PLATINUM UNDERWRITERS HOLDINGS LTD - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

| X | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003

or

| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number 001-31341

PLATINUM UNDERWRITERS HOLDINGS, LTD.
---------------------------------
(Exact name of Registrant as specified in its charter)

Bermuda Not Applicable
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)

The Belvedere Building
69 Pitts Bay Road
Pembroke, Bermuda HM 08
(Address of principal executive offices) (Zip Code)

(441) 295-7195
--------------------------------------------------------
(Registrant's telephone number, including area code)

Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

As of August 1, 2003, there were outstanding 43,024,000 common shares, par value
$0.01 per share, of the Registrant.

PLATINUM UNDERWRITERS HOLDINGS, LTD.
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2003

TABLE OF CONTENTS

Page
----

PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Platinum Underwriters Holdings, Ltd. And Subsidiaries
Consolidated Balance Sheets as of June 30, 2003 (Unaudited) and December 31, 2002................ 1
Consolidated Statements of Income and Comprehensive Income for the Three and
Six Months Ended June 30, 2003 (Unaudited)..................................................... 2
Consolidated Statements of Changes in Shareholders' Equity for the Three and
Six Months Ended June 30, 2003 (Unaudited)..................................................... 3
Consolidated Statement of Cash Flows for the Six Months Ended June 30, 2003 (Unaudited).......... 4
Notes to Condensed Consolidated Financial Statements (Unaudited)................................. 5

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations for the Three and Six Months Ended June 30, 2003.................. 10
Item 3. Quantitative and Qualitative Disclosure about Market Risk................................. 19
Item 4. Controls and Procedures................................................................... 20

PART II - OTHER INFORMATION

Item 1. Legal Proceedings......................................................................... 21
Item 2. Changes in Securities and Use of Proceeds................................................. 21
Item 3. Defaults Upon Senior Securities........................................................... 21
Item 4. Submission of Matters to a Vote of Security Holders....................................... 21
Item 5. Other Information......................................................................... 22
Combined Financial Data of Reinsurance Underwriting Segment of The St. Paul Companies, Inc.
(Predecessor)
Combined Statement of Underwriting Results for the Three and Six Months Ended June 30, 2002
(Unaudited).................................................................................. 23
Combined Statement of Identifiable Underwriting Cash Flows for the Three and Six Months Ended
June 30, 2002 (Unaudited).................................................................... 23
Notes to Combined Statements of June 30, 2002 (Unaudited)...................................... 24

Item 6. Exhibits and Reports on Form 8-K.......................................................... 27
(a) Exhibits.................................................................................... 27
(b) Reports on Form 8-K......................................................................... 27

SIGNATURES........................................................................................... 28

PART I - FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES
Consolidated Balance Sheets
($ in thousands, except share data)

(Unaudited)
June 30, December 31,
2003 2002
------------ ------------

ASSETS
Fixed maturities available-for-sale at fair value
(amortized cost - $1,447,937 and $1,052,923, respectively) $ 1,496,797 $ 1,065,216
Cash and cash equivalents 124,633 281,486
Accrued investment income 13,286 9,993
Reinsurance premiums receivable 475,204 5,599
Reinsurance recoverable on ceded losses and loss adjustment expenses 1,286 -
Prepaid reinsurance premiums 8,352 -
Amounts receivable from The St. Paul Companies, Inc. 814 162,908
Funds held by ceding companies 44,203 54,902
Deferred acquisition costs 82,435 49,332
Deferred taxes 2,411 -
Other assets 7,683 15,451
------------ ------------
Total assets $ 2,257,104 $ 1,644,887
============ ============

LIABILTIES AND SHAREHOLDERS' EQUITY
Liabilities
Unpaid losses and loss adjustment expenses $ 533,310 $ 281,659
Unearned premiums 351,759 191,016
Reinsurance deposit liabilities 5,904 23,661
Debt obligations 137,500 137,500
Ceded premiums payable 10,013 -
Commissions payable 154,831 37,562
Income taxes payable 22,125 -
Deferred taxes - 6,496
Other liabilities 37,774 45,747
------------ ------------
Total liabilities 1,253,216 723,641
------------ ------------
Shareholders' Equity
Preferred shares, $.01 par value, 25,000,000 shares authorized,
no shares issued or outstanding - -
Common shares, $.01 par value, 200,000,000 shares authorized, 43,004,000
shares issued and outstanding 430 430
Additional paid-in capital 908,136 903,797
Accumulated other comprehensive income 38,573 10,581
Retained earnings 56,749 6,438
------------ ------------
Total shareholders' equity 1,003,888 921,246
------------ ------------
Total liabilities and shareholders' equity $ 2,257,104 $ 1,644,887
============ ============

See accompanying notes to condensed consolidated financial statements.

