              10,408
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              10,408Net
      income attributable to common shareholders
              
              $
              215,832
              
              
              
              25,664
              
              
              
              279,617
              
              
              
              (305,281
              )
              
              $
              215,832
   Consolidating
      Statement of Operations
                For
      the Year Ended December 31, 2007
              
              Platinum
      Holdings
              
              
              Platinum
      Finance
              
              
              Non-guarantor
      Subsidiaries
              
              
              Consolidating
      Adjustments
              
              
              ConsolidatedRevenue:Net
      premiums earned
              
              $
              –
              
              
              
              –
              
              
              
              1,173,088
              
              
              
              –
              
              
              $
              1,173,088Net
      investment income
              
              
              6,449
              
              
              
              2,348
              
              
              
              205,425
              
              
              
              –
              
              
              
              214,222Net
      realized losses on investments
              
              
              –
              
              
              
              –
              
              
              
              (413
              )
              
              
              –
              
              
              
              (413
              )Net
      impairment losses on investments
              
              
              –
              
              
              
              –
              
              
              
              (809
              )
              
              
              –
              
              
              
              (809
              )Other
      income (expense)
              
              
              4,167
              
              
              
              –
              
              
              
              (6,340
              )
              
              
              –
              
              
              
              (2,173
              )Total
      revenue
              
              
              10,616
              
              
              
              2,348
              
              
              
              1,370,951
              
              
              
              –
              
              
              
              1,383,915Expenses:Net
      losses and loss adjustment expenses
              
              
              –
              
              
              
              –
              
              
              
              655,487
              
              
              
              –
              
              
              
              655,487Net
      acquisition expenses
              
              
              –
              
              
              
              –
              
              
              
              220,330
              
              
              
              –
              
              
              
              220,330Net
      changes in fair value of derivatives
              
              
              –
              
              
              
              –
              
              
              
              5,007
              
              
              
              –
              
              
              
              5,007Operating
      expenses
              
              
              28,693
              
              
              
              361
              
              
              
              74,539
              
              
              
              –
              
              
              
              103,593Net
      foreign currency exchange gains
              
              
              –
              
              
              
              –
              
              
              
              (2,775
              )
              
              
              –
              
              
              
              (2,775
              )Interest
      expense
              
              
              –
              
              
              
              21,470
              
              
              
              –
              
              
              
              –
              
              
              
              21,470Total
      expenses
              
              
              28,693
              
              
              
              21,831
              
              
              
              952,588
              
              
              
              –
              
              
              
              1,003,112Income
      (loss) before income tax expense (benefit)
              
              
              (18,077
              )
              
              
              (19,483
              )
              
              
              418,363
              
              
              
              –
              
              
              
              380,803Income
      tax expense (benefit)
              
              
              2,400
              
              
              
              (6,665
              )
              
              
              28,090
              
              
              
              –
              
              
              
              23,825Income
      (loss) before equity in earnings of subsidiaries
              
              
              (20,477
              )
              
              
              (12,818
              )
              
              
              390,273
              
              
              
              –
              
              
              
              356,978Equity
      in earnings of subsidiaries
              
              
              377,455
              
              
              
              52,111
              
              
              
              52,115
              
              
              
              (481,681
              )
              
              
              –Net
      income
              
              
              356,978
              
              
              
              39,293
              
              
              
              442,388
              
              
              
              (481,681
              )
              
              
              356,978Preferred
      dividends
              
              
              10,408
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              10,408Net
      income attributable to common shareholders
              
              $
              346,570
              
              
              
              39,293
              
              
              
              442,388
              
              
              
              (481,681
              )
              
              $
              346,570
  F-33
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Notes to
Consolidated Financial Statements, continued
 Condensed
      Consolidating Statement of Cash Flows
              
