##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the quarterly period ended March 31, 2008
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the transition period from  to
 Commission File No. 001-33374
 CastlePoint Holdings, Ltd.
  Bermuda
(State or other jurisdiction of 
incorporation or organization)
    
    N/A
(I.R.S. Employer
Identification No.)
 Victoria Hall, 11 Victoria Street
Hamilton HM 11, Bermuda
(Address of principal executive offices) (Zip code)
 (441) 294-6400
(Registrants telephone number, including area code)
 
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



TABLE OF CONTENTS
 PAGEPart I  FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    1Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    32Item 4T. Controls and Procedures
    
    
    33Part II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    33Item 1A. Risk Factors
    
    
    33Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    33Item 4. Submission of Matters to a Vote of Security Holders
    
    
    34Item 6. Exhibits
    
    
    34EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32: CERTIFICATION
    i




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 CastlePoint Holdings, Ltd.
Consolidated Balance Sheets
(Unaudited)
 March 31,
    
    
    December 31,2008
    
    
    2007( in thousands, except par valueand share amounts)AssetsFixed-maturity securities, available-for-sale, at fair value (amortized cost
$524,532 for 2008; $484,489 for 2007)
    
    $
    516,791
    
    
    $
    484,972Equity securities, available-for-sale, at fair value (cost $42,623 for 2008;
$44,036 for 2007)
    
    
    37,397
    
    
    
    42,402Short-term investments, available-for-sale, at fair value (amortized cost
$39,102 for 2008; $0 for 2007)
    
    
    39,102
    
    
    
    Total available-for-sale investments
    
    
    593,290
    
    
    
    527,374Investment in partnerships, equity method
    
    
    5,525
    
    
    
    8,503Common trust securities  statutory business trusts, equity method
    
    
    4,022
    
    
    
    4,022Total investments
    
    
    602,837
    
    
    
    539,899Cash and cash equivalents
    
    
    193,714
    
    
    
    153,632Accrued investment income
    
    
    3,834
    
    
    
    4,064Premiums receivable (primarily with related parties  See note 3)
    
    
    168,562
    
    
    
    125,597Premiums receivable  programs (primarily with related parties  See note 3)
    
    
    21,203
    
    
    
    9,083Prepaid reinsurance premiums
    
    
    7,480
    
    
    
    3,475Deferred acquisition costs (primarily with related parties  See note 3)
    
    
    78,405
    
    
    
    73,073Deferred income taxes
    
    
    7,825
    
    
    
    7,051Deferred financing fees
    
    
    3,642
    
    
    
    3,673Other assets
    
    
    10,258
    
    
    
    7,196Total Assets
    
    $
    1,097,760
    
    
    $
    926,743Liabilities and Shareholders EquityLiabilitiesLoss and loss adjustment expenses (primarily with related parties  See note 3)
    
    $
    151,817
    
    
    $
    121,426Unearned premium (primarily with related parties  See note 3)
    
    
    239,209
    
    
    
    217,518Losses payable (primarily with related parties  See note 3)
    
    
    21,334
    
    
    
    8,527Premiums payable-programs (primarily with related parties  See note 3)
    
    
    37,028
    
    
    
    16,257Accounts payable and accrued expenses
    
    
    3,060
    
    
    
    3,592Payable for securities
    
    
    86,402
    
    
    
    Other liabilities
    
    
    5,050
    
    
    
    3,595Subordinated debentures
    
    
    134,022
    
    
    
    134,022Total Liabilities
    
    
    677,922
    
    
    
    504,937Shareholders EquityCommon shares ($0.01 par value, 100,000,000 shares authorized; and 38,305,735
and 38,289,430 shares issued in 2008 and 2007)
    
    
    383
    
    
    
    383Additional paid-in-capital
    
    
    385,524
    
    
    
    385,057Accumulated other comprehensive net (loss) income
    
    
    (12,093
    )
    
    
    (1,051
    )Retained earnings
    
    
    46,024
    
    
    
    37,417Total Shareholders Equity
    
    
    419,838
    
    
    
    421,806Total Liabilities and Shareholders Equity
    
    $
    1,097,760
    
    
    $
    926,743
  1




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CastlePoint Holdings, Ltd.
Consolidated Statements of Income and
Comprehensive Income
(Unaudited)
 Three Months EndedMarch 31,2008
    
    
    2007($ in thousands, except par value andshare amounts)RevenuesNet premiums earned (primarily with
related parties  See note 3)
    
    $
    100,404
    
    
    $
    46,596Insurance service revenue (primarily with
related parties  See note 3)
    
    
    7,978
    
    
    
    1,561Net investment income
    
    
    5,157
    
    
    
    5,791Net realized investment gains
    
    
    1,365
    
    
    
    6Total revenues
    
    
    114,904
    
    
    
