TRANSATLANTIC HOLDINGS INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K

(MARK ONE)

[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-10545
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TRANSATLANTIC HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 13-3355897
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)

80 PINE STREET, NEW YORK, NEW YORK 10005
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

(212) 770-2000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
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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 such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) 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. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [x] No [ ]
The aggregate market value of the voting and non-voting common equity held
by nonaffiliates of the registrant computed by reference to the price at which
the common equity was last sold, as of June 28, 2002 (the last business day of
the registrant's most recently completed second fiscal quarter) was
approximately $1,529,014,400.
As of January 31, 2003, there were outstanding 52,371,765 shares of Common
Stock, $1.00 par value, of the registrant.
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DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive proxy statement filed or to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A involving
the election of directors at the annual meeting of the shareholders of the
registrant scheduled to be held on May 15, 2003 are incorporated by reference in
Part III of this Form 10-K.

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TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS

PART I

ITEM 1. BUSINESS

INTRODUCTION

Transatlantic Holdings, Inc. (the 'Company') is a holding company
incorporated in the state of Delaware. Originally formed in 1986 under the name
PREINCO Holdings, Inc. as a holding company for Putnam Reinsurance Company
(Putnam), the Company's name was changed to Transatlantic Holdings, Inc. on
April 18, 1990 following the acquisition on April 17, 1990 of all of the common
stock of Transatlantic Reinsurance Company (TRC) in exchange for shares of
common stock of the Company (the 'Share Exchange'). Prior to the Share Exchange,
American International Group, Inc. (AIG, and collectively, with its
subsidiaries, the AIG Group) held a direct and indirect interest of
approximately 25% in the Company and an indirect interest of 49.99% in TRC. As a
result of the Share Exchange, AIG became the beneficial owner of approximately
41% of the Company's outstanding common stock and TRC became a wholly-owned
subsidiary of the Company. In June 1990, certain stockholders of the Company
(other than AIG) sold shares of the Company's common stock in a registered
public offering. As of December 31, 2002, 2001 and 2000, AIG beneficially owned
approximately 60% of the Company's outstanding shares.

The Company, through its wholly-owned subsidiaries, TRC, Trans Re Zurich
(TRZ), acquired by TRC in 1996, and Putnam (contributed by the Company to TRC in
1995), offers reinsurance capacity for a full range of property and casualty
products on a treaty and facultative basis, directly and through brokers, to
insurance and reinsurance companies, in both the domestic and international
markets. One or both of TRC and Putnam is licensed, accredited, authorized or
can serve as a reinsurer in 50 states and the District of Columbia in the United
States and in Puerto Rico and Guam. TRC is licensed by the federal government of
and seven provinces in Canada. TRC is also licensed in Japan, the United Kingdom
and the Dominican Republic and is registered or authorized as a foreign
reinsurer in Peru, Colombia, Argentina (where it also maintains a representative
office in Buenos Aires, Transatlantic Re (Argentina) S.A.), Brazil (where it
maintains a representative office in Rio de Janeiro, Transatlantic Re (Brasil)
Ltda.), Chile, Mexico, Ecuador, Guatemala, Venezuela and France. In addition,
TRC is licensed in the Hong Kong Special Administrative Region, People's
Republic of China, and maintains a branch in Hong Kong. Also, TRC is authorized
to maintain a representative office in Shanghai, People's Republic of China. TRZ
is licensed as a reinsurer in Switzerland. Transatlantic Polska Sp. z o.o., a
subsidiary of TRC, maintains a registered representative office in Warsaw,
Poland. In addition, in 2002, Transatlantic's representative office in Sydney,
Australia obtained a license to underwrite reinsurance business as an authorized
branch in Australia. TRH's (Transatlantic Holdings, Inc. and its subsidiaries)
principal lines of reinsurance include auto liability (including nonstandard
risks), other liability (including directors' and officers' liability and other
professional liability), medical malpractice, ocean marine and aviation,
accident and health and surety and credit in the casualty lines, and fire,
homeowners and auto physical damage in the property lines. Reinsurance is
provided for most major lines of insurance on both excess-of-loss and pro rata
bases.

The statutory surplus of TRC of $1,545.9 million, as of December 31, 2002,
ranked TRC as the 6th largest domestic reinsurer according to statistics
distributed by the Reinsurance Association of America. Although TRC and its
wholly-owned subsidiary, Putnam, are separate entities, together they would have
ranked as the 4th largest domestic reinsurer based upon combined statutory net
premiums written of $2,336.7 million and 4th based upon combined statutory net
income of $113.5 million for the year ended December 31, 2002, according to such
statistics.

Transatlantic's website, which can be found on the Internet at
http://www.transre.com, contains frequently updated information about the
Company and its operations. Copies of TRH's Form 10-K, Form 10-Q and Form 8-K
and all amendments to those reports can be accessed free of charge as soon as
reasonably practicable after the reports and amendments are electronically filed
with or furnished to the Securities and Exchange Commission by clicking on
'Transatlantic Holdings, Inc. Investor Information' at the Company's website and
then clicking on 'SEC Filings.'

1

In addition, copies of any of TRH's reports on Form 10-K, Form 10-Q and
Form 8-K and all amendments to those reports as well as any Quarterly Earnings
Press Release may be obtained by contacting TRH's Investor Relations Department
at:

Transatlantic Holdings, Inc.
80 Pine Street
New York, New York 10005
Telephone: (212) 770-2040
Telefax: (212) 248-0965
E-mail: investor_relations@transre.com

THE REINSURANCE BUSINESS

Reinsurance is an arrangement whereby one or more insurance companies, the
'reinsurer,' agrees to indemnify another insurance company, the 'ceding
company,' for all or part of the insurance risks underwritten by the ceding
company. Reinsurance can provide certain basic benefits to the ceding company.
It reduces net liability on individual risks, thereby enabling the ceding
company to underwrite more business than its own resources can support; it
provides catastrophe protection to lessen the impact of large or multiple
losses; it stabilizes results by leveling fluctuations in the ceding company's
loss ratio; and it helps the ceding company maintain acceptable surplus and
reserve ratios.

There are two major classes of reinsurance: treaty reinsurance and
facultative reinsurance. Treaty reinsurance is a contractual arrangement that
provides for the automatic reinsuring of a type or category of risk underwritten
by the ceding company. Facultative reinsurance is the reinsurance of individual
risks. Rather than agreeing to reinsure all or a portion of a class of risk, the
reinsurer separately rates and underwrites each risk. Facultative reinsurance is
normally purchased to cover risks not covered by treaty reinsurance or for
individual risks covered by reinsurance treaties that are in need of capacity
beyond that provided by such treaties.

A ceding company's reinsurance program may involve pro rata and
excess-of-loss reinsurance on both a treaty and facultative basis. Under pro
rata reinsurance (also referred to as proportional), the ceding company and the
reinsurer share the premiums as well as the losses and expenses in an agreed
proportion. Under excess-of-loss reinsurance, the reinsurer agrees to reimburse
the ceding company for all losses in excess of a predetermined amount up to a
predetermined limit. Premiums paid by the ceding company to the reinsurer for
excess-of-loss coverage are generally not proportional to the premiums that the
ceding company receives because the reinsurer does not assume a proportionate
risk.

In pro rata reinsurance, the reinsurer generally pays the ceding company a
ceding commission. Generally, the ceding commission is based on the ceding
company's cost of obtaining the business being reinsured (i.e., brokers' and
agents' commissions, local taxes and administrative expenses). Often there is no
ceding commission on excess-of-loss reinsurance and therefore the pricing
mechanism used by reinsurers in those instances is a rate applicable to premiums
of the individual policy or policies subject to the reinsurance agreement.

In general, casualty insurance protects the insured against financial loss
arising out of its obligation to others for loss or damage to their person or
property. Property insurance protects the insured against financial loss arising
out of the loss of property or its use caused by an insured peril. Property and
casualty reinsurance protects the ceding company against loss to the extent of
the reinsurance coverage provided. A greater degree of unpredictability is
associated generally with casualty risks and with catastrophe-exposed (natural
and man-made (e.g., terrorist attacks)) property and casualty risks, and there
tends to be a greater lag in the reporting and settlement of casualty
reinsurance claims, due to the nature of casualty risks and their greater
potential for litigation.

GENERAL

TRH reinsures risks from a broad spectrum of industries throughout the
United States and foreign countries. A portion of the reinsurance written by TRH
is assumed from subsidiaries of AIG and

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therefore reflects their underwriting philosophy and diversified insurance
products. Approximately $395 million (13%), $232 million (10%) and $209 million
(11%) of gross premiums written by TRH in the years 2002, 2001 and 2000,
respectively, were attributable to reinsurance purchased by subsidiaries of AIG.
(For a discussion of TRH's business with the AIG Group, see Relationship with
the AIG Group.)

In 2002, TRH's activities in the United States were conducted through its
worldwide headquarters in New York and its regional office in Chicago. All
domestic treaty business is underwritten by, or under the close supervision of,
senior officers of TRH located in New York. TRH's headquarters in New York, the
Miami office (underwriting business from Latin America and the Caribbean) and
international offices in Toronto, London, Paris, Zurich, Sydney (license
obtained to operate as an authorized branch in Australia in 2002), Hong Kong and
Tokyo can offer treaty as well as facultative reinsurance. In addition, TRH
operates representative offices in Buenos Aires, Rio de Janeiro, Warsaw and
Shanghai, and maintains an exclusive arrangement with a representative agency in
Johannesburg, South Africa. Business underwritten by all offices located outside
the United States and by the Miami office (which underwrites business in Latin
America and the Caribbean) accounted for approximately 45%, 47% and 49% of
worldwide net premiums written in 2002, 2001 and 2000, respectively. (See
Management's Discussion and Analysis of Financial Condition and Results of
Operations (Management's Discussion) for a discussion of premium fluctuations
between years and Note 15 of Notes to Consolidated Financial Statements for
financial data by business segment.) One of the international offices, the
London branch, had net premiums written totaling $527.3 million, $409.8 million
and $364.9 million in 2002, 2001 and 2000, respectively, representing 21%, 22%
and 22%, respectively, of worldwide net premiums written in each of those years.
(For a discussion of certain conditions associated with international business
see Regulation and Note 15 of Notes to Consolidated Financial Statements.)

In addition, TRH holds a 40% interest in Kuwait Reinsurance Company
(K.S.C.), acquired in exchange for a $30 million contribution to the capital of
that company. Kuwait Reinsurance Company provides property, casualty and life
reinsurance products to clients in Middle Eastern and North African markets. TRH
also has a 20% interest (acquired for $30 million) in RAM Reinsurance Company
Ltd., a financial guaranty reinsurer domiciled in Bermuda.

Casualty reinsurance constitutes the larger portion of TRH's business,
accounting for 74% of net premiums written in 2002, 79% in 2001 and 77% in 2000.
As a general matter, due to the longer period of time necessary to settle
casualty claims, casualty reinsurance underwriting tends to involve variables
(such as those discussed in the paragraph immediately following) that are not as
predictable as those in property reinsurance underwriting. The greater degree of
uncertainty associated generally with casualty business as a result of these
variables may produce a more volatile result over a period of time, although
catastrophe-exposed property and casualty business is also subject to
significant year to year volatility due to major natural and man-made disasters.
2002 catastrophe losses did not have a material impact on that year's results.
Operating results in 2001 included net pre-tax catastrophe losses of $215
million ($200 million of which represents the estimated cost of the
September 11th attack) and a net pre-tax loss of $60 million for the estimated
reinsurance exposure related to Enron Corporation. 2000 catastrophe losses did
not have a material impact on that year's results. (See Management's
Discussion.) TRH also seeks to focus on more complex risks within the casualty
and property lines, and to adjust its mix of business to take advantage of
market opportunities.

In general, the overall operating results (including investment performance)
and other changes to stockholders' equity of property and casualty insurance and
reinsurance companies, and TRH, in particular, are subject to significant
fluctuations due to competition, natural and man-made catastrophic events,
economic and social conditions, foreign currency exchange rate fluctuations,
interest rates, operating performance and prospects of investee companies and
other factors, such as changes in tax laws, tort laws and the regulatory
environment.

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The following table presents certain underwriting information concerning
TRH's casualty and property business for the periods indicated:(5)

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(1) A significant portion of this line includes more complex risks such as
professional liability (other than medical malpractice), directors' and
officers' liability, errors and omissions and environmental impairment
liability.

(2) In 2002, development on reserves held at December 31, 2001 related to losses
that occurred in 2001 and prior years significantly increased net losses and
loss adjustment expenses in auto liability, other liability, medical
malpractice, ocean marine and aviation, accident and health and surety and
credit lines and significantly decreased net losses and loss adjustment
expenses in fire and allied lines. In addition, 2002 catastrophe losses did
not have a significant impact on that year's results.

(3) In 2001, development on reserves held at December 31, 2000 related to losses
that occurred in 2000 and prior years significantly increased net losses and
loss adjustment expenses in medical malpractice, ocean marine and aviation,
accident and health and surety and credit and significantly decreased net
losses and loss adjustment expenses in other liability, fire, homeowners
multiple peril and allied lines. In addition, net pre-tax catastrophe losses
of $215 million (primarily from the September 11, 2001 terrorist attack)
significantly increased net losses and loss adjustment expenses in other
liability, fire and allied lines. The net pre-tax loss related to estimated
reinsurance exposure from Enron Corporation of $60 million increased net
losses and loss adjustment expenses primarily in the surety and credit line.

(4) In 2000, development on reserves held at December 31, 1999 related to losses
that occurred in 1999 and prior years significantly increased net losses and
loss adjustment expenses in ocean marine and aviation, surety and credit,
fire, auto physical damage and allied lines and significantly decreased net
losses and loss adjustment expenses in other liability, medical malpractice
and homeowners multiple peril. In addition, 2000 catastrophe losses did not
have a material impact on that year's results.

(5) See Management's Discussion for a discussion of TRH's underwriting
components.

Treaty reinsurance constitutes the great majority of TRH's business,
accounting for 95%, 96% and 96% of net premiums written in 2002, 2001 and 2000,
respectively.

4

The following table presents certain information concerning TRH's treaty and
facultative business for the periods indicated:

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(1) In 2002 compared to 2001, domestic treaty premiums increased significantly
in specialty casualty (principally directors' and officers' liability,
professional liability and medical malpractice), property, general casualty
and ocean marine and aviation lines. International treaty premiums increased
significantly in property, auto liability and specialty casualty
(principally medical malpractice and other professional liability) lines.
Facultative premiums, in 2002 compared to 2001, increased principally in
property and medical malpractice lines.

(2) In 2001 compared to 2000, domestic treaty premiums increased significantly
in auto liability, general casualty and professional liability lines.
International treaty premiums increased significantly in auto liability and
professional liability lines. Facultative net premiums written, in 2001
compared to 2000, increased principally in medical malpractice and the fire
line.

TREATY REINSURANCE

Treaty reinsurance accounted for approximately $2,720.5 million of gross
premiums written and $2,384.9 million of net premiums written in 2002,
approximately 75% of which resulted from casualty lines treaties, with the
remainder from property lines treaties. Approximately 69% of treaty gross
premiums written in 2002 represented treaty reinsurance written on a pro rata
basis and the balance represented treaty reinsurance written on an
excess-of-loss basis. Approximately 12% of treaty gross premiums written in 2002
were attributable to the AIG Group. Such premiums were primarily written on a
pro rata basis. The majority of TRH's non-AIG Group treaty premiums were also
written on a pro rata basis. As pro rata business is a proportional sharing of
premiums and losses among ceding company and reinsurer, generally, the
underwriting results of such business more closely reflect the underwriting
results of the business ceded than do the results of excess-of-loss business.

TRH's treaty business consists primarily of lines of business within auto
liability (including nonstandard risks), other liability (including directors'
and officers' liability and other professional liability), medical malpractice,
ocean marine and aviation, accident and health, surety and credit, fire, auto
physical damage, homeowners multiple peril and allied lines. A significant
portion of TRH's business within these lines (primarily other liability, medical
malpractice and accident and health) is derived from certain more complex risks.
TRH also underwrites non-traditional reinsurance, which blends funding
characteristics with more traditional risk transfer.

TRH's treaty underwriting process emphasizes a team approach between TRH's
underwriters, actuaries and claims staff, as appropriate. Treaties are reviewed
for compliance with TRH's underwriting guidelines and objectives and certain
larger treaties are evaluated in part based upon actuarial analyses conducted by
TRH. The generic actuarial models used in such analyses are tailored in each
case to the exposures and experience underlying the specific treaty and the loss
experience for the risks covered thereunder. TRH also at times conducts
underwriting and claims audits at the offices of a prospective ceding company
before entering into major treaties, because reinsurers, including TRH, do not
separately evaluate each of the individual risks assumed under their treaties
and, consequently, are largely dependent on the original underwriting decisions
made by the ceding company. Such dependence subjects TRH, and reinsurers in
general, to the possibility that the ceding companies have

5

not adequately evaluated the risks to be reinsured and, therefore, that the
premiums ceded in connection therewith may not adequately compensate the
reinsurer for the risk assumed.

