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, 2003

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. [x]

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 30, 2003 (the last business day of
the registrant's most recently completed second fiscal quarter) was
approximately $1,326,951,712.

As of January 31, 2004, there were outstanding 52,500,247 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 20, 2004 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, 2003, 2002 and 2001, 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, TRC's representative office in Sydney, Australia
obtained a license to underwrite business as an authorized branch in Australia,
and presently does so. 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 multiple peril 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 $1,851.2 million, as of December 31, 2003,
ranked TRC as the 6th largest domestic reinsurer according to statistics
distributed by the Reinsurance Association of America (RAA). Although TRC and
its wholly-owned subsidiary, Putnam, are separate entities, together they would
have ranked as the 3rd largest domestic reinsurer based upon combined statutory
net premiums written of $3,100.4 million and 4th based upon combined statutory
net income of $193.2 million for the year ended December 31, 2003, according to
such RAA statistics.

TRH'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
(including Section 16 Filings -- Forms 3, 4 and 5).'

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

Throughout this Annual Report on Form 10-K, TRH presents its operations in
the way it believes will be most meaningful. TRH's net unpaid losses and loss
adjustment expenses and TRH's combined ratio and its components are included
herein and presented in accordance with principles prescribed or permitted by
insurance regulatory authorities as these are standard measures in the insurance
and reinsurance industries.

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.

2

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 other subsidiaries of AIG and therefore generally reflects their
underwriting philosophy and diversified insurance products. Approximately $633
million (17%), $395 million (13%) and $232 million (10%) of gross premiums
written by TRH in the years 2003, 2002 and 2001, respectively, were attributable
to reinsurance purchased by other subsidiaries of AIG. The great majority of
such gross premiums written were recorded in auto liability, property, other
liability and aircraft lines. (For a more detailed discussion of TRH's business
with the AIG Group, see Relationship with the AIG Group.)

In 2003, TRH's activities in the United States were conducted through its
worldwide headquarters in New York, its office in Miami (as further discussed
below) and its regional office in Chicago. All domestic treaty business is
underwritten by, or under the 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, Hong Kong, Tokyo and Sydney (license obtained to
operate as an authorized branch in Australia in 2002) 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%, 45% and 47% of worldwide net premiums written in 2003,
2002 and 2001, 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 $690.1 million, $527.3 million and $409.8 million in 2003, 2002 and
2001, respectively, representing 21%, 21% 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 2000 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 23% interest (acquired through an initial and subsequent
investment made in 1999 and 2003, respectively, for $57 million in the
aggregate) 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 2003, 74% in 2002 and 79% in 2001.
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.
2003 and 2002 catastrophe losses did not have a material impact on those years'
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. (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.

3

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 majority of the amounts within the other liability line relates to more
complex risks such as professional liability (other than medical
malpractice), directors' and officers' liability and, to a much lesser
extent, environmental impairment liability.

(2) In 2003, development on reserves held at December 31, 2002 related to losses
that occurred in 2002 and prior years significantly increased net losses and
loss adjustment expenses in other liability, medical malpractice, surety and
credit and other casualty lines. In addition, 2003 catastrophe losses did
not have a significant impact on that year's results.

(3) 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 other liability, auto liability, medical
malpractice, ocean marine and aviation, surety and credit and accident and
health 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.

(4) 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,
surety and credit and accident and health 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.

(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 96%, 95% and 96% of net premiums written in 2003, 2002 and 2001,
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 2003 compared to 2002, domestic treaty premiums increased significantly
in specialty casualty (principally directors' and officers' liability,
medical malpractice and other professional liability), property and ocean
marine and aviation lines. International treaty premiums increased
significantly in property, specialty casualty (principally directors' and
officers' liability, other professional liability and medical malpractice)
and auto liabilty lines. Facultative premiums, in 2003 compared to 2002,
increased principally in other liability, auto liability and property lines.
(See Management's Discussion.)

(2) In 2002 compared to 2001, domestic treaty premiums increased significantly
in specialty casualty (principally directors' and officers' liability, other
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.

TREATY REINSURANCE

Treaty reinsurance accounted for approximately $3,397.2 million of gross
premiums written and $3,219.2 million of net premiums written in 2003,
approximately 75% of which resulted from casualty lines treaties, with the
remainder from property lines treaties. Approximately 67% of treaty gross
premiums written in 2003 represented treaty reinsurance written on a pro rata
basis and the balance represented treaty reinsurance written on an
excess-of-loss basis. Approximately 15% of treaty gross premiums written in 2003
were attributable to other subsidiaries of AIG and 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. (See Relationship with the AIG Group.) 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'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 most
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 frequently 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

5

dependence subjects TRH, and reinsurers in general, to the possibility that the
ceding companies have 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 treaty reinsurance purchased
by other subsidiaries of AIG, 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 such AIG
subsidiaries 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 3,549 treaties in effect for the current
underwriting year. In 2003, 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 2003 except for other subsidiaries of AIG (see
Relationship with the AIG Group), and members of Lloyd's of London (Lloyd's)
(which accounted for 5% 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, 2003.

FACULTATIVE REINSURANCE

During 2003, TRH wrote approximately $240.7 million of gross premiums
written and $121.9 million of net premiums written of facultative reinsurance,
approximately 48% of which represented casualty risks with the balance
comprising property risks. The majority of facultative net premiums written in
2003 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. Other 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 48% of facultative gross premiums written in 2003 were
attributable to other subsidiaries of AIG. Except for such AIG subsidiaries, no
single ceding company accounted for more than 3% of total facultative gross
premiums written in 2003. Non-U.S. facultative business accounted for
approximately 2% of TRH's total net premiums written for the year ended
December 31, 2003.

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.

6

Under TRH's underwriting guidelines and retrocession arrangements in effect
at the end of 2003, 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. In
addition, TRH may purchase retrocession protection designed to limit the amount
of losses that it may incur. For 2004, TRH has purchased property catastrophe
excess-of-loss reinsurance protection that management deems prudent and cost
effective. TRH estimates that its probable maximum gross loss (gross PML) from
any single event in any one geographic zone would approximate $470 million
(before TRH's property catastrophe excess-of-loss reinsurance protection). TRH
defines gross PML as its anticipated maximum loss (taking into account contract
limits), before its retrocession recoveries, caused by a single catastrophic
event affecting a broad contiguous area with an expected likelihood of
occurrence of once in every 100 years. Based upon the above gross PML estimate,
TRH would record net loss and loss adjustment expenses incurred of approximately
$235 million before tax benefit, or $153 million, net of tax, in such an event,
subject to other terms and conditions of the retrocessional coverages purchased
by TRH. There can be no assurance that TRH will not experience losses from one
or more catastrophic events that exceed, perhaps by a material amount, such
gross and net amounts. 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.

'Certified' terrorism risk, as defined in the Terrorism Risk Insurance Act
(TRIA), which was signed into law in 2002, has generally been limited or
excluded from commercial lines business assumed and reinsurance coverages
purchased (including property catastrophe coverages) in 2003 and TRH anticipates
that it will generally continue this practice in 2004. 'Non-certified' terrorism
risk, which relates to acts of terrorism not defined under TRIA (such as acts
committed by domestic parties), is generally not excluded from commercial lines
coverages assumed and reinsurance coverages purchased by TRH. In addition, TRH
offers terrorism-specific (certified and non-certified) coverages to ceding
companies on a limited basis. TRH does not purchase reinsurance protection for
such coverages.

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.

7

As of December 31, 2003, TRH had in place approximately 200 active
retrocessional arrangements for current and prior underwriting years with 372
retrocessionnaires, and reinsurance recoverable on paid and unpaid losses and
loss adjustment expenses totaled $869.9 million, including $221.7 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.)

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.

Business assumed from other subsidiaries of AIG is generally obtained
directly from the ceding company. No ceding company, other than such AIG
subsidiaries 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 Aon Corporation (Aon) and Marsh & McLennan Companies, Inc.
(Marsh), 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 2003, approximately 85% of TRH's non-AIG Group business was written
through brokers and the balance was written directly. Also in 2003, companies
controlled by Aon and Marsh, TRH's largest brokerage sources of non-AIG Group
business, accounted for 16% and 13%, respectively, of TRH's consolidated
revenues. In addition, Aon and Marsh accounted for 15% and 12%, respectively, of
gross premiums written in 2003. 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

8

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.

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, which are subject to change without
notice. TRH writes a significant amount of non-proportional assumed casualty
reinsurance as well as proportional assumed reinsurance of excess casualty
business for classes such as medical malpractice and directors' and officers'
liability, which classes can exhibit greater volatility over time than most
other classes due to their low frequency, high severity nature, and loss cost
trends that are more difficult to predict.

Included in TRH's reserves are amounts 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 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

9

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.

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 which are reflected in TRH's
consolidated financial statements. (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 unpaid loss and loss
adjustment expenses, net of related reinsurance recoverable, for calendar years
1993 through 2003. 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 adjustment expense reserve of $1,727.4 million
as of December 31, 1994, by the end of 2003 (nine years later) $1,362.6 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 $1,727.4
million was reestimated to be $1,560.9 million at December 31, 2003. 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 $126.5
million at December 31, 2003 related to December 31, 1997 net loss and loss
adjustment expense reserves of $2,522.7 million, represents the cumulative
amount by which net reserves for 1997 have developed favorably from 1998 through
2003.