              Platinum
              
              
              Platinum
              
              
              Non-guarantor
              
              
              ConsolidatingFor
      the Year Ended December 31, 2009
              
              Holdings
              
              
              Finance
              
              
              Subsidiaries
              
              
              Adjustments
              
              
              ConsolidatedNet
      cash provided by (used in) operating activities
              
              $
              (7,638
              )
              
              
              (17,008
              )
              
              
              501,843
              
              
              
              –
              
              
              $
              477,197Investing Activities:Proceeds
      from sale of available-for-sale securities
              
              
              –
              
              
              
              –
              
              
              
              1,538,633
              
              
              
              –
              
              
              
              1,538,633Proceeds
      from sale of subsidiary shares
              
              
              –
              
              
              
              –
              
              
              
              15,377
              
              
              
              (15,377
              )
              
              
              –Purchase
      of subsidiary shares
              
              
              –
              
              
              
              –
              
              
              
              (18,367
              )
              
              
              18,367
              
              
              
              –Proceeds
      from maturity or paydown of available-for-sale securities
              
              
              –
              
              
              
              757
              
              
              
              434,126
              
              
              
              –
              
              
              
              434,883Proceeds
      from sale of trading securities
              
              
              –
              
              
              
              –
              
              
              
              153,223
              
              
              
              –
              
              
              
              153,223Acquisition
      of available-for-sale securities
              
              
              –
              
              
              
              (9,985
              )
              
              
              (2,351,328
              )
              
              
              –
              
              
              
              (2,361,313
              )Acquisition
      of trading securities
              
              
              –
              
              
              
              –
              
              
              
              (164,748
              )
              
              
              –
              
              
              
              (164,748
              )Increase
      in short-term investments
              
              
              –
              
              
              
              (14,944
              )
              
              
              63,977
              
              
              
              –
              
              
              
              49,033Dividends
      from subsidiaries
              
              
              255,000
              
              
              
              20,000
              
              
              
              –
              
              
              
              (275,000
              )
              
              
              –Net
      cash provided by (used in) investing activities
              
              
              255,000
              
              
              
              (4,172
              )
              
              
              (329,107
              )
              
              
              (272,010
              )
              
              
              (350,289
              )Financing Activities:Dividends
      paid to preferred shareholders
              
              
              (2,602
              )
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              (2,602
              )Dividends
      paid to common shareholders
              
              
              (16,099
              )
              
              
              –
              
              
              
              (275,000
              )
              
              
              275,000
              
              
              
              (16,099
              )Proceeds
      from exercise of share options
              
              
              6,759
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              6,759Purchase
      of common shares
              
              
              (252,296
              )
              
              
              –
              
              
              
              (15,377
              )
              
              
              15,377
              
              
              
              (252,296
              )Proceeds
      from common share issuance
              
              
              –
              
              
              
              18,367
              
              
              
              –
              
              
              
              (18,367
              )
              
              
              –Net
      cash provided by (used in) financing activities
              
              
              (264,238
              )
              
              
              18,367
              
              
              
              (290,377
              )
              
              
              272,010
              
              
              
              (264,238
              )Effect
      of foreign currency exchange rate changes on cash
              
              
              –
              
              
              
              –
              
              
              
              7,097
              
              
              
              –
              
              
              
              7,097Net
      decrease in cash and cash equivalents
              
              
              (16,876
              )
              
              
              (2,813
              )
              
              
              (110,544
              )
              
              
              –
              
              
              
              (130,233
              )Cash
      and cash equivalents at beginning of year
              
              
              66,325
              
              
              
              10,468
              
              
              
              736,224
              
              
              
              –
              
              
              
              813,017Cash
      and cash equivalents at end of year
              
              $
              49,449
              
              
              
              7,655
              
              
              
              625,680
              
              
              
              –
              
              
              $
              682,784
   Condensed
      Consolidating Statement of Cash Flows
              
              Platinum
              
              
              Platinum
              
              
              Non-guarantor
              
              
              ConsolidatingFor
      the year ended December 31, 2008
              
              Holdings
              
              
              Finance
              
              
              Subsidiaries
              
              
              Adjustments
              
              
              ConsolidatedNet
      cash provided by (used in) operating activities
              
              $
              (11,470
              )
              