- 1 -

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES
Consolidated Statements of Income and Comprehensive Income (Unaudited)
For the Three and Six Months Ended June 30, 2003
($ in thousands, except per share data)

Three Months Six Months
Ended Ended
June 30, 2003 June 30, 2003
-------------- --------------

Revenue:
Net premiums earned $ 279,376 $ 517,446
Net investment income 13,431 27,634
Net realized capital gains 519 1,263
Other income 2,749 3,900
----------- ----------
Total revenue 296,075 550,243
----------- ----------
Expenses:
Losses and loss adjustment expenses 156,801 295,605
Acquisition expenses 60,376 112,095
Operating expenses 32,995 53,164
Net foreign currency exchange losses 4,736 4,812
Interest expense 2,238 4,706
----------- ----------
Total expenses 257,146 470,382
----------- ----------
Income before income tax expense 38,929 79,861
Income tax expense 12,324 22,670
----------- ----------
Net income $ 26,605 $ 57,191
=========== ==========
Earnings per share:
Basic earnings per share $ 0.62 $ 1.33
Diluted earnings per share $ 0.57 $ 1.23

Shareholder dividends:
Dividends declared $ 3,440 $ 6,880
Dividends declared per share $ 0.08 $ 0.16

Comprehensive income:

Net income $ 26,605 $ 57,191
Other comprehensive income:
Net change in unrealized gains on available-for-sale securities,
net of deferred tax 20,345 27,992
----------- ----------
Comprehensive income $ 46,950 $ 85,183
=========== ==========

See accompanying notes to condensed consolidated financial statements.

- 2 -

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES
Consolidated Statements of Changes in Shareholders' Equity (Unaudited)
For the Three and Six Months Ended June 30, 2003
($ in thousands)

Three Months Six Months
Ended Ended
June 30, 2003 June 30, 2003
-------------- --------------

Preferred shares:
Balances at beginning and end of period $ - $ -
----------- ------------

Common shares:
Balances at beginning and end of period 430 430
----------- ------------

Additional paid-in-capital:
Balance at beginning of period 903,797 903,797
Stock based compensation expense 4,339 4,339
----------- ------------
Balances at end of period 908,136 908,136
----------- ------------

Accumulated other comprehensive income:
Balance at beginning of periods 18,228 10,581
Net change in unrealized gains on available-for-sale securities, net
of deferred tax 20,345 27,992
----------- ------------
Balances at end of period 38,573 38,573
----------- ------------

Retained earnings:
Balance at beginning of period 33,584 6,438
Net income 26,605 57,191
Dividends to shareholders (3,440) (6,880)
----------- ------------
Balances at end of period 56,749 56,749
----------- ------------
Total shareholders' equity $ 1,003,888 $ 1,003,888
----------- ------------

See accompanying notes to condensed consolidated financial statements.

- 3 -

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES
Consolidated Statement of Cash Flows (Unaudited)
For the Six Months Ended June 30, 2003
($ in thousands)

Operating Activities:
Net income $ 57,191
Adjustments to reconcile net income to cash used in operations:
Depreciation and amortization 10,242
Net realized gain on investments (1,263)
Stock based compensation 4,339
Changes in assets and liabilities:
Increase in accrued investment income (3,293)
Increase in reinsurance premiums receivable (469,605)
Decrease in amounts receivable from The St. Paul Companies, Inc. 162,094
Decrease in funds held by ceding companies 10,699
Increase in deferred acquisition costs (33,103)
Increase in unpaid losses and loss adjustment expenses 250,365
Increase in unearned premiums 152,391
Increase in commissions payable 117,269
Increase in income taxes payable 22,125
Decrease in deferred taxes (17,482)
Decrease in reinsurance deposit liabilities (17,757)
Increase in ceded premiums payable 10,013
Decrease in other assets and liabilities 7,671
Other, net (2)
----------
Net cash provided by operating activities 261,894
----------

Investing Activities:
Fixed maturities sold 257,565
Fixed maturities matured and called 58,877
Fixed maturities acquired (728,309)
----------
Net cash used in investing activities (411,867)
----------

Financing Activities - Dividends to shareholders (6,880)

----------
Net decrease in cash and cash equivalents (156,853)

Cash and cash equivalents at beginning of period 281,486

----------
Cash and cash equivalents at end of period $ 124,633
==========

Supplemental disclosures of cash flow information:
Income taxes paid $ 16,257
Interest paid 5,214

See accompanying notes to condensed consolidated financial statements.

- 4 -

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 30, 2003

NOTE 1 BASIS OF PRESENTATION

The condensed consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States of
America ("U.S. GAAP") and include the accounts of Platinum Underwriters
Holdings, Ltd. and its subsidiaries (the "Company"), including Platinum Re (UK)
Limited, Platinum Underwriters Bermuda, Ltd. ("Platinum Bermuda"), Platinum
Underwriters Finance, Inc., Platinum Regency Holdings and Platinum Underwriters
Reinsurance, Inc. ("Platinum US"). All material inter-company transactions have
been eliminated in preparing these consolidated financial statements. The
amounts included in this report as of and for the three and six months ended
June 30, 2003 are unaudited and include those adjustments, consisting of normal
recurring items, that management considers necessary for a fair presentation
under U.S. GAAP. These consolidated financial statements should be read in
conjunction with the consolidated financial statements and related notes
included in the Company's Annual Report on Form 10-K for the year ended December
31, 2002.

The preparation of financial statements 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 the reported amounts of revenues and expenses
during the reporting period. Actual results could materially differ from these
estimates. The results of operations for any interim period are not necessarily
indicative of results for the full year.