    53,954ExpensesLoss and loss adjustment expenses
(primarily with related parties  See note
3)
    
    
    54,535
    
    
    
    25,326Commission and other acquisition expenses
(primarily with related parties  See note
3)
    
    
    41,524
    
    
    
    16,573Other operating expenses
    
    
    6,437
    
    
    
    3,336Interest expense
    
    
    2,843
    
    
    
    2,201Total expenses
    
    
    105,339
    
    
    
    47,436Income before income taxes
    
    
    9,565
    
    
    
    6,518Income tax benefit
    
    
    
    
    
    
    553Net income
    
    $
    9,565
    
    
    $
    7,071Comprehensive incomeNet income
    
    $
    9,565
    
    
    $
    7,071Other comprehensive income:Gross unrealized investment holding
(losses) gains arising during period
    
    
    (10,451
    )
    
    
    715Less: reclassification adjustment for
gain included in net income
    
    
    1,365
    
    
    
    6(11,816
    )
    
    
    709Income tax recovery related to items
of other comprehensive income
    
    
    774
    
    
    
    (28
    )Total other comprehensive (loss) income
    
    
    (11,042
    )
    
    
    681Comprehensive (loss) income
    
    $
    (1,477
    )
    
    $
    7,752Earnings Per ShareBasic earnings per common share
    
    $
    0.25
    
    
    $
    0.23Diluted earnings per common share
    
    $
    0.25
    
    
    $
    0.23Weighted Average Common Shares Outstanding:Basic
    
    
    38,277,704
    
    
    
    30,421,659Diluted
    
    
    38,494,609
    
    
    
    30,570,021
  2




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CastlePoint Holdings, Ltd.
Consolidated Statements of Cash Flows
(Unaudited)
 Three Months Ended March 31,2008
    
    
    2007($ in thousands)Cash flows from operating activities:Net income
    
    $
    9,565
    
    
    $
    7,071Adjustments to reconcile net income to net cash provided
by (used in) operations:(Gain)/ loss on sale of investments
    
    
    (1,365
    )
    
    
    (6
    )Depreciation and amortization
    
    
    86
    
    
    
    23Amortization of bond premium or discount
    
    
    (45
    )
    
    
    (123
    )Amortization of stock-based compensation expense
    
    
    467
    
    
    
    356Amortization of deferred financing fees
    
    
    31
    
    
    
    26Equity in limited partnerships
    
    
    2,979
    
    
    
    Deferred income taxes
    
    
    
    
    
    
    (553
    )(Increase)/decrease in assets:Accrued investment income
    
    
    230
    
    
    
    (662
    )Premiums receivable
    
    
    (42,966
    )
    
    
    (7,604
    )Premiums receivable  programs
    
    
    (12,120
    )
    
    
    (699
    )Prepaid reinsurance premiums
    
    
    
    
    
    
    Deferred acquisition costs
    
    
    (4,006
    )
    
    
    (8,243
    )Funds held with reinsured companies
    
    
    (5,332
    )
    
    
    Other assets
    
    
    (3,043
    )
    
    
    (3,237
    )Increase in liabilities:Loss and loss adjustment expenses
    
    
    30,390
    
    
    
    19,921Unearned premium
    
    
    21,692
    
    
    
    25,300Losses payable
    
    
    12,807
    
    
    
    1,897Premiums payable  programs
    
    
    20,771
    
    
    
    729Accounts payable and accrued expenses
    
    
    (532
    )
    
    
    (509
    )Other liabilities
    
    
    1,454
    
    
    
    340Net cash flows provided by operations
    
    
    31,603
    
    
    
    34,027Cash flows from investing activities:Cost of fixed assets purchased
    
    
    (105
    )
    
    
    (98
    )Purchases of investments:Cost of fixed-maturity securities purchased
    
    
    (146,186
    )
    
    
    (212,164
    )Cost of equity securities
    
    
    (13,220
    )
    
    
    Sale of investments:Proceeds from sales of fixed-maturity securities
    
    
    194,655
    
    
    
    97,818Other investments
    
    
    
    
    
    
    40,000Proceeds from sales of equities
    
    
    13,877
    
    
    
    Net short term investments (purchased)/sold
    
    
    (39,044
    )
    
    
    49,887Net cash flows provided/(used) in investing activities
    
    
    9,976
    
    
    
    (24,557
    )Cash flows from financing activities:Net proceeds from Initial Public Offering
    
    
    
    
    
    
    114,866Deferred financing fees
    
    
    
    
    
    
    (34
    )Dividends to shareholders
    
    
    (958
    )
    
    
    (740
    )Net cash flows (used)/provided by financing activities
    
    
    (958
    )
    
    
    114,126Increase in cash and cash equivalents
    
    
    40,082
    
    
    
    123,596Cash and cash equivalents, beginning of period
    
    
    153,632
    
    
    