              
              (12,479
              )
              
              
              152,848
              
              
              
              –
              
              
              $
              128,899Investing Activities:Proceeds
      from sale of available-for-sale securities
              
              
              –
              
              
              
              1,970
              
              
              
              1,534,781
              
              
              
              –
              
              
              
              1,536,751Proceeds
      from maturity or paydown of available-for-sale securities
              
              
              –
              
              
              
              2,629
              
              
              
              960,131
              
              
              
              –
              
              
              
              962,760Acquisition
      of available-for-sale securities
              
              
              –
              
              
              
              –
              
              
              
              (2,557,648
              )
              
              
              –
              
              
              
              (2,557,648
              )Proceeds
      from sale of preferred stock
              
              
              –
              
              
              
              –
              
              
              
              120
              
              
              
              –
              
              
              
              120Increase
      in short-term investments
              
              
              –
              
              
              
              –
              
              
              
              (59,251
              )
              
              
              –
              
              
              
              (59,251
              )Dividends
      from subsidiaries
              
              
              305,000
              
              
              
              –
              
              
              
              –
              
              
              
              (305,000
              )
              
              
              –Net
      cash provided by (used in) investing activities
              
              
              305,000
              
              
              
              4,599
              
              
              
              (121,867
              )
              
              
              (305,000
              )
              
              
              (117,268
              )Financing Activities:Dividends
      paid to preferred shareholders
              
              
              (10,408
              )
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              (10,408
              )Dividends
      paid to common shareholders
              
              
              (15,770
              )
              
              
              –
              
              
              
              (305,000
              )
              
              
              305,000
              
              
              
              (15,770
              )Proceeds
      from exercise of share options
              
              
              25,941
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              25,941Purchase
      of common shares
              
              
              (266,561
              )
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              (266,561
              )Net
      cash used in financing activities
              
              
              (266,798
              )
              
              
              –
              
              
              
              (305,000
              )
              
              
              305,000
              
              
              
              (266,798
              )Effect
      of foreign currency exchange rate changes on cash
              
              
              –
              
              
              
              –
              
              
              
              (8,095
              )
              
              
              –
              
              
              
              (8,095
              )Net
      increase (decrease) in cash and cash equivalents
              
              
              26,732
              
              
              
              (7,880
              )
              
              
              (282,114
              )
              
              
              –
              
              
              
              (263,262
              )Cash
      and cash equivalents at beginning of year
              
              
              39,593
              
              
              
              18,348
              
              
              
              1,018,338
              
              
              
              –
              
              
              
              1,076,279Cash
      and cash equivalents at end of year
              
              $
              66,325
              
              
              
              10,468
              
              
              
              736,224
              
              
              
              –
              
              
              $
              813,017
  F-34
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Notes to
Consolidated Financial Statements, continued
 Condensed
      Consolidating Statement of Cash Flows
              
              Platinum
              
              
              Platinum
              
              
              Non-guarantor
              
              
              ConsolidatingFor
      the year ended December 31, 2007
              
              Holdings
              
              
              Finance
              
              
              Subsidiaries
              
              
              Adjustments
              
              
              ConsolidatedNet
      cash provided by (used in) operating activities
              
              $
              (10,170
              )
              
              
              (12,889
              )
              
              
              464,614
              
              
              
              –
              
              
              $
              441,555Investing Activities:Proceeds
      from sale of available-for-sale securities
              
              
              –
              
              
              
              4,708
              
              
              
              243,633
              
              
              
              –
              
              
              
              248,341Proceeds
      from maturity or paydown of available-for-sale securities
              
              
              –
              
              
              
              76
              
              
              
              1,453,611
              
              
              