TRH offers brokers full service with large capacity for both casualty and
property risks. For non-AIG Group business, TRH generally seeks to lead treaty
arrangements. The lead reinsurer on a treaty generally accepts one of the
largest percentage shares of the treaty and represents the other participating
reinsurers in negotiating price, terms and conditions. TRH believes that this
strategy has enabled it to influence more effectively the terms and conditions
of the treaties in which it has participated. TRH has generally not set terms
and conditions as lead underwriter with respect to AIG Group treaty reinsurance,
although it may do so in the future. When TRH does not lead the treaty, it may
still suggest changes to any aspect of the treaty. In either case, TRH may
reject any treaty business offered to it by the AIG Group or others based upon
its assessment of all relevant factors. Such factors include type and level of
risk assumed, actuarial and underwriting judgment with respect to rate adequacy,
various treaty terms, prior and anticipated loss experience (including exposure
to natural and man-made (e.g., terrorist attacks) catastrophes) on the treaty,
prior business experience with the ceding company, overall financial position,
operating results and A.M. Best Company (Best's), Standard & Poor's (S&P) and
Moody's Investors Service (Moody's) ratings of the ceding company and social,
legal, regulatory, environmental and general economic conditions affecting the
risks assumed or the ceding company.

TRH currently has approximately 3,266 treaties in effect for the current
underwriting year. In 2002, no single treaty exceeded 3% of treaty gross
premiums written. No ceding company accounted for more than 3% of total treaty
gross premiums written in 2002 other than AIG Group companies (see Relationship
with the AIG Group), and members of Lloyd's of London (Lloyd's) (which accounted
for 8% of treaty gross premiums written).

Non-U.S. treaty business accounted for approximately 43% of TRH's total net
premiums written for the year ended December 31, 2002.

FACULTATIVE REINSURANCE

During 2002, TRH wrote approximately $206.8 million of gross premiums
written and $115.3 million of net premiums written of facultative reinsurance,
approximately 47% of which represented casualty risks with the balance
comprising property risks. The majority of facultative net premiums written in
2002 represented facultative reinsurance written on an excess-of-loss basis.
Facultative coverages are generally offered for most lines of business. However,
the great majority of premiums are within the medical malpractice, other
liability (including directors' and officers' liability and other professional
liability), fire and inland marine lines. Underwriting expenses associated with
facultative business are generally higher in proportion to related premiums than
those associated with treaty business, reflecting, among other things, the more
labor-intensive nature of underwriting and servicing facultative business.
Approximately 37% of facultative gross premiums written in 2002 were
attributable to AIG Group companies. Except for AIG Group companies, no single
ceding company accounted for more than 4% of total facultative gross premiums
written in 2002. Non-U.S. facultative business accounted for approximately 3% of
TRH's total net premiums written for the year ended December 31, 2002.

RETENTION LEVELS AND RETROCESSION ARRANGEMENTS

TRH enters into retrocession arrangements for many of the same reasons
primary insurers seek reinsurance, including reducing the effect of individual
or aggregate losses and increasing gross premium writings and risk capacity
without requiring additional capital.

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Under TRH's underwriting guidelines and retrocession arrangements in effect
at the end of 2002, the maximum net amounts generally retained and the maximum
gross capacities on a per program basis for treaty business and per risk basis
for facultative business are set forth in the table below.

TRH is exposed to multiple insured losses arising out of a single occurrence
(e.g., natural or man-made catastrophe) that have the potential to accumulate to
material amounts and affect multiple risks/programs and classes of business. TRH
uses modeling techniques to manage certain such risks to acceptable limits,
although current techniques used to estimate the exposure may not accurately
predict the probability of such an event nor the extent of resulting losses.
Such actual resulting losses may differ materially from TRH's estimates. In
addition, TRH may purchase retrocession protection designed to limit the amount
of losses that it may incur.

For 2003, TRH also purchases property catastrophe loss reinsurance
protection that management deems prudent and cost effective. TRH estimates
that the probable maximum gross loss from any single event in any one
geographic zone would approximate $450 million (before property catastrophe
loss protection). Based on this estimate, TRH would record net losses incurred
of approximately $140 million before tax benefit, in such an event, subject to
other terms and conditions of the coverages purchased. Terms of the catastrophe
reinsurance protections often require the purchaser to make additional payments
to the reinsurer which may increase the net cost of such event to TRH. Certain
of such payments represent a contractually stipulated reinstatement premium
which generally restores coverage utilized to respond to the initial
catastrophic loss for the remainder of the original coverage period.

Terrorism risk for commercial lines has generally been limited or excluded
from new business assumed and reinsurance coverage purchased (including property
catastrophe coverage) in 2002 and TRH anticipates that it will generally
continue this practice throughout 2003. TRH also offers terrorism-specific
coverage to ceding companies on a limited basis.

Average gross lines and net retentions on risks assumed historically have
been smaller than the maximums permissible under the underwriting guidelines.
Underwriting guidelines, including gross lines and net retention levels, may be
changed and limited exceptions are made by TRH from time to time.

Retrocession arrangements do not relieve TRH from its obligations to the
insurers and reinsurers from whom it assumes business. The failure of
retrocessionnaires to honor their obligations could result in losses to TRH. TRH
holds substantial amounts of funds and letters of credit to collateralize
reinsurance recoverables. Such funds and letters of credit can be drawn on for
amounts remaining unpaid beyond contract terms. In addition, an allowance has
been established for estimated unrecoverable amounts.

As of December 31, 2002, TRH had in place approximately 200 active
retrocessional arrangements for current and prior underwriting years with 386
retrocessionnaires, and reinsurance recoverable on paid and unpaid losses
totaled $817.6 million, including $191.7 million recoverable from affiliates. No
unsecured recoverables from a single retrocessionnaire, other than amounts due
from affiliates, are considered material to the financial position of TRH. (See
Note 14 of Notes to Consolidated Financial Statements.)

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MARKETING

TRH provides property and casualty reinsurance capacity through brokers and
directly to insurance and reinsurance companies in both the domestic and
international markets. TRH believes its worldwide network of offices and its
relationship with the AIG Group help position TRH to take advantage of market
opportunities.

AIG Group business is generally obtained directly from the ceding company.
No ceding company, other than the AIG Group companies and, in 2001 and 2000
only, Lloyd's (which accounted for 12% and 10% of TRH's 2001 and 2000
consolidated revenues, respectively), has accounted for 10% or more of TRH's
consolidated revenues in any of the last five years. A significant portion of
the business assumed from Lloyd's was obtained through brokers controlled by
Marsh & McLennan Companies, Inc. (Marsh) and Aon Corporation (Aon), which are
further discussed below.

Non-AIG Group treaty business is produced primarily through brokers, while
non-AIG Group facultative business is produced both directly and through
brokers. In 2002, approximately 84% of TRH's non-AIG Group business was written
through brokers and the balance was written directly. Also in 2002, companies
controlled by Marsh and Aon, TRH's largest brokerage sources of non-AIG Group
business, accounted for 13% and 14%, respectively, of TRH's consolidated
revenues. In addition, Marsh and Aon accounted for 12% and 13%, respectively, of
gross premiums written in 2002. TRH's largest 10 brokers accounted for non-AIG
Group business aggregating approximately 57% of gross premiums written.
Brokerage fees generally are paid by reinsurers. TRH believes that its emphasis
on seeking the lead position in non-AIG Group reinsurance treaties in which it
participates is beneficial in obtaining business.

Brokers do not have the authority to bind TRH with respect to reinsurance
agreements, nor does TRH commit in advance to accept any portion of the business
that brokers submit to it. Reinsurance business from any ceding company, whether
new or renewal, is subject to acceptance by TRH.

Effective January 1, 1995, TRC and Putnam entered into a quota share
reinsurance agreement whereby TRC ceded 5% of its total reinsurance liabilities,
net of retrocessions, to Putnam. Thereafter, TRC cedes 5% of its assumed
reinsurance, net of other retrocessions, to Putnam pursuant to this quota share
reinsurance agreement. Presently all of Putnam's business is assumed from TRC
pursuant to this quota share reinsurance agreement. This agreement was entered
into for operational reasons and had no impact on TRH's financial position or
results of operations.

CLAIMS

Claims are managed by TRH's professional claims staff whose responsibilities
include the review of initial loss reports, creation of claim files,
determination of whether further investigation is required, establishment and
adjustment of case reserves and payment of claims. In addition to claims
assessment, processing and payment, the claims staff conducts comprehensive
claims audits of both specific claims and overall claims procedures at the
offices of selected ceding companies, which TRH believes benefit all parties to
the reinsurance arrangement. Claims audits are conducted in the ordinary course
of business. In certain instances, a claims audit may be performed prior to
assuming reinsurance business.

RESERVES FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES

Significant periods of time may elapse between the occurrence of an insured
loss, the reporting of the loss to the ceding company and the reinsurer, and the
ceding company's payment of that loss and subsequent payments to the ceding
company by the reinsurer. To recognize liabilities for unpaid losses and loss
adjustment expenses (LAE), insurers and reinsurers establish reserves, which are
balance sheet liabilities representing estimates of future amounts needed to pay
claims and related expenses with respect to insured events which have occurred
on or before the balance sheet date, including events which have not been
reported to the ceding company.

Upon receipt of a notice of claim from the ceding company, TRH establishes
its own case reserve for the estimated amount of the ultimate settlement, if
any. Case reserves usually are based upon the amount of reserves recommended by
the ceding company and may be supplemented by additional amounts as deemed
necessary. In certain instances, TRH establishes case reserves even when the
ceding company does not report any liability to the reinsurer.

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TRH also establishes reserves to provide for the estimated expenses of
settling claims, including legal and other fees, and the general expenses of
administering the claims adjustment process (i.e., LAE), and the losses and loss
adjustment expenses incurred but not reported (IBNR). TRH calculates LAE and
IBNR reserves by using generally accepted actuarial reserving techniques to
project the ultimate liability for losses and loss adjustment expenses. Such
reserves are periodically revised by TRH to adjust for changes in the expected
loss development pattern over time. TRH has an in-house actuarial staff which
periodically reviews its loss reserves, and therefore does not retain any
outside actuarial firm to review its loss reserves.

Losses and loss adjustment expenses, net of related reinsurance recoverable,
are charged to income as incurred. Unpaid losses and loss adjustment expenses
represent the accumulation of case reserves and IBNR. Provisions for inflation
and 'social inflation' (e.g., awards by judges and juries which progressively
increase in size at a rate exceeding that of general inflation) are implicitly
considered in the overall reserve setting process as an element of the numerous
judgments which are made as to expected trends in average claim severity.
Legislative changes may also affect TRH's liabilities, and evaluation of the
impact of such changes is made in the reserve setting process.

The methods of determining estimates for reported and unreported losses and
establishing resulting reserves and related reinsurance recoverable are
continually reviewed and updated, and adjustments resulting therefrom are
reflected in income currently. The process relies upon the basic assumption that
past experience, adjusted for the effect of current developments and likely
trends, is an appropriate basis for predicting future events. However,
estimation of loss reserves is a difficult process, especially in view of
changes in the legal and tort environment which impact the development of loss
reserves, and therefore quantitative techniques frequently have to be
supplemented by subjective considerations and managerial judgment. In addition,
trends that have affected development of liabilities in the past may not
necessarily occur or affect liability development to the same degree in the
future.

While the reserving process is difficult and subjective for the ceding
companies, the inherent uncertainties of estimating such reserves are even
greater for the reinsurer, due primarily to the longer-term nature of most
reinsurance business, the diversity of development patterns among different
types of reinsurance treaties or facultative contracts, the necessary reliance
on the ceding companies for information regarding reported claims and differing
reserving practices among ceding companies. Thus, actual losses and loss
adjustment expenses may materially differ from estimates of reserves reflected
in the Company's consolidated financial statements.

During the loss settlement period, which can be many years in duration,
additional facts regarding individual claims and trends usually become known. As
these become apparent, it usually becomes necessary to refine and adjust the
reserves upward or downward and even then the ultimate net liability may be
materially different from the revised estimates.

Included in TRH's reserves are amounts related to environmental impairment
and asbestos-related illnesses, which, net of related reinsurance recoverable,
totaled $89 million and $81 million as of December 31, 2002 and 2001,
respectively. The majority of TRH's environmental and asbestos-related
liabilities arise from contracts entered into after 1984 and underwritten
specifically as environmental or asbestos-related coverages rather than as
standard general liability coverages where the environmental or asbestos-related
liabilities were neither clearly defined nor specifically excluded. Significant
uncertainty exists as to the ultimate settlement of these liabilities since,
among other things, there are inconsistent court resolutions and judicial
interpretations with respect to underlying policy intent and coverage and
uncertainties as to the allocation of responsibility for resultant damages.
Additionally, loss and loss adjustment expense reserves, net of related
reinsurance recoverables, include amounts resulting from the September 11, 2001
terrorist attack which are principally related to property (including business
interruption), other liability, workers' compensation and aviation coverages.
These amounts are subject to significant uncertainty due to a variety of issues
such as coverage disputes, the assignment of liability and a potentially long
latency period for claims due to respiratory disorders and stress. (See
Management's Discussion and Note 2(f) of Notes to Consolidated Financial
Statements for further discussion.)

The 'Analysis of Consolidated Net Loss and Loss Adjustment Expense Reserve
Development' which follows presents the development of balance sheet loss and
loss adjustment expense reserves for calendar years 1992 through 2002. The upper
half of the table shows the cumulative amounts paid during successive years
related to the opening reserve. For example, with respect to the net loss and
loss

9

adjustment expense reserve of $1,503.4 million as of December 31, 1993, by the
end of 2002 (nine years later) $1,197.5 million had actually been paid in
settlement of those reserves. In addition, as reflected in the lower section of
the table, the original reserve of $1,503.4 million was reestimated to be
$1,392.1 million at December 31, 2002. This change from the original estimate
would normally result from a combination of a number of factors, including
losses being settled for different amounts than originally estimated. The
original estimates will also be increased or decreased as more information
becomes known about the individual claims and overall claim frequency and
severity patterns. The net deficiency or redundancy depicted in the table, for
any particular calendar year, shows the aggregate change in estimates over the
period of years subsequent to the calendar year reflected at the top of the
respective columns. For example, the net redundancy of $309.5 million at
December 31, 2002 related to December 31, 1996 net loss and loss adjustment
expense reserves of $2,383.5 million, represents the cumulative amount by which
net reserves for 1996 have developed favorably from 1997 through 2002.

Each amount other than the original reserves in the following table includes
the effects of all changes in amounts for prior periods. For example, if a loss
settled in 1995 for $150,000 was first reserved in 1992 at $100,000 and remained
unchanged until settlement, the $50,000 deficiency (actual loss minus original
estimate) would be included in the cumulative net deficiency in each of the
years in the period 1992 through 1994 shown in the following table. Conditions
and trends that have affected development of liability in the past may not
necessarily occur in the future. Accordingly, it may not be appropriate to
extrapolate future development based on this table.

ANALYSIS OF CONSOLIDATED NET LOSS AND LOSS ADJUSTMENT EXPENSE RESERVE
DEVELOPMENT(1)(2)(3)

- ---------

(1) This table excludes data related to TRZ, a non-U.S. subsidiary acquired in
the third quarter of 1996, for 1995 and prior years as such data is not
available.

(2) This table is on a calendar year basis and does not present accident or
underwriting year data.

(3) Data have been affected by transactions between TRH and the AIG Group. (See
Relationship with the AIG Group and Notes 12 and 14 of Notes to
Consolidated Financial Statements.)

(4) Represents gross liability for unpaid losses and loss adjustment expenses
net of related reinsurance recoverable.

10

ANALYSIS OF NET UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES
AND NET REESTIMATED LIABILITY(1)

- ---------

(1) This table excludes data related to TRZ for 1995 and prior years.

11

The trend depicted in the latest development year in the reestimated net
liability portion of the 'Analysis of Consolidated Net Loss and Loss Adjustment
Expense Reserve Development' table and in the 'Analysis of Net Unpaid Losses and
Loss Adjustment Expenses and Net Reestimated Liability' table reflects net
adverse development. Net adverse development of $339.1 million was recorded in
2002 on losses occurring in prior years. (See Management's Discussion.)

In general, the deficiencies shown in the table for years 1998 through 2001
developed in 2002 and resulted largely from losses occurring between 1998 and
2000 in casualty lines (see Management's Discussion). In addition, the majority
of the redundancies shown in the table in years prior to 1998 result from
favorable development of reserves in the other liability line for losses
occurring since 1986, partially offset by continued adverse development of
reserves in the other liability line for losses occurring prior to 1984. Adverse
development of losses occurring in the early 1980s was common throughout the
industry and was caused by a number of industry and external factors which
combined to drive loss frequency and severity to unexpectedly high levels.

The length of time needed for reserves to be ultimately paid has generally
been decreasing over the past ten years due, in large part, to a shift in the
business mix towards lines with shorter loss payment patterns, the higher
incidence (compared to earlier years) of catastrophe losses paid in 1999 and
2000 related to events occuring prior to the year in which such payments were
made and, from 1992 through 1995, the return of loss and loss adjustment expense
reserves associated with the reduced participation in one of TRH's then largest
assumed treaties.

The following table presents a reconciliation of beginning and ending net
reserve balances for the years indicated. For TRH's domestic subsidiaries (TRC
and Putnam), there is no difference in reserves for losses and loss adjustment
expenses net of reinsurance recoverable on unpaid losses and loss adjustment
expenses whether determined in accordance with accounting principles generally
accepted in the United States of America or statutory accounting principles.

RECONCILIATION OF RESERVE
FOR NET LOSSES AND LOSS ADJUSTMENT EXPENSES

- ---------

* In TRH's balance sheet and in accordance with Statement of Financial
Accounting Standards (SFAS) No. 113, unpaid losses and loss adjustment
expenses are presented before deduction of related reinsurance recoverable.
(See Notes 2 and 5 of Notes to Consolidated Financial Statements.)