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 1996 for $150,000 was first reserved in 1993 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 1993 through 1995 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.

10

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.

11

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.

12

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 $322.6 million was recorded in
2003 on losses occurring in prior years. (See Management's Discussion.)

In general, the deficiencies shown in the table for years 1998 through 2002
developed principally in 2002 and 2003 and resulted largely from losses
occurring between 1998 and 2000 in certain casualty lines. Such adverse
development involved an unexpected increase in the frequency and severity of
large claims reported in late 2002 and in 2003, as was common in the industry,
related to non-proportional assumed casualty reinsurance as well as proportional
assumed reinsurance of excess casualty business for such volatile classes as
medical malpractice and directors' and officers' liability. (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 from 1986 through 1994, 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, and the higher
incidence (compared to earlier years) of catastrophe losses paid in 1999, 2000,
2002 and 2003 related to events occuring prior to the year in which such
payments were made.

The following table presents a reconciliation of beginning and ending net
unpaid losses and loss adjustment expense 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 UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES

- ---------

(1) 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 2003 and 2002, each as compared to the immediate prior year, paid losses
have been increasing largely as a result of a shift in the mix of business
toward lines with shorter payment patterns and an increase in the amount of
business TRH has written over the past several years. (See Management's
Discussion for further analysis of incurred and paid loss activity.)

13

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.

TRH engages in securities lending transactions whereby certain securities
(i.e., fixed maturities and common stocks available for sale) from its portfolio
are 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, 2003.

INVESTMENT RESULTS

(footnotes on next page)

14

(footnotes from previous page)

(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 gains (losses).

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

The following table summarizes the investments of TRH (on the basis of
carrying value) as of December 31, 2003:

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, 2003, the market value of the total investment portfolio
was $6,696.4 million.

The following table indicates the composition of the fixed maturity
portfolio of TRH by rating as of December 31, 2003:

At December 31, 2003, TRH had no real estate or derivative instruments. (See
Note 3 of Notes to Consolidated Financial Statements.)

15

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.)

COMPETITION

The reinsurance business is highly competitive in virtually all lines. After
many years of deteriorating prices and contract terms, rate increases were
achieved in many lines in late 2000 and continued in 2001, further intensified
after the net industry surplus drain occurring as a result of the September 11,
2001 terrorist attack.

Market conditions for reinsurers generally continued to improve throughout
2002 and 2003 as rates increased and terms and conditions generally became more
restrictive. Attracted by the improved market conditions, additional capital
entered the market in late 2001 and has continued through 2003 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, most significantly in property lines, and will
also likely serve to lessen the magnitude of pricing improvements in casualty
lines going forward.

Rates, terms and conditions were generally stronger in longer-tail casualty
lines, particularly in certain specialty casualty classes such as medical
malpractice, other professional liability and directors' and officers' liability
lines due, in part, to recent elevated industry-wide loss activity (that also
materially affected TRH) experienced in certain of those lines related
principally to losses occurring in the late 1990s and 2000. In fact, pricing for
certain property lines business has begun to be negatively influenced by the
added market capacity discussed above. Overall, the impact of market
improvements in recent years does not necessarily translate into ultimate
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 few years, generally increased market capacity, domestic and
international merger and acquisition activity, and Lloyd's, have added to
competitive pressures. The ultimate impact on the market of these events is
uncertain.

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 3rd, on the
basis of statutory net premiums written for the year ended December 31, 2003,
based on the RAA's survey as of that date, 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 RAA, there were 29 domestic reinsurers for which results were
reported in their quarterly survey as of December 31, 2003.

16

EMPLOYEES

At December 31, 2003, TRH had approximately 455 employees. Approximately 220
employees were located in the New York headquarters; 40 employees were located
in Chicago and Miami (serving Latin America and the Caribbean) and 195 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
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 2003, 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

17

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, 2003,
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 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 and other developments in foreign countries, including
possibilities of tax changes, nationalization and changes in regulatory policy,
as well as by consequences 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 services and asset management. AIG subsidiaries other than TRH,
collectively, are one of the largest purchasers of reinsurance in the insurance
industry based on premiums ceded.

CONTROL OF THE COMPANY

As of December 31, 2003, 2002 and 2001, 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 an Honorary Director and Senior Advisor; Mr. Smith is a Director and
Vice Chairman, Chief Financial Officer and Chief Administrative Officer; and,
Mr. Tizzio is an Honorary 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 other subsidiaries of AIG. TRH
either accepts or rejects such reinsurance

18

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 treaty reinsurance
purchased by other subsidiaries of AIG; 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 $633 million (17%), $395 million (13%) and $232 million (10%)
of gross premiums written by TRH in the years 2003, 2002 and 2001, respectively,
were attributable to reinsurance purchased by other subsidiaries of AIG, for the
production of which TRH paid ceding commissions to such AIG subsidiaries
totaling approximately $167 million, $88 million and $50 million, respectively,
in such years. The great majority of such gross premiums written were recorded
in auto liability, property, other liability and aircraft lines. Of the premiums
assumed from other subsidiaries of AIG, $294 million, $162 million and $69
million in 2003, 2002 and 2001, respectively, represent premiums resulting from
certain insurance business written by other AIG subsidiaries that, by
prearrangement with TRH, is almost entirely reinsured by TRH, for the production
of which TRH paid ceding commissions to such AIG subsidiaries totaling
approximately $83 million, $31 million and $7 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.

TRH retroceded gross premiums written to other subsidiaries of AIG in the
years 2003, 2002 and 2001 of approximately $87 million, $91 million and $114
million, respectively, and received ceding commissions of approximately $10
million, $10 million and $11 million, respectively, for the production of such
business in such years. (See Note 14 of Notes to Consolidated Financial
Statements.)

ITEM 2. PROPERTIES

As of December 31, 2003, 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,
Hong Kong, Shanghai, Tokyo and Sydney 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 2003.

19

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 10, 2004.

- ---------

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

(2) Mr. Mucci was elected Executive Vice President and Chief Actuary of the
Company in May 2003. From May 1991 to May 2003, Mr. Mucci was a Senior Vice
President and Actuary 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.

(4) Mr. Higuchi was appointed as a Director of the Company by unanimous consent
of its Board of Directors in August 2003. Mr. Higuchi replaced Mr. Takashi
Aihara, who resigned as a Director of the Company upon his retirement as
Chairman of the Board of The Nichido Fire & Marine Insurance Company,
Limited.

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.

20

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 2003 and 2002:

(b) As of January 31, 2004, the approximate number of holders of Common
Stock, including those whose Common Stock is held in nominee name, was 29,000.

(c) In 2003, the Company declared a quarterly dividend of $0.10 per share of
Common Stock in March and $0.11 per share of Common Stock in each of May,
September and December. In 2002, the Company declared a quarterly dividend of
$0.096 per share of Common Stock in March and $0.10 per share of Common Stock in
each of May, September and December. The Company paid each dividend in the
quarter following the date of declaration.

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.)

21

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.

- ---------

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

22

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 U.S. federal securities
laws. These forward-looking statements are identified, including without
limitation, by their use of such terms and phrases as 'intends,' 'intend,'
'intended,' 'goal,' 'estimate,' 'estimates,' 'expects,' 'expect,' 'expected,'
'project,' 'projects,' 'projected,' 'projections,' 'plans,' 'anticipates,'
'anticipated,' 'should,' 'think,' 'thinks,' 'designed to,' 'foreseeable future,'
'believe,' 'believes' and 'scheduled' and similar expressions. 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, regulatory and accounting 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.

23

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

Throughout this Annual Report on Form 10-K, Transatlantic Holdings, Inc. and
its subsidiaries (TRH) presents its operations in the way it believes will be
most meaningful. TRH's net unpaid losses and loss adjustment expenses and TRH's
combined ratio and its components are included herein and presented in
accordance with principles prescribed or permitted by insurance regulatory
authorities as these are standard measures in the insurance and reinsurance
industries.

FINANCIAL STATEMENTS

The following discussion refers to the consolidated financial statements of
TRH as of December 31, 2003 and 2002 and for each of the three years in the
period ended December 31, 2003, which are presented elsewhere herein. Financial
data discussed below have been affected by certain transactions between TRH and
American International Group, Inc. and its subsidiaries (the AIG Group). (See
Notes 10, 12 and 14 of Notes to Consolidated Financial Statements.)