In November 2002, Platinum Underwriters Holdings, Ltd. ("Platinum
Holdings") completed an initial public offering of 33,044,000 common shares.
Concurrent with the public offering, Platinum Holdings sold 6,000,000 common
shares to The St. Paul Companies, Inc. ("St. Paul") and 3,960,000 common shares
to RenaissanceRe Holdings Ltd. in private placements. In addition to the common
shares issued, the Company issued equity security units, consisting of a
contract to purchase common shares in 2005 and an ownership interest in a senior
note due 2007. Also, concurrent with these transactions, the Company and St.
Paul entered into several agreements for the transfer of continuing reinsurance
business and certain related assets of St. Paul. Among these agreements were
quota share retrocession agreements effective November 2, 2002 under which the
Company assumed from St. Paul unpaid losses and loss adjustment expenses
("LAE"), unearned premiums and certain other liabilities on reinsurance
contracts becoming effective in 2002 (the "Quota Share Retrocession
Agreements").

Stock-Based Compensation

Pursuant to the provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the
Company has elected to continue using the intrinsic value method of accounting
for stock-based awards granted to employees established by Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25").
Under APB 25, if the exercise price of the Company's employee share options is
equal to or greater than the fair market value of the underlying stock on the
date of the grant, no compensation expense is recorded.

Had the Company calculated and recorded compensation expense for share
option grants based on the "fair value" method described in SFAS 123, net income
and earnings per share, net of tax, for the three and six months ended June 30,
2003 would have been the pro forma amounts as indicated below ($ in thousands,
except per share data):

- 5 -

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited), continued
June 30, 2003

Three Months Six Months
Ended Ended
June 30, 2003 June 30, 2003
--------------- ----------------

Stock-based compensation expense:
As reported $ 4,339 $ 4,339
Pro forma 9,841 11,474

Net income:
As reported $ 26,605 $ 57,191
Pro forma 21,103 50,056

Basic earnings per share:
As reported $ 0.62 $ 1.33
Pro forma 0.49 1.16

Diluted earnings per share:
As reported $ 0.57 $ 1.23
Pro forma 0.46 1.09

On May 13, 2003 the Company entered into a Separation and Consulting
Agreement with its former President and Chief Executive Officer pursuant to
which the Company paid him $4,950,000 and on June 1, 2003 fully vested his
option to purchase 975,000 of the Company's common shares with an exercise
period of five years. The differential between the option price and the market
value of 975,000 common shares on May 13, 2003 of $4,339,000 was recognized as
compensation expense with a corresponding credit to additional paid in capital.

NOTE 2 INVESTMENTS

Investments classified as available-for-sale are carried at fair value
as of the balance sheet date. Net change in unrealized investment gains for the
three and six months ended June 30, 2003 were as follows ($ in thousands):

Three Months Six Months
Ended Ended
June 30, 2003 June 30, 2003
------------- --------------

Fixed maturities $ 26,477 $ 36,567
Less deferred taxes (6,132) (8,575)
----------- ------------
Net change in unrealized gains $ 20,345 $ 27,992
----------- ------------

Investments with a carrying value of $374,598,000 and cash and cash
equivalents of $17,087,000 at June 30, 2003 were held in trust as security for
an equivalent amount of liabilities ceded by St. Paul to the Company under the
Quota Share Retrocession Agreements.

As a result of interest rate changes, net unrealized gains declined
from $48,860,000 as of June 30, 2003 to $255,000 as of July 31, 2003.

NOTE 3 EARNINGS PER SHARE

Following is a reconciliation of the numerators and denominators of the
basic and diluted

- 6 -

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited), continued
June 30, 2003

earnings per share computations for the three and six months ended June 30, 2003
(amounts in thousands, except per share data):

Weighted
Average Net
Shares Income
Net Income Outstanding Per Share
---------- ----------- ---------

Three Months Ended June 30, 2003:
Basic earnings per share:
Income available to common shareholders $ 26,605 43,004 $ 0.62
Effect of dilutive securities:
Share options - 659
Equity Security Units 1,481 5,208
Diluted earnings per share:
--------- ------
Income available to common shareholders $ 28,086 48,871 $ 0.57
--------- ------
Six Months Ended June 30, 2003:
Basic earnings per share:
Income available to common shareholders $ 57,191 43,004 $ 1.33

Effect of dilutive securities:
Share options - 478
Equity Security Units 3,114 5,450

Diluted earnings per share:
--------- ------
Income available to common shareholders $ 60,305 48,932 $ 1.23
--------- ------

NOTE 4 OPERATING SEGMENT INFORMATION

The Company conducts its worldwide reinsurance business through three
operating segments: Global Property and Marine, Global Casualty and Finite Risk.
The Global Property and Marine operating segment includes principally property
and marine reinsurance coverages that are written both in the United States and
international markets. This business consists of catastrophe excess-of-loss
reinsurance treaties, property per risk excess-of-loss treaties and property
proportional treaties. The Global Casualty operating segment includes
principally reinsurance treaties that cover umbrella liability, general
liability, professional liability, workers' compensation and automobile
liability. This segment also includes accident and health reinsurance treaties,
which are predominantly reinsurance of health insurance products. The Finite
Risk operating segment includes principally structured reinsurance contracts
with ceding companies whose needs may not be met efficiently through traditional
reinsurance products.