In 2002, the increase in paid losses compared to 2001 is due primarily to
increasing premium volume in recent years and a continued shift in the business
mix towards lines with shorter payment patterns. In general, the decrease in
paid loss activity in 2001 is attributable, in part, to a reduction in payments
of previously reserved claims, including net catastrophe losses. (See
Management's Discussion for further analysis of incurred and paid loss
activity.)

12

INVESTMENT OPERATIONS

TRH's investments must comply with the insurance laws of the state of New
York, the state of domicile of TRC and Putnam, and of the other states and
jurisdictions in which the Company and its subsidiaries are regulated. These
laws prescribe the kind, quality and concentration of investments which may be
made by insurance companies. In general, these laws permit investments, within
specified limits and subject to certain qualifications, in federal, state and
municipal obligations, corporate fixed maturities, preferred and common stocks,
real estate mortgages and real estate. The Finance Committee of the Company's
Board of Directors and senior management oversee investments, establish TRH's
investment strategy and implement investment decisions with the assistance of
certain subsidiaries of AIG, which act as financial advisors and managers of
TRH's investment portfolio and, in connection therewith, make the selection of
particular investments. Other than as set forth above, there are no guidelines
or policies with respect to the specific composition of TRH's overall investment
portfolio or the composition of its fixed maturity portfolio by rating or
maturity. A significant portion of TRH's domestic investments are in tax-exempt
fixed maturities.

TRH's current investment strategy seeks to maximize after-tax income through
a high quality diversified taxable fixed maturity and tax-exempt municipal fixed
maturity portfolio, while maintaining an adequate level of liquidity. TRH
adjusts its mix of taxable and tax-exempt investments, as appropriate, generally
as a result of strategic investment and tax planning considerations. During
recent years, the yields on fixed maturities purchased have generally been lower
than yields on fixed maturities sold or otherwise disposed of. Tax-exempt fixed
maturities carry lower pre-tax yields than taxable fixed maturities that are
comparable in risk and term to maturity due to their tax-advantaged status. (See
Management's Discussion.) The equity portfolio is structured to achieve capital
appreciation primarily through investment in quality growth companies. The great
majority of other invested assets represent investments in partnerships and a
limited duration bond fund managed by an AIG subsidiary.

In 2002 and 2001, TRH engaged in securities lending transactions whereby
certain securities (i.e., fixed maturities and common stocks available for sale)
from its portfolio were loaned to third parties. In these transactions, initial
collateral, principally cash, is received by TRH in an amount exceeding the
market value of the loaned security. Such funds are held in a pooled account of
the lending agent in these transactions (an AIG subsidiary) and are carried as
an investment on the balance sheet (at cost, which approximates market value). A
liability is recorded in an amount equal to the collateral received to recognize
TRH's obligation to return such funds when the related loaned securities are
returned. The market value of the loaned securities is monitored on a daily
basis with additional collateral obtained or refunded as such value fluctuates.
Fees received net of fees paid related to these transactions are recorded in net
investment income.

The following table reflects investment results for TRH for each of the five
years in the period ended December 31, 2002.

INVESTMENT RESULTS

- ---------

(1) Average of the beginning and ending carrying values of investments and cash
for the year, excluding non-interest bearing cash. Fixed maturities
available for sale, common stocks, nonredeemable preferred stocks and other
invested assets are carried at market value. Other fixed maturities are
carried at amortized cost and the short-term investment of funds received
under securities loan agreements is carried at cost.

(2) After investment expenses, excluding realized net capital (losses) gains.

(3) Pre-tax net investment income for the year divided by average investments
for the same year.

13

The following table summarizes the investments of TRH (on the basis of
carrying value) as of December 31, 2002:

During the first quarter of 2001, the Company transferred all of the fixed
maturities in its held-to-maturity classification to the fixed maturities
available-for-sale classification to enhance the Company's flexibility with
respect to future portfolio management. (See Note 2(k)(i) of Notes to
Consolidated Financial Statements.)

The carrying value of fixed maturities and equities available for sale are
subject to significant volatility from changes in their market values. (See
Management's Discussion.)

As of December 31, 2002, the market value of the total investment portfolio
was $5,460.1 million.

The following table indicates the composition of the fixed maturity
portfolio of TRH by rating as of December 31, 2002:

At December 31, 2002, TRH had no real estate or derivative instruments. (See
Note 3 of Notes to Consolidated Financial Statements.)

In addition, TRH's operations are exposed to market risk which could result
in the loss of fair market value resulting from adverse fluctuations in interest
rates, equity prices and foreign currency exchange rates. TRH has performed
Value at Risk (VaR) analyses to estimate the maximum potential loss of fair
value that could occur over a period of one month at a confidence level of 95%.
(See Management's Discussion).

14

COMPETITION

The reinsurance business is highly competitive in virtually all lines. After
many years of deteriorating contract terms and pricing, a noticeable firming of
rates was evident as the year 2001 progressed (particularly after the net
industry surplus drain occurring as a result of the September 11th attack),
reinforcing the positive signs observed in certain classes of business in late
2000. These market improvements prompted the formation of new companies,
principally in Bermuda, and attracted additional capital to certain existing
ones late in 2001 and into 2002. This additional market capacity may serve to
lessen the magnitude of pricing improvements resulting, in part, from the burden
of industry costs from September 11, particularly in catastrophe-exposed lines,
going forward. Market conditions for reinsurers generally continued to improve
throughout 2002 as rates increased and terms and conditions generally became
more restrictive. These market improvements do not necessarily translate into
pricing adequacy.

TRH faces competition from new market entrants and from market participants
that devote greater amounts of capital to the types of business written by TRH.
Over the past several years, generally increased market capacity, significant
domestic and international merger and acquisition activity, and Lloyd's of
London, have added to competitive pressures. The ultimate impact on the market
of these events is uncertain. While competition in 2002 remains strong, capacity
in certain lines and certain regions has declined due to recent heightened
industry losses and a reluctance to assume certain risks among certain
competitors.

Competition in the types of reinsurance in which TRH is engaged is based on
many factors, including the perceived overall financial strength of the
reinsurer, Best's, S&P and Moody's ratings, the states or other jurisdictions
where the reinsurer is licensed, accredited, authorized or can serve as a
reinsurer, premiums charged, other terms and conditions of the reinsurance
offered, services offered, speed of claims payment and reputation and experience
in the lines of business underwritten.

TRH competes in the United States and international reinsurance markets with
numerous major international reinsurance companies and numerous domestic
reinsurance companies, some of which have greater financial and other resources
than TRH. While TRC and Putnam, on a combined basis, would rank 4th, on the
basis of statutory net premiums written, they are a less significant reinsurer
in international reinsurance markets. TRH's competitors include independent
reinsurance companies, subsidiaries or affiliates of established worldwide
insurance companies, reinsurance departments of certain primary insurance
companies and domestic and European underwriting syndicates. Many of these
competitors have been operating for substantially longer than TRH and have
established long-term and continuing business relationships throughout the
industry, which can be a significant competitive advantage. Although most
reinsurance companies operate in the broker market, most of TRH's largest
competitors also work directly with ceding companies, competing with brokers.
According to the Reinsurance Association of America, there were 30 domestic
reinsurers for which results were reported in their quarterly survey as of
December 31, 2002.

EMPLOYEES

At December 31, 2002, TRH had approximately 435 employees. Approximately 205
employees were located in the New York headquarters; 40 employees were located
in Chicago and Miami (serving Latin America and the Caribbean) and 190 employees
were located in other international offices.

REGULATION

The rates and contract terms of reinsurance agreements are generally not
subject to regulation by any governmental authority. This contrasts with primary
insurance agreements, the rates and policy terms of which are generally closely
regulated by state insurance departments. As a practical matter, however, the
rates charged by primary insurers and the policy terms of primary insurance
agreements may affect the rates charged and the policy terms associated with
reinsurance agreements.

The Company, TRC, TRZ and Putnam are subject to the insurance statutes,
including insurance holding company statutes, of various states and
jurisdictions. The insurance holding company laws and regulations vary from
jurisdiction to jurisdiction, but generally require domestic insurance holding

15

companies and insurers and reinsurers that are subsidiaries of insurance holding
companies to register with the applicable state regulatory authority and to file
with that authority certain reports which provide information concerning their
capital structure, ownership, financial condition and general business
operations.

Such holding company laws generally also require prior regulatory agency
approval of changes in direct or indirect control of an insurer or reinsurer and
of certain material intercorporate transfers of assets within the holding
company structure. The New York Insurance Law provides that no corporation or
other person, except an authorized insurer, may acquire direct control of TRC or
Putnam, or acquire control of the Company and thus indirect control of TRC and
Putnam, unless such corporation or person has obtained the prior approval of the
New York Insurance Department for such acquisition. For the purposes of the New
York Insurance Law, any investor acquiring ten percent or more of the Common
Stock of the Company would be presumed to be acquiring 'control' of the Company
and its subsidiaries, unless the New York Insurance Department determines upon
application that such investor would not control the Company. An investor who
would be deemed to be acquiring control of the Company would be required to
obtain the approval of the New York Insurance Department prior to such
acquisition. In addition, such investor would become subject to various ongoing
reporting requirements in New York and in certain other states.

TRC, TRZ and Putnam, in common with other reinsurers, are subject to
regulation and supervision by the states and by other jurisdictions in which
they do business. Within the United States, the method of such regulation varies
but generally has its source in statutes that delegate regulatory and
supervisory powers to an insurance official. The regulation and supervision
relate primarily to the standards of solvency that must be met and maintained,
including risk-based capital measurements, the licensing of reinsurance, the
nature of and limitations on investments, restrictions on the size of risks
which may be insured under a single contract, deposits of securities for the
benefit of ceding companies, methods of accounting, periodic audits of the
affairs and financial reports of insurance companies, the form and content of
reports of financial condition required to be filed, and reserves for unearned
premiums, losses and other purposes. As required by the state of New York, TRC
and Putnam adopted the Codification of Statutory Accounting Principles
(Codification) as of January 1, 2001 as primary guidance on statutory
accounting. The cumulative effect on statutory surplus of adopting the
Codification (which differed from the existing statutory guidance at that time)
on January 1, 2001 was not material. The impact of adopting the Codification was
not material in 2002 or 2001 to statutory net income, financial position or cash
flows and is not expected to be material in the future. (See Management's
Discussion.) In general, such regulation is for the protection of the ceding
companies and, ultimately, their policyholders rather than security holders.

Risk Based Capital (RBC) is designed to measure the adequacy of an insurer's
statutory surplus in relation to the risks inherent in its business. Thus,
inadequately capitalized insurance companies may be identified. The RBC formula
develops a risk adjusted target level of statutory surplus by applying certain
factors to various asset, premium and reserve items. Higher factors are applied
to items deemed to have more risk by the National Association of Insurance
Commissioners and lower factors are applied to items that are deemed to have
less risk. Thus, the target level of statutory surplus varies not only as a
result of the insurer's size, but also on the risk profile of the insurer's
operations. The RBC Model Law provides for four incremental levels of regulatory
attention for insurers whose surplus is below the calculated RBC target. These
levels of attention range in severity from requiring the insurer to submit a
plan for corrective action to placing the insurer under regulatory control. At
December 31, 2002, the statutory surpluses of TRC and Putnam each significantly
exceeded the level of surplus required under RBC requirements for regulatory
attention.

Through the 'credit for reinsurance' mechanism, TRC and Putnam are
indirectly subject to the effects of regulatory requirements imposed by
jurisdictions in which TRC's and Putnam's ceding companies are licensed. In
general, an insurer which obtains reinsurance from a reinsurer that is licensed,
accredited or authorized by the state in which the insurer files statutory
financial statements is permitted to take a credit on its statutory financial
statements in an aggregate amount equal to the reinsurance recoverable on paid
losses and the liabilities for unearned premiums and loss and loss adjustment
expense reserves ceded to the reinsurer, subject to certain limitations where
amounts of

16

reinsurance recoverable on paid losses are more than 90 days overdue. Certain
states impose additional requirements that make it difficult to become so
authorized, and certain states do not allow credit for reinsurance ceded to
reinsurers that are not licensed or accredited in that state without additional
provision for security.

In addition to licensing requirements, TRH's international operations are
also regulated in various jurisdictions with respect to currency, amount and
type of security deposits, amount and type of reserves and amount and type of
local investment, and are subject to local economic, political and social
conditions. International operations and assets held abroad may be adversely
affected by political developments in foreign countries, including possibilities
of tax changes, nationalization and changes in regulatory policy, as well as by
consequence of hostilities and unrest. The risks of such occurrences and their
overall effect upon TRH vary from country to country and cannot easily be
predicted. In addition, TRH's results of operations and net unrealized currency
translation gain or loss (a component of accumulated other comprehensive income)
are subject to volatility as the value of the foreign currencies fluctuate
relative to the U.S. dollar. (See Note 9 of Notes to Consolidated Financial
Statements.) Regulations governing constitution of technical reserves and
remittance balances in some countries may hinder remittance of profits and
repatriation of assets.

RELATIONSHIP WITH THE AIG GROUP

AIG

AIG is a holding company which through its subsidiaries is engaged in a
broad range of insurance and insurance-related activities in the United States
and abroad. AIG's primary activities include both general and life insurance
operations. Other significant activities include financial services, and
retirement savings and asset management. AIG subsidiaries, collectively, are
among one of the largest purchasers of reinsurance in the insurance industry
based on premiums ceded.

CONTROL OF THE COMPANY

As of December 31, 2002, 2001 and 2000, AIG beneficially owned approximately
60% of the Company's outstanding shares. Four of the Company's 9 current
directors, including the Chairman, are current, or in the case of Mr. Matthews
retired, executive officers of AIG and hold the following positions with AIG:
Mr. Greenberg is a Director and the Chairman and Chief Executive Officer; Mr.
Matthews is a Director and Senior Advisor; Mr. Smith is a Director and Vice
Chairman, Chief Financial Officer and Chief Administrative Officer and Mr.
Tizzio is a Director and Senior Vice Chairman -- General Insurance.

AIG GROUP REINSURANCE

AIG offers TRH the opportunity to participate in a significant amount of
property and casualty reinsurance purchased by the AIG Group. TRH either accepts
or rejects the AIG Group reinsurance offered based upon TRH's assessment of risk
selection, pricing, terms and conditions. Historically, and with few exceptions,
TRH has generally not set terms and conditions as lead underwriter with respect
to the AIG Group treaty reinsurance; however, TRH may in the future set terms
and conditions with respect to such business as lead underwriter and intends
that the terms and conditions of any such reinsurance will be negotiated on an
arms' length basis. The operating management of TRH is not employed by the AIG
Group, and the Underwriting Committee of the Board of Directors of the Company,
which includes directors of the Company who are not employees of the AIG Group,
monitor TRH's underwriting policies.

Approximately $395 million (13%), $232 million (10%) and $209 million (11%)
of gross premiums written by TRH in the years 2002, 2001 and 2000, respectively,
were attributable to reinsurance purchased by subsidiaries of AIG, for the
production of which TRH paid ceding commissions to such AIG subsidiaries
totaling approximately $88 million, $50 million and $38 million, respectively,
in such years. TRH has no goal with respect to the proportion of AIG Group
subsidiary versus non-AIG Group subsidiary business it accepts. TRH's objective
in determining its business mix is to evaluate each underwriting opportunity
individually with a view to maximizing overall underwriting results.

17

TRH retroceded gross premiums written to AIG subsidiaries in the years 2002,
2001 and 2000 of approximately $90.6 million, $113.5 million and $95.1 million,
respectively, and received ceding commissions of approximately $10.3 million,
$10.9 million and $11.2 million, respectively, for the production of such
business in such years.

ITEM 2. PROPERTIES

As of December 31, 2002, the office space of TRH's New York headquarters and
its Toronto office are rented from the AIG Group, which leases it from others.
The Chicago, Miami, Buenos Aires, Rio de Janeiro, London, Paris, Zurich, Warsaw,
Sydney, Hong Kong, Shanghai and Tokyo offices, are rented from third parties.
The lease for the office space occupied by TRH's New York headquarters expires
in 2021.

ITEM 3. LEGAL PROCEEDINGS

TRH, in common with the reinsurance industry in general, is subject to
litigation in the normal course of its business. TRH does not believe that any
pending litigation will have a material adverse effect on its consolidated
results of operations, financial position or cash flows.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during the
fourth quarter of 2002.

18

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The table below sets forth the names, positions and ages of the persons who
are the directors and executive officers of the Company as of March 20, 2003.

- ---------

(1) Prior to April 1990, such person was a director or an officer of TRC and
Putnam, but not of the Company.

(2) Mr. Vijil was elected Executive Vice President, President Latin American
Division of the Company in October 1998. From May 1996 to October 1998,
Mr. Vijil was a Senior Vice President of the Company.

(3) Mr. Schwartz was named Vice President and General Counsel of the Company by
action of the Executive Committee in July 1999, and by election of the Board
of Directors in October 1999. From March 1996 to July 1999, Mr. Schwartz was
a Vice President and Director of Taxation of TRC and Putnam, but not of the
Company.

Except as noted, each of the executive officers has, for more than five
years, occupied an executive position with the Company or companies that are now
its subsidiaries. Since January 1991, Ms. Tuck has also served as the Secretary
of a number of AIG Group companies.

19

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

(a) The following table sets forth the high and low closing sales prices per
share of the Company's Common Stock, as reported on the New York Stock Exchange
Composite Tape for each of the four quarters of 2002 and 2001, adjusted, as
appropriate, for the 3-for-2 common stock split effected in the form of a 50%
stock dividend, paid on July 20, 2001:

(b) As of January 31, 2003, the approximate number of holders of Common
Stock, including those whose Common Stock is held in nominee name, was 27,000.