              –
              
              
              
              1,453,687Acquisition
      of available-for-sale securities
              
              
              –
              
              
              
              –
              
              
              
              (1,650,626
              )
              
              
              –
              
              
              
              (1,650,626
              )Proceeds
      from sale of other invested asset
              
              
              –
              
              
              
              –
              
              
              
              4,745
              
              
              
              –
              
              
              
              4,745Increase
      in short-term investments
              
              
              –
              
              
              
              –
              
              
              
              14,035
              
              
              
              –
              
              
              
              14,035Dividends
      from subsidiaries
              
              
              190,000
              
              
              
              30,000
              
              
              
              –
              
              
              
              (220,000
              )
              
              
              –Net
      cash provided by (used in) investing activities
              
              
              190,000
              
              
              
              34,784
              
              
              
              65,398
              
              
              
              (220,000
              )
              
              
              70,182Financing Activities:Dividends
      paid to preferred shareholders
              
              
              (10,408
              )
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              (10,408
              )Dividends
      paid to common shareholders
              
              
              (18,632
              )
              
              
              –
              
              
              
              (220,000
              )
              
              
              220,000
              
              
              
              (18,632
              )Proceeds
      from exercise of share options
              
              
              23,435
              
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              23,435Purchase
      of common shares
              
              
              (240,672
              )
              
              
              –
              
              
              
              –
              
              
              
              –
              
              
              
              (240,672
              )Repayment
      of debt obligations
              
              
              –
              
              
              
              (42,840
              )
              
              
              –
              
              
              
              –
              
              
              
              (42,840
              )Net
      cash used in financing activities
              
              
              (246,277
              )
              
              
              (42,840
              )
              
              
              (220,000
              )
              
              
              220,000
              
              
              
              (289,117
              )Effect
      of foreign currency exchange rate changes on cash
              
              
              –
              
              
              
              –
              
              
              
              2,007
              
              
              
              –
              
              
              
              2,007Net
      increase (decrease) in cash and cash equivalents
              
              
              (66,447
              )
              
              
              (20,945
              )
              
              
              312,019
              
              
              
              –
              
              
              
              224,627Cash
      and cash equivalents at beginning of year
              
              
              106,040
              
              
              
              39,293
              
              
              
              706,319
              
              
              
              –
              
              
              
              851,652Cash
      and cash equivalents at end of
      year
              
              $
              39,593
              
              
              
              18,348
              
              
              
              1,018,338
              
              
              
              –
              
              
              $
              1,076,279
 
 
 F-35
  Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Index to
Schedules to Consolidated Financial Statements
 
 
 PageReports
      of Independent Registered Public Accounting Firms
              S-2Schedule
      I Summary of Investments - Other Than Investments in Related Parties as of
      December 31, 2009
              S-4Schedule
      II Condensed Financial Information of the Registrant
              S-5Schedule
      III Supplementary Insurance Information for the years ended
      December 31, 2009, 2008 and 2007
              S-8Schedule
      IV Reinsurance for the years ended December 31, 2009, 2008 and
      2007
              S-9
 
 Schedules
other than those listed above are omitted for the reason that they are not
applicable or the information is provided elsewhere in the consolidated
financial statements.
 
 
 S-1
 
 
 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 
 The Board
of Directors and Shareholders
 Platinum
Underwriters Holdings, Ltd.:
 
 
 
 Under
date of February 24, 2010, we reported on the consolidated balance sheet of
Platinum Underwriters Holdings, Ltd. and subsidiaries as of December 31,
2009, and the related consolidated statements of operations and comprehensive
income, shareholders' equity and cash flows for the year ended December 31,
2009, which are included in the December 31, 2009 annual report on Form
10-K.  In connection with our audit of the aforementioned consolidated
financial statements, we also audited the 2009 information on the related
consolidated financial statement schedules appearing on pages S-4 through S-9 of
the Form 10-K.  These financial statement schedules are the
responsibility of the Company's management.  Our responsibility is to
express an opinion on these financial statement schedules based on our
audit.
 