    34,784Cash and cash equivalents, end of period
    
    $
    193,714
    
    
    $
    158,380Supplemental disclosures of cash flow information:Cash paid for income taxes
    
    $
    
    
    
    $
    Cash paid for interest
    
    $
    2,867
    
    
    $
    1,836
  3




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CastlePoint Holdings , Ltd.
Consolidated Statement of Changes in Shareholders Equity
for the period ended March 31, 2008
(Unaudited)
 AccumulatedAdditional
    
    
    Other
    
    
    
    
    
    
    TotalCommon
    
    
    Paid-In
    
    
    Comprehensive
    
    
    Retained
    
    
    ShareholdersShares
    
    
    Capital
    
    
    Income(Loss)
    
    
    Earnings
    
    
    Equity($ in thousands)Balance at December 31, 2007
    
    $
    383
    
    
    $
    385,057
    
    
    $
    (1,051
    )
    
    $
    37,417
    
    
    $
    421,806Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,565
    
    
    
    9,565Net unrealized losses
    
    
    
    
    
    
    
    
    
    
    (11,042
    )
    
    
    
    
    
    
    (11,042
    )Stock based compensation
    
    
    
    
    
    
    467
    
    
    
    
    
    
    
    
    
    
    
    467Dividends to shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (958
    )
    
    
    (958
    )Balance at March 31, 2008
    
    $
    383
    
    
    $
    385,524
    
    
    $
    (12,093
    )
    
    $
    46,024
    
    
    $
    419,838
  4




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##### Table of Contents



CastlePoint Holdings, Ltd.
Notes to Consolidated Financial Statements
(Unaudited)
 Note 1  Basis of Presentation  Summary of Significant Accounting Policies
  Note 2  Accounting Pronouncements
    5




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Note 3  Related Party Transactions
   Reinsurance Agreements:
   6




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Three Months Ended March 31,2008
    
    2007Net premiums earned
    
    $
    75,627
    
    
    $
    38,533Net losses incurred
    
    
    39,340
    
    
    
    20,554Net commission expense
    
    
    27,984
    
    
    
    13,218
 Management Agreements:
  Service and Expense Sharing Agreements:
 7




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Note 4  Investments
  Cost or
    
    
    Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value($ in thousands)March 31, 2008:Fixed Maturities:US government and agencies
securities
    
    $
    5,048
    
    
    $
    307
    
    
    $
    
    
    
    $
    5,355Corporate fixed maturities
    
    
    140,775
    
    
    
    2,003
    
    
    
    (3,875
    )
    
    
    138,903Mortgage and asset-backed securities
    
    
    378,709
    
    
    
    1,755
    
    
    
    (7,931
    )
    
    
    372,533Total fixed maturities
    
    
    524,532
    
    
    
    4,065
    
    
    
    (11,806
    )
    
    
    516,791Equities
    
    
    42,623
    
    
    
    92
    
    
    
    (5,318
    )
    
    
    37,397Short term investments
    
    
    39,102
    
    
    
    
    
    
    
    
    
    
    
    39,102Total available-for-sale investments
    
    $
    606,257
    
    
    $
    4,157
    
    
    $
    (17,124
    )
    
    $
    593,290December 31, 2007:Fixed Maturities:US government and agencies
securities
    
    $
    8,598
    
    
    $
    214
    
    
    $
    
    
    
    $
    8,812Corporate fixed maturities
    
    
    132,268
    
    
    
    1,372
    
    
    
    (1,370
    )
    
    
    132,270Mortgage and asset-backed securities
    
    
    343,623
    
    
    
    3,124
    
    
    
    (2,857
    )
    
    
    343,890Total fixed maturities
    
    
    484,489
    
    
    
    4,710
    
    
    
    (4,227
    )
    
    
    484,972Equities
    
    
    44,036
    
    
    
    28
    
    
    
    (1,662
    )
    
    
    42,402Total available-for-sale investments
    
    $
    528,525
    
    
    $
    4,738
    
    
    $
    (5,889
    )
    
    $
    527,374
   8




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Quoted Prices in
    
    
    Significant Other
    
    
    Significant OtherFair Value
    
    
    Active Markets
    
    
    Observable Inputs
    
    
    Unobservable InputsMeasurements
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(in thousands)Fixed maturity-securities
    
    $
    516,791
    
    
    $
    
    
    
    $
    516,791
    
    
    $
    Equity securities
    
    
    37,397
    
    
    
    1,553
    
    
    
    35,844
    
    
    
    Short-term investments
    
    
    39,102
    
    
    
    
    
    
    
    39,102
    
    
    
    Total
    
    $
    593,290
    
    
    $
    1,553
    
    
    $
    591,737
    
    
    $
    
  Number
    
    
    Less than 12 Months
    
    
    More than 12 Months
    
    
    Totalof
    
    
    