(c) In 2002, the Company declared a quarterly dividend of $0.096 per common
share in March and $0.10 per common share in each of May, September and
December. In 2001, the Company declared a quarterly dividend of $0.090 per
common share in March and $0.096 per common share in each of May, September and
December. The Company paid each dividend in the quarter following the date of
declaration. All dividend information has been adjusted, as appropriate, to
reflect the 3-for-2 stock split paid in July 2001.

The declaration and payment of future dividends, if any, by the Company will
be at the discretion of the Board of Directors and will depend upon many
factors, including the Company's consolidated earnings, financial condition and
business needs, capital and surplus requirements of the Company's operating
subsidiaries, regulatory considerations and other factors.

The Company is a holding company whose principal source of income is
dividends from its subsidiary, TRC. The payment of dividends by TRC and its
wholly-owned subsidiaries, TRZ and Putnam, is restricted by insurance
regulations. (See Note 13 of Notes to Consolidated Financial Statements.)

20

ITEM 6. SELECTED FINANCIAL DATA

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES

The following Selected Consolidated Financial Data is prepared in accordance
with accounting principles generally accepted in the United States of America.
This data should be read in conjunction with the Consolidated Financial
Statements and accompanying notes included elsewhere herein.

- ---------

* Share and per share data have been retroactively adjusted, as appropriate, to
reflect common stock splits.

21

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This Annual Report and other publicly available documents may include, and
Transatlantic Holdings, Inc. and its subsidiaries (collectively, TRH) officers
and representatives may from time to time make, statements which may constitute
'forward-looking statements' within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are not historical facts but
instead represent only TRH's belief regarding future events and financial
performance, many of which, by their nature, are inherently uncertain and
outside of TRH's control. These statements may address, among other things,
TRH's strategy and expectations for growth, product development, government and
industry regulatory actions, market conditions, financial results and reserves,
as well as the expected impact on TRH of natural and man-made (e.g., terrorist
attacks) catastrophic events and political, economic, legal and social
conditions. It is possible that TRH's actual results, financial condition and
expected outcomes may differ, possibly materially, from those anticipated in
these forward-looking statements. Important factors that could cause TRH's
actual results to differ, possibly materially, from those discussed in the
specific forward-looking statements may include, but are not limited to,
uncertainties relating to economic conditions and cyclical industry conditions,
credit quality, government and regulatory policies, volatile and unpredictable
developments (including natural and man-made catastrophes), the legal
environment, the reserving process, the competitive environment in which TRH
operates, interest rate and foreign currency exchange rate fluctuations, and the
uncertainties inherent in international operations, and are further discussed
throughout Management's Discussion and Analysis of Financial Condition and
Results of Operations. TRH is not under any obligation to (and expressly
disclaims any such obligations to) update or alter any forward-looking
statement, whether written or oral, that may be made from time to time, whether
as a result of new information, future events or otherwise.

22

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

FINANCIAL STATEMENTS

The following discussion refers to the consolidated financial statements of
Transatlantic Holdings, Inc. and its subsidiaries (collectively, TRH) as of
December 31, 2002 and 2001 and for each of the three years in the period ended
December 31, 2002, which are presented elsewhere herein. TRH's principal
operating subsidiaries are Transatlantic Reinsurance Company (TRC), Trans Re
Zurich (TRZ) and Putnam Reinsurance Company (Putnam).

As of December 31, 2002, 2001 and 2000, American International Group, Inc.
(AIG, and collectively, with its subsidiaries, the AIG Group) beneficially owned
approximately 60% of the Company's outstanding shares. Financial data discussed
below have been affected by certain transactions between TRH and the AIG Group.
(See Notes 10, 12 and 14 of Notes to Consolidated Financial Statements.)

CRITICAL ACCOUNTING ESTIMATES

Our discussion and analysis of the financial condition and results of
operations are based upon our consolidated financial statements which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
the use of estimates and judgments that affect the reported amounts and related
disclosures. We rely on historical experience and on various other assumptions,
that we believe to be reasonable under the circumstances, to make judgments
about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ materially from these
estimates.

We believe the following represent our most important accounting policies as
they require management's most significant exercise of judgment on both a
quantitative and qualitative basis used in the preparation of TRH's consolidated
financial statements and footnotes. The accounting estimates that result from
the application of these policies require the use of assumptions about certain
matters that are highly uncertain at the time of estimation.

Loss Reserves -- TRH's unpaid losses and loss adjustment expenses, net of
reinsurance recoverable thereon, represent estimates of future liability and
related reinsurance recoverable for losses occurring on or prior to the balance
sheet date. Net losses and loss adjustment expenses are charged to income as
incurred. Unpaid losses and loss adjustment expenses are principally based on
reports and individual case estimates received from ceding companies. A
provision is included for losses and loss adjustment expenses incurred but not
reported (IBNR) on the basis of past experience and other factors. The methods
of making such estimates and for establishing the resulting reserves and related
recoverables are continually reviewed and updated, and any adjustments resulting
therefrom are reflected in income currently. Provisions for inflation and
'social inflation' (e.g., awards by judges and juries which progressively
increase in size at a rate exceeding that of general inflation) are implicitly
considered in the overall reserve setting process as an element of numerous
judgments which are made as to expected trends in average claim severity.

Loss and loss adjustment expense reserves, net of related reinsurance
recoverables, include amounts for risks related to environmental impairment and
asbestos-related illnesses totaling $89 million and $81 million at December 31,
2002 and 2001, respectively. The majority of TRH's environmental and
asbestos-related liabilities arise from contracts entered into after 1984. These
obligations generally arose from contracts underwritten specifically as
environmental or asbestos-related coverages rather than from standard general
liability coverages where the environmental or asbestos-related liabilities were
neither clearly defined nor specifically excluded. The reserves carried for such
claims, including IBNR, are based upon known facts and current law. However,
significant uncertainty exists as, among other things, there are inconsistent
court resolutions and judicial interpretations with respect to underlying policy
intent and coverage and uncertainties as to the allocation of responsibility for
resultant damages.

Additionally, loss and loss adjustment expense reserves, net of related
reinsurance recoverables, include amounts resulting from the September 11, 2001
terrorist attack which are principally related to property (including business
interruption), other liability, workers' compensation and aviation

23

coverages. These amounts are subject to significant uncertainty due to a variety
of issues such as coverage disputes, the assignment of liability and a
potentially long latency period for claims due to respiratory disorders and
stress. As of December 31, 2002, unpaid loss and loss adjustment expenses, net
of reinsurance recoverable, related to this event totaled $170 million.

Because the reserving process is inherently difficult and subjective, actual
net losses and loss adjustment expenses may materially differ from reserves and
related reinsurance recoverables reflected in TRH's consolidated financial
statements, and accordingly, may have a material effect on future results of
operations. And while there is also the possibility of changes in statutes,
laws, regulations and other factors that could have a material effect on these
liabilities and, accordingly, future earnings, TRH believes that its claims
reserves carried at December 31, 2002 are adequate.

Deferred Acquisition Costs -- Acquisition costs, consisting primarily of net
commissions incurred on business conducted through reinsurance contracts or
certificates, are deferred, and then amortized over the period in which the
related premiums are earned, generally one year. Anticipated losses and loss
adjustment expenses and estimated remaining costs of servicing the contracts are
considered in determining acquisition costs to be deferred. Anticipated
investment income is not considered in the deferral of acquisition costs. If the
level of actual losses and loss adjustment expenses and estimated remaining
costs of servicing the contracts materially differs from anticipated levels used
in determining the amount of acquisition costs to be deferred, future results of
operations may be affected, perhaps materially.

OPERATIONAL REVIEW

IMPACT OF SEPTEMBER 11TH TERRORIST ATTACK ON THE UNITED STATES

Results for 2001 include pre-tax net losses and loss adjustment expenses of
$200 million from the September 11th terrorist attack, or $130 million after
tax. The pre-tax net loss estimate is comprised of gross incurred losses and
loss adjustment expenses of approximately $500 million less related reinsurance
ceded of approximately $300 million. The losses recorded for this event
represent TRH's estimate of ultimate losses based upon information presently
available. Net loss payments related to this event were not material to 2002 or
2001 operating cash flow.

RESULTS OF OPERATIONS

TRH derives its revenue from two principal sources: premiums from
reinsurance assumed net of reinsurance ceded (i.e., net premiums earned) and
income from investments. Premiums are earned primarily on a pro rata basis over
the term of the related coverages. Unearned premiums and prepaid reinsurance
premiums represent the portion of gross premiums assumed and reinsurance ceded,
respectively, relating to the unexpired terms of such coverages. The
relationship between net premiums written and net premiums earned will,
therefore, vary depending generally on the volume and inception dates of the
business assumed and ceded and the mix of such business between pro rata and
excess-of-loss reinsurance.

The following table shows net premiums written, net premiums earned and net
investment income of TRH for the periods indicated:

For the period under discussion, the reinsurance market has been
characterized by significant competition worldwide in most lines of business. In
late 2000 and continuing through 2001, rate increases, which were achieved in
many lines, intensified after the net industry surplus drain occurring as a
result of

24

the September 11, 2001 terrorist attack. Market conditions for reinsurers
generally continued to improve throughout 2002 as rates increased and terms and
conditions generally became more restrictive.

Insurance industry estimates of losses from the September 11, 2001 attack
originally ranged from $30 billion to $70 billion and made this event the most
costly insured catastrophe ever. The range of expected industry loss remains
broad due to the unprecedented nature of this event and the many lines of
business affected. Attracted by the improved market conditions resulting from
this decline in industry capacity, additional capital entered the market in late
2001 and into 2002 through the formation of new companies, principally in
Bermuda, and through the addition of capital to certain existing companies. The
additional market capacity has spurred additional competition, particularly in
catastrophe exposed lines, and may lessen the magnitude of pricing improvements
resulting from the burden of industry costs from September 11 going forward.
While TRH believes that rate increases will continue through at least 2003, TRH
cannot predict, with any reasonable certainty, future market conditions.

In 2002 compared to 2001, the net premiums written increase resulted from
significant rate increases and, to a lesser extent, increased coverage provided.
The increase in net premiums written in 2001 compared to 2000 resulted from
increased coverage provided and, to a lesser extent, rate increases. In 2002 and
2001, as compared to the immediately prior years, premium increases were
primarily from treaty business. On a worldwide basis, casualty lines business
represented 73.9% of net premiums written in 2002 versus 79.2% and 76.7% in 2001
and 2000, respectively. The balance represented property lines. Treaty business
represented 95.4% of net premiums written in 2002 versus 95.7% in 2001 and 96.3%
in 2000. The balance represented facultative accounts.

Of the total increase in net premiums written in 2002 compared to 2001,
domestic net premiums written increased by $349.6 million, or 34.5%, to $1,362.6
million, with significant increases recorded in specialty casualty (principally
directors' and officers' liability, professional liability and medical
malpractice), property, general casualty and ocean marine and aviation lines.

Net premiums written by international offices increased in 2002 by $244.9
million, or 27.4%, over the prior year, to $1,137.6 million. All of the
international offices recorded increases in net premiums written, led by London,
TRZ and Miami (serving Latin America and the Caribbean). International net
premiums written increased significantly in property, auto liability and
specialty casualty (principally medical malpractice and other professional
liability) lines. International business represented 45.5% of 2002 net premiums
written compared to 46.8% in 2001.

Of the total increase in net premiums written in 2001 compared to 2000,
domestic net premiums written increased by $167.5 million, or 19.8%, to $1,013.0
million, with significant increases recorded in auto liability, general casualty
and professional liability lines. These increases were partially offset by
significant decreases in accident and health and aviation lines.

Net premiums written by international offices increased in 2001 by $79.6
million, or 9.8%, over the prior year, to $892.7 million. The majority of
international offices recorded increases in net premiums written, led by London
and TRZ. International net premiums written increased significantly in auto
liability and professional liability lines. These increases were partially
offset by significant decreases in aviation and accident and health lines.
International business represented 46.8% of 2001 net premiums written compared
to 49.0% in 2000.

Generally, reasons for increases in gross premiums written between years are
similar to those for net premiums written. In 2002, ceded premiums written and
earned increased over 2001. Such increase was caused by the higher cost of
reinsurance coverage and additional coverage purchased (including catastrophe
coverage) in 2002 over the prior year offset, in part, by a reduction in ceded
premiums written resulting from certain domestic contracts in the specialty
casualty area wherein a portion of premiums assumed under those agreements were
retroceded to non-affiliates. In 2001 over 2000, ceded premiums written and
earned increased dramatically over the prior year due also to the higher cost of
reinsurance coverage and additional coverage purchased as well as increases
related to the aforementioned domestic specialty casualty contracts.

As further discussed in Notes 12 and 14 of Notes to Consolidated Financial
Statements, TRH transacts a significant amount of business assumed and ceded
with subsidiaries of AIG. TRH either accepts or rejects the proposed
transactions with such companies based on its assessment of risk selection,
pricing, terms and conditions.

25

With respect to net premiums earned, the increase in each of 2002 and 2001
compared to the respective prior year amounts resulted primarily from the growth
in net premiums written in both years.

Net investment income increased in 2002 compared to 2001, due principally to
an increase in interest from fixed maturities. This increase resulted primarily
from the increased level of operating cash flow in 2002 compared to 2001 and, to
a lesser extent, the positive impact of foreign exchange from investment income
earned in certain of our international locations, offset, in part, by the impact
of lower interest rates on fixed maturities purchased compared to interest rates
on fixed maturities sold or matured. (See cash flow discussion under Financial
Condition and Liquidity). Net investment income increased in 2001 compared to
2000 due to an increase in income from equities and in other interest income,
offset, in part, by a reduction in interest income from fixed maturities, due
principally to lower interest rates on fixed maturities purchased compared to
interest rates on fixed maturities sold or matured. (See Note 3 of Notes to
Consolidated Financial Statements.)

The property and casualty insurance and reinsurance industries use the
combined ratio as a measure of underwriting profitability. The combined ratio
reflects only underwriting results, and does not include income from
investments. Generally, a combined ratio under 100 indicates an underwriting
profit and a combined ratio exceeding 100 indicates an underwriting loss.
Underwriting profitability is subject to significant fluctuations due to
competition, natural and man-made catastrophic events, economic and social
conditions, foreign currency exchange rate fluctuations, interest rates and
other factors. The combined ratio represents the sum of the loss and loss
adjustment expense ratio and the underwriting expense ratio. The loss and loss
adjustment expense ratio represents net losses and loss adjustment expenses
divided by net premiums earned, while the underwriting expense ratio represents
the sum of net commissions and other operating expenses expressed as a
percentage of net premiums written.

The following table presents loss and loss adjustment expense ratios,
underwriting expense ratios and combined ratios for consolidated TRH, and
separately for its domestic and international components, for the years
indicated:

There were no significant catastrophe losses occurring during 2002. In
addition, as a result of net increases in estimates of losses occurring in prior
years, based principally upon factors discussed above under Critical Accounting
Estimates, net losses and loss adjustment expenses were increased by $339.1
million in 2002. Of this amount, in the fourth quarter of 2002, TRH recorded an
increase to net loss and loss adjustment expense reserves of $100 million ($55
million domestic and $45 million international), resulting in a $65 million
after-tax charge to net income. Such net reserve increase was largely caused by
the impact of losses principally occurring between 1998 and 2000 in certain
casualty lines. Such lines include other liability (a portion of which
represents certain specialty casualty classes such as directors' and officers'
liability and professional liability other than medical malpractice), medical
malpractice and surety. This fourth quarter reserve adjustment was based
primarily on an unexpected increase in the frequency and severity of reported
claims late in the year reflecting industry-wide trends. The

26

aforementioned fourth quarter increase to net loss and loss adjustment expense
reserves added 4.2 to each of the loss and loss adjustment expense and combined
ratios for consolidated, domestic and international operations. In addition, as
a result of greater than expected reported loss activity in 2002 indicating that
TRH's estimates as of the end of 2001 of the ultimate amounts of losses
occurring in 2001 and prior years required a further net increase, significant
adverse development was also recorded in 2002 on losses occurring in 1998
through 2001 in the auto liability and aviation lines and in 1999 through 2001
in the accident and health line. These increases to incurred losses were
partially offset by favorable development on losses occurring in 2001,
principally in fire and allied lines and other liability lines.

TRH's 2001 results include net pre-tax catastrophe losses of $215 million
(domestic -- $115 million; international -- $100 million), $200 million of which
represents the cost of the September 11th attack. 2001 results also include
pre-tax losses of $60 million (domestic) for reinsurance exposure related to
Enron Corporation. Such events added 15.4, 18.7 and 11.7 to each of the loss and
loss adjustment expense and combined ratios for consolidated, domestic and
international operations, respectively.

In addition, as a result of net increases in estimates of losses occurring
in prior years, net losses and loss adjustment expenses were increased by
$35.7 million. Significant adverse development was recorded in 2001 on losses
occurring in 1994 through 1998 in medical malpractice, 1997 through 2000 in auto
liability, 1998 and 1999 in accident and health and 2000 in the fire line. These
increases to incurred losses were partially offset by favorable development in
2001 on losses occurring primarily from 1990 through 1996 and 1999 through 2000
in the other liability line.