EXECUTIVE OVERVIEW

The operations of Transatlantic Holdings, Inc. (the Company) are conducted
principally by its three major operating subsidiaries -- Transatlantic
Reinsurance Company (TRC), Trans Re Zurich (TRZ) and Putnam Reinsurance Company
(Putnam) -- and managed based on its geographic segments which are presented in
this Form 10-K as Domestic, International-Europe and International-Other.
Through its operations on six continents, TRH offers reinsurance capacity on
both a treaty and facultative basis -- structuring programs for a full range of
property and casualty products, with an emphasis on specialty lines, which may
exhibit greater volatility of results over time than most other lines. TRH's
operating strategy emphasizes product and geographic diversification as key
elements in controlling its level of risk concentration. TRH also adjusts its
mix of business to take advantage of market opportunities. Over time, TRH has
also capitalized on market opportunities when they arise by strategically
expanding operations in an existing location or opening a branch or
representative office in new locations (except for the acquisition of TRZ in
1996). TRH's operations that serve international markets grow by leveraging
TRH's product knowledge, worldwide resources and financial strength, typically
utilizing indigenous management and staff with a thorough knowledge of local
markets and product characteristics.

In 2003, casualty lines comprised 74% of TRH's net premiums written, while
property lines totaled 26%. Treaty reinsurance totaled 96% of net premiums
written, with the balance representing facultative accounts. Moreover,
reinsurance assumed by international offices represented 45% of net premiums
written in 2003. American International Group, Inc. (AIG), which through its
subsidiaries is one of the largest providers of insurance and investment
products and services to businesses and individuals around the world,
beneficially owned 60% of the common stock of the Company as of December 31,
2003, 2002 and 2001.

TRH offers reinsurance through reinsurance brokers and, to a lesser extent,
directly to domestic and foreign insurance and reinsurance entities. Although
TRC and its wholly owned subsidiary, Putnam, are separate entities, together
they would have ranked as the 3rd largest domestic reinsurer, based upon
combined statutory net premiums written for the year ended December 31, 2003,
based on the Reinsurance Association of America's survey as of that date.

TRH's major sources of revenues are net premiums earned for reinsurance
risks undertaken and net investment income earned on investments made. The great
majority of TRH's investments are in fixed maturity securities with an average
duration of 5.3 years as of December 31, 2003. In general, premiums are received
significantly in advance of related claims payments. The following table
summarizes TRH's revenues, income (loss) before income taxes and net income for
the periods indicated:

24

CONSOLIDATED RESULTS

Revenues during the period under discussion grew significantly, principally
due to increases in net premiums earned which increasingly resulted from rate
increases across virtually all lines and regions in which TRH does business, as
well as the greater number of favorable underwriting opportunities for global
reinsurers with superior financial strength ratings and a full range of
products, such as TRH. The markets in which we operate have historically been
cyclical. During most of the period under discussion, the market was
characterized by declining capacity in certain classes and rating downgrades of
many major reinsurers. These occurrences generally resulted from years of rate
declines, high levels of industry loss activity, exacerbated by losses from the
major European storms of late 1999, the tragic event of September 11, 2001,
losses related to major corporate collapses such as Enron Corporation, and
adverse development in 2002 and 2003 on losses occurring in 1998 through 2000 in
certain specialty casualty classes such as directors' and officers' liability
(included in the other liability line) and medical malpractice. These events
also materially affected TRH's results in those years.

Income before income taxes and net income improved in 2003 and 2002, each as
compared to the immediately prior year, due primarily to improvements in
underwriting profit (loss) in each succeeding year. Underwriting profit (loss)
represents net premiums earned less net losses and loss adjustment expenses, net
commissions and other underwriting expenses, plus (minus) the increase
(decrease) in deferred acquisition costs. Generally, rate improvements and more
restrictive contract terms and conditions increasingly benefited results in each
of 2003 and 2002 as compared to the immediately prior years. In addition, 2002
benefited from the absence, as compared to 2001, of significant catastrophe loss
activity and losses related to Enron reinsurance exposure that impacted the 2001
year. The year 2001 included $215 million ($200 million related to September 11)
of pre-tax catastrophe losses, or $139.8 million, net of tax, as well as pre-tax
losses of $60 million, or $39 million, net of tax, for reinsurance exposure
related to Enron Corporation. 2002 results also included the impact of a fourth
quarter increase in loss reserves (totaling $100 million, or $65 million, net of
tax) largely caused by an unexpected increase, late in the year, in the
frequency and severity of reported losses occurring in 1998 through 2000 in
certain casualty lines, reflecting industry wide trends. (See Operational
Review.)

MARKET CONDITIONS AND OUTLOOK

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 the September 11, 2001 terrorist attack. Insurance industry estimates
of losses from that 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 was necessarily broad due to the unprecedented nature of this
event and the many lines of business affected.

Market conditions for reinsurers generally continued to improve throughout
2002 and 2003 as rates increased and terms and conditions generally became more
restrictive. Attracted by the improved market conditions, additional capital
entered the market in late 2001 and has continued through 2003 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, most significantly in property lines, and will
also likely serve to lessen the magnitude of pricing improvements in casualty
lines going forward.

25

Rates, terms and conditions were generally stronger in longer-tail casualty
lines, particularly in certain specialty casualty classes such as medical
malpractice, other professional liability and directors' and officers' liability
lines due, in part, to recent elevated industry-wide loss activity (that also
materially affected TRH) experienced in certain of those lines related
principally to losses occurring in the late 1990s and 2000. In fact, pricing for
certain property lines business has begun to be negatively influenced by the
added market capacity discussed above. Nevertheless, TRH believes that market
conditions in most classes remain favorable. While TRH believes that conditions
will continue to remain favorable in 2004, these conditions will not necessarily
translate into ultimate pricing adequacy. TRH cannot predict, with any
reasonable certainty, future market conditions.

Premiums are expected to grow and result in positive operating cash flow and
increased net investment income in 2004, absent any unusual loss events or other
unforeseen developments. However, TRH believes that the percentage increase in
net premiums written in 2004 over 2003 may be less than the 33.6% year over year
increase in 2003 compared to 2002, due largely to the expected overall tempering
of premium rate increases in 2004 as compared to 2003.

Further information related to items discussed in this Executive Overview
may be found throughout this Management's Discussion and Analysis of Financial
Condition and Results of Operations.

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.

TRH believes its most critical accounting estimates are those with respect
to unpaid losses and loss adjustment expenses, net of reinsurance recoverable
thereon ('loss reserves'), and deferred acquisition costs, 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 require the use
of assumptions about certain matters that are highly uncertain at the time of
estimation.

The major categories for which assumptions are developed and used to
establish each critical accounting estimate are highlighted below:

LOSS RESERVES

Loss cost trend factors by class of business -- These factors are used to
establish expected loss and loss adjustment expense ratios for future accident
years based on the projected loss and loss adjustment expense ratios with
respect to prior accident years. These factors take into account, among other
things, loss cost inflation, changes in amounts of jury awards, social inflation
(e.g., awards by judges and juries which progressively increase in size at a
rate exceeding that of general inflation) and trends in court interpretations of
coverages.

Expected loss and loss adjustment expense ratio for the latest accident year
by class of business -- These ratios are determined based on the significant
body of knowledge that TRH has gathered with respect to current and historical
loss trends by class of business. Since certain longer-tail casualty lines such
as excess-of-loss medical malpractice and directors' and officers' liability
tend to settle claims over an extended number of years, loss experience for
recent accident years may not constitute statistically reliable data to use to
project ultimate losses for current year business. Therefore, the results of
more fully developed accident years modified for current trends need to be
considered in the determination of these ratios.

26

Loss development factors -- These factors are used to project reported
losses to an ultimate amount by class of business using historical data. These
too need to be modified to allow for current trends in a variety of factors such
as those discussed in the paragraph above under loss cost trend factors.

Variability of reserving practices and reporting patterns affecting premiums
and losses -- These practices govern the information reported to us, which is
the single most important factor used in estimating reserves, and may vary by
country, class of business and ceding company and are subject to significant
variability and change over time.

Premium trends and rate sufficiency considerations -- As the various factors
discussed above are used to generate a loss and loss adjustment expense ratio or
factor that is often based upon premiums earned, the changing relationships of
premium rates to related exposures must be factored into the analyses used to
arrive at appropriate reserve estimates.

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. The evaluation of recoverability of acquisition costs to
be deferred considers the expected profitability of the underlying treaties
and facultative certificates which may vary materially from actual results.

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 2003,
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:

The increase in net premiums written in 2003 compared to 2002 resulted from
rate increases and, to a lesser extent, increased coverage provided, as well as
the impact of the weakened U.S. dollar in 2003 compared to the currencies in
which TRH does business, particularly in TRH's European locations. In 2002
compared to 2001, the net premiums written increase resulted from significant
rate increases and,

27

to a lesser extent, increased coverage provided. In 2003 and 2002, as compared
to the immediately prior years, premium increases were primarily from treaty
business. On a worldwide basis, casualty lines business represented 73.5% of net
premiums written in 2003 versus 73.9% and 79.2% in 2002 and 2001, respectively.
The balance represented property lines. Treaty business represented 96.4% of net
premiums written in 2003 versus 95.4% in 2002 and 95.7% in 2001. The balance
represented facultative accounts.

Of the total increase in net premiums written in 2003 compared to 2002,
domestic net premiums written increased by $478.2 million, or 35.1%, to $1,840.8
million, due principally to the above mentioned rate increases and overall
improved market conditions, with significant increases in net premiums written
recorded in specialty casualty (principally directors' and officers' liability,
medical malpractice and other professional liability), property and ocean marine
and aviation lines. The increase in net premiums written in property lines is
due, in part, to a reduction in property quota share retrocession coverage
purchased.