The following table summarizes underwriting activity and ratios for the
operating segments together with a reconciliation of underwriting income to
income before income taxes for the three and six months ended June 30, 2003 ($
in thousands):

- 7 -

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited), continued
June 30, 2003

Global
Property Global Finite
and Marine Casualty Risk Total
---------- ---------- ---------- ----------

Three Months Ended June 30, 2003:
Net premiums written $ 83,487 132,320 91,436 $ 307,243
---------- ---------- ---------- ----------
Net premiums earned 94,006 105,951 79,419 279,376
Losses and LAE 52,469 74,530 29,802 156,801
Acquisition expenses 13,186 26,449 20,741 60,376
Other underwriting expenses 10,372 4,542 4,732 19,646
---------- ---------- ---------- ----------
Segment underwriting income $ 17,979 430 24,144 $ 42,553
---------- ---------- ----------
Corporate expenses not allocated to segments (13,349)
Net foreign currency exchange losses (4,736)
Interest expense (2,238)
Net investment income, net realized capital gains and
other income 16,699
----------
Income before income tax expense $ 38,929
----------
Ratios:
Losses and LAE 55.8% 70.3% 37.5% 56.1%
Acquisition costs 14.0% 25.0% 26.1% 21.6%
Other underwriting expenses 11.0% 4.3% 6.0% 7.0%
---------- ---------- ---------- ----------
Combined 80.8% 99.6% 69.6% 84.7%
---------- ---------- ---------- ----------
Six Months Ended June 30, 2003:
Net premiums written $ 201,255 246,014 220,066 $ 667,335
---------- ---------- ---------- ----------
Net premiums earned 183,939 183,677 149,830 517,446
Losses and LAE 94,055 128,437 73,113 295,605
Acquisition expenses 28,804 45,478 37,813 112,095
Other underwriting expenses 20,831 9,160 6,869 36,860
---------- ---------- ---------- ----------
Segment underwriting income $ 40,249 602 32,035 $ 72,886
---------- ---------- ----------
Corporate expenses not allocated to segments (16,304)
Net foreign currency exchange loss (4,812)
Interest expense (4,706)
Net investment income, net realized capital gains and
other income 32,797
----------
Income before income tax expense $ 79,861
----------
Ratios:
Losses and LAE 51.1% 69.9% 48.8% 57.1%
Acquisition costs 15.7% 24.8% 25.2% 21.7%
Operating expenses 11.3% 5.0% 4.6% 7.1%
---------- ---------- ---------- ----------
Combined 78.1% 99.7% 78.6% 85.9%
---------- ---------- ---------- ----------

- 8 -

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited), continued
June 30, 2003

NOTE 5 LEASE COMMITMENTS

Subsequent to June 30, 2003, Platinum US entered into a non-cancelable
operating lease for office space. Future minimum annual lease commitments under
various non-cancelable operating leases for the Company's office facilities,
which expire at various dates through 2013, are as follows: ($ in thousands):

Years Ending December 31,
2003 $ 1,007
2004 1,105
2005 2,084
2006 2,099
2007 1,786
2008 1,860
Thereafter 4,836
--------
Total $ 14,777
--------

- 9 -

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2003

BUSINESS OVERVIEW

Platinum Underwriters Holdings, Ltd. ("Platinum Holdings") is a Bermuda
insurance holding company. Platinum Holdings and its subsidiaries (the
"Company") operate through three licensed reinsurance subsidiaries: Platinum
Underwriters Reinsurance, Inc. ("Platinum US"), Platinum Re (UK) Limited
("Platinum UK") and Platinum Underwriters Bermuda, Ltd. ("Platinum Bermuda").
The Company provides property, casualty, marine, and finite reinsurance
coverages to a diverse clientele of insurers and select reinsurers on a
worldwide basis.

The following discussion and analysis should be read in conjunction
with the consolidated financial statements and related notes thereto and
management's discussion and analysis of financial condition and results of
operations included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2002. The Company's consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in the
United States of America ("U.S. GAAP").

In November 2002 Platinum Holdings completed an initial public offering
of 33,044,000 common shares. Concurrent with the public offering, Platinum
Holdings sold 6,000,000 common shares to The St. Paul Companies, Inc. ("St.
Paul") and 3,960,000 common shares to RenaissanceRe Holdings Ltd.
("RenaissanceRe") in private placements. In addition to the common shares
issued, the Company issued equity security units, consisting of a contract to
purchase common shares in 2005 and an ownership interest in a senior note due
2007. Also, concurrent with these transactions, the Company and St. Paul entered
into several agreements for the transfer of continuing reinsurance business and
certain related assets of St. Paul. Among these agreements were quota share
retrocession agreements effective November 2, 2002 under which the Company
assumed from St. Paul unpaid losses and loss adjustment expenses ("LAE"),
unearned premiums and certain other liabilities on reinsurance contracts
becoming effective in 2002 (the "Quota Share Retrocession Agreements").

FORWARD LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements are necessarily based on
estimates and assumptions that are inherently subject to significant business,
economic and competitive uncertainties and contingencies, many of which are
subject to change. These uncertainties and contingencies can affect actual
results and could cause actual results to differ materially from those expressed
in any forward-looking statements made by, or on behalf of, us.