 In our
opinion, such financial statement schedules, when considered in relation to the
basic consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
 
 As
discussed in note 1 to the consolidated financial statements, the Company
changed the manner in which it accounts for other-than-temporary impairments of
debt securities in 2009.
 
 
 /s/
KPMG
 
 
 Hamilton,
Bermuda
 February 24,
2010
 
 S-2
 
 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 
 The Board
of Directors and Shareholders
 Platinum
Underwriters Holdings, Ltd.:
 
 
 
 Under
date of February 26, 2009, we reported on the consolidated balance sheet of
Platinum Underwriters Holdings, Ltd. and subsidiaries as of December 31,
2008 and the related consolidated statements of operations and comprehensive
income, shareholders' equity and cash flows for each of the years in the
two-year period ended December 31, 2008, which are included in the
December 31, 2008 annual report on Form 10-K.  In connection with
our audits of the aforementioned consolidated financial statements, we also
audited the 2008 and 2007 information on the related consolidated financial
statement schedules appearing on pages S-5 through S-9 of the Form
10-K.  These financial statement schedules are the responsibility of
the Company's management.  Our responsibility is to express an opinion
on these financial statement schedules based on our audits.
 
 In our
opinion, such financial statement schedules, when considered in relation to the
basic consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
 
 
 
 /s/ KPMG
LLP
 
 
 New York,
New York
 February
26, 2009
  
 S-3
 
 SCHEDULE
      I
 
 Platinum
Underwriters Holdings, Ltd. and Subsidiaries
 Summary
of Investments - Other Than Investments in Related Parties
 As of
December 31, 2009
 ($ in
thousands)
 
 Cost*
              
              
              Fair
      Value
              
              
              Amount
      at which shown in Balance SheetFixed
      maturity securities:Bonds:U.S.
      Government and government agencies and authorities
              
              $
              1,281,213
              
              
              
              1,274,624
              
              
              $
              1,274,624State,
      municipalities and political subdivisions
              
              
              686,316
              
              
              
              699,039
              
              
              
              699,039Foreign
      governments
              
              
              663,919
              
              
              
              678,748
              
              
              
              678,748Foreign
      corporate
              
              
              119,101
              
              
              
              123,797
              
              
              
              123,797Public
      utilities
              
              
              116,193
              
              
              
              120,053
              
              
              
              120,053All
      other corporate
              
              
              859,765
              
              
              
              760,357
              
              
              
              760,357Total
      bonds
              
              
              3,726,507
              
              
              
              3,656,618
              
              
              
              3,656,618Redeemable
      preferred stock
              
              
              −
              
              
              
              −
              
              
              
              −Total
      fixed maturity securities
              
              
              3,726,507
              
              
              
              3,656,618
              
              
              
              3,656,618Preferred
      stock
              
              
              1,879
              
              
              
              3,897
              
              
              
              3,897Other
      long term investments
              
              
              −
              
              
              
              −
              
              
              
              –Short-term
      investments
              
              
              26,350
              
              
              
              26,350
              
              
              
              26,350Total
      investments
              
              $
              3,754,736
              
              
              
              3,686,865
              
              
              $
              3,686,865
 
 *Original
cost of fixed maturities reduced by repayments and adjusted for amortization of
premiums and discounts.
  See
accompanying report of the independent auditors.
  S-4
  SCHEDULE
      II
 
 Platinum
Underwriters Holdings, Ltd.
 (Parent
Company)
 Condensed
Balance Sheets
 December 31,
2009 and 2008
 ($ in
thousands, except share data)
 
 2009
              
              
              2008ASSETSInvestments
      in subsidiaries
              
              $
              2,023,276
              
              
              $
              1,736,321Cash
      and cash equivalents
              
              
              49,448
              
              
              