2000 catastrophe losses had an immaterial impact on that year's results. In
addition, as a result of net increases in estimates of losses occurring in prior
years, net losses and loss adjustment expenses were increased by $14.4 million
in 2000. In particular, significant adverse development was recorded in 2000 on
losses occurring in 1998 and 1999 in fire and allied lines. These increases to
incurred losses were partially offset by favorable development in 2000 on losses
occurring primarily in 1994 through 1999 in the other liability line.

With respect to ceded incurred losses, 2001 amounts are significantly higher
than comparable 2002 or 2000 amounts due largely to ceded losses in 2001 related
to the September terrorist attack.

While TRH believes that it has taken appropriate steps to control its
exposure to possible future catastrophe losses, the occurrence of one or more
catastrophic events of unanticipated frequency or severity, such as a terrorist
attack, earthquake or hurricane, that causes insured losses could have a
material adverse effect on TRH's results of operations, liquidity or financial
position. Current techniques and models may not accurately predict the
probability of catastrophic events in the future and the extent of the resulting
losses. Moreover, one or more catastrophe losses could weaken TRH's
retrocessionnaires and result in an inability of TRH to collect reinsurance
recoverables.

The underwriting expense ratio decreased in 2002 compared to 2001 due to
decreases of 0.6 in each of the net commission component and the other operating
expense component of the ratio. With respect to the net commission component,
the decreases between years result from decreases in Domestic and
International-Other business, offset, in part, by an increase in
International-Europe, all due largely to slight changes in the mix of business
between periods. With respect to the other operating expense component, the
decreases between years are due to the fact that the rates of increase in other
operating expenses, spread through all segments, are significantly exceeded by
the rates of increase of net premiums written for the respective periods. The
underwriting expense ratio increased in 2001 compared to 2000 due principally to
an increase in the commission ratio. This increase was caused, in large part, by
a slight shift in the mix of business between years, including an increase in
2001 of ceded excess-of-loss premiums which have minimal ceding commissions.

Other deductions generally include currency transaction gains and losses and
other miscellaneous income and expense items.

Pre-tax realized net capital (losses) gains totaled ($6.0) million in 2002,
($0.2) million in 2001 and $33.1 million in 2000. Such gains and losses are
generally the result of investment dispositions which reflect TRH's investment
and tax planning strategies to maximize after-tax income. In 2002 only, realized
net capital losses include write-downs totaling $12.1 million and $1.8 million
of equities available for sale and fixed maturities available for sale,
respectively, related to certain of such securities that, in the opinion of
management, had experienced a decline in market value that was other than

27

temporary. (See discussion under Financial Condition and Liquidity for criteria
used in determination of such write-downs.)

Income (loss) before income taxes was $188.3 million in 2002, ($34.1)
million in 2001 and $268.0 million in 2000. The increase in income before income
taxes in 2002 compared to the prior year resulted, in large part, from the
absence of significant catastrophe losses in 2002. The other large loss items
identified above in 2002 (fourth quarter increase in net loss reserves) and 2001
(loss related to Enron reinsurance exposure) also significantly affected income
(loss) before income taxes in those years. The decrease in income before income
taxes in 2001 compared to 2000 resulted principally from a high level of
catastrophe losses and the loss due to Enron reinsurance exposure in 2001 and a
change from realized net capital gains in 2000 to realized net capital losses in
2001.

Federal and foreign income tax expense (benefit) of $19.0 million, ($53.0)
million and $56.3 million were recorded in 2002, 2001 and 2000, respectively.
The Company and its domestic subsidiaries, TRC (which includes foreign
operations) and Putnam, filed consolidated federal income tax returns for the
years under discussion, except those for 2002 which are not yet due. The tax
burden among the companies is allocated in accordance with a tax sharing
agreement. TRC will also include as part of its taxable income or loss those
items of income of the non-U.S. subsidiary, TRZ, which are subject to U.S.
income tax currently, pursuant to Subpart F income rules of the Internal Revenue
Code, and included, as appropriate, in the consolidated federal income tax
return.

The effective tax rates, which represent the sum of current and deferred
income taxes (benefits) divided by income (loss) before income taxes, were 10.1%
in 2002, 155.4% in 2001 and 21.0% in 2000. The adjustments reconciling the
'expected' tax expense (benefit) to actual tax expense (benefit) in each of the
three years under discussion (as detailed in Note 4 of Notes to Consolidated
Financial Statements) are similar in terms of their nature and relative size,
except that the adjustment for tax-exempt interest has been steadily increasing
as the size of the tax-exempt fixed maturity portfolio has grown in 2002 and
2001 over the respective immediately prior year.

However, in 2002 as compared to 2000, the lower effective tax rate is caused
by the fact that adjustments reducing 'expected' tax expense to actual tax
expense represent a larger portion of pre-tax income in 2002 than in 2000. While
these tax adjustments have increased, pre-tax income in 2002 (for the reasons
discussed above) and the related 'expected' tax expense have declined in 2002 as
compared to 2000.

In 2001, the unusual effective tax rate results from the fact that the tax
benefit exceeds the amount of pre-tax loss due to the ability of TRH to reflect
the current benefit of carrying its current year tax net operating loss back to
prior years ($17.7 million current tax benefit and a component of federal income
tax recoverable on the balance sheet) and record a deferred tax benefit
(included on the balance sheet as a deferred income tax asset of $19.6 million)
for a minimum tax credit carryforward which, by law at that time, could be
carried forward indefinitely. However, a change in the U.S. federal tax law
extended the net operating loss carryback period to five years enabling TRH to
utilize its tax net operating loss for 2001 currently. (See Note 4 of Notes to
Consolidated Financial Statements.)

Net income and net income per common share on a diluted basis, respectively,
were as follows: 2002 -- $169.3 million, $3.21; 2001 -- $18.9 million, $0.36;
2000 -- $211.6 million, $4.03. Reasons for the changes between years are as
discussed earlier. Per share amounts have been retroactively adjusted, as
appropriate, to reflect the 3-for-2 common stock split paid in July 2001. (See
Note 7 of Notes to Consolidated Financial Statements.)

In the years under discussion, the after-tax impact of certain significant
items included in net income are as follows: 2002 -- fourth quarter increase in
net loss and loss adjustment expense reserves -- $65.0 million;
2001 -- catastrophe losses -- $139.8 million (including $130.0 million related
to the terrorist attack); losses related to Enron reinsurance exposure -- $39.0
million. After-tax realized net capital (losses) gains included in net income
amounted to ($3.9) million in 2002, ($0.2) million in 2001 and $21.5 million in
2000.

28

SEGMENT RESULTS

(a) DOMESTIC:

2002 compared to 2001 -- Domestic revenues increased over the prior year due
primarily to increases in net premiums earned for reasons discussed earlier in
the Operational Review. Income before income taxes for 2002 far exceeded the
prior year amount due to improved underwriting results in 2002 resulting
principally from reduced loss activity and, to a lesser extent, a reduction of
the relationship of underwriting expenses to net premiums written, each as
compared to 2001. (Also see combined ratio table earlier in Operational Review
for relationships of elements of adjusted underwriting loss with net premiums
written and earned.) Loss activity in 2002 includes a $55 million fourth quarter
charge to net losses and loss adjustment expenses related to an increase in loss
reserves as discussed earlier in the Operational Review. 2001 loss activity
includes significant catastrophe losses and a charge related to Enron which are
further discussed in the comparison of 2001 to 2000 below.

2001 compared to 2000 -- Domestic revenues were higher in 2001 due to
increased net premiums written, as discussed earlier in the Operational Review,
offset, in part, by a greater increase in net unearned premiums and a reduction
in realized net capital gains in 2001 as compared to 2000. The greater increase
in net unearned premiums in 2001 was due, in large part, to increased net
premiums written volume in the 2001 period, differences in earnings patterns
related to variances in the inception dates of business assumed and the mix of
business between pro rata and excess-of-loss between periods. The difference
between the loss before income taxes in 2001 compared to the income before
income taxes in 2000 was primarily due to a $115 million increase in net pre-tax
catastrophe losses (including $100 million related to September 11), a net
pre-tax loss of $60 million from estimated reinsurance exposure related to Enron
Corporation, a reduction of pre-tax realized net capital gains of $29.4 million
and an increase in net acquisition costs -- all in 2001 as compared to 2000.

Assets in 2001 significantly exceeded the 2000 amount due to the short-term
investment of funds received under securities loan agreements, an increase in
fixed maturities available for sale (see Accounting Standards (a) below
discussing change in classification of certain fixed maturities) and an increase
in reinsurance recoverable on paid and unpaid losses and loss adjustment
expenses, related principally to 2001 catastrophe losses.

(b) INTERNATIONAL -- EUROPE (LONDON AND PARIS BRANCHES AND TRZ):

2002 compared to 2001 -- European revenues increased compared to the prior
year primarily due to increases in net premiums earned in London and Trans Re
Zurich. The majority of these increases occurred in property and auto liability
lines. Income before income taxes for 2002 far exceeded the prior year amount
due to improved underwriting results in 2002 resulting principally from reduced
loss activity compared to 2001. Loss activity in 2002 includes a $30 million
fourth quarter pre-tax charge (related to the London branch) to net losses and
loss adjustment expenses related to an increase in loss reserves as discussed
earlier in the Operational Review. 2001 loss activity includes significant
catastrophe losses which are further discussed in the comparison of 2001 to 2000
below.

The significant increase in assets in 2002 as compared to 2001 is primarily
due to significant operating cash flow in 2002 and, to a lesser extent, the
impact of foreign exchange on investments held, as the U.S. dollar weakened
during the year compared to currencies in which the investments were held.

2001 compared to 2000 -- Revenues were higher in 2001 compared to 2000 due
principally to increases in net premiums written in London and TRZ related, in
large part, to auto liability lines. The difference between the loss before
income taxes in 2001 compared to income before income taxes in 2000 was
primarily due to $100 million of net pre-tax catastrophe losses related to
September 11 incurred primarily through the London market and increased
acquisition costs, offset, in part, by improved experience in other loss
activity.

Assets in 2001 significantly exceeded the 2000 amount due to the short-term
investment of funds received under securities loan agreements, an increase in
fixed maturities available for sale, and an increase in reinsurance recoverable
on paid and unpaid losses and loss adjustment expenses, related principally to
2001 catastrophe losses from the London market related to September 11.

29

(c) INTERNATIONAL -- OTHER (MIAMI (SERVING LATIN AMERICA AND THE CARIBBEAN),
TORONTO, HONG KONG AND TOKYO BRANCHES):

2002 compared to 2001 -- Revenues increased in 2002 compared to 2001 due to
increases in net premiums earned in each of the offices in this grouping, led by
Miami and Toronto. Loss before income taxes in 2002 worsened compared to a year
ago, due principally to a deterioration of underwriting results caused by
increased loss activity. Loss activity in 2002 includes a $15 million fourth
quarter charge (related to the Miami branch) to net losses and loss adjustment
expenses related to an increase in loss reserves as discussed earlier in the
Operational Review. The underwriting expense ratio improved in 2002 compared to
the prior year.

2001 compared to 2000 -- Revenues in 2001 were slightly lower than in 2000
principally as a result of a reduction in realized net capital gains. The
difference between loss before income taxes recorded in 2001 and income before
income taxes recorded in 2000 was due, in large part, to increased loss activity
in the Latin American region and in Asia, other than Japan.

FINANCIAL CONDITION AND LIQUIDITY

As a holding company, the Company's assets consist primarily of the stock of
TRC and the Company's future cash flows depend on the availability of dividends
or other statutorily permissible payments from TRC and its wholly-owned
operating subsidiaries, TRZ and Putnam. (See Note 13 of Notes to Consolidated
Financial Statements for a discussion of restrictions on dividend payment.) In
2002 and 2001, the Company received cash dividends from TRC of $15.5 million and
$26.4 million, respectively. Sources of funds for the operating subsidiaries
consist primarily of premiums, reinsurance recoverables, investment income,
proceeds from sales, redemptions and the maturing of investments and funds
received under securities loan agreements. Funds are applied primarily to
payments of claims, ceded reinsurance premiums, insurance operating expenses,
income taxes and investments in fixed income and equity securities. Premiums are
generally received substantially in advance of related claims payments. Cash and
cash equivalents are maintained for the payment of claims and expenses as they
become due. TRH does not anticipate any material capital expenditures in the
foreseeable future.

At December 31, 2002, total investments and cash were $5,587.5 million
compared to $5,004.4 million at December 31, 2001. The increase was caused, in
large part, by $598.0 million of cash provided by operating activities and, to a
lesser extent, the impact of foreign exchange on investments held principally in
Europe, offset, in part, by cash flow from financing activities (principally net
funds disbursed under securities loan agreements -- see Note 2 of Notes to
Consolidated Financial Statements).

For 2002, TRH's operating cash flow of $598.0 million significantly exceeded
the comparable 2001 amount of $242.1 million. The increase was caused
principally by a significant increase in net premiums written, net of
commissions, offset, in part, by an increase in paid losses, each in 2002 as
compared to 2001. The increase in paid losses is due primarily to increasing
premium volume in recent years and a continued shift in the business mix towards
lines with shorter payment patterns.

For 2001, TRH's operating cash flow of $242.1 million significantly exceeded
the comparable 2000 amount of -$14.9 million. The increase was caused
principally by a significant increase in net premiums written, net of
commissions, a reduction in paid losses, due, in part, to a reduction in
payments of previously reserved claims, including net catastrophe losses, and a
reduction in taxes paid, in 2001 versus 2000. TRH's business mix continues to
shift towards lines with shorter payment patterns.

As significant losses from the September 11, 2001 terrorist attack (see
Operational Review above) and Enron reinsurance exposure remain unpaid, TRH
expects that payments related to these events may significantly reduce cash flow
in 2003 and 2004.

A portion of consolidated operating cash flow, namely, $250.6 million,
$138.6 million and -$5.0 million, was derived from international operations in
2002, 2001 and 2000, respectively.

TRH believes that its balance of cash and cash equivalents of $127.4 million
as of December 31, 2002 and its future cash flows will be sufficient to meet
TRH's cash requirements through the end of

30

2003 and thereafter for a period the length of which is difficult to predict,
but which TRH believes will be at least one year.

If paid losses accelerated significantly beyond TRH's ability to fund such
paid losses from current operating cash flows, TRH would be compelled to
liquidate a portion of its investment portfolio and/or arrange for financing.
Such events that may cause such a liquidity strain could be the result of
several catastrophic events occurring in a relatively short period of time.
Additional strain on liquidity could occur if the investments sold to fund such
paid losses were sold in a depressed marketplace and/or reinsurance recoverable
on such paid losses became uncollectible.

TRH's fixed maturity investments, approximately 79.9% of total investments
as of December 31, 2002, are predominantly investment grade, liquid securities,
approximately 43% of which will mature in less than 10 years. Also as of that
date, approximately 8.4% of total investments were in common and nonredeemable
preferred stocks, approximately 5.1% of total investments were in other invested
assets, including investments in partnerships, approximately 6.4% of total
investments were in the short-term investment of funds received under securities
loan agreements, and the remaining 0.2% consisted of short-term investments.
Based on the foregoing, TRH considers its liquidity to be adequate through the
end of 2003 and thereafter for a period the length of which is difficult to
predict, but which TRH believes will be at least one year.

Activity within the fixed maturities available for sale portfolio for the
years under discussion generally represented strategic portfolio realignments to
maximize after-tax income. TRH adjusts its mix of taxable and tax-exempt
investments, as appropriate, generally as a result of strategic investment and
tax planning considerations. In addition, TRH engaged in securities lending
transactions whereby certain securities (i.e., fixed maturities and common
stocks available for sale) from its portfolio were loaned to third parties (see
Note 2(b) of Notes to Consolidated Financial Statements). The market values of
fixed maturities and common stocks available for sale that are on loan are
reflected parenthetically as pledged on the balance sheet and totaled $327.3
million and $13.4 million, respectively, as of December 31, 2002.

Gross unrealized gains and losses on fixed maturities available for sale as
of December 31, 2002 amounted to $196.6 million and $16.5 million, respectively.

As of December 31, 2002, 94.8% of the fixed maturity portfolio was rated Aaa
or Aa, an additional 4.5% was also rated investment grade or better, 0.7% was
rated below investment grade and less than 0.1% was not rated. Also, as of
December 31, 2002, TRH had no derivative instruments. (See Note 3 of Notes to
Consolidated Financial Statements.)

Management reviews its investments on a continual basis for evidence of
other than temporary declines in market value and exercises its judgment in
making such a determination and calculating the amount of loss recognition (as a
realized net capital loss). Generally, a security is considered a candidate for
such a write-down to its current market value from its cost or amortized cost if
it meets any of the following criteria: a) trading at a significant discount to
par, amortized cost (if lower) or cost for an extended period of time; or b) a
discrete credit event has occurred, resulting in (i) the issuer defaulting on a
material outstanding obligation; (ii) the issuer seeking protection from
creditors under bankruptcy laws or any similar laws intended for the court
supervised reorganization of insolvent enterprises; or (iii) the issuer
proposing a voluntary reorganization pursuant to which creditors are asked to
exchange their claims for cash or securities having a market value substantially
lower than par value of their claims; or c) in the opinion of management, it is
unlikely that TRH will realize a full recovery on its investment, irrespective
of the occurrence of one of the foregoing events. As the market price following
a significant credit event of any issuer may be volatile after such an event,
other factors impacting its market performance and its recent financial
performance will be considered to determine if further impairment has occurred.
(See Operational Review for a discussion of realized net capital losses
resulting from write-downs of securities for other than temporary declines in
market value.)