    
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    
    
    
    
    UnrealizedPositions
    
    
    Book Value
    
    
    Fair Value
    
    
    Losses
    
    
    Book Value
    
    
    Fair Value
    
    
    Losses
    
    
    Book Value
    
    
    Fair Value
    
    
    losses($ in thousands)As of March 31, 2008Corporates
    
    
    25
    
    
    $
    35,413
    
    
    $
    31,538
    
    
    $
    (3,875
    )
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    35,413
    
    
    $
    31,538
    
    
    $
    (3,875
    )Mortgage & asset backed
    
    
    52
    
    
    
    187,274
    
    
    
    179,568
    
    
    
    (7,706
    )
    
    
    4,605
    
    
    
    4,380
    
    
    
    (225
    )
    
    
    191,879
    
    
    
    183,948
    
    
    
    (7,931
    )Total fixed maturities
    
    
    77
    
    
    
    222,687
    
    
    
    211,106
    
    
    
    (11,581
    )
    
    
    4,605
    
    
    
    4,380
    
    
    
    (225
    )
    
    
    227,292
    
    
    
    215,486
    
    
    
    (11,806
    )Equities
    
    
    22
    
    
    
    39,591
    
    
    
    34,273
    
    
    
    (5,318
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,591
    
    
    
    34,273
    
    
    
    (5,318
    )Total
    
    
    99
    
    
    $
    262,278
    
    
    $
    245,379
    
    
    $
    (16,899
    )
    
    $
    4,605
    
    
    $
    4,380
    
    
    $
    (225
    )
    
    $
    266,883
    
    
    $
    249,759
    
    
    $
    (17,124
    )As of December 31, 2007Corporates
    
    
    17
    
    
    $
    28,206
    
    
    $
    26,836
    
    
    
    (1,370
    )
    
    $
    
    
    
    $
    
    
    
    
    
    
    
    $
    28,206
    
    
    $
    26,836
    
    
    $
    (1,370
    )Mortgage & asset backed
    
    
    23
    
    
    
    77,757
    
    
    
    74,911
    
    
    
    (2,846
    )
    
    
    3,669
    
    
    
    3,658
    
    
    
    (11
    )
    
    
    81,426
    
    
    
    78,569
    
    
    
    (2,857
    )Total fixed maturities
    
    
    40
    
    
    
    105,963
    
    
    
    101,747
    
    
    
    (4,216
    )
    
    
    3,669
    
    
    
    3,658
    
    
    
    (11
    )
    
    
    109,632
    
    
    
    105,405
    
    
    
    (4,227
    )Equities
    
    
    9
    
    
    
    21,383
    
    
    
    19,721
    
    
    
    (1,662
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,383
    
    
    
    19,721
    
    
    
    (1,662
    )Total
    
    
    49
    
    
    $
    127,346
    
    
    $
    121,468
    
    
    $
    (5,878
    )
    
    $
    3,669
    
    
    $
    3,658
    
    
    $
    (11
    )
    
    $
    131,015
    
    
    $
    125,126
    
    
    $
    (5,889
    )
  9




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Corporate Fixed Maturities
 Mortgage and Asset Backed Securities
 Equity Securities
    10




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##### Table of Contents



March 31, 2008
    
    
    December 31, 2007Percentage
    
    
    
    
    
    
    Percentage($ in thousands)
    
    Fair Value
    
    
    of Fair Value
    
    
    Fair Value
    
    
    of Fair ValueRatingU.S. Treasury securities
    
    $
    2,644
    
    
    
    0.51
    %
    
    $
    3,218
    
    
    
    0.66
    %AAA
    
    
    378,487
    
    
    
    73.24
    %
    
    
    352,079
    
    
    
    72.60
    %AA
    
    
    49,916
    
    
    
    9.66
    %
    
    
    46,920
    
    
    
    9.67
    %A
    
    
    39,121
    
    
    
    7.57
    %
    
    
    50,312
    
    
    
    10.37
    %BBB
    
    
    45,428
    
    
    
    8.79
    %
    
    
    30,660
    
    
    
    6.32
    %BB
    
    
    1,195
    
    
    
    0.23
    %
    
    
    1,783
    
    
    
    0.37
    %Total
    
    $
    516,791
    
    
    
    100.00
    %
    
    $
    484,972
    
    
    
    100.00
    %
 Note 5  Dividends Declared
   Note 6  Earnings Per Share
  Income
    
    
    Shares
    
    
    Per Share(Numerator)
    
    
    (Denominator)
    
    
    Amount(in thousands, except shares and per share amounts)Three Months Ended
March 31, 2008Net income
    
    $
    9,565Basic earnings per share
    
    
    9,565
    
    
    
    38,277,704
    
    
    $
    0.25Effect of dilutive securities:Stock options
    
    
    