In particular, statements using words such as "may," "should,"
"estimate," "expect," "anticipate," "intend," "believe," "predict," "potential,"
or words of similar import generally involve forward-looking statements. For
example, we have included certain forward-looking statements in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" with
regard to trends in results, prices, volumes, operations, investment results,
margins, risk management and exchange rates. This Form 10-Q also contains
forward-looking statements with respect to our business and industry, such as
those relating to our strategy and management objectives and trends in market
conditions, market standing, product volumes, investment results and pricing
conditions.

- 10 -

In light of the risks and uncertainties inherent in all future
projections, the inclusion of forward-looking statements in this Form 10-Q
should not be considered as a representation by us or any other person that our
objectives or plans will be achieved. Numerous factors could cause our actual
results to differ materially from those in the forward-looking statements,
including the following:

(1) our ability to successfully implement the Company's business strategy
and continue the business acquired from St. Paul;

(2) conducting operations in a competitive environment;

(3) our ability to maintain our A.M. Best Company rating;

(4) significant weather-related or other natural or man-made disasters
over which the Company has no control;

(5) the effectiveness of our loss limitation methods;

(6) the adequacy of the Company's liability for unpaid losses and LAE;

(7) the availability of retrocessional reinsurance on acceptable terms;

(8) our ability to maintain our business relationships with reinsurance
brokers;

(9) general political and economic conditions, including the effects of
civil unrest, war or a prolonged U.S. or global economic downturn or
recession;

(10) the cyclicality of the property and casualty reinsurance business;

(11) factors such as market volatility and interest rate and currency
exchange rate fluctuation;

(12) tax, regulatory or legal restrictions or limitations applicable to
the Company or the property and casualty reinsurance business
generally; and

(13) changes in the Company's plans, strategies, objectives, expectations
or intentions which may happen at any time at the Company's
discretion.

As a consequence, current plans, anticipated actions and future
financial condition and results may differ from those expressed in any
forward-looking statements made by or on behalf of the Company. The foregoing
factors should not be construed as exhaustive. Additionally, forward-looking
statements speak only as of the date they are made, and we undertake no
obligation to release publicly the results of any future revisions or updates we
may make to forward-looking statements to reflect new information or
circumstances after the date hereof or to reflect the occurrence of future
events.

CRITICAL ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS

It is important to understand the Company's accounting policies in
order to understand its consolidated financial statements. Certain critical
accounting policies require management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues, expenses, and
related disclosures at the financial reporting date and throughout the period
being reported upon. Certain of the estimates result from judgments that can be
subjective and complex, and consequently actual results may materially differ
from these estimates. The Company's critical accounting policies involve
written, earned and unearned premiums, unpaid losses and LAE, reinsurance risk
transfer, other than temporary declines in fair value of investments, income
taxes and stock-based compensation. The critical accounting policies discussed
herein are discussed in more detail in the notes to the consolidated financial
statements included in the Company's Annual Report on Form 10-K for the year
ended December 31, 2002.

- 11 -

Due to the nature of reinsurance, premiums are not always reported by
the ceding company to the Company in a timely manner. Additionally, premiums on
proportional treaty contracts are generally not reported to the Company until
after the reinsurance coverage has incepted and the Company is at risk.
Consequently, an estimate of premiums written and earned but not reported
("EBNR") is recorded. The Company estimates EBNR based on estimates of ultimate
premium, unearned premiums and premiums reported from ceding companies. Along
with estimating EBNR the Company records the expenses associated with these
premiums in the form of losses, LAE and commissions. Unpaid losses and LAE
represent an estimate of the expected cost of the ultimate settlement and
administration of losses. Actuarial methodologies are employed to assist in
establishing such estimates and include judgments relative to estimates of
claims severity and frequency, length of time before a claim is actually
settled, judicial theories of liability and other third party factors which are
often beyond our control. Due to the inherent uncertainty associated with the
estimation process, the ultimate liability may materially differ from the
original estimate. Such estimates are regularly reviewed and updated and any
resulting adjustments are included in the current period's results.

Reinsurance accounting is followed for assumed and ceded transactions
when risk transfer requirements have been met. The assessment of whether a
reinsurance contract has met risk transfer requirements involves significant
assumptions being made relating to the expected future experience under the
contract and applying this experience to the contract terms. Reinsurance
contracts that do not transfer significant insurance risk are accounted for as
deposits with interest expense credited to the contract deposit.

Unrealized losses in the value of individual securities considered by
management to be other than temporary is charged to income in the period it is
determined. The Company monitors the difference between cost and the estimated
fair value of investments, which involves uncertainty as to whether declines in
value are temporary in nature. When a decline in fair value of an investment is
considered to be "other than temporary," the investment is written down to fair
value and a realized loss is recorded. Management's assessment of a decline in
value includes current judgment as to the financial position and future
prospects of the issuer of the investment security.

Platinum Holdings and Platinum Bermuda are domiciled in Bermuda. The
Company also has subsidiaries in the United States, the United Kingdom and
Ireland which are subject to the tax laws thereof. The Company applies the asset
and liability method of accounting for income taxes under which deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.

The Company has elected to use the intrinsic value method of accounting
for share-based awards granted, established by Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees", under which if the
exercise price of the Company's employee share options is equal to or greater
than the fair market value of the underlying share on the date of the grant, no
compensation expense is recorded.

RESULTS OF OPERATIONS

Platinum Holdings completed its initial public offering and assumed
certain rights and obligations of the reinsurance business from St. Paul in
November 2002. Consequently, the operations of the Company commenced in November
2002 and there are no comparable periods in 2002 for comparison.