At December 31, 2002, reserves for unpaid losses and loss adjustment
expenses totaled $4.03 billion, an increase of $285.0 million, or 7.6%, as
compared to the prior year. A portion of such increase ($100 million) relates to
a fourth quarter increase in net loss reserves in certain casualty lines which
was based primarily on an unexpected increase in the frequency and severity of
reported claims late in the

31

year (see Note 5 of Notes to Consolidated Financial Statements). Also at
December 31, 2002, reinsurance recoverable on unpaid losses and loss adjustment
expenses totaled $761.6 million, a decrease of $64.0 million, or 7.8%, from the
prior year. This decrease was related principally to amounts due from affiliates
and occurred in the normal course of business.

Of the amount of reinsurance recoverable on paid and unpaid losses and loss
adjustment expenses, which totaled $817.6 million as of December 31, 2002,
$589.8 million represented balances that were unsecured. Of such unsecured
balances, $123.9 million was due from affiliates (which are rated AAA) and 88.7%
of the remaining balance was due from companies rated A or better. (See Note 14
of Notes to Consolidated Financial Statements.)

TRH's operations are exposed to market risk. Market risk is the risk of loss
of fair market value resulting from adverse fluctuations in interest rates,
equity prices and foreign currency exchange rates.

Measuring potential losses in fair values is a major focus of risk
management efforts by many companies. Such measurements are performed through
the application of various statistical techniques. One such technique is Value
at Risk (VaR). VaR is a summary statistical measure that uses changes in
historical interest rates, equity prices and foreign currency exchange rates to
calculate the maximum loss that could occur over a defined period of time given
a certain probability.

TRH believes that statistical models alone do not provide a reliable method
of monitoring and controlling market risk. While VaR models are relatively
sophisticated, the quantitative market risk information generated is limited by
the assumptions and parameters established in creating the related models.
Therefore, such models are tools and do not substitute for the experience or
judgment of senior management.

TRH has performed VaR analyses to estimate the maximum potential loss of
fair value for financial instruments for each type of market risk. In this
analysis, financial instrument assets include all investments and cash and
accrued investment income. Financial instrument liabilities include unpaid
losses and loss adjustment expenses and unearned premiums, each net of
reinsurance. TRH has calculated the VaR for 2002 and 2001 using historical
simulation. The historical simulation methodology entails re-pricing all assets
and liabilities under explicit changes in market rates within a specific
historical time period. In this case, the most recent three years of historical
market information for interest rates, equity index prices and foreign currency
exchange rates are used to construct the historical scenarios. For each
scenario, each transaction is re-priced. Consolidated totals are calculated by
netting the values of all the underlying assets and liabilities. The final VaR
number represents the maximum potential loss incurred with 95% confidence (i.e.,
only 5% of historical scenarios show losses greater than the VaR figure). A
one-month holding period is assumed in computing the VaR figure.

The following table presents the VaR on a combined basis and of each
component of market risk for 2002 and 2001. VaR with respect to combined
operations cannot be derived by aggregating the individual risk amounts
presented herein.

TRH's stockholders' equity totaled $2.03 billion at December 31, 2002, an
increase of $184.8 million from year-end 2001. The net increase consisted
principally of net income of $169.3 million and an increase in accumulated other
comprehensive income of $33.0 million, less cash dividends declared of $20.6
million.

The increase in accumulated other comprehensive income consisted principally
of the following: net unrealized appreciation of fixed maturities available for
sale, net of income tax, of $50.1 million, caused principally by a continued
decrease in market interest rates; net unrealized currency translation gain, net
of income tax, of $21.6 million, caused by a weakening of the U.S. dollar,
particularly against

32

certain European currencies partially offset by net unrealized depreciation of
equities, net of income tax, of $38.8 million, caused principally by a general
weakening of the U.S. economy during the year.

Net unrealized appreciation (depreciation) of investments, net of income
taxes, is subject to significant volatility resulting from changes in the market
value of fixed maturities and equities available for sale. Market values may
fluctuate due to changes in general economic and political conditions, market
interest rates, prospects of investee companies and other factors.

Risk-based capital (RBC) standards, promulgated by the National Association
of Insurance Commissioners (NAIC), relate an individual company's statutory
policyholders' surplus to the risk inherent in its overall operations and sets
thresholds at which certain company and regulatory corrective actions are
mandated. At December 31, 2002, the statutory surpluses of TRC and Putnam each
significantly exceeded the level of surplus required under RBC requirements for
regulatory attention.

With respect to commitments and contingent liabilities, see Note 16 of Notes
to Consolidated Financial Statements.

ACCOUNTING STANDARDS

(a) ADOPTION OF STATEMENT OF FINANCIAL ACCOUNTING STANDARDS (SFAS) NO. 133
AND CHANGE IN CLASSIFICATION OF CERTAIN FIXED MATURITIES:

SFAS No. 133, 'Accounting for Derivative Instruments and Hedging
Activities,' issued by the Financial Accounting Standards Board (FASB) in June
1998, as amended, established accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. In accordance with the standard, TRH
adopted its provisions on January 1, 2001 with no resulting effect on net income
or cash flows.

In accordance with the transition provisions of SFAS No. 133, as amended,
TRH transferred during the first quarter of 2001 all of its fixed maturities in
the held-to-maturity classification (with an amortized cost of $932.3 million
and market value of $982.1 million at the date of transfer) to the fixed
maturities available-for-sale classification (on the balance sheet) to enhance
TRH's flexibility with respect to future portfolio management. The resulting
increase in unrealized appreciation of investments, net of income taxes (a
component of accumulated other comprehensive income), of $32.4 million (net of a
tax effect of $17.4 million) has been recorded as the cumulative effect of an
accounting change in the Consolidated Statement of Comprehensive Income and the
Consolidated Statement of Stockholders' Equity in 2001. Under the provisions of
SFAS No. 133, such a transfer does not affect TRH's intent nor its ability to
hold fixed maturities acquired in the future to their maturity.

(b) OTHER ACCOUNTING STANDARDS:

In December 2002, the FASB issued SFAS No. 148, 'Accounting for Stock-Based
Compensation -- Transition and Disclosure,' an amendment of SFAS No. 123,
'Accounting for Stock-Based Compensation,' to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, this Statement amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in both
annual (see Note 2(j) of Notes to Consolidated Financial Statements) and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. In addition,
if awards of stock-based employee compensation were outstanding and accounted
for under the intrinsic value method of Accounting Principles Board Opinion
(APB) No. 25 for any period for which an income statement is presented, TRH must
present the stock-based employee compensation cost, net of related tax effects,
that would have been included in the determination of net income if the fair
value based method prescribed in SFAS No. 123 had been applied to all awards.

In accordance with the standard, TRH has adopted the disclosure provisions
in these footnotes with comparable information provided for all years for which
an income statement is presented. In addition, TRH expects to adopt the
recognition provisions of SFAS No. 123 in the first quarter of 2003, and will
report that change in accounting principle using the prospective method of
transition. That method requires application of the recognition provisions of
SFAS No. 123 to all employee awards

33

granted, modified, or settled on or after that date. The effect of adopting the
recognition provisions of SFAS No. 123 is not expected to be material to results
of operations, financial position or cash flows for 2003. While the pro forma
impact of applying the aforementioned recognition provisions to all award grants
(occurring before and after adoption of the standard) will continue to be
disclosed in the Summary of Significant Accounting Policies, the charges to
income in 2003 resulting from TRH adopting the recognition provisions of SFAS
No. 123 may not be indicative of future amounts charged to income, as those
charges to income under the prospective method of transition will not reflect
costs associated with stock compensation issued or granted prior to 2003.
Additional stock-based compensation in future years is anticipated.

SFAS No. 142, 'Goodwill and Other Intangible Assets,' was issued by the FASB
in June 2001. This statement addresses financial accounting and reporting for
acquired goodwill and other intangible assets and supersedes APB No. 17,
'Intangible Assets.' The new standard addresses how intangible assets that are
acquired individually or with a group of other assets (but not those acquired in
a business combination) should be accounted for in financial statements upon
their acquisition. This statement also addresses how goodwill and other
intangible assets should be accounted for after they have been initially
recognized in the financial statements. Among other things, goodwill and some
intangible assets will no longer be amortized, but will be subject to impairment
tests at least annually. In accordance with the statement, TRH adopted SFAS No.
142 on January 1, 2002. The implementation of this standard did not have a
material effect on TRH's results of operations, financial position or cash
flows.

OTHER MATTERS

In 1998, the NAIC adopted the Codification of Statutory Accounting
Principles (Codification) as primary guidance on statutory accounting effective
January 1, 2001. The Codification provides guidance for areas where previously
statutory accounting had been silent and has also changed current statutory
accounting in some areas. The New York Insurance Department (the state of
domicile of TRC and Putnam) adopted most of the Codification guidance for
implementation on January 1, 2001, but did not adopt certain key provisions
including those on deferred income taxes. The cumulative effect of the
implementation of Codification guidance (as adopted by the New York Insurance
Department) on the statutory surplus of TRC and Putnam as of January 1, 2001 was
not material. In the fourth quarter of 2002, the guidance related to deferred
income taxes was adopted. Accordingly, as of year-end 2002, statutory surplus of
both TRC and Putnam include the impact of deferred tax assets of $88.3 million
and $4.4 million, respectively, representing the cumulative benefit of adopting
such provision in 2002. Statutory net income (loss) was not affected.

As one or both of TRC and Putnam is also licensed, accredited or otherwise
permitted to serve as a reinsurer in all states and the District of Columbia in
the United States, they are required to disclose the differences between
implementing Codification guidance on a New York State basis and Codification
guidance adopted by the NAIC in a footnote to their statutory filings. As of
December 31, 2002, remaining differences between Codification and those
Codification provisions adopted by the New York Insurance Department are not
material to 2002 statutory surplus and net income of TRC or Putnam and are not
expected to be material in the future.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Included in Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations.

34

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

Schedules:

I -- Summary of Investments -- Other than Investments in
Related Parties as of December 31, 2002................... S-1
II -- Condensed Financial Information of Registrant as of
December 31, 2002 and 2001 and for the years ended
December 31, 2002, 2001 and 2000.......................... S-2
III -- Supplementary Insurance Information as of December 31,
2002, 2001 and 2000 and for the years then ended.......... S-5
IV -- Reinsurance for the years ended December 31, 2002, 2001
and 2000.................................................. S-6
VI -- Supplementary Information Concerning Property/Casualty
Insurance Operations as of December 31, 2002, 2001 and
2000 and for the years then ended......................... S-7

35

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
TRANSATLANTIC HOLDINGS, INC.:

In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Transatlantic Holdings, Inc. and Subsidiaries at December 31, 2002
and 2001, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2002 in conformity with
accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedules listed in the
accompanying index present fairly, in all material respects, the information set
forth therein when read in conjunction with the related consolidated financial
statements. These financial statements and financial statement schedules are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements and financial statement schedules based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

As discussed in Note 2 to the consolidated financial statements, the Company
adopted Statement of Financial Accounting Standards No. 133, 'Accounting for
Derivative Instruments and Hedging Activities,' in 2001.

/s/ PricewaterhouseCoopers LLP

PRICEWATERHOUSECOOPERS LLP

New York, New York
February 12, 2003

36

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2002 AND 2001

The accompanying notes are an integral part of the consolidated financial
statements.

37

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

The accompanying notes are an integral part of the consolidated financial
statements.

38

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

The accompanying notes are an integral part of the consolidated financial
statements.

39

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

The accompanying notes are an integral part of the consolidated financial
statements.

40

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

The accompanying notes are an integral part of the consolidated financial
statements.

41

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND NATURE OF OPERATIONS

Transatlantic Holdings, Inc. (the 'Company') is a holding company,
incorporated in the state of Delaware, which owns all of the common stock of
Transatlantic Reinsurance Company (TRC). TRC owns all of the common stock of
Trans Re Zurich (TRZ) and Putnam Reinsurance Company (Putnam). As of
December 31, 2002, 2001 and 2000, American International Group, Inc. (AIG, and
collectively, with its subsidiaries, the AIG Group) beneficially owned
approximately 60% of the Company's outstanding shares.

Transatlantic Holdings, Inc. and its subsidiaries (collectively, TRH),
through its operating subsidiaries TRC, TRZ and Putnam, offers reinsurance
capacity for a full range of property and casualty products to insurers and
reinsurers on a treaty and facultative basis, with an emphasis on specialty
classes. Including domestic as well as international risks, TRH's principal
lines of business are auto liability (including nonstandard risks), other
liability (including directors' and officers' liability and other professional
liability), medical malpractice, ocean marine and aviation, accident and health
and surety and credit in the casualty lines, and fire, homeowners and auto
physical damage in the property lines (which include property catastrophe
risks). Casualty lines represented 73.9%, 79.2% and 76.7% of net premiums
written in 2002, 2001 and 2000, respectively. The balance represented property
lines.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION: The accompanying
consolidated financial statements have been prepared on the basis of accounting
principles generally accepted in the United States of America (GAAP). Certain
reclassifications have been made to conform prior years' presentations with
2002.

The preparation of financial statements in conformity with GAAP requires
management 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 reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those
estimates.

These consolidated financial statements include the accounts of the Company
and its subsidiaries. Intercompany accounts and transactions have been
eliminated.

(b) INVESTMENTS: Fixed maturities are classified as held-to-maturity and
carried at amortized cost if TRH has the positive intent and ability to hold
each of these securities to maturity. In the first quarter of 2001, TRH
transferred all of its fixed maturities previously classified as
held-to-maturity (and carried at amortized cost) to the available for sale
classification. (See discussion on Adoption of Statement of Financial Accounting
Standards (SFAS) No. 133 and Change in Classification of Certain Fixed
Maturities in Note 2(k)(i).) As of December 31, 2002 and 2001, all fixed
maturities are classified as available-for-sale and carried at market value.
Common and nonredeemable preferred stocks are carried principally at market
value. Market values for fixed maturity securities and equities are generally
based upon quoted market prices. For certain fixed maturity securities, for
which market prices were not readily available, market values were estimated
using values obtained from independent pricing services. Other invested assets
consist of investments in partnerships, a limited duration bond fund managed by
an AIG subsidiary and other investments which are carried primarily at market
value. Short-term investments are carried at cost, which approximates market
value.

In 2002 and 2001, TRH engaged in securities lending transactions whereby
certain securities (i.e., fixed maturities and common stocks available for sale)
from its portfolio were loaned to third parties. In these transactions, initial
collateral, principally cash, is received by TRH in an amount exceeding the
market value of the loaned security. Such funds are held in a pooled account of
the lending agent in these transactions (an AIG subsidiary) and are carried as
an investment on the balance sheet (at cost, which approximates market value) in
accordance with SFAS No. 140, 'Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities -- a replacement of SFAS No.
125.' A

42

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
liability is recorded in an amount equal to the collateral received to recognize
TRH's obligation to return such funds when the related loaned securities are
returned. The market value of the loaned securities is monitored on a daily
basis with additional collateral obtained or refunded as such value fluctuates.
Fees received net of fees paid related to these transactions are recorded in net
investment income.

Realized gains or losses on the sale of investments are determined on the
basis of specific identification. In addition, where the declines in the market
value of securities below cost or amortized cost are considered to be other than
temporary, a realized loss is recorded for the difference between cost or
amortized cost and estimated market value of such securities. Except where there
has been an other than temporary impairment of market value, changes in
unrealized appreciation (depreciation) of fixed maturities available for sale,
equity investments and other invested assets are charged or credited, net of
deferred income taxes, directly to accumulated other comprehensive income (see
Note 9), a component of stockholders' equity. Investment income is recorded as
earned. Amortization of fixed maturity premium and the accrual of fixed maturity
discount are charged or credited to net investment income.

(c) CASH AND CASH EQUIVALENTS: Cash and cash equivalents generally include
cash deposited in demand deposits at banks and highly liquid investments with
original maturities of 90 days or less.

(d) DEFERRED ACQUISITION COSTS: Acquisition costs, consisting primarily of
net commissions incurred on business conducted through reinsurance contracts or
certificates, are deferred, and then amortized over the period in which the
related premiums are earned, generally one year. Anticipated losses and loss
adjustment expenses and estimated remaining costs of servicing the contracts are
considered in determining acquisition costs to be deferred. Anticipated
investment income is not considered in the deferral of acquisition costs.

(e) PREMIUM REVENUES: Premiums are earned primarily on a pro rata basis over
the term of the related coverages. Unearned premiums and prepaid reinsurance
premiums represent the portion of gross premiums assumed and reinsurance ceded,
respectively, relating to the unexpired terms of such coverages. In the
Consolidated Statements of Operations, premiums written and earned and the
change in unearned premiums are presented net of reinsurance ceded.

(f) LOSSES AND LOSS ADJUSTMENT EXPENSES: Losses and loss adjustment
expenses, net of related reinsurance recoverable, are charged to income as
incurred. Unpaid losses and loss adjustment expenses are principally based on
reports and individual case estimates received from ceding companies. An amount
is included for losses and loss adjustment expenses incurred but not reported
(IBNR) on the basis of past experience. The methods of making such estimates and
for establishing the resulting reserves are continually reviewed and updated,
and any adjustments resulting therefrom are reflected in income currently.