Net premiums written by international offices increased in 2003 by $362.7
million, or 31.9%, over the prior year, to $1,500.3 million. All of the
international offices recorded increases in net premiums written, led by London,
TRZ and Paris. International net premiums written increased significantly in
property, specialty casualty (principally directors' and officers' liability,
other professional liability and medical malpractice) and auto liability
lines. Note that increases in international net premiums written resulted,
in part, from the impact of the weakened U.S. dollar in 2003 compared to
the currencies in which TRH does business. International business represented
44.9% of 2003 net premiums written compared to 45.5% in 2002.

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, other 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.

Generally, reasons for increases in gross premiums written between years are
similar to those for net premiums written. In 2003 over 2002, ceded premiums
written and earned were lower primarily due to less property quota share
retrocession coverage purchased in 2003 as compared to 2002 and to a reduction
in ceded premiums resulting from certain domestic contracts in the specialty
casualty area wherein a portion of premiums assumed under those agreements was
retroceded to non-affiliates. In 2002, ceded premiums written and earned
increased over 2001. Such increase was largely 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 such domestic contracts in the specialty
casualty area wherein a portion of premiums assumed under those agreements
were retroceded to non-affiliates.

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 other 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.

As premiums written are earned on a pro rata basis over the terms of the
related coverages, the reasons for increases in net premiums earned are
generally similar to the reasons for increases in net premiums written.

Net investment income increased in 2003 and 2002, each as compared to the
immediately prior year, due to the investment (principally in fixed maturities)
of significant positive cash flow from operating activities generated in recent
periods and, to a lesser extent, the impact of the weakening U.S.

28

dollar compared to certain currencies, particularly from European countries, in
which TRH's net investment income is earned, offset, in part, by declining
investment yields, principally from the fixed maturity portfolio. For 2003,
2002 and 2001, the pre-tax yields on fixed maturities were 4.6 percent,
5.1 percent and 5.6 percent, respectively. The pre-tax yield on fixed
maturities represents pre-tax net investment income from fixed maturities
for the periods indicated divided by the average balance sheet carrying value
of the fixed maturity portfolio for such periods. (See cash flow discussion
under Financial Condition and Liquidity.) (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 underwriting 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 2003. 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 $322.6 million
in 2003. As a result of greater than expected reported loss activity in 2003
indicating that TRH's estimates as of the end of 2002 of the ultimate amounts of
losses occurring in 2002 and prior years required a further net increase,
significant adverse development was recorded in 2003 on losses occurring between
1998 and 2000 in certain casualty lines, principally in domestic and London
branch operations, as further discussed in the paragraph immediately below. Such
lines included 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, to a lesser
extent, surety and fidelity lines. These increases to incurred losses were
offset, in small part, by favorable development on losses occurring in 2001 and
2002 in fire and allied lines and, in 2002 only, in other liability lines.

TRH writes a significant amount of non proportional assumed casualty
reinsurance as well as proportional assumed reinsurance of excess casualty
business for such volatile classes as medical malpractice and directors' and
officers' liability. At the primary level, there are significant risk factors
which contribute to the variability and unpredictability of the loss cost trends
for this business such as

29

jury awards, social inflation, medical inflation, tort reforms and court
interpretations of coverage. In addition, as a reinsurer, TRH is also highly
dependent upon the claims reserving and reporting practices of its cedants,
which vary greatly by size, specialization and country of origin and whose
practices are subject to change without notice. In particular, an unexpected
increase in the frequency and severity of large claims beginning towards the
end of 2002 and continuing into 2003 which has increased expected loss and
loss adjustment expense ratio factors, reflecting industry wide trends,
resulted in material adverse development in TRH's loss reserves in these
years. While based on information presently available, TRH believes its
loss reserves are adequate, there can be no assurance that TRH's loss
reserves will not develop adversely due to the inherent volatility in
loss cost trends and variability of reporting practices for these classes,
among others, and materially exceed the carried reserves as of
December 31, 2003.

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 ($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. (See further discussion of adverse
development related to these specialty classes in the preceeding paragraph). The
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.

With respect to ceded incurred losses, 2003 and 2002 amounts were
significantly lower than the 2001 amount due principally to the fact that 2001
amounts include ceded losses incurred 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.

30

The underwriting expense ratio for consolidated TRH decreased in 2003
compared to 2002 due to decreases of 0.2 in each of the net commission
component and the other underwriting expense component of the ratio. With
respect to the net commission component, the decrease between years result
from a decrease in such components related to Domestic and International-Other,
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 underwriting expense component, the decreases between years are
primarily due to the fact that the rates of increase in other underwriting
expenses, for Domestic and International-Europe, are exceeded by the rates
of increase of net premiums written for the respective periods. The
underwriting expense ratio for consolidated TRH decreased in 2002 compared
to 2001 due to decreases of 0.6 in each of the net commission component
and the other underwriting expense component of the ratio. With respect to the
net commission component, the decreases between years resulted from a decrease
in such components related to Domestic and International-Other, offset, in part,
by an increase in International-Europe, all due largely to slight changes in the
mix of business, including amounts ceded, between periods. With respect to the
other underwriting expense component, the decreases between years are due to the
fact that the rates of increase in other underwriting expenses, spread through
all segments, are significantly exceeded by the rates of increase of net
premiums written for the respective periods.

The increase in deferred acquisition costs for 2003 and 2002 each exceeded
the respective prior year amounts. As the increase in unearned premiums in 2003
and 2002 was greater than such increase in the respective prior year, a related,
and larger, portion of acquisition costs was deferred in 2003 and 2002, each as
compared to the respective prior year amounts. Acquisition costs (consisting
primarily of net commissions incurred) are charged to earnings over the period
in which the related premiums are earned.

Other deductions, net, generally includes expense charges of $1.1 million
for stock-based compensation, in 2003 only, (see Other Matters herein for a
discussion of the Change in Accounting Principle and Disclosure of Stock-Based
Compensation) related to TRH's voluntary adoption of the recognition provisions
of Statement of Financial Accounting Standards (SFAS) No. 123, as well as
currency transaction gains and losses and other miscellaneous income and expense
items.

Pre-tax realized net capital gains (losses) totaled $9.9 million in 2003,
($6.0) million in 2002 and ($0.2) million in 2001. Realized capital 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
addition, pre-tax realized net capital gains (losses) include charges for
write-downs related to certain of such securities that, in the opinion of
management, had experienced a decline in market value that was other than
temporary. In 2003, pre-tax realized net capital gains include charges for
write-downs for other than temporary declines in market value totaling $6.1
million and $4.6 million of equities available for sale and fixed maturities
available for sale, respectively, and for 2002, write-downs totaling $12.1
million and $1.8 million of equities available for sale and fixed maturities
available for sale, respectively. There were no write-downs for other than
temporary declines in market value in 2001. Upon the ultimate disposition of
securities which have recorded write-downs, a portion of the write-downs may be
recoverable depending on market conditions. (See discussion under Financial
Condition and Liquidity for criteria used in determination of such write-downs.)

Income (loss) before income taxes was $386.7 million in 2003, $188.3 million
in 2002 and ($34.1) million in 2001. The increase in income before income taxes
in 2003 compared to the prior year resulted primarily from improved underwriting
profit (loss) and, to a much lesser extent, increased net investment income in
2003. The increase in income before income taxes in 2002 compared to the prior
year resulted, in large part, from improved underwriting profit (loss) in 2002
compared to 2001. In particular, the loss and loss adjustment expense ratios
have significantly improved in 2003 and 2002, each as compared to the
immediately prior year, as further discussed above.

Federal and foreign income tax expense (benefit) of $83.0 million, $19.0
million and ($53.0) million were recorded in 2003, 2002 and 2001, 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 2003 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

31

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 21.5%
in 2003, 10.1% in 2002 and 155.4% in 2001. The major 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 2003 and
2002 over the respective immediately prior year.

The increased effective tax rate in 2003 compared to 2002 resulted primarily
from the fact that income before income taxes is increasing at a greater rate
than tax-exempt investment income.

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 record a deferred tax
benefit 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
in 2002 extended the net operating loss carryback period to five years for net
operating losses occurring in 2001 and 2002 enabling TRH to utilize its tax net
operating loss for 2001 in 2002. (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: 2003 -- $303.6 million, $5.75; 2002 -- $169.3 million, $3.21;
2001 -- $18.9 million, $0.36. Reasons for the changes between years are as
discussed earlier. Outstanding share amounts used in the 2001 net income per
common share calculation 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 impacts on net income of
certain significant items discussed above in the Operational Review 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.