    
    
    
    56,623Unvested restricted stock
    
    
    
    
    
    
    Warrants
    
    
    
    
    
    
    160,282Diluted earnings per share
    
    $
    9,565
    
    
    
    38,494,609
    
    
    $
    0.25Three Months Ended
March 31, 2007Net income
    
    $
    7,071Basic income per share
    
    
    7,071
    
    
    
    30,421,659
    
    
    $
    0.23Effect of dilutive securities:Stock options
    
    
    
    
    
    
    Unvested restricted stock
    
    
    
    
    
    
    Warrants
    
    
    
    
    
    
    148,362Diluted earnings per share
    
    $
    7,071
    
    
    
    30,570,021
    
    
    $
    0.23
 11




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##### Table of Contents



Note 7  Employee Compensation Plans
 2006 Long-Term Equity Compensation Plan
  Three Months EndedMarch 31, 2008WeightedNumber of
    
    Average ExerciseShares
    
    PriceOutstanding at December 31, 2007
    
    
    1,618,783
    
    
    $
    11.50Granted at market value
    
    
    499,518
    
    
    
    10.12Forfeitures and expirations
    
    
    Exercised
    
    
    Outstanding at March 31, 2008
    
    
    2,118,301
    
    
    
    11.17Exercisable, end of period
    
    
    376,133
    
    
    
    10.00Weighted average fair value per
share of options granted
    
    
    
    
    
    
    4.07
 Three Months EndedMarch 31, 2007WeightedNumber of
    
    Average ExerciseShares
    
    PriceOutstanding at December 31, 2006
    
    
    1,082,666
    
    
    $
    10.00Granted at market value
    
    
    539,447
    
    
    
    14.50Forfeitures and expirations
    
    
    Exercised
    
    
    Outstanding at March 31, 2007
    
    
    1,622,113
    
    
    
    11.50Exercisable, end of period
    
    
    
    
    
    
    10.00Weighted average fair value per
share of options granted
    
    
    
    
    
    
    4.81
 12




---



##### Table of Contents



Options outstanding
    
    
    Options exercisableAverageRemainingNumber of
    
    
    Contractual
    
    
    Average
    
    
    Number of
    
    
    AverageRange of Exercise Prices
    
    Shares
    
    
    Life
    
    
    Exercise Price
    
    
    Shares
    
    
    Exercise PriceMarch 31, 2008:$10.00  2006
    
    
    1,082,666
    
    
    8.00 years
    
    $
    10.00
    
    
    
    376,133
    
    
    $
    10.00$14.50  03/22/07
    
    
    519,310
    
    
    9.00 years
    
    $
    14.50
    
    
    
    
    
    
    
    $15.25  04/30/07
    
    
    16,807
    
    
    9.08 years
    
    $
    15.25
    
    
    
    
    
    
    
    $10.12  03/10/08
    
    
    499,518
    
    
    9.94 years
    
    $
    10.12
    
    
    
    
    
    
    
    Total Options
    
    
    2,118,301
    
    
    8.71 years
    
    $
    11.17
    
    
    
    376,133
    
    
    $
    10.00December 31, 2007:$10.00  2006
    
    
    1,082,666
    
    
    8.25 years
    
    $
    10.00
    
    
    
    376,133
    
    
    $
    10.00$14.50  03/22/07
    
    
    519,310
    
    
    9.25 years
    
    $
    14.50
    
    
    
    
    
    
    
    $15.25  04/30/07
    
    
    16,807
    
    
    9.33 years
    
    $
    15.25
    
    
    
    
    
    
    
    Total Options
    
    
    1,618,783
    
    
    8.58 years
    
    $
    11.50
    
    
    
    376,133
    
    
    $
    10.00
    13




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##### Table of Contents



Note 8  Segment Information
  Three Months EndedMarch 31,2008
    
    
    2007($ in thousands)Insurance SegmentRevenues:Net premiums earned
    
    $
    23,960
    
    
    $
    Total revenues
    
    
    23,960
    
    
    
    Expenses:Net loss and loss adjustment expenses
    
    
    13,195
    
    
    
    Commission expense
    
    
    8,949
    
    
    
    Other underwriting expenses
    
    
    736
    
    
    
    2Total expenses
    
    
    22,880
    
    
    
    2Segment profit/(loss)
    
    $
    1,080
    
    
    $
    (2
    )
 Three Months EndedMarch 31,2008
    
    
    2007($ in thousands)Reinsurance SegmentRevenues:Net premiums earned
    
    $
    76,443
    
    
    $
    46,596Total revenues
    
    
    76,443
    
    
    
    46,596Expenses:Net loss and loss adjustment expenses
    
    
    41,341
    
    
    
    25,326Commission expenses
    
    
    25,653
    
    
    