Unpaid losses and loss adjustment expenses include certain amounts for the
reinsurance of risks related to environmental impairment and asbestos-related
illnesses. The majority of TRH's environmental and asbestos-related liabilities
arise from contracts entered into after 1984. These obligations generally arose
from contracts underwritten specifically as environmental or asbestos-related
coverages rather than from standard general liability coverages where the
environmental or asbestos-related liabilities were neither clearly defined nor
specifically excluded. The reserves carried at December 31, 2002 for such
claims, including IBNR, are based upon known facts and current law. However,
significant uncertainty exists as, among other things, there are inconsistent
court resolutions and judicial interpretations with respect to underlying policy
intent and coverage and uncertainties as to the allocation of responsibility for
resultant damages. Further, there is always the possibility of changes in
statutes, laws, regulations and other factors that could have a material effect
on these liabilities and, accordingly, future earnings.

43

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Additionally, loss and loss adjustment expense reserves, net of related
reinsurance recoverables, include amounts resulting from the September 11, 2001
terrorist attack which are principally related to property (including business
interruption), other liability, workers' compensation and aviation coverages.
These amounts are subject to significant uncertainty due to a variety of issues
such as coverage disputes, the assignment of liability and a potentially long
latency period for claims due to respiratory disorders and stress. (See
Note 8.)

(g) DEFERRED INCOME TAXES: Deferred income taxes are provided for the
expected tax effect of temporary differences between the amounts of assets and
liabilities used for financial reporting purposes and the amounts used in tax
returns.

(h) REINSURANCE DEPOSITS: Amounts received pursuant to reinsurance contracts
that are not expected to indemnify the ceding company against loss or liability
are recorded as deposits and included in 'reinsurance balances payable' on the
Consolidated Balance Sheets. These deposits are treated as financing
transactions and are credited with interest according to contract terms.

(i) CURRENCY TRANSLATION: Assets and liabilities denominated in foreign
currencies are translated into U.S. dollars at year-end exchange rates. Income
and expense accounts are translated at average exchange rates for the year. The
resulting net unrealized currency translation gain (loss) for functional
currencies is reflected in accumulated other comprehensive income, a component
of stockholders' equity.

Transaction gains and losses on assets and liabilities denominated in
foreign currencies which are not designated as functional currencies are
reflected in results of operations during the period in which they occur.

(j) STOCK-BASED COMPENSATION: The Company accounts for its stock options
based on the intrinsic value method prescribed in Accounting Principles Board
Opinion (APB) No. 25 and related interpretations, as permitted under SFAS
No. 123. (See Notes 2(k)(ii) and 11 for a discussion of the Company's stock
option plans.) Had compensation cost been charged to earnings in accordance with
the fair value method discussed in SFAS No. 123, the Company's net income and
net income per share (on a pro forma basis) would have been as follows:

(k) ACCOUNTING STANDARDS:

(i) Adoption of SFAS No. 133 and Change in Classification of Certain Fixed
Maturities:

SFAS No. 133, 'Accounting for Derivative Instruments and Hedging
Activities,' issued by the Financial Accounting Standards Board (FASB) in
June 1998, as amended, established accounting and

44

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. In
accordance with the standard, TRH adopted its provisions on January 1, 2001 with
no resulting effect on net income or cash flows.

In accordance with the transition provisions of SFAS No. 133, as amended,
TRH transferred during the first quarter of 2001 all of its fixed maturities in
the held-to-maturity classification (with an amortized cost of $932.3 million
and market value of $982.1 million at the date of transfer) to the fixed
maturities available-for-sale classification (on the balance sheet) to enhance
TRH's flexibility with respect to future portfolio management. The resulting
increase in unrealized appreciation of investments, net of income taxes (a
component of accumulated other comprehensive income), of $32.4 million (net of a
tax effect of $17.4 million) has been recorded as the cumulative effect of an
accounting change in the Consolidated Statement of Comprehensive Income and the
Consolidated Statement of Stockholders' Equity in 2001. Under the provisions of
SFAS No. 133, such a transfer does not affect TRH's intent nor its ability to
hold fixed maturities acquired in the future to their maturity.

(ii) Other Accounting Standards:

In December 2002, the FASB issued SFAS No. 148, 'Accounting for Stock-Based
Compensation -- Transition and Disclosure,' an amendment of SFAS No. 123,
'Accounting for Stock-Based Compensation,' to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, this Statement amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in both
annual (see Note 2(j)) and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. In addition, if awards of stock-based employee
compensation were outstanding and accounted for under the intrinsic value method
of APB No. 25 for any period for which an income statement is presented, TRH
must present the stock-based employee compensation cost, net of related tax
effects, that would have been included in the determination of net income if the
fair value based method prescribed in SFAS No. 123 had been applied to all
awards.

In accordance with the standard, TRH has adopted the disclosure provisions
in these footnotes with comparable information provided for all years for which
an income statement is presented. In addition, TRH expects to adopt the
recognition provisions of SFAS No. 123 in the first quarter of 2003, and will
report that change in accounting principle using the prospective method of
transition. That method requires application of the recognition provisions of
SFAS No. 123 to all employee awards granted, modified, or settled on or after
that date. The effect of adopting the recognition provisions of SFAS No. 123 is
not expected to be material to results of operations, financial position or cash
flows for 2003. While the pro forma impact of applying the aforementioned
recognition provisions to all award grants (occurring before and after adoption
of the standard) will continue to be disclosed in the Summary of Significant
Accounting Policies, the charges to income in 2003 resulting from TRH adopting
the recognition provisions of SFAS No. 123 may not be indicative of future
amounts charged to income, as those charges to income under the prospective
method of transition will not reflect costs associated with stock compensation
issued or granted prior to 2003. Additional stock-based compensation in future
years is anticipated.

SFAS No. 142, 'Goodwill and Other Intangible Assets,' was issued by the FASB
in June 2001. This statement addresses financial accounting and reporting for
acquired goodwill and other intangible assets and supersedes APB No. 17,
'Intangible Assets.' The new standard addresses how intangible assets that are
acquired individually or with a group of other assets (but not those acquired in
a business combination) should be accounted for in financial statements upon
their acquisition. This statement also addresses how goodwill and other
intangible assets should be accounted for after they have been initially
recognized in the financial statements. Among other things, goodwill and some
intangible assets will no longer be amortized, but will be subject to impairment
tests at least annually. In accordance with

45

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the statement, TRH adopted SFAS No. 142 on January 1, 2002. The implementation
of this standard did not have a material effect on TRH's results of operations,
financial position or cash flows.

3. INVESTMENTS

(a) STATUTORY DEPOSITS: Investments, the substantial majority of which are
fixed maturities and common stocks available for sale, were deposited with
governmental authorities as required by law and amounted to approximately
$142,000,000 and $126,000,000 at December 31, 2002 and 2001, respectively.

(b) NET INVESTMENT INCOME: An analysis of net investment income of TRH
follows:

(c) INVESTMENT GAINS AND LOSSES: Realized net capital (losses) gains,
principally on sales of investments, and the change in net unrealized
appreciation (depreciation) of investments are summarized as follows:

- ---------

(1) Before deferred income tax effect.

(2) Amounts for 2001 include the change in classification of certain fixed
maturities (see Note 2(k)(i)).

46

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. INVESTMENTS (CONTINUED)
(d) FIXED MATURITIES: The amortized cost and market value of fixed
maturities at December 31, 2002 and 2001 are summarized as follows:

The amortized cost and market value of fixed maturities at December 31, 2002
by contractual maturity, are as follows. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties. Investments in fixed
maturities exclude short-term investments.

Gross gains of $76,037,000, $6,069,000 and $6,688,000 and gross losses of
$11,146,000, $7,145,000 and $41,457,000 were realized on sales of investments in
fixed maturities available for sale in 2002, 2001 and 2000, respectively.

(e) EQUITIES: Gross gains of $45,978,000, $90,698,000 and $118,739,000 and
gross losses of $103,644,000, $90,956,000 and $51,860,000 were realized on sales
of equities in 2002, 2001 and 2000, respectively. At December 31, 2002 and 2001,
net unrealized (depreciation) appreciation of equities (before applicable income
taxes) included gross gains of $12,100,000 and $31,723,000 and gross losses of
$56,174,000 and $16,038,000, respectively.

47

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. FEDERAL AND FOREIGN INCOME TAXES

(a) The Company files a U.S. consolidated federal income tax return with its
domestic subsidiaries, TRC (which includes foreign operations) and Putnam. TRC
will also include as part of its taxable income those items of income of the
non-U.S. subsidiary, TRZ, which are subject to U.S. income tax currently,
pursuant to Subpart F income rules of the Internal Revenue Code, and included,
as appropriate, in the consolidated federal income tax return.

The U.S. federal income tax rate was 35% for 2002, 2001 and 2000. Actual tax
expense (benefit) on income (loss) before income taxes differs from the
'expected' amount computed by applying the U.S. federal income tax rate because
of the following:

The domestic current tax benefit for 2001 includes $17.7 million resulting
from a tax net operating loss carryback to prior years. In addition, the 2001
domestic deferred tax benefit includes $19.6 million resulting from a minimum
tax credit carryforward which, by law, was able to be carried forward
indefinitely in accordance with U.S. federal income tax law in effect for 2001.

However, in the first quarter of 2002, a change in the U.S. federal income
tax law extended the net operating loss carry back period to five years. As a
result, the $19.6 million deferred tax asset, established in 2001, was
reclassified in 2002 to a current tax benefit as the tax law now permits TRH to
fully utilize its tax net operating loss for 2001 currently. To record the
impact of this tax law change in 2002, deferred income tax assets and the
domestic deferred income tax benefit have been reduced by $19.6 million, and
federal income tax recoverable has been increased by, and domestic current
income tax expense has been reduced by $19.6 million.

48

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. FEDERAL AND FOREIGN INCOME TAXES (CONTINUED)
(b) The components of the net deferred income tax asset at December 31, 2002
and 2001 were as follows:

No valuation allowance has been recorded.

(c) Income tax payments by TRH totaled $29,962,000, $27,702,000 and
$47,594,000 in 2002, 2001 and 2000, respectively.

5. LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES

Activity in the liability for unpaid losses and loss adjustment expenses is
summarized as follows:

There were no significant catastrophe losses occurring during 2002. In
addition, as a result of net increases in estimates of losses occurring in prior
years, net losses and loss adjustment expenses were increased by $339.1 million
in 2002. Of this amount, in the fourth quarter of 2002, TRH recorded an increase
to net loss and loss adjustment expense reserves of $100 million, resulting in a
$65 million after-

49

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES (CONTINUED)
tax charge to net income. Such net adjustment was largely caused by the impact
of losses principally occurring between 1998 and 2000 in certain casualty lines.
Such lines include other liability (a portion of which represents certain
specialty casualty classes such as directors' and officers' liability and
professional liability other than medical malpractice), medical malpractice and
surety. This fourth quarter reserve adjustment was based primarily on an
unexpected increase in the frequency and severity of reported claims late in the
year reflecting industry-wide trends. In addition, as a result of greater than
expected reported loss activity in 2002 indicating that TRH's estimates as of
the end of 2001 of the ultimate amounts of losses occurring in 2001 and prior
years required a further net increase, significant adverse development was also
recorded in 2002 on losses occurring in 1998 through 2001 in the auto liability
and aviation lines and in 1999 through 2001 in the accident and health line.
These increases to incurred losses were partially offset by favorable
development on losses occurring in 2001, principally in fire and allied lines
and other liability lines.

2001 current year net losses and loss adjustment expenses incurred include
catastrophe losses of $215 million ($200 million of which represents the
estimated cost of the September 11th attack -- see Note 8) and a loss of $60
million for the estimated reinsurance exposure related to Enron Corporation.

In addition, as a result of net increases in estimates of losses occurring
in prior years, net losses and loss adjustment expenses were increased by $35.7
million. Significant adverse development was recorded in 2001 on losses
occurring in 1994 through 1998 in medical malpractice, 1997 through 2000 in auto
liability, 1998 and 1999 in accident and health and 2000 in the fire line. These
increases to incurred losses were partially offset by favorable development in
2001 on losses occurring primarily from 1990 through 1996 and 1999 through 2000
in the other liability line.

2000 catastrophe losses had an immaterial impact on that year's results. In
addition, as a result of net increases in estimates of losses occurring in prior
years, net losses and loss adjustment expenses were increased by $14.4 million
in 2000. In particular, significant adverse development was recorded in 2000 on
losses occurring in 1998 and 1999 in fire and allied lines. These increases to
incurred losses were partially offset by favorable development in 2000 on losses
occurring primarily in 1994 through 1999 in the other liability line.

6. COMMON STOCK

Common stock activity for each of the three years in the period ended
December 31, 2002 was as follows:

As a result of a common stock split in the form of a 50% stock dividend,
common stock increased by $17.4 million and additional paid-in capital decreased
by $17.5 million in 2001. This stock split was paid on July 20, 2001, to holders
of record on June 29, 2001.

7. NET INCOME PER COMMON SHARE

Net income per common share has been computed in the following table based
upon weighted average common shares outstanding. Share and per share amounts
have been retroactively adjusted, as appropriate, to reflect a 3-for-2 split of
the common stock in the form of a 50% stock dividend, paid in July 2001.

50

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. NET INCOME PER COMMON SHARE (CONTINUED)

8. IMPACT OF SEPTEMBER 11TH TERRORIST ATTACK ON THE UNITED STATES

Results for 2001 include pre-tax net losses and loss adjustment expenses of
$200 million from the September 11th terrorist attack, or $130 million after
tax. The pre-tax net loss estimate is comprised of gross incurred losses and
loss adjustment expenses of approximately $500 million less related reinsurance
ceded of approximately $300 million. The losses recorded for this event
represent TRH's estimate of ultimate losses based upon information presently
available.

9. ACCUMULATED OTHER COMPREHENSIVE INCOME

The components of accumulated other comprehensive income and changes in such
amounts between years are as follows:

10. PENSION, SAVINGS AND STOCK INCENTIVE PLANS

TRH's employees participate in benefit plans administered by the AIG Group
(See Note 11), including a noncontributory defined benefit pension plan, an
employee stock purchase plan, a stock incentive plan and a voluntary savings
plan (a 401(k) plan) which provides for certain matching contributions. A
substantial majority of TRH's employees are eligible to participate in these
plans. Certain of these plans do not separately identify plan benefits and plan
assets attributable to employees

51

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. PENSION, SAVINGS AND STOCK INCENTIVE PLANS (CONTINUED)
of participating companies. In the opinion of management, no material additional
liability would accrue to TRH were such plan benefits and plan assets
identifiable.

In addition, under TRH's 1990 Employee Stock Purchase Plan, as amended,
full-time employees with at least one year of employment with the Company or any
of its subsidiaries are eligible to receive privileges to purchase shares of the
Company's common stock at a price which is 85% of the fair market value of such
stock on the date of subscription. An aggregate of 1,125,000 shares of common
stock has been authorized for subscription and 1,122 shares were purchased under
the plan in 2002.

In 2002, certain TRH employees were granted restricted stock units (RSU)
under the AIG 2002 Stock Incentive Plan. Four years after the grant date of
RSUs, those RSU recipients who remain employed by TRH will receive shares of AIG
common stock or equivalent compensation.

The charges made to operations for these plans for 2002, 2001 and 2000 were
$3,011,000, $2,398,000, and $2,035,000, respectively.

11. STOCK OPTION PLANS

In 2000, the Company's Board of Directors adopted, and the stockholders
approved, the 'Transatlantic Holdings, Inc. 2000 Stock Option Plan' (the 2000
Plan). This plan provides that options may be granted to certain key employees
and non-employee directors to purchase a maximum of 2,250,000 shares of the
Company's common stock at prices not less than their fair market value at the
date of grant. At December 31, 2002, 1,523,557 shares were reserved for future
grants under the 2000 Plan. The 2000 Plan also provides that 25% of the options
granted become exercisable on the anniversary date of the grant in each of the
four years following the grant and expire 10 years from the date of grant. The
Company also maintains the 'Transatlantic Holdings, Inc. 1995 Stock Option Plan'
(the 1995 Plan) and the 'Transatlantic Holdings, Inc. 1990 Stock Option Plan'
(the 1990 Plan). The 1995 Plan and the 1990 Plan operate under substantially
similar terms to the 2000 Plan, except that non-employee directors were not
covered under the 1990 Plan. No further options can be granted under the 1995
Plan nor the 1990 Plan, although options outstanding continue in force until
exercise, expiration or forfeiture. (See Note 2(j) for the determination of pro
forma net income had compensation cost been charged to income in accordance with
the fair value method discussed in SFAS No. 123.)

In each of 1994 and 1992, the Stock Option Plan Committee granted 45,000
options to certain non-employee directors of the Company, who were directors,
officers and employees of AIG, to purchase shares of the Company's common stock
at $22.67 per share and $23.33 per share, respectively. Such options were
granted outside of, but on substantially the same terms and conditions as, the
1990 Plan. During 2002, all such options granted in 1992 were exercised, and
none remain outstanding. As of year-end 2002, those options granted in 1994 were
exercisable, as none have been exercised or forfeited. The impact of these
options on the financial statements is not material.

52

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. STOCK OPTION PLANS (CONTINUED)
A summary of the combined status of the 2000 Plan, the 1995 Plan and the
1990 Plan (collectively, the Company Plans) as of December 31, 2002, 2001 and
2000 and changes during the years ended on those dates is presented below:

The weighted average fair value of each option grant is estimated on the
date of grant using the 'Binomial Option Price Model' with the following
weighted average assumptions used for grants in 2002, 2001 and 2000,
respectively: expected volatility of 20.0%, 20.0% and 18.0%; risk-free interest
rates of 3.6%, 4.4%, and 5.4%; and expected lives of six years for each grant.
An increasing dividend schedule is used in the binomial model based on
historical experience.