SEGMENT RESULTS

(a) DOMESTIC:

2003 compared to 2002 -- Domestic revenues increased over the prior year due
primarily to increases in net premiums written for reasons discussed earlier in
the Operational Review. Income before income taxes for 2003 increased compared
to the prior year due primarily to improved underwriting profit (loss) caused
principally by a lower net loss and loss adjustment expense ratio resulting from
improving market conditions in recent years. Both years included significant
adverse development of losses occurring in 1998 through 2000 in certain more
volatile casualty classes as further discussed earlier under Results of
Operations. Loss activity in 2002 includes a $55 million fourth quarter pre-tax
charge to net losses and loss adjustment expenses related to an increase in loss
reserves, comprising part of the adverse development as discussed earlier in
this paragraph.

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 profit (loss) 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 underwriting profit (loss) with net premiums
written and earned.) Loss activity in 2002 includes a $55 million fourth quarter
pre-tax 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 $115 million of net pre-tax catastrophe losses (including $100
million related to September 11) and a net pre-tax loss of $60 million from
estimated reinsurance exposure related to Enron Corporation.

32

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

2003 compared to 2002 -- European revenue increased compared to the prior
year primarily due to significant increases in net premiums written in each
location, with the largest increase occurring in London. These increases
generally occurred in property, specialty casualty (principally directors' and
officers' liability, other professional liability and medical malpractice)
and auto liability lines. Such increases were a result, in part, of
the weakening U.S. dollar compared to the currencies in which premiums were
written in 2003 as compared to 2002. Income before income taxes for 2003
increased compared to the prior year amounts due principally to improved
underwriting profit (loss) that was the result of better loss experience in each
location, partially offset by a higher commission rate in London, due to a
slight change in the mix of business. Such improved loss experience resulted
from improving market conditions in recent years. Both years included
significant adverse development from the London branch on losses occurring in
1998 through 2000 in certain more volatile casualty classes as further discussed
earlier under Results of Operations. 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,
comprising part of the adverse development as discussed earlier in this
paragraph.

The significant increase in assets in 2003 as compared to 2002 is primarily
due to significant operating cash flows in 2003 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.

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 profit (loss) 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 $100
million of net pre-tax catastrophe losses related to September 11 incurred
primarily through the London market.

The significant increase in assets in 2002 as compared to 2001 is primarily
due to significant operating cash flows 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.

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

2003 compared to 2002 -- Revenues increased in 2003 versus the prior year
due to increases in net premiums written, net of the change in unearned
premiums, in each location. These increases generally occurred in the property
lines. 2003 income before income taxes improved significantly over the loss
before income taxes reported in 2002, due principally to improved loss
experience in each location. Loss activity in 2002 includes a $15 million fourth
quarter pre-tax 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.

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 profit (loss) caused by
increased loss activity. Loss activity in 2002 includes a $15 million fourth
quarter pre-tax 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.

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
2003 and 2002, the Company received cash dividends from TRC of $21.9 million and
$15.5 million,

33

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, 2003, total investments and cash were $6,867.2 million
compared to $5,587.5 million at December 31, 2002. The increase was caused, in
large part, by $921.1 million of cash provided by operating activities and, to a
lesser extent, the impact of a weakening U.S. dollar on investments held,
principally in European currencies, and net unrealized appreciation of fixed
maturities and equities available for sale during the year.

TRH's fixed maturity investments, approximately 80.8% of total investments
as of December 31, 2003, are predominantly investment grade, liquid securities,
approximately 60% of which will mature in less than 10 years. Also as of that
date, approximately 8.7% of total investments were in common and nonredeemable
preferred stocks, approximately 2.8% of total investments were in other invested
assets, including investments in partnerships, approximately 7.3% of total
investments were in the short-term investment of funds received under securities
loan agreements, and the remaining 0.4% consisted of short-term investments.
Based on the foregoing, TRH considers its liquidity to be adequate through the
end of 2004 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 2003, TRH purchased certain fixed maturities
which are classified as held-to-maturity and carried at amortized cost as TRH
has the positive intent and ability to hold each of these securities to
maturity. The duration of the fixed maturity portfolio was 5.3 years as of
December 31, 2003. 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 $426.5 million and
$48.0 million, respectively, as of December 31, 2003.

Gross unrealized gains and losses on fixed maturities as of December 31,
2003 amounted to $211.1 million and $9.2 million, respectively.

As of December 31, 2003, 93.2% of the fixed maturity portfolio was rated Aaa
or Aa, an additional 6.2% was also rated investment grade or better, 0.4% was
rated below investment grade and 0.2% was not rated. Also, as of December 31,
2003, TRH had no derivative instruments. (See Note 3 of Notes to Consolidated
Financial Statements.)

Management reviews TRH's 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) resulting from investment write-downs.

In general, a security is considered a candidate for such a write-down if it
meets any of the following criteria:

o Trading at a significant discount to par, amortized cost (if lower) or
cost for an extended period of time;

o The occurrence of a discrete credit event resulting in (i) the issuer
defaulting on a material outstanding obligation; or (ii) the issuer
seeking protection from creditors under the 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 fair value substantially lower than par value of their
claims; or,

34

o In the opinion of management, it is possible that TRH may not realize a
full recovery on its investment, irrespective of the occurrence of one of
the foregoing events.

Once a security has been identified as impaired, the amount of such
impairment is determined by reference to that security's contemporaneous market
price.

TRH has the ability to hold any security to its stated maturity. Therefore,
the decision to sell reflects the judgment of management that the security sold
is unlikely to provide, on a relative value basis, as attractive a return in the
future as alternative securities entailing comparable risks. With respect to
distressed securities, the sale decision reflects management's judgment that the
risk-discounted anticipated ultimate recovery is less than the value achievable
on sale. (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, 2003, reserves for unpaid losses and loss adjustment
expenses totaled $4.81 billion, an increase of $772.9 million, or 19.2%, as
compared to the prior year. Also at December 31, 2003, reinsurance recoverable
on unpaid losses and loss adjustment expenses totaled $836.0 million, an
increase of $74.4 million, or 9.8%, from the prior year. Of the amount of
reinsurance recoverable on paid and unpaid losses and loss adjustment expenses,
which totaled $869.9 million as of December 31, 2003, $652.4 million represented
balances that were unsecured. Of such unsecured balances, $178.5 million was due
from affiliates (which are rated AAA) and 88.3% of the remaining balance was due
from companies rated A or better. (See Note 14 of Notes to Consolidated
Financial Statements.) An analysis of the change in net loss reserves from
year-end 2002 to year-end 2003 is included in Note 5 of Notes to Consolidated
Financial Statements and reflects the impact of adverse development of losses
occurring in prior years, as further discussed earlier herein under Results of
Operations, as well as the impact of the weakening U.S. dollar against most
foreign currencies, particularly from Europe. Both of these factors served to
increase net loss reserves in 2003.

TRH's loss reserves 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.

The reserving process is inherently difficult and subjective, 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. Trends that
have affected development of liabilities in the past may not necessarily occur
or affect development to the same degree in the future. While this process is
difficult for ceding companies, the inherent uncertainties of estimating
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 and the
necessary reliance on the ceding companies for information regarding reported
claims and differing reserving practices among ceding companies, which are
subject to change without notice. In addition, loss reserves are estimated using
data that include reported losses of more recent accident years of long tail
casualty lines that have limited statistical credibility. 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. (See discussion of adverse development on losses
occurring in prior years under Results of Operations.)

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

35

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. As of December 31, 2003, unpaid loss and loss adjustment
expenses, net of reinsurance recoverable, related to this event totaled
$134 million.

Loss reserves include amounts for risks related to environmental impairment
and asbestos-related illnesses totaling $75 million and $71 million at December
31, 2003 and 2002, 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.

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 loss and
loss adjustment expense reserves carried at December 31, 2003 are adequate.

For 2003, TRH's operating cash flows of $921.1 million exceeded the
comparable 2002 amount of $598.0 million. The increase was caused largely by
increased net premiums written, net of commissions, partially offset by
increased paid losses and loss adjustment expenses and taxes paid.

For 2002, TRH's operating cash flows 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 and loss adjustment
expenses, each in 2002 as compared to 2001.

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 negatively impact cash flows
in 2004 and 2005.

Of total consolidated operating cash flows, $431.7 million, $229.2 million
and $138.6 million, were derived from international operations in 2003, 2002 and
2001, respectively. More than half of such international operations cash flows
was derived from London in each of such years.

TRH believes that its balance of cash and cash equivalents of $182.9 million
as of December 31, 2003 and its future cash flows will be sufficient to meet
TRH's cash requirements through the end of 2004 and thereafter for a period the
length of which is difficult to predict, but which TRH believes will be at least
one year.

Generally, paid losses have been increasing in more recent years largely as
a result of a shift in the mix of business towards lines with shorter payment
patterns and an increase in the amount of business TRH has written over the past
several years. 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 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.

36

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 2003 and 2002 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 2003 and 2002. VaR with respect to combined
operations cannot be derived by aggregating the individual risk amounts
presented herein.

The increase in the VaR in 2003 as compared to 2002 is due, in general, to
increased volatility in the historical market information in the years used to
construct the more recent historical scenarios.

TRH's stockholders' equity totaled $2.38 billion at December 31, 2003, an
increase of $345.8 million from year-end 2002. The net increase consisted
principally of net income of $303.6 million and an increase in accumulated other
comprehensive income of $60.1 million, less cash dividends declared of $22.6
million.