    15,357Other underwriting expenses
    
    
    1,091
    
    
    
    650Total expenses
    
    
    68,085
    
    
    
    41,333Segment profit
    
    $
    8,358
    
    
    $
    5,263
 14




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##### Table of Contents



Three Months EndedMarch 31,2008
    
    
    2007($ in thousands)Insurance Services SegmentRevenues:Direct commission revenue from program business
    
    $
    8,709
    
    
    $
    1,561Total revenues
    
    
    8,709
    
    
    
    1,561Expenses:Direct commission expenses from program business
    
    
    7,653
    
    
    
    1,216Other insurance services expenses
    
    
    1,980
    
    
    
    1,344Total expenses
    
    
    9,633
    
    
    
    2,560Segment loss
    
    $
    (924
    )
    
    $
    (999
    )
  Three Months EndedMarch 31,2008
    
    
    2007($ in thousands)Revenues:Insurance segment
    
    $
    23,960
    
    
    $
    Reinsurance segment
    
    
    76,443
    
    
    
    46,596Insurance services segment
    
    
    8,709
    
    
    
    1,561Total segment revenues
    
    
    109,112
    
    
    
    48,157Segment revenue elimination
    
    
    (730
    )
    
    
    Net Investment income
    
    
    5,157
    
    
    
    5,791Net realized capital gains
    
    
    1,365
    
    
    
    6Consolidated revenues
    
    $
    114,904
    
    
    $
    53,954
  Three Months EndedMarch 31,2008
    
    
    2007($ in thousands)Insurance segment profit/(loss)
    
    $
    1,080
    
    
    $
    (2
    )Reinsurance segment profit
    
    
    8,358
    
    
    
    5,263Insurance services segment loss
    
    
    (924
    )
    
    
    (999
    )Segment profit
    
    
    8,514
    
    
    
    4,262Net investment income
    
    
    5,157
    
    
    
    5,791Net realized capital gains
    
    
    1,365
    
    
    
    6Corporate expenses
    
    
    (2,628
    )
    
    
    (1,340
    )Interest expense
    
    
    (2,843
    )
    
    
    (2,201
    )Income before taxes
    
    $
    9,565
    
    
    $
    6,518
 15




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##### Table of Contents



Note 9  Security Requirements
  
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Note on Forward-Looking Statements
   
    
    our lack of extensive operating history;
    
    our heavy dependence on Tower for revenue, which is expected to continue, and
the continued growth of Towers business;
    
    the risk that CastlePoint Bermuda Holdings or CastlePoint Holdings may be
deemed to be engaged in a U.S. trade or business, or that CastlePoint Re may be
considered to be doing business through a permanent establishment in the United States,
either of which would subject these companies to U.S. taxation;
    
    changes in regulation or tax laws applicable to us, our brokers or our
customers;
    
    the terms of our arrangements with Tower may change as a result of the
regulatory review and approval process;
    
    our ability to write premiums with clients other than Tower;
    
    the possibility that we will need additional capital for our reinsurance and
insurance businesses, as well as to acquire at least one additional broadly-licensed
U.S. insurance company for our insurance business, and to make strategic investments in
some of our clients, including Tower, and the risk that we may not be able to obtain
future additional financing on favorable terms or at all;
    
    the ineffectiveness or obsolescence of our planned business strategy due to
changes in current or future market conditions;
 16




---



##### Table of Contents




    
    changes in the availability, cost or quality of insurance business that meets
our reinsurance underwriting standards;
    
    actual results, changes in market conditions, the occurrence of catastrophic
losses and other factors outside our control that may require us to alter our
anticipated methods of conducting our business, such as the nature, amount and types of
risk we assume and the terms, limits or other characteristics of the products we write
or intend to write;
    
    possible future downgrade in the A.M. Best rating of some or all of our
insurance or reinsurance subsidiaries, or any that we may acquire;
    
    changes in rating agency policies or practices; and
    
    changes in general economic conditions, including inflation, foreign currency
exchange rates, interest rates and other factors.
   Overview
   17




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##### Table of Contents



Tower
   Other Customers .
 Critical Accounting Estimates
  
    
    premiums;
    
    losses and loss adjustment expense reserves;
    
    deferred acquisition costs;
    
    investments;
    
    reinsurance accounting;
    
    deferred taxes; and
    
    U.S. taxation.
  18




---



##### Table of Contents



i.e.
  i.e
 Non-GAAP Measures
 19




---



##### Table of Contents



Consolidated combined ratio
 Operating net income and operating return on average equity.
  Three Months Ended March 31,2008
    
    
    2007($ in thousands)Operating net income
    
    
    11,043
    
    
    
    7,065Reconciliation to Net Income:Realized and unrealized gains (losses) on
investment in Partnership (1)
    
    
    (2,979
    )
    