              66,325Other
      assets
              
              
              13,649
              
              
              
              14,158Total
      assets
              
              $
              2,086,373
              
              
              $
              1,816,804LIABILITIES
      AND SHAREHOLDERS’ EQUITYLiabilitiesOther
      liabilities
              
              $
              8,642
              
              
              $
              7,407Total
      liabilities
              
              
              8,642
              
              
              
              7,407Shareholders' equityPreferred
      shares, $.01 par value, 25,000,000 shares authorized, none and 5,750,000
      shares issued and outstanding, respectively
              
              
              –
              
              
              
              57Common
      shares, $.01 par value, 200,000,000 shares authorized, 45,942,639 and
      47,482,161 shares issued and outstanding, respectively
              
              
              459
              
              
              
              475Additional
      paid-in capital
              
              
              883,425
              
              
              
              1,114,135Accumulated
      other comprehensive loss
              
              
              (70,005
              )
              
              
              (188,987
              )Retained
      earnings
              
              
              1,263,852
              
              
              
              883,717Total
      shareholders' equity
              
              
              2,077,731
              
              
              
              1,809,397Total
      liabilities and shareholders' equity
              
              $
              2,086,373
              
              
              $
              1,816,804
  See
accompanying report of the independent auditors.
  S-5
  SCHEDULE
      II, continued
 
 Platinum
Underwriters Holdings, Ltd.
 (Parent
Company)
 Condensed
Statements of Operations
 For the
years ended December 31, 2009, 2008 and 2007
 ($ in
thousands)
 
 2009
              
              
              2008
              
              
              2007Revenue:Net
      investment income
              
              $
              54
              
              
              
              1,644
              
              
              $
              6,449Other
      income
              
              
              4,724
              
              
              
              2,390
              
              
              
              4,167Total
      revenue
              
              
              4,778
              
              
              
              4,034
              
              
              
              10,616Expenses:Operating
      expenses
              
              
              29,640
              
              
              
              23,937
              
              
              
              28,693Total
      expenses
              
              
              29,640
              
              
              
              23,937
              
              
              
              28,693Loss
      before income taxes
              
              
              (24,862
              )
              
              
              (19,903
              )
              
              
              (18,077
              )Income
      tax expense
              
              
              600
              
              
              
              600
              
              
              
              2,400Net
      loss before equity in earnings of subsidiaries
              
              
              (25,462)
              
              
              
              (20,503
              )
              
              
              (20,477
              )Equity
      in earnings of subsidiaries
              
              
              408,753
              
              
              
              246,743
              
              
              
              377,455Net
      income
              
              
              383,291
              
              
              
              226,240
              
              
              
              356,978Preferred
      dividends
              
              
              1,301
              
              
              
              10,408
              
              
              
              10,408Net
      income attributable to common shareholders
              
              $
              381,990
              
              
              
              215,832
              
              
              $
              346,570
  See
accompanying report of the independent auditors.
  S-6
  SCHEDULE
      II, continued
 
 Platinum
Underwriters Holdings, Ltd.
 (Parent
Company)
 Condensed
Statements of Cash Flows
 For the
years ended December 31, 2009, 2008 and 2007
 ($ in
thousands)
 
 2009
              
              
              2008
              
              
              2007Operating Activities:Net
      loss before equity in earnings of subsidiaries
              
              $
              (25,462
              )
              
              
              (20,503
              )
              
              $
              (20,477
              )Adjustments
      to reconcile net income to net cash provided in
operations:Share-based
      compensation
              
              
              6,865
              
              
              
              7,057
              
              
              
              4,895Depreciation
      and amortization
              
              
              403
              
              
              
              445
              
              
              
              269Other,
      net
              
              
              10,556
              
              
              
              1,531
              
              
              
              5,143Net
      cash used in operating activities
              
              
              (7,638
              )
              
              
              (11,470
              )
              