The increase in accumulated other comprehensive income consisted principally
of the following: net unrealized appreciation of equities, net of income tax, of
$67.5 million, caused principally by improved performance of equity markets
worldwide over last year, net unrealized appreciation of fixed maturities
available for sale, net of income tax, of $6.3 million, partially offset by net
unrealized currency translation loss, net of income tax, of ($13.6) million,
caused, in large part, by a weakening U.S. dollar particularly against certain
European currencies.

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.

37

As of December 31, 2003, the amounts of payment due under specified
contractual obligations are as follows:

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

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, 2003, the statutory surpluses of TRC and Putnam each
significantly exceeded the level of surplus required under RBC requirements for
regulatory attention.

OTHER MATTERS

(a) CHANGE IN ACCOUNTING PRINCIPLE AND DISCLOSURE OF STOCK-BASED
COMPENSATION:

Prior to 2003, TRH had accounted for stock-based compensation based on the
intrinsic-value method prescribed in Accounting Principles Board Opinion (APB)
No. 25, 'Accounting for Stock Issued to Employees' and related Interpretations,
as permitted under SFAS No. 123, 'Accounting for Stock-Based Compensation.'

In December 2002, the Financial Accounting Standards Board (FASB) issued
SFAS No. 148, 'Accounting for Stock-Based Compensation -- Transition and
Disclosure, an amendment of SFAS No. 123,' to provide alternative methods (in
addition to the prospective method already provided in SFAS No. 123) of
transition for a voluntary change to the recognition provisions of SFAS
No. 123, as well as to amend certain of its disclosure requirements as reflected
in Note 2(i) of Notes to Consolidated Financial Statements.

On January 1, 2003, TRH adopted the recognition provisions of SFAS No. 123,
using the prospective method of transition. That method requires application of
such recognition provisions under the fair value method to all stock-based
compensation awards granted, modified, or settled on or after the date of
adoption of the standard. Accordingly, net income for 2003 reflects stock-based
compensation expenses primarily related to stock options granted in 2003 only.
Such expenses are included in the Statement of Operations as a component of
other deductions, net. The impact of adopting the recognition provisions of SFAS
No. 123 was not material to net income, financial condition or cash flows in
2003. Pursuant to APB No. 25, no stock-based compensation expenses were
recognized in 2002 or 2001. (See Note 2(i) of Notes to Consolidated Financial
Statements.)

While the pro forma impact of applying the recognition provisions to all
award grants are disclosed, 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-based compensation issued or granted prior to January 1, 2003.

(b) 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 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

38

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 at that time (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 net 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) was 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.

(c) OTHER ACCOUNTING STANDARDS:

In November 2003, the FASB Emerging Issues Task Force (EITF) reached a
consensus on, and the FASB ratified, a portion of EITF Issue 03-1, 'The Meaning
of Other-Than-Temporary Impairment and its Application to Certain Investments.'
EITF Issue 03-1 addresses the meaning of the term 'other-than-temporary
impairment' and its application to investments accounted for pursuant to SFAS
No. 115, 'Accounting for Certain Investments in Debt and Equity Securities.' The
consensus required disclosure of certain information concerning held-to-maturity
and available-for-sale investments with market values that are less than their
respective costs or amortized costs at the balance sheet date but for which a
write-down has not been recognized. The EITF has not yet reached a consensus
regarding the other issues in EITF Issue 03-1 including the recognition and
measurement issues. In accordance with the consensus, TRH has provided the
information required in Note 3(f) of Notes to Consolidated Financial Statements.

In January 2003, the FASB issued, and in December 2003 revised,
Interpretation No. 46 (FIN 46), 'Consolidation of Variable Interest Entities, an
interpretation of ARB No. 51.' FIN 46 requires a variable interest entity (VIE)
to be consolidated by its primary beneficiary if such VIE has (i) equity that is
insufficient to permit the entity to finance its activities without additional
subordinated financial support from other parties, or (ii) equity investors that
cannot make significant decisions about the entity's operations, or that do not
absorb the expected losses or receive the expected returns of the entity. The
primary beneficiary of a VIE is the party that has a majority of the expected
losses or a majority of the expected residual returns of the VIE, or both. All
other entities are evaluated for consolidation under existing guidance. FIN 46
also requires disclosure of significant VIEs for which a company is not the
primary beneficiary.

As originally issued in January 2003, the provisions of FIN 46 were to be
applied immediately to VIEs created after January 31, 2003 and to VIEs in which
an interest was obtained after that date. However, as revised by the FASB in
December 2003, the provisions of FIN 46 currently are to be applied to VIEs
commonly referred to as special-purpose entities in the first interim or annual
period ending after December 15, 2003 and to all other types of VIEs in the
first interim or annual period ending after March 15, 2004. In addition, the
provisions of FIN 46 are to continue to be applied to any VIEs to which the
provisions of FIN 46 were first applied before the FASB's December 2003 revision
of FIN 46.

For any VIE that must be consolidated under FIN 46 that was created before
December 31, 2003, the assets, liabilities and noncontrolling interest of the
VIE would be initially measured at their 'carrying' amounts with any difference
between the net amount added to the balance sheet and any previously recognized
interest being recognized as the cumulative effect of an accounting change.

The application of FIN 46 did not have a material effect on results of
operations, financial condition or cash flows in 2003, nor does TRH presently
anticipate that its application will have a material effect in 2004.

(d) IMPACT OF THE CODIFICATION OF STATUTORY ACCOUNTING PRINCIPLES
(CODIFICATION):

39

In 1998, the NAIC adopted the 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 addition, the implementation of such
Codification guidance did not have a material effect on statutory net income in
any of the years subsequent to adoption. In the fourth quarter of 2002, the
guidance related to deferred income taxes was adopted. Accordingly, as of
year-end 2003, statutory surplus of both TRC and Putnam include the impact of
deferred tax assets of $90.1 million and $4.7 million, respectively. 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 was not affected in 2002 or 2003 by the adoption of the
guidance related to deferred income taxes.

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, 2003, remaining differences between Codification and those
Codification provisions adopted by the New York Insurance Department were not
material to 2003 statutory surplus and net income of TRC or Putnam and were 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.

40

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, 2003................... S-1
II -- Condensed Financial Information of Registrant as of
December 31, 2003 and 2002 and for the years ended
December 31, 2003, 2002 and 2001.......................... S-2
III -- Supplementary Insurance Information as of December 31,
2003, 2002 and 2001 and for the years then ended.......... S-5
IV -- Reinsurance for the years ended December 31, 2003, 2002
and 2001.................................................. S-6
VI -- Supplementary Information Concerning Property/Casualty
Insurance Operations as of December 31, 2003, 2002 and
2001 and for the years then ended......................... S-7

41

REPORT OF INDEPENDENT AUDITORS

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, 2003
and 2002, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2003 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 11, 2004

42

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2003 AND 2002

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

43

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

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

44

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

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

45

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

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

46

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

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

47

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, 2003, 2002 and 2001, 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 multiple peril
and auto physical damage in the property lines (which include property
catastrophe risks). Casualty lines represented 73.5%, 73.9% and 79.2% of net
premiums written in 2003, 2002 and 2001, 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
2003.

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 materially 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. The balance of fixed maturity securities
is classified as available-for-sale and carried at market value. In the first
quarter of 2001, TRH transferred all of its fixed maturities then 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(j).) As of December 31, 2002 and 2001, all fixed maturities
were 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 principally estimated
using values obtained from independent pricing services. Other invested assets
consist of investments in partnerships, certain of which are accounted for under
the equity method, 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.

TRH engages in securities lending transactions whereby certain securities
(i.e., fixed maturities and common stocks available for sale) from its portfolio
are 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

48

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.

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, respectively, 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 the evaluation of recoverability of acquisition costs to be
deferred. Anticipated investment income is not considered in such evaluation.

(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. Premiums
written and earned, along with related costs, for which data has not been
reported by the ceding companies, are estimated based on historical patterns and
other relevant information. These estimates are subject to change when actual
data for such items estimated becomes available. 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.

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

49

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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, which are subject to change without
notice. TRH writes a significant amount of non-proportional assumed casualty
reinsurance as well as proportional assumed reinsurance of excess casualty
business for classes such as medical malpractice and directors' and officers'
liability, which classes can exhibit greater volatility over time than most
other classes due to their low frequency, high severity nature and loss cost
trends that are more difficult to predict.

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, 2003 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.

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 Notes 5
and 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) 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 are reflected in results of operations during the period in
which they occur.

(i) CHANGE IN ACCOUNTING PRINCIPLE AND DISCLOSURE OF STOCK-BASED
COMPENSATION: Prior to 2003, TRH had accounted for stock-based compensation
based on the intrinsic-value method prescribed in Accounting Principles Board
Opinion (APB) No. 25, 'Accounting for Stock Issued to Employees' and related
Interpretations, as permitted under SFAS No. 123, 'Accounting for Stock-Based
Compensation.'