    
    0Net realized gains (losses) on investments
    
    
    1,365
    
    
    
    6Tax effect on realized and unrealized gains (losses)
    
    
    136
    
    
    
    0Net Income
    
    $
    9,565
    
    
    $
    7.071
 
 (1)
    
    Realized and unrealized gains and losses from
our investment in a limited partnership were
recorded as a component of net investment income 20




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##### Table of Contents



Consolidated Results of Operations
 Three Months Ended March 31,2008
    
    
    2007($ in thousands)RevenuesNet premiums earned
    
    $
    100,404
    
    
    $
    46,596Commission income
    
    
    7,978
    
    
    
    1,561Net investment income
    
    
    5,157
    
    
    
    5,791Net realized investment gains
    
    
    1,365
    
    
    
    6Total revenues
    
    
    114,904
    
    
    
    53,954ExpensesNet loss and loss adjustment expenses
    
    
    54,535
    
    
    
    25,326Commission and other acquisition expenses
    
    
    41,524
    
    
    
    16,573Other operating expenses
    
    
    6,437
    
    
    
    3,336Interest expenses
    
    
    2,843
    
    
    
    2,201Total expenses
    
    
    105,339
    
    
    
    47,436Income before taxes
    
    
    9,565
    
    
    
    6,518Income tax benefit
    
    
    
    
    
    
    553Net Income
    
    $
    9,565
    
    
    $
    7,071Key MeasuresReturn on average equity
    
    
    9.1
    %
    
    
    9.6
    %Consolidated combined ratio
    
    
    94.1
    %
    
    
    93.7
    %
  Consolidated Results of Operations for the Three Months Ended March 31, 2008 and 2007
 Summary .
     21




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##### Table of Contents



Total revenues .
 Premiums earned .
 Commission income .
 Net investment income and realized investment gains .
  22




---



##### Table of Contents



Loss and loss adjustment expenses .
 Operating expenses .
 Interest expense .
 Income tax benefit .
 Net income and return on average equity .
 Consolidated combined ratio .
 23




---



##### Table of Contents



Insurance Segment Results of Operations
 Three Months EndedMarch 31,2008
    
    
    2007($ in thousands)RevenuesPremiums earnedGross premiums earned
    
    $
    31,594
    
    
    $
    Less: ceded premiums earned
    
    
    (7,634
    )
    
    
    Net premiums earned
    
    
    23,960
    
    
    
    ExpensesLoss and loss adjustment expensesGross loss and loss adjustment expenses
    
    
    16,479
    
    
    
    Less: ceded loss and loss adjustment expenses
    
    
    (3,284
    )
    
    
    Net loss and loss adjustment expenses
    
    
    13,195
    
    
    
    Underwriting expensesCommission expense
    
    
    8,949
    
    
    
    Other underwriting expenses
    
    
    736
    
    
    
    2Total underwriting expenses
    
    
    9,685
    
    
    
    2Underwriting profit/(loss)
    
    $
    1,080
    
    
    $
    (2
    )Key MeasuresPremiums writtenGross premiums written
    
    $
    34,949
    
    
    $
    Less: ceded premiums written
    
    
    (11,017
    )
    
    
    Net premiums written
    
    $
    23,932
    
    
    $
    Loss RatiosGross
    
    
    52.2
    %
    
    
    n/aNet
    
    
    55.1
    %
    
    
    n/aAccident Year Loss RatiosGross
    
    
    50.6
    %
    
    
    n/aNet
    
    
    53.5
    %
    
    
    n/aUnderwriting Expense RatiosGross
    
    
    30.7
    %
    
    
    n/aNet
    
    
    40.4
    %
    
    
    n/aCombined RatiosGross
    
    
    82.9
    %
    
    
    n/aNet
    
    
    95.5
    %
    
    
    n/a
 24




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##### Table of Contents



Insurance Segment Results of Operations for the Three Months Ended March 31, 2008 and 2007
  Summary .
 Gross premiums and net premiums .
 Gross and net loss and loss adjustment expenses and loss ratio .
 Underwriting expenses and underwriting expense ratio .
 Underwriting loss and net combined ratio .
 Reinsurance Segment Results of Operations
 Three Months Ended March 31,2008
    
    
    2007($ in thousands)RevenuesPremiums earnedGross premiums earned
    
    $
    76,452
    
    
    $
    46,596Less: ceded premiums earned
    
    
    (9
    )
    
    
    Net premiums earned
    
    
    76,443
    
    
    
    46,596ExpensesLoss and loss adjustment expensesGross loss and loss adjustment expenses
    
    
    41,341
    
    
    
    25,326Less: ceded loss and loss adjustment expenses
    
    
    
    
    
    
    Net loss and loss adjustment expenses
    
    
    41,341
    
    
    
    25,326Underwriting expensesCeding commission expense
    
    
    25,653
    
    
    