              
              (10,170
              )Investing Activities:Dividends
      from subsidiaries
              
              
              255,000
              
              
              
              305,000
              
              
              
              190,000Net
      cash provided by investing activities
              
              
              255,000
              
              
              
              305,000
              
              
              
              190,000Financing Activities:Dividends
      paid to preferred shareholders
              
              
              (2,602
              )
              
              
              (10,408
              )
              
              
              (10,408
              )Dividends
      paid to common shareholders
              
              
              (16,099
              )
              
              
              (15,770
              )
              
              
              (18,632
              )Proceeds
      from exercise of share options
              
              
              6,759
              
              
              
              25,941
              
              
              
              23,435Purchase
      of common shares
              
              
              (252,296
              )
              
              
              (266,561
              )
              
              
              (240,672
              )Net
      cash used in financing activities
              
              
              (264,238
              )
              
              
              (266,798
              )
              
              
              (246,277
              )Net
      increase (decrease) in cash and cash equivalents
              
              
              (16,876
              )
              
              
              26,732
              
              
              
              (66,447
              )Cash
      and cash equivalents at beginning of year
              
              
              66,325
              
              
              
              39,593
              
              
              
              106,040Cash
      and cash equivalents at end of year
              
              $
              49,449
              
              
              
              66,325
              
              
              $
              39,593
  See
accompanying report of the independent auditors.
 
 S-7
  SCHEDULE
      III
 
 Platinum
Underwriters Holdings, Ltd.
 Supplementary
Insurance Information
 ($ in
thousands)
 
 Period
              
              Deferred
                policy
      acquisition costs
              
              
              Net
      unpaid losses
                and
      loss adjustment expenses
              
              
              Net
                unearned
      premiums
              
              
              Other
      policy claims and benefits payable
              
              
              Net
                earned
      premium
              
              
              Net
      investment income
              
              
              Net
      losses
                and
      loss adjustment expenses incurred
              
              
              Amortization
      of deferred policy acquisition costs
              
              
              Other
      operating expenses
              
              
              Net
                written
      premiumsYear
      endedDecember 31,
      2009:Property
      and Marine
              
              $
              6,840
              
              
              
              470,288
              
              
              
              32,194
              
              
              
              
              
              
              528,488
              
              
              
              
              
              
              250,646
              
              
              
              48,815
              
              
              
              
              
              $
              517,011Casualty
              
              
              31,854
              
              
              
              1,753,160
              
              
              
              130,174
              
              
              
              
              
              
              388,901
              
              
              
              
              
              
              226,511
              
              
              
              71,270
              
              
              
              
              
              
              356,488Finite
      Risk
              
              
              1,733
              
              
              
              111,560
              
              
              
              7,771
              
              
              
              
              
              
              19,947
              
              
              
              
              
              
              1,185
              
              
              
              13,553
              
              
              
              
              
              
              24,335Total
              
              
              40,427
              
              
              
              2,335,008
              
              
              
              170,139
              
              
              
              –
              
              
              
              937,336
              
              
              
              163,941
              
              
              
              478,342
              
              
              
              133,638
              
              
              
              30,295
              
              
              
              897,834Year
      endedDecember 31,
      2008:Property
      and Marine
              
              
              8,816
              
              
              
              527,844
              
              
              
              42,739
              
              
              
              
              
              
              
              599,110
              
              
              
              
              
              
              
              397,200
              
              
              
              62,889
              
              
              
              
              
              
              
              593,087Casualty
              
              
              41,009
              
              
              
              1,754,386
              
              
              
              161,871
              
              
              
              
              
              
              
              503,300
              
              
              
              
              
              
              
              337,051
              
              
              
              102,868
              
              
              
              
              
              
              
              430,084Finite
      Risk
              
              
              894
              
              
              
              169,815
              
              
              
              3,383
              
              
              
              
              
              
              
              12,386
              
              
              
              
              
              
              
              (16,018
              )
              