Net premiums written for the three months ended June 30, 2003 and March
31, 2003 were $307,243,000 and $360,091,000, respectively. Net written premiums
declined from the first quarter as

- 12 -

there are fewer contracts incepting in the second quarter and, consequently,
less premium tends to be written. Overall, premiums written increased in 2003
over 2002 due to increased underwriting activity in an improving casualty
marketplace and the commencement of a second underwriting year in 2003, as well
as the seasonal increase in first quarter premium production. Premiums from
reinsurance contracts in any given calendar year may be generated by several
underwriting years and premiums written in 2003 include premiums from
reinsurance contracts incepting in 2003 and 2002, whereas net premiums written
in 2002 include only reinsurance contracts becoming effective in 2002.

Net premiums earned for the three months ended June 30, 2003 and March
31, 2003 were $279,376,000 and $238,069,000, respectively. Generally, the
increases in net premiums earned are consistent with normal recognition of
premiums earned over the exposure periods for the business written. Net premiums
earned as a percent of net premiums written for the three months ended June 30,
2003 and March 31, 2003 were 90.9% and 66.1%, respectively, and the increase was
the result of development of the book of business.

Net investment income for the three months ended June 30, 2003 and
March 31, 2003, was $13,431,000 and $14,203,000, respectively. Net investment
income in the three months ended March 31, 2003 includes $1,357,000 of interest
received from St. Paul on balances due relating to the Quota Share Reinsurance
Agreements. Net realized capital gains of $519,000 and $1,263,000 for the three
and six months ended June 30, 2003 are the result of management of portfolio
credit and duration.

Other income for the three months ended June 30, 2003 and March 31,
2003 was $2,749,000 and $1,151,000, respectively, and represents earnings on
reinsurance contracts accounted for as deposits. Net foreign currency exchange
losses for the three months ended June 30, 2003 and March 31, 2003 were
$4,736,000 and $76,000, respectively and resulted from the conversion of
insurance liabilities denominated in foreign currencies into U.S. dollars.

Losses and LAE incurred for the three months ended June 30, 2003 and
March 31, 2003 were $156,801,000 and $138,803,000, respectively. The ratio of
losses and LAE incurred to premiums earned, also referred to as loss ratio, was
56.1% and 58.3%, respectively. Losses and LAE incurred for the three months
ended June 30, 2003 include provisions for losses arising from storms and
flooding in the Southwest United States in April and tornadoes in the Midwest
United States in May. However, overall both periods were favorably impacted by a
low level of catastrophe losses.

Acquisition expenses include brokerage, commissions and other direct
underwriting expenses associated with underwriting activities and for the three
months ended June 30, 2003 and March 31, 2003 were $60,376,000 and $51,719,000,
respectively. The resulting acquisition expense ratios for three months ended
June 30, 2003 and March 31, 2003 were comparable overall at 21.6% and 21.7%,
respectively.

Operating expenses for the three months ended June 30, 2003 and March
31, 2003 were $32,995,000 and $20,169,000, respectively, and include a charge
for $9,289,000 for the payment to and share option expense of the Company's
former chief executive, other underwriting expenses related to the reinsurance
operations as well as costs associated with the Bermuda holding company.

Interest expense for the three months ended June 30, 2003 and March 31,
2003 was $2,238,000 and $2,468,000, respectively, and relates to the Company's
equity security units classified as debt obligations on the balance sheet.

Income tax expense for the three months ended June 30, 2003 and March
31, 2003 was $12,324,000 and $10,346,000, respectively. The resulting effective
tax rates were 31.7% and 25.3%,

- 13 -

respectively. The effective tax rate for the three months ended June 30, 2003
reflects the fact the most of the Company's income before income tax expense was
derived from the 2002 underwriting year which is contractually required to be
retained in the U.S. and which is taxed at 35%. The effective tax rate for the
three months ended June 30, 2003 was also affected by expenses related to the
separation and consulting agreement of the Company's former chief executive
officer that were incurred by the Company's Bermuda holding company which, when
combined with the income before income tax expense from subsidiaries in taxable
jurisdictions, increased the effective tax rate.

SEGMENT INFORMATION

The Company conducts its worldwide reinsurance business through three
operating segments. The following table summarizes underwriting activity and
ratios for the three operating segments for the three months ended March 31,
2003 and the three and six months ended June 30, 2003 ($ in thousands):

Global
Property Global Finite
and Marine Casualty Risk Total
---------- ----------- ----------- -----------