In December 2002, the Financial Accounting Standards Board (FASB) issued
SFAS No. 148, 'Accounting for Stock-Based Compensation -- Transition and
Disclosure, an amendment of SFAS No. 123,' to provide alternative methods (in
addition to the prospective method already provided in SFAS No. 123) of
transition for a voluntary change to the recognition provisions of SFAS
No. 123, as well as to amend certain of its disclosure requirements as reflected
in the table below.

On January 1, 2003, TRH adopted the recognition provisions of SFAS No. 123,
using the prospective method of transition. That method requires application of
such recognition provisions under

50

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the fair value method to all stock-based compensation awards granted, modified,
or settled on or after the date of adoption of the standard. Accordingly, net
income for 2003 reflects stock-based compensation expenses primarily related to
stock options granted in 2003 only. Such expenses are included in the Statement
of Operations as a component of other deductions, net. The impact of adopting
the recognition provisions of SFAS No. 123 was not material to net income,
financial condition or cash flows in 2003. Pursuant to APB No. 25, no
stock-based compensation expenses were recognized in 2002 or 2001. Had
compensation cost been charged to earnings in accordance with the fair value
based method as prescribed in SFAS No. 123 for all outstanding stock-based
compensation awards (occurring both before and after adoption of the recognition
provisions of SFAS No. 123), TRH's net income and net income per common share
(on a pro forma basis) would have been as follows:

While the pro forma impact of applying the recognition provisions to all
award grants are disclosed, 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-based compensation issued or granted prior to January 1, 2003.

(j) 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 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 at that time (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 net 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) was recorded as the cumulative effect of
an accounting change in the Consolidated Statement of Comprehensive Income and
the Consolidated Statement of

51

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.

(k) OTHER ACCOUNTING STANDARDS: In November 2003, the FASB Emerging Issues
Task Force (EITF) reached a consensus on, and the FASB ratified, a portion of
EITF Issue 03-1, 'The Meaning of Other-Than-Temporary Impairment and its
Application to Certain Investments.' EITF Issue 03-1 addresses the meaning of
the term 'other-than-temporary impairment' and its application to investments
accounted for pursuant to SFAS No. 115, 'Accounting for Certain Investments in
Debt and Equity Securities.' The consensus required disclosure of certain
information concerning held-to-maturity and available-for-sale investments with
market values that are less than their respective costs or amortized costs at
the balance sheet date but for which a write-down has not been recognized. The
EITF has not yet reached a consensus regarding the other issues in EITF Issue
03-1 including the recognition and measurement issues. In accordance with the
consensus, TRH has provided the information required in Note 3(f).

In January 2003, the FASB issued, and in December 2003 revised,
Interpretation No. 46 (FIN 46), 'Consolidation of Variable Interest Entities, an
interpretation of ARB No. 51.' FIN 46 requires a variable interest entity (VIE)
to be consolidated by its primary beneficiary if such VIE has (i) equity that is
insufficient to permit the entity to finance its activities without additional
subordinated financial support from other parties, or (ii) equity investors that
cannot make significant decisions about the entity's operations, or that do not
absorb the expected losses or receive the expected returns of the entity. The
primary beneficiary of a VIE is the party that has a majority of the expected
losses or a majority of the expected residual returns of the VIE, or both. All
other entities are evaluated for consolidation under existing guidance. FIN 46
also requires disclosure of significant VIEs for which a company is not the
primary beneficiary.

As originally issued in January 2003, the provisions of FIN 46 were to be
applied immediately to VIEs created after January 31, 2003 and to VIEs in which
an interest was obtained after that date. However, as revised by the FASB in
December 2003, the provisions of FIN 46 currently are to be applied to VIEs
commonly referred to as special-purpose entities in the first interim or annual
period ending after December 15, 2003 and to all other types of VIEs in the
first interim or annual period ending after March 15, 2004. In addition, the
provisions of FIN 46 are to continue to be applied to any VIEs to which the
provisions of FIN 46 were first applied before the FASB's December 2003 revision
of FIN 46.

For any VIE that must be consolidated under FIN 46 that was created before
December 31, 2003, the assets, liabilities and noncontrolling interest of the
VIE would be initially measured at their 'carrying' amounts with any difference
between the net amount added to the balance sheet and any previously recognized
interest being recognized as the cumulative effect of an accounting change.

The application of FIN 46 did not have a material effect on results of
operations, financial condition or cash flows in 2003, nor does TRH presently
anticipate that its application will have a material effect in 2004.

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
$187,000,000 and $142,000,000 at December 31, 2003 and 2002, respectively.

52

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

3. INVESTMENTS (CONTINUED)
(b) NET INVESTMENT INCOME: An analysis of net investment income of TRH
follows:

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

- ---------

(1) Includes write-downs for other than temporary declines in market value of
$4,635,000 and $1,783,000 for 2003 and 2002, respectively. There were no
write-downs for other than temporary declines in market value in 2001.

(2) Includes write-downs for other than temporary declines in market value of
$6,092,000 and $12,122,000 for 2003 and 2002, respectively. There were no
write-downs for other than temporary declines in market value in 2001.

(3) Before deferred income tax effect.

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

53

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, 2003 and 2002 are summarized as follows:

- ---------

(1) See Note 3(f) for additional information about gross unrealized losses as of
December 31, 2003.

The amortized cost and market value of fixed maturities at December 31, 2003
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.

54

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

3. INVESTMENTS (CONTINUED)

Gross gains of $39,999,000, $76,037,000 and $6,069,000 and gross losses of
$6,289,000, $11,146,000 and $7,145,000 were realized on sales of investments in
fixed maturities available for sale in 2003, 2002 and 2001, respectively.

(e) EQUITIES: Gross gains of $39,784,000, $45,978,000 and $90,698,000 and
gross losses of $53,437,000, $103,644,000 and $90,956,000 were realized on sales
of equities in 2003, 2002 and 2001, respectively. At December 31, 2003 and 2002,
net unrealized appreciation (depreciation) of equities (before applicable income
taxes) included gross gains of $61,521,000 and $12,100,000 and gross losses of
$1,823,000 and $56,174,000, respectively. (See Note 3(f) for additional
information about gross unrealized losses as of December 31, 2003.)

(f) ADDITIONAL INFORMATION ON GROSS UNREALIZED LOSSES ON FIXED MATURITIES
AND EQUITIES: As of December 31, 2003, TRH's aggregate gross unrealized losses
on all fixed maturities and equities totaled $11,027,000. No single issuer
accounted for more than 9% of the aggregate gross unrealized losses. As of
December 31, 2003, the aging of the gross unrealized losses with respect to
fixed maturities and equities, grouped by percentage of gross unrealized loss
(the extent by which the market value is less than amortized cost or cost)
relative to cost, including the number of respective items, was as follows:

- ---------
(1) For fixed maturities, represents amortized cost.

55

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

3. INVESTMENTS (CONTINUED)
At December 31, 2003, the gross unrealized losses for fixed maturities and
equities included the following concentrations:

The market value of fixed maturities in an unrealized loss position at
December 31, 2003, by contractual maturity, is shown below:

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 2003, 2002 and 2001. 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:

56

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

4. FEDERAL AND FOREIGN INCOME TAXES (CONTINUED)

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 for net
operating losses occurring in 2001 and 2002. 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 permitted TRH to fully utilize its tax net operating
loss for 2001. To record the impact of this tax law change in 2002, deferred
income tax assets and the domestic deferred income tax benefit were reduced by
$19.6 million, and federal income tax recoverable was increased by, and domestic
current income tax expense was reduced by $19.6 million.

(b) The components of the net deferred income tax asset at December 31, 2003
and 2002 were as follows:

No valuation allowance has been recorded.

(c) Income tax payments by TRH totaled $66,168,000, $29,962,000 and
$27,702,000 in 2003, 2002 and 2001, respectively.

57

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

5. LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES

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

59

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

7. NET INCOME PER COMMON SHARE (CONTINUED)
appropriate, to reflect a 3-for-2 split of the common stock in the form of a 50%
stock dividend, paid in July 2001.

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

60

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 1,178 shares were purchased under
the plan in 2003.

In 2003, the Company's Board of Directors adopted and the stockholders
approved the '2003 Stock Incentive Plan' (the TRH Stock Incentive Plan). This
plan provides that equity-based or equity-related awards with respect to up to a
maximum of 500,000 shares of the Company's common stock can be granted to
officers, directors, employees, and other individuals as determined by the
Company's Board of Directors, except that no award may be made to directors who
are not employees of the Company without stockholder approval. Pursuant to the
TRH Stock Incentive Plan, no grantee may receive awards covering more than
25,000 shares of the Company's common stock in any one year. During 2003, the
Company granted restricted stock units (TRH RSU) relating to 6,900 shares of
common stock. TRH RSUs will vest on the fourth anniversary of the date of grant
for those grantees with continued employment through such date. The Company
reserves the right to make payment for the TRH RSUs in shares of common stock or
the cash equivalent of the market value of such shares on the date of vesting.
At December 31, 2003, there were 493,100 shares of common stock reserved for
issuance in connection with future grants of awards under the TRH Stock
Incentive Plan.