    15,357Other underwriting expenses
    
    
    1,091
    
    
    
    650Total underwriting expenses
    
    
    26,744
    
    
    
    16,007
 25




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##### Table of Contents



Three Months Ended March 31,2008
    
    
    2007($ in thousands)Underwriting Profit
    
    $
    8,358
    
    
    $
    5,263Key MeasuresPremiums writtenGross premiums written
    
    $
    94,167
    
    
    $
    71,896Less: ceded premiums written
    
    
    (9
    )
    
    
    Net premiums written
    
    $
    94,158
    
    
    $
    71,896Loss RatiosGross
    
    
    54.1
    %
    
    
    54.3
    %Net
    
    
    54.1
    %
    
    
    54.3
    %Accident Year Loss RatiosGross
    
    
    54.7
    %
    
    
    53.2
    %Net
    
    
    54.7
    %
    
    
    53.2
    %Underwriting Expense RatiosGross
    
    
    35.0
    %
    
    
    34.4
    %Net
    
    
    35.0
    %
    
    
    34.4
    %Combined RatiosGross
    
    
    89.1
    %
    
    
    88.7
    %Net
    
    
    89.1
    %
    
    
    88.7
    %
 Reinsurance Segment Results of Operations for the Three Months Ended March 31, 2008 and 2007
 Summary .
 Gross premiums and net premiums .
 Loss and loss adjustment expenses and loss ratio .
 Underwriting expenses and underwriting expense ratio .
 26




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##### Table of Contents



Underwriting profit and combined ratio .
 Insurance Services Segment Results of Operations
 Three Months Ended March 31,2008
    
    
    2007($ in thousands)RevenuesDirect commission revenue from programs
    
    $
    8,709
    
    
    $
    1,561Total Revenues
    
    
    8,709
    
    
    
    1,561ExpensesDirect commissions expense for programs
    
    
    7,653
    
    
    
    1,216Other insurance services expenses
    
    
    1,980
    
    
    
    1,344Total Expenses
    
    
    9,633
    
    
    
    2,560Insurance Services Loss
    
    $
    (924
    )
    
    $
    (999
    )
 Insurance Services Segment Results of Operations for the Three Months Ended March 31, 2008 and 2007
 Direct commission revenue from programs .
 Direct commission expense for programs .
 Other insurance services expenses .
 Insurance services loss .
 27




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##### Table of Contents



Liquidity and Capital Resources
     Sources and Uses of Cash and Cash Flows
   28




---



##### Table of Contents



Cash Flows
    29




---



##### Table of Contents



Security Requirements
  Investments
    30




---



##### Table of Contents



Contractual Obligations
  Off-Balance Sheet Transactions
  31




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##### Table of Contents



Ratings
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Sensitivity Analysis
     Estimated Increase(Decrease)
    
    Estimated Percentagein Fair Value
    
    Increase (Decrease)Change in Interest Rate
    
    ($ in thousands)
    
    in Fair Value300 basis point rise
    
    
    (58,238
    )
    
    
    (10.8
    )%200 basis point rise
    
    
    (38,380
    )
    
    
    (7.1
    )%100 basis point rise
    
    
    (18,205
    )
    
    
    (3.4
    )%100 basis point decline
    
    
    17,866
    
    
    
    3.3
    %200 basis point decline
    
    
    30,566
    
    
    
    5.7
    %300 basis point decline
    
    
    39,181
    
    
    
    7.3
    %
  32




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##### Table of Contents



Item 4T. Controls and Procedures
   
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
     33




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##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 6. Exhibits
 31.1
    
    Chief Executive Officer  Certification pursuant to Sarbanes-Oxley Act of 2002 Section 30231.2
    
    Chief Financial Officer  Certification pursuant to Sarbanes-Oxley Act of 2002 Section 30232
    
    Chief Executive Officer and Chief Financial Officer  Certification pursuant to
Sarbanes-Oxley Act of 2002 Section 906
 34




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##### Table of Contents



SIGNATURES
  CASTLEPOINT HOLDINGS, LTD.
(Registrant)Date:  May 9, 2008
    /s/ Michael H. LeeMichael H. LeeChairman of the Board and
Chief Executive OfficerDate:  May 9, 2008
    /s/ Joel. S. WeinerJoel S. WeinerSenior Vice President and
Chief Financial Officer 35




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##### Table of Contents



EXHIBIT INDEX
 31.1
    
    Chief Executive Officer  Certification pursuant to Sarbanes-Oxley Act of 2002 Section 30231.2
    
    Chief Financial Officer  Certification pursuant to Sarbanes-Oxley Act of 2002 Section 30232
    
    Chief Executive Officer and Chief Financial Officer  Certification pursuant to
Sarbanes-Oxley Act of 2002 Section 906
 36