Three months ended March 31, 2003
Net premiums written $ 117,767 113,694 128,630 $ 360,091
---------- ----------- ----------- -----------
Net premiums earned 89,932 77,726 70,411 238,069
Losses and LAE 41,585 53,907 43,311 138,803
Acquisition costs 15,618 19,029 17,072 51,719
Other underwriting expenses 10,459 4,618 2,137 17,214
---------- ----------- ----------- -----------
Underwriting income $ 22,270 172 7,891 $ 30,333
---------- ----------- ----------- -----------
Ratios:
Losses and LAE 46.2% 69.4% 61.5% 58.3%
Acquisition costs 17.4% 24.5% 24.2% 21.7%
Other underwriting expense 11.6% 5.9% 3.0% 7.2%
---------- ----------- ----------- -----------
Combined ratio 75.2% 99.8% 88.7% 87.2%
---------- ----------- ----------- -----------
Three months ended June 30, 2003
Net premiums written $ 83,487 132,320 91,436 $ 307,243
---------- ----------- ----------- -----------
Net premiums earned 94,006 105,951 79,419 279,376
Losses and LAE 52,469 74,530 29,802 156,801
Acquisition costs 13,186 26,449 20,741 60,376
Other underwriting expenses 10,372 4,542 4,732 19,646
---------- ----------- ----------- -----------
Underwriting income $ 17,979 430 24,144 $ 42,553
---------- ----------- ----------- -----------
Ratios:
Losses and LAE 55.8% 70.3% 37.5% 56.1%
Acquisition costs 14.0% 25.0% 26.1% 21.6%
Other underwriting expense 11.0% 4.3% 6.0% 7.0%
---------- ----------- ----------- -----------
Combined ratio 80.8% 99.6% 69.6% 84.7%
---------- ----------- ----------- -----------

- 14 -

Global
Property Global Finite
and Marine Casualty Risk Total
---------- ---------- ----------- -----------

Six months ended June 30, 2003
Net premiums written 201,255 246,014 220,066 667,335
---------- ---------- ----------- -----------
Net premiums earned $ 183,939 183,677 149,830 $ 517,446
Losses and LAE 94,055 128,437 73,113 295,605
Acquisition costs 28,804 45,478 37,813 112,095
Other underwriting expenses 20,831 9,160 6,869 36,860
---------- ---------- ----------- -----------
Underwriting income $ 40,249 602 32,035 $ 72,886
---------- ---------- ----------- -----------
Ratios:
Losses and LAE 51.1% 69.9% 48.8% 57.1%
Acquisition costs 15.7% 24.8% 25.2% 21.7%
Other underwriting expense 11.3% 5.0% 4.6% 7.1%
---------- ---------- ----------- -----------
Combined ratio 78.1% 99.7% 78.6% 85.9%
---------- ---------- ----------- -----------

GLOBAL PROPERTY AND MARINE

The Global Property and Marine operating segment includes principally
property and marine reinsurance contracts written in the United States and
international markets. This business includes catastrophe excess-of-loss
reinsurance treaties, property per risk excess-of-loss treaties and property
proportional treaties. A single event can produce claims to a ceding company
from multiple insureds. This operating segment generated 27.1% and 32.7% of the
Company's net premiums written for the three months ended June 30, 2003 and
March 31, 2003, respectively.

Net premiums written for the three months ended June 30, 2003 and March
31, 2003 were $83,487,000 and $117,767,000, respectively. Net written premiums
declined from the first quarter as the property business has fewer contracts
incepting in the second quarter and, consequently, less premium tends to be
written.

Net premiums earned for the three months ended June 30, 2003 and March
31, 2003 were $94,006,000 and $89,932,000, respectively. The increases in net
premiums earned are consistent with the modest growth in property business in
2003 over 2002 and normal recognition of premiums earned over the exposure
periods for the business written.

The loss ratios for the three months ended June 30, 2003 and March 31,
2003 were 55.8% and 46.2%, respectively. Both periods benefited from a low level
of catastrophe losses. Despite a relatively high level of catastrophe losses for
the U.S. insurance industry in the three months ended June 30, 2003, much of
those losses remained at the primary or ceding company level and, consequently,
losses in our portfolio were below our normal expectation. Although still
favorable overall, the increased loss ratio for the three months ended June 30,
2003 is due to losses arising from storms and flooding in the Southwest United
States in April and tornadoes in the Midwest United States in May.

Acquisition costs for the three months ended June 30, 2003 and March
31, 2003 were $13,186,000 and $15,618,000, respectively. The resulting
acquisition expense ratios for three months ended June 30, 2003 and March 31,
2003 were 14.0% and 17.4%, respectively. The ratios reflect the mix of business
and effects of differences in terms and conditions on various contracts.

Other underwriting expenses for the three months ended June 30, 2003
and March 31, 2003 were $10,372,000 and $10,459,000, respectively, and represent
costs associated with the property segment,

- 15 -

including fees of $906,000 and $2,822,000 for the three months ended June 30,
2003 and March 31, 2003, respectively, relating to an agreement with
RenaissanceRe that provides for a periodic review of aggregate property
catastrophe exposures.

GLOBAL CASUALTY

The Global Casualty operating segment includes principally reinsurance
treaties that cover umbrella liability, general liability, professional
liability, workers' compensation and automobile liability. This segment also
includes accident and health reinsurance treaties, which are predominantly
reinsurance of health insurance products. We generally write casualty
reinsurance on an excess-of-loss basis. A single event can produce claims to a
ceding company from multiple insureds. This operating segment generated 43.1%
and 31.6% of the Company's net premiums written for the three months ended June
30, 2003 and March 31, 2003, respectively. The increase in overall percentage of
premiums written in the Global Casualty segment is the result of increased
underwriting activity in an improving marketplace.

Net premiums written for the three months ended June 30, 2003 and March
31, 2003 were $132,320,000 and $113,694,000, respectively. The increase in
premiums written is due to increased underwriting activity in an improving
casualty marketplace, increased premium rates and the continuation of premiums
written being generated by reinsurance contracts incepting in the prior year.
The Company selected a significant portfolio of casualty contracts in 2002 to be
assumed from St. Paul under the Quota Share Retrocession Agreements and has been
able to increase its participation levels on some of those contracts as well as
write new business.