In 2002 only, certain TRH employees were granted AIG restricted stock units
(AIG RSU) under the AIG 2002 Stock Incentive Plan. AIG granted AIG RSUs relating
to 5,050 shares of AIG common stock to certain TRH employees. Four years after
the grant date of AIG RSUs, those AIG 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 2003, 2002 and 2001 were
$4,243,000, $3,011,000, and $2,398,000, 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, 2003, 1,005,334 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(i) 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

61

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

11. STOCK OPTION PLANS (CONTINUED)

year-end 2003, 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.

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, 2003, 2002 and
2001 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 2003, 2002 and 2001,
respectively: expected volatility of 20.0% for each grant; risk-free interest
rates of 3.6%, 3.6%, and 4.4%; 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, 2003:

12. RELATED PARTY TRANSACTIONS

As of December 31, 2003, 2002 and 2001, 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 2003, 2002 and
2001, $9,100,000, $8,200,000 and $7,900,000,

62

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

12. RELATED PARTY TRANSACTIONS (CONTINUED)
respectively, of operating and investment expenses relate to services and
expenses provided by the AIG Group under these agreements.

Approximately $633 million (17%), $395 million (13%) and $232 million (10%)
of gross premiums written by TRH in 2003, 2002 and 2001, respectively, were
attributable to reinsurance purchased by other subsidiaries of AIG, for the
production of which TRH paid ceding commissions to such AIG subsidiaries
totaling $167 million, $88 million and $50 million, respectively, in such years.
The great majority of such gross premiums written were recorded in auto
liability, property, other liability and aircraft lines. Of the premiums assumed
from other subsidiaries of AIG, $294 million, $162 million and $69 million in
2003, 2002 and 2001, respectively, represent premiums resulting from certain
insurance business written by AIG subsidiaries that, by prearrangement with TRH,
is almost entirely reinsured by TRH, for the production of which TRH paid ceding
commissions to such AIG subsidiaries totaling approximately $83 million, $31
million and $7 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, 2003, TRC had statutory
earned surplus of $1,300,980,000, and, in 2004, in accordance with the statutory
formula, could pay dividends of approximately $185,119,000 without regulatory
approval.

Statutory surplus and net income (loss) 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

63

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

13. DIVIDEND RESTRICTION AND STATUTORY FINANCIAL DATA (CONTINUED)
(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 any of the years subsequent to adoption. In the fourth
quarter of 2002, the guidance related to deferred income taxes was adopted. The
initial establishment of deferred income taxes upon such adoption and any
subsequent increases or decreases were credited or charged, respectively,
directly to statutory surplus. Accordingly, as of year-end 2003, statutory
surplus of both TRC and Putnam include the impact of deferred tax assets of
$90.1 million and $4.7 million, respectively. 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, which represented the cumulative
benefit of adopting such provision in 2002. Statutory net income was not
affected in 2002 or 2003 by the adoption of the guidance related to deferred
income taxes.

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:

- ---------

(1) Premiums written and earned that were ceded to affiliates include amounts
which, by prearrangement with TRH, were assumed from an affiliate and then
ceded in an equal amount to other affiliates. Ceded premiums written include
$79 million, $50 million and $56 million in 2003, 2002 and 2001,
respectively, and ceded premiums earned include $71 million, $48 million and
$55 million in 2003, 2002 and 2001, respectively, related to such
arrangements.

64

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

14. REINSURANCE CEDED (CONTINUED)
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, 2003 and 2002
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 2003 and
2002. 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 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 and other developments in foreign
countries, including possibilities of tax changes, nationalization and changes
in regulatory policy, as well as by consequences 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 16% and
13% in 2003, 14% and 13% in 2002 and 14% and 15% in 2001, of consolidated
revenues, with a significant portion in each segment. Further, one
non-affiliated customer accounted for approximately 5%, 8% and 12% of
consolidated revenues in 2003, 2002 and 2001, 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.

65

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

15. SEGMENT INFORMATION (CONTINUED)
The following table is a summary of financial data by segment:

(footnotes on next page)

66

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

15. SEGMENT INFORMATION (CONTINUED)
(footnotes from previous page)

(1) Domestic revenues and income before income taxes include realized net
capital gains (losses) of $3,277, ($7,325) and $241 in 2003, 2002 and 2001,
respectively. International-Other revenues and income (loss) before
income taxes include realized net capital gains (losses) of $5,388, $781 and
($511) in 2003, 2002 and 2001, respectively. Realized net capital gains
(losses) for International-Europe in each of the years presented are not
material.

(2) Net revenues from affiliates approximate $533,700, $230,900 and $100,300 in
2003, 2002 and 2001, respectively, and are included primarily in Domestic
and, for 2003 and 2002 only, International-Europe revenues.

(3) Includes revenues from the London, England office of $711,876, $525,520 and
$435,007 in 2003, 2002 and 2001, 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
underwriting expenses.

(6) 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).

Net premiums earned by major product line are as follows:

Rent expense approximated $8,804,000, $8,249,000 and $7,844,000 in 2003,
2002 and 2001, respectively.

17. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following is a summary of unaudited quarterly financial data for each of
the years ended December 31, 2003 and 2002. 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.

- ---------

(1) Net loss for the fourth quarter of 2002 includes a charge of $65 million
(after-tax), related to the increase in net loss and loss adjustment expense
reserves in certain casualty lines (see Note 5).

(2) As the impact of potential shares for the three-month period ended
December 31, 2002 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 that
period.

68

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, 2003.

ITEM 9A. CONTROLS AND PROCEDURES

TRH's disclosure controls and procedures are designed to ensure that
information required to be disclosed in the reports that TRH files or submits
under the Securities Exchange Act of 1934, as amended (Exchange Act), is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the Securities and Exchange Commission. Disclosure
controls and procedures include controls and procedures designed to ensure that
information required to be disclosed by TRH in the reports that it files or
submits under the Exchange Act is accumulated and communicated to TRH's
management, including TRH's Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure. TRH's
management, with the participation of TRH's Chief Executive Officer and Chief
Financial Officer, have evaluated the effectiveness of TRH's disclosure controls
and procedures as of the end of the period covered by this report. Based on that
evaluation, TRH's Chief Executive Officer and Chief Financial Officer concluded
that the disclosure controls and procedures provided reasonable assurance of
effectiveness as of the end of the period covered by this report. In addition,
there has been no change in TRH's internal control over financial reporting that
occurred during the fourth fiscal quarter that has materially affected, or is
reasonably likely to materially affect, TRH's internal control over financial
reporting.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information required by this Item concerning directors of the Company and
our code of ethics is included in the Company's Proxy Statement for the 2004
Annual Meeting of Stockholders, to be filed with the Securities and Exchange
Commission within 120 days after the end of the Company's fiscal year (the '2004
Proxy Statement'), in the section captioned 'Election of Directors,' and such
information is incorporated herein by reference. We intend to adopt a code of
ethics that applies to our principal executive officer and principal financial
and accounting officer, that establishes minimum standards of professional
responsibility and ethical conduct. This code of ethics will be available on our
website at http://www.transre.com, prior to our 2004 annual meeting. If we make
any substantive amendments to this code of ethics or grant any waiver from a
provision of this code for such persons, we will disclose the nature of such
amendment or waiver on our website or in a report on Form 8-K. 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 2004 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 2004 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 2004 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 2004 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 equity compensation
granted by the Company are as follows:

69

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 2003,
those options granted in 1994 were exercisable, as none have been exercised or
forfeited.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information required by this Item is included in the 2004 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.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information required by this item is included in the 2004 Proxy Statement in
the sections captioned 'Ratification of Selection of Independent Accountants,'
and such information is incorporated herein by reference.

PART IV

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.

31.1 -- Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002, by Robert F. Orlich, President and Chief
Executive Officer.

31.2 -- Certification pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002, by Steven S. Skalicky, Executive Vice President
and Chief Financial Officer.

32.1 -- Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by
Robert F. Orlich, President and Chief Executive Officer.

32.2 -- Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by
Steven S. Skalicky, Executive Vice President and Chief
Financial Officer.

See accompanying Exhibit Index for additional Exhibits incorporated by
reference.

(b) Reports on Form 8-K

No reports on Form 8-K were filed during the last quarter of 2003.

70

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 9, 2004

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.

71

SCHEDULE I

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
SUMMARY OF INVESTMENTS -- OTHER THAN INVESTMENTS IN RELATED PARTIES
AS OF DECEMBER 31, 2003

- ---------

(1) 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, 2003 AND 2002

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, 2003, 2002 AND 2001

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, 2003, 2002 AND 2001

- ---------

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, 2003, 2002 AND 2001 AND FOR THE YEARS THEN ENDED

S-5

SCHEDULE IV

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
REINSURANCE
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

S-6

SCHEDULE VI

TRANSATLANTIC HOLDINGS, INC. AND SUBSIDIARIES
SUPPLEMENTARY INFORMATION CONCERNING
PROPERTY/CASUALTY INSURANCE OPERATIONS
AS OF DECEMBER 31, 2003, 2002 AND 2001 AND FOR THE YEARS THEN ENDED

S-7

EXHIBIT INDEX

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* Management compensation plan.