The following table summarizes information about the Company Plans'
outstanding and exercisable options at December 31, 2002:

12. RELATED PARTY TRANSACTIONS

As of December 31, 2002, 2001 and 2000, AIG beneficially owned approximately
60% of the Company's outstanding shares.

TRH has service and expense agreements and certain other agreements with the
AIG Group which provide for the reimbursement to the AIG Group of certain
administrative and operating expenses which include, but are not limited to,
investment advisory and cash management services, office space and human
resource related activities. Under the guidance of TRH's Finance Committee of
the Board of Directors and senior management, certain subsidiaries of AIG act as
financial advisors and managers of TRH's investment portfolio. In 2002, 2001 and
2000, $8,200,000, $7,900,000 and $7,700,000, respectively, of operating and
investment expenses relate to services and expenses provided by the AIG Group
under these agreements.

Approximately $395 million (13%), $232 million (10%) and $209 million (11%)
of gross premiums written by TRH in 2002, 2001 and 2000, respectively, were
attributable to reinsurance purchased by

53

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. RELATED PARTY TRANSACTIONS (CONTINUED)
subsidiaries of AIG, for the production of which TRH paid ceding commissions to
such AIG subsidiaries totaling $88 million, $50 million and $38 million,
respectively, in such years. (See Note 14 for information relating to
reinsurance ceded to related parties.)

13. DIVIDEND RESTRICTION AND STATUTORY FINANCIAL DATA

The payment of dividends by the Company is dependent on the ability of its
subsidiaries to pay dividends. The payment of dividends by TRC and its
wholly-owned subsidiaries, TRZ and Putnam, is restricted by insurance
regulations. Under New York insurance law, TRC and Putnam may pay dividends only
out of their statutory earned surplus. Such dividends are limited by statutory
formula unless otherwise approved by the New York Insurance Department. The
statutory surplus of TRC includes the statutory surplus of Putnam since all the
capital stock of Putnam is owned by TRC. At December 31, 2002, TRC had statutory
earned surplus of $1,150,140,000, and, in 2003, in accordance with the statutory
formula, could pay dividends of approximately $154,594,000 without regulatory
approval.

Statutory surplus and net income as reported to the New York Insurance
Department were as follows:

TRC and Putnam each prepare statutory financial statements in accordance
with accounting practices prescribed or permitted by New York -- their state of
domicile. Prescribed statutory accounting practices are discussed in a variety
of publications of the National Association of Insurance Commissioners (NAIC),
as well as in state laws, regulations and general administrative rules.
Permitted statutory accounting practices encompass all accounting practices not
so prescribed. All material statutory accounting practices of TRC and Putnam are
prescribed in the authoritative literature described above.

In 1998, the NAIC adopted the Codification of Statutory Accounting
Principles (Codification) as primary guidance on statutory accounting effective
January 1, 2001. The Codification provides guidance for areas where previously
statutory accounting had been silent and has also changed current statutory
accounting in some areas. The New York Insurance Department adopted most of the
Codification guidance for implementation on January 1, 2001, but did not adopt
certain key provisions including those on deferred income taxes. The cumulative
effect of the implementation of Codification guidance (as adopted by the New
York Insurance Department) on the statutory surplus of TRC and Putnam as of
January 1, 2001 was not material. In addition, the implementation of such
Codification guidance did not have a material effect on statutory net income in
2002 or 2001. In the fourth quarter of 2002, the guidance related to deferred
income taxes was adopted. Accordingly, as of year-end 2002, statutory surplus of
both TRC and Putnam include the impact of deferred tax assets of $88.3 million
and $4.4 million, respectively, representing the cumulative benefit of adopting
such provision in 2002. Statutory net income (loss) was not affected.

54

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. REINSURANCE CEDED

In the normal course of business, TRH purchases reinsurance from its
retrocessionnaires to reduce the effect of individual or aggregate losses and to
allow increased gross premium writings and afford greater risk capacity without
necessarily requiring additional capital.

TRH's ceded reinsurance agreements consist of pro rata and excess-of-loss
contracts. Under pro rata reinsurance, TRH and its retrocessionnaires share
premiums, losses and expenses in an agreed upon proportion. For consideration,
generally based on a percentage of premiums of the individual policy or policies
subject to the reinsurance agreement, excess-of-loss contracts provide
reimbursement to TRH for losses in excess of a predetermined amount up to a
predetermined limit.

Premiums written and earned and losses and loss adjustment expenses incurred
are comprised as follows:

Amounts recoverable from retrocessionnaires are recognized in a manner
consistent with the claims liabilities associated with the retrocession and are
presented on the balance sheet as reinsurance recoverable on paid and unpaid
losses and loss adjustment expenses. Such balances at December 31, 2002 and 2001
are comprised as follows:

Ceded reinsurance arrangements do not relieve TRH from its obligations to
the insurers and reinsurers from whom it assumes business. The failure of
retrocessionnaires to honor their obligations could result in losses to TRH;
consequently, an allowance has been established for estimated unrecoverable
reinsurance on paid and unpaid losses totaling $13.0 million in both 2002 and
2001. TRH evaluates the financial condition of its retrocessionnaires through a
security committee. With respect to reinsurance recoverable on paid and unpaid
losses and prepaid reinsurance premiums, TRH holds substantial amounts of funds
and letters of credit to collateralize these amounts. Such funds and letters

55

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

14. REINSURANCE CEDED (CONTINUED)
of credit can be drawn on for amounts remaining unpaid beyond contract terms. No
uncollateralized amounts recoverable from a single retrocessionnaire, other than
amounts due from affiliates, are considered material to the financial position
of TRH.

15. SEGMENT INFORMATION

TRH conducts its business and assesses performance through segments
organized along geographic lines. Financial data from the London and Paris
branches and from TRZ are reported in the aggregate as International-Europe and
considered as one segment due to operational and regional similarities. Data
from branches in the Americas, other than those in the United States which
underwrite primarily domestic business, and from branches in the Asia Pacific
region are grouped as International-Other and represent the aggregation of
non-material segments. In each segment, property and casualty reinsurance is
provided to insurers and reinsurers on a treaty and facultative basis, through
brokers or directly to ceding companies.

A significant portion of assets and liabilities of TRH's international
operations relate to the countries where ceding companies and reinsurers are
located. Most investments are located in the country of domicile of these
operations. In addition to licensing requirements, TRH's international
operations are regulated in various jurisdictions with respect to currency,
amount and type of security deposits, amount and type of reserves and amount and
type of local investment. Regulations governing constitution of technical
reserves and remittance balances in some countries may hinder remittance of
profits and repatriation of assets. International operations and assets held
abroad may be adversely affected by political developments in foreign countries,
including possibilities of tax changes, nationalization and changes in
regulatory policy, as well as by consequence of hostilities and unrest. The
risks of such occurrences and their overall effect upon TRH vary from country to
country and cannot easily be predicted.

While the great majority of premium revenues and assets relate to the
regions where particular offices are located, a portion of such amounts are
derived from other regions of the world. In addition, two large international
brokers, respectively, accounted for non-affiliated business equal to 13% and
14% in 2002, 15% and 14% in 2001 and 15% and 14% in 2000, of consolidated
revenues, with a significant portion in each segment. Further, one customer
accounted for approximately 8%, 12% and 10% of consolidated revenues in 2002,
2001 and 2000, respectively. Revenues from such customer, a significant portion
of which were obtained through the two large international brokers discussed
above, are included principally in the International-Europe segment, for all
periods discussed.

The following table is a summary of financial data by segment:

56

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15. SEGMENT INFORMATION (CONTINUED)

- ---------
(1) Domestic revenues and income (loss) before income taxes include realized net
capital (losses) gains of ($7,325), $241 and $29,668 in 2002, 2001 and 2000,
respectively. Realized net capital gains (losses) for other segments in each
of the years presented are not material.
(2) Net revenues from affiliates approximate $230,900, $100,300 and $110,000 in
2002, 2001 and 2000, respectively, and are included primarily in Domestic
and, for 2002 only, International -- Europe revenues.
(3) Includes revenues from the London, England office of $525,520, $435,007 and
$380,694 in 2002, 2001 and 2000, respectively.
(4) Results for 2002 include pre-tax net losses and loss adjustment expenses of
$100 million (representing $55 million, $30 million and $15 million from
Domestic operations, International -- Europe operations and
International -- Other operations, respectively) related to the fourth
quarter increase in net loss reserves in certain casualty lines (see Note 5
of Notes to Consolidated Financial Statements).
(5) Underwriting expenses represent the sum of net commissions and other
operating expenses.
(6) Adjusted underwriting profit (loss) represents net premiums earned less net
losses and loss adjustment expenses and underwriting expenses, plus (minus)
the increase (decrease) in deferred acquisition costs.
(7) As of December 31.
(8) Results for 2001 include pre-tax net losses and loss adjustment expenses of
$200 million (representing $100 million from Domestic operations and $100
million from International -- Europe operations) from the September 11th
terrorist attack (see Note 8 of Notes to Consolidated Financial Statements).

57

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

15. SEGMENT INFORMATION (CONTINUED)
Net premiums earned by major product line are as follows:

- ---------

* A significant portion of this product line includes more complex risks such as
professional liability (other than medical malpractice), directors' and
officers' liability, errors and omissions and environmental impairment
liability.

16. COMMITMENTS AND CONTINGENT LIABILITIES

(a) LEGAL PROCEEDINGS: TRH, in common with the reinsurance industry in
general, is subject to litigation in the normal course of its business. TRH does
not believe that any pending litigation will have a material adverse effect on
its results of operations, financial position or cash flows.

(b) COMMERCIAL COMMITMENTS: In the normal course of business, TRH has issued
letters of credit to ceding companies amounting to $55,024,000. Where TRH
provides a letter of credit, it is generally contractually obligated to continue
to provide a letter of credit to the ceding company in the future to secure
certain reserves and other balances.

(c) LEASES: As of December 31, 2002, the future minimum lease payments
(principally for leased office space) under various long-term operating leases
were as follows:

Rent expense approximated $8,249,000, $7,844,000 and $8,281,000 in 2002,
2001 and 2000, respectively.

58

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

17. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following is a summary of unaudited quarterly financial data for each of
the years ended December 31, 2002 and 2001. However, in the opinion of
management, all adjustments, consisting of normal recurring accruals, necessary
to present fairly the results of operations for such periods have been made. Per
share amounts have been retroactively adjusted, as appropriate, to reflect the
3-for-2 common stock split paid in July 2001.

- ---------

(1) Operating loss and net loss for the fourth quarter of 2002 include a charge
of $100 million (pre-tax) and $65 million (after-tax), respectively, related
to the increase in net loss reserves in certain casualty lines (see
Note 5).

(2) As the impact of potential shares for each of the three-month periods ended
December 31, 2002 and September 30, 2001 is antidilutive (i.e., reduces the
loss per common share) because there is a loss from continuing operations,
potential shares are not included in the diluted net loss per common share
calculation for those periods.

(3) Operating loss and net loss for the third quarter of 2001 include $200
million (pre-tax) and $130 million (after-tax), respectively, related to the
September 11th terrorist attack (see Note 8).

59

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

There have been no changes in nor any disagreements with accountants on
accounting and financial disclosure within the twenty-four months ended
December 31, 2002.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information required by this Item concerning directors of the Company is
included in the Company's Proxy Statement for the 2003 Annual Meeting of
Stockholders, filed with the Securities and Exchange Commission within 120 days
after the end of the Company's fiscal year (the '2003 Proxy Statement'), in the
section captioned 'Election of Directors,' and such information is incorporated
herein by reference. Information required by this Item concerning the executive
officers of the Company is included in Part I of this Annual Report on
Form 10-K under the section captioned 'Directors and Executive Officers of the
Registrant.' Information required by this Item concerning compliance with
Section 16(a) of the Securities Exchange Act of 1934, as amended, is included in
the 2003 Proxy Statement under the caption 'Election of Directors: `Ownership of
Certain Securities,' ' and such information is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

Information required by this Item is included in the 2003 Proxy Statement in
the sections captioned 'Election of Directors: `Compensation of Directors and
Executive Officers,' `Compensation Committee Interlocks and Insider
Participation' and `Pension Benefits,' ' and such information is incorporated
herein by reference. The sections of the 2003 Proxy Statement captioned
'Election of Directors: `Committee Reports on Executive Compensation' and
`Performance Graph' ' are not incorporated by reference herein.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

Information required by this Item is included in the 2003 Proxy Statement in
the sections captioned 'Beneficial Ownership' and 'Election of Directors:
`Ownership of Certain Securities,' ' and such information is incorporated herein
by reference.

In addition, summarized information with respect to stock options granted by
the Company are as follows:

The equity compensation plan not approved by security holders is composed of
options granted in 1994 by the Stock Option Plan Committee to certain
non-employee directors of the Company who were directors, officers and employees
of AIG, to purchase shares of the Company's common stock at $22.67 per share.
Such options were granted outside of, but on substantially the same terms as the
'Transatlantic Holdings, Inc. 1990 Stock Option Plan.' As of year-end 2002,
those options granted in 1994 were exercisable, as none have been exercised or
forfeited.

60

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information required by this Item is included in the 2003 Proxy Statement in
the sections captioned 'Election of Directors: `Compensation Committee
Interlocks and Insider Participation,' `Relationship with AIG,' `AIG Group
Reinsurance,' `Certain Transactions with the AIG Group' and `Relationship with
SICO and Starr,' ' and such information is incorporated herein by reference.

PART IV

ITEM 14. CONTROLS AND PROCEDURES

Our disclosure controls and procedures are designed to ensure that
information required to be disclosed in reports that we file or submit under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the rules and forms of the Securities and
Exchange Commission. The Chief Executive Officer and the Chief Financial Officer
have reviewed the effectiveness of our disclosure controls and procedures within
the last ninety days and have concluded that the disclosure controls and
procedures are effective. There were no significant changes in our internal
controls or in other factors that could significantly affect these controls
subsequent to the last day they were evaluated by our Chief Executive Officer
and Chief Financial Officer.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Financial Statements and Exhibits

1. Financial Statements and Schedules

See accompanying Index to Consolidated Financial Statements in Item
8. Schedules not included in the accompanying index have been omitted
because they are not applicable.

2. Exhibits

21.1 -- Subsidiaries of Registrant.

23.1 -- Consent of PricewaterhouseCoopers LLP.

See accompanying Exhibit Index for additional Exhibits incorporated
by reference.

(b) Reports on Form 8-K

In a Current Report on Form 8-K filed on November 13, 2002,
Transatlantic Holdings, Inc. disclosed that pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
each of the principal executive officer and principal financial officer have
furnished certifications of the Quarterly Report of Transatlantic Holdings,
Inc. (TRH) on Form 10-Q for the quarter ended September 30, 2002, which
certifications were attached to the transmittal letter accompanying such
filing. The transmittal letter with attachments was submitted to and the
abovementioned Form 10-Q was filed with the Securities and Exchange
Commission on November 13, 2002.

61

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.

TRANSATLANTIC HOLDINGS, INC.

By: /s/ ROBERT F. ORLICH
.................................
Robert F. Orlich
Title: President and Chief
Executive Officer

March 20, 2003

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.

62

CERTIFICATIONS PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Robert F. Orlich, certify that:

1. I have reviewed this annual report on Form 10-K of Transatlantic
Holdings, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the 'Evaluation Date'); and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and

6. The registrant's other certifying officer and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: March 27, 2003

/s/ ROBERT F. ORLICH
.....................................
Robert F. Orlich
President and Chief Executive Officer

63

CERTIFICATION

I, Steven S. Skalicky, certify that:

1. I have reviewed this annual report on Form 10-K of Transatlantic
Holdings, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the 'Evaluation Date'); and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls;
and

6. The registrant's other certifying officer and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: March 27, 2003

/s/ STEVEN S. SKALICKY
.....................................
Steven S. Skalicky
Executive Vice President and Chief
Financial Officer

64

SCHEDULE I

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
SUMMARY OF INVESTMENTS -- OTHER THAN INVESTMENTS IN RELATED PARTIES
AS OF DECEMBER 31, 2002

- ---------

* Investments in fixed maturities are shown at amortized cost.

S-1

SCHEDULE II

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
(PARENT COMPANY ONLY)
AS OF DECEMBER 31, 2002 AND 2001

See Notes to Condensed Financial Information of Registrant -- (Parent Company
Only)

S-2

SCHEDULE II

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- (CONTINUED)
STATEMENTS OF OPERATIONS
(PARENT COMPANY ONLY)
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

See Notes to Condensed Financial Information of Registrant -- (Parent Company
Only)

S-3

SCHEDULE II

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- (CONTINUED)
STATEMENTS OF CASH FLOWS
(PARENT COMPANY ONLY)
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

- ---------

Notes to Condensed Financial Information of Registrant -- (Parent Company Only)

(1) The condensed financial information of registrant should be read in
conjunction with the Consolidated Financial Statements and Notes to
Consolidated Financial Statements included elsewhere herein.

(2) Investment in subsidiaries is reflected on the equity method.

S-4

SCHEDULE III

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION
AS OF DECEMBER 31, 2002, 2001 AND 2000 AND FOR THE YEARS THEN ENDED

S-5

SCHEDULE IV

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
REINSURANCE
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

S-6

SCHEDULE VI

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION CONCERNING
PROPERTY/CASUALTY INSURANCE OPERATIONS
AS OF DECEMBER 31, 2002, 2001 AND 2000 AND FOR THE YEARS THEN ENDED

S-7

EXHIBIT INDEX

- ---------

* Management compensation plan.