              
              16,861
              
              
              
              
              
              
              
              14,394Total
              
              
              50,719
              
              
              
              2,452,045
              
              
              
              207,993
              
              
              
              –
              
              
              
              1,114,796
              
              
              
              186,574
              
              
              
              718,233
              
              
              
              182,618
              
              
              
              24,464
              
              
              
              1,037,565Year
      endedDecember 31,
      2007:Property
      and Marine
              
              
              10,779
              
              
              
              432,268
              
              
              
              50,002
              
              
              
              
              
              
              
              502,291
              
              
              
              
              
              
              
              195,398
              
              
              
              46,330
              
              
              
              
              
              
              
              505,010Casualty
              
              
              59,393
              
              
              
              1,700,597
              
              
              
              237,752
              
              
              
              
              
              
              
              637,856
              
              
              
              
              
              
              
              444,701
              
              
              
              113,916
              
              
              
              
              
              
              
              584,605Finite
      Risk
              
              
              336
              
              
              
              209,320
              
              
              
              1,375
              
              
              
              
              
              
              
              32,941
              
              
              
              
              
              
              
              15,388
              
              
              
              3,809
              
              
              
              
              
              
              
              30,192Total
              
              $
              70,508
              
              
              
              2,342,185
              
              
              
              289,129
              
              
              
              –
              
              
              
              1,173,088
              
              
              
              214,222
              
              
              
              655,487
              
              
              
              164,055
              
              
              
              29,281
              
              
              $
              1,119,807
  See
accompanying report of the independent auditors.
  S-8
  SCHEDULE
      IV
 
 Platinum
Underwriters Holdings, Ltd.
 Reinsurance
 ($ in
thousands)
 
 Description
              
              Direct
      Amount
              
              
              Ceded
      to other companies
              
              
              Assumed
      from other companies
              
              
              Net
      Amount
              
              
              Percentage
      of amount assumed to netProperty
      and liability premiums written:Year ended December 31,
      2009:Property
      and Marine
              
              $
              –
              
              
              
              26,840
              
              
              
              543,851
              
              
              $
              517,011
              
              
              
              105.2
              %Casualty
              
              
              –
              
              
              
              –
              
              
              
              356,488
              
              
              
              356,488
              
              
              
              100.0
              %Finite
      Risk
              
              
              –
              
              
              
              –
              
              
              
              24,335
              
              
              
              24,335
              
              
              
              100.0
              %Total
              
              
              –
              
              
              
              26,840
              
              
              
              924,674
              
              
              
              897,834
              
              
              
              103.0
              %Year ended December 31,
      2008:Property
      and Marine
              
              
              –
              
              
              
              29,084
              
              
              
              622,171
              
              
              
              593,087
              
              
              
              104.9
              %Casualty
              
              
              –
              
              
              
              (33
              )
              
              
              430,051
              
              
              
              430,084
              
              
              
              100.0
              %Finite
      Risk
              
              
              –
              
              
              
              –
              
              
              
              14,394
              
              
              
              14,394
              
              
              
              100.0
              %Total
              
              
              –
              
              
              
              29,051
              
              
              
              1,066,616
              
              
              
              1,037,565
              
              
              
              102.8
              %Year ended December 31,
      2007:Property
      and Marine
              
              
              –
              
              
              
              22,132
              
              
              
              527,142
              
              
              
              505,010
              
              
              
              104.4
              %Casualty
              
              
              –
              
              
              
              306
              
              
              
              584,911
              
              
              
              584,605
              
              
              
              100.1
              %Finite
      Risk
              
              
              –
              
              
              
              (1,942
              )
              
              
              28,250
              
              
              
              30,192
              
              
              
              93.6
              %Total
              
              $
              –
              
              
              
              20,496
              
              
              
              1,140,303
              
              
              $
              1,119,807
              
              
              
              101.8
              %
  See
accompanying report of the independent auditors.
   S-9