Net premiums earned for the three months ended June 30, 2003 and March
31, 2003 were $105,951,000 and $77,726,000, respectively. The steady increase in
net premiums earned is consistent with the increase in premiums written and
normal recognition of premiums earned over the exposure periods for the business
written.

The loss ratios incurred for the Global Casualty segment for the three
months ended June 30, 2003 and March 31, 2003 were comparable at 70.3% and
69.4%, respectively.

Acquisition costs for the three months ended June 30, 2003 and March
31, 2003 were $26,449,000 and $19,029,000, respectively. The resulting
acquisition expense ratios for three months ended June 30, 2003 and March 31,
2003 were 25.0% and 24.5%, respectively. The ratios reflect the mix of business
and effects of differences in terms and conditions on various contracts.

Other underwriting expenses for the three months ended June 30, 2003
and March 31, 2003 were $4,542,000 and $4,618,000, respectively, and represent
costs associated with the casualty segment.

FINITE RISK

The Finite Risk operating segment includes principally structured
reinsurance contracts with ceding companies whose needs may not be met
efficiently through traditional reinsurance products. The Company focuses on
providing such clients with customized solutions for their financial management
needs. The classes of risks underwritten through finite products are generally
consistent with the classes covered using traditional products. At the time the
Company was formed in 2002, management had the opportunity to select a strong
initial portfolio of finite risk contracts to be assumed from St. Paul under the
Quota Share Retrocession Agreements. Consequently, the portfolio had the
potential to produce above average profits over the near term. This operating
segment generated 29.8% and 35.7% of the Company's net premiums written for the
three months ended June 30, 2003 and March 31, 2003, respectively.

- 16 -

Net premiums written for the three months ended June 30, 2003 and March
31, 2003 were $91,436,000 and $128,630,000, respectively. Finite risk contracts
tend to be written on an opportunistic basis and several significant finite
quota share treaties were written in the three months ended March 31, 2003.

Net premiums earned for the three months ended June 30, 2003 and March
31, 2003 were $79,419,000 and $70,411,000, respectively. The net earned premium
is impacted by the same factors as the net premium written and the normal
recognition of premiums earned over the exposure periods for the business
written.

The loss ratios incurred for the Finite Risk segment for the three
months ended June 30, 2003 and March 31, 2003 were 37.5% and 61.5%,
respectively. Included in the results of the Finite Risk segment for the three
months ended June 30, 2003 was effects of a significant change to a reinsurance
program that resulted in an underwriting gain of $7,209,000. The continued
emergence of favorable experience on certain contracts has resulted in an
additional $8,554,000 of underwriting gain for the Finite Risk segment. The
Finite Risk segment was also favorably impacted by the absence of any major
catastrophe activity.

Acquisition costs for the three months ended June 30, 2003 and March
31, 2003 were $20,741,000 and $17,072,000, respectively. The resulting
acquisition expense ratios for three months ended June 30, 2003 and March 31,
2003 were 26.1% and 24.2%, respectively. The ratios reflect the mix of business
and effects of differences in terms and conditions on various contracts.

Other underwriting expenses for the three months ended June 30, 2003
and March 31, 2003 were $4,732,000 and $2,137,000, respectively, and represent
costs associated with the finite risk segment.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

FINANCIAL CONDITION

Fixed maturities were $1,496,797,000 as of June 30, 2003. The Company's
fixed maturity investment portfolio primarily consists of investment grade
bonds. The portfolio had an average duration of 3.4 years as of June 30, 2003.
Management monitors the composition of the investment portfolio and cash flows
from the portfolio to maintain the appropriate levels of liquidity in order to
ensure the Company's ability to satisfy claims. Investments with a carrying
value of $374,598,000 and cash and cash equivalents of $17,087,000 at June 30,
2003 were held in trust to secure St. Paul for an equivalent amount of
liabilities ceded by St. Paul to the Company under the Quota Share Retrocession
Agreements. The Company has sufficient cash on hand to meet its short term
obligations and to maintain the liquidity necessary for portfolio management.
All cash flow in excess of this requirement is invested in a timely manner into
our investment portfolio. As a result of interest rate changes, net unrealized
gains declined from $48,860,000 as of June 30, 2003 to $255,000 as of July 31,
2003. While it is impossible to predict future changes in interest rates, the
Company manages its portfolio for the long-term.

As the Company has been developing its book of business, certain assets
and liabilities associated with underwriting have increased significantly, some
of which include significant estimates. Premiums receivable, deferred
acquisition costs, unpaid losses and LAE, unearned premiums and commissions
payable have all increased significantly from December 31, 2002. Premiums
receivable increased by approximately $469,605,000 from December 31, 2002 to
June 30, 2003, of which $426,690,000 represents EBNR. Unpaid losses and LAE, net
of reinsurance recoverable on ceded losses and LAE,

- 17 -

increased by approximately $250,365 from December 31, 2002 to June 30, 2003,
of which $209,242 represents IBNR.

SOURCES OF LIQUIDITY

The consolidated sources of funds of the Company consist primarily of
premiums written, losses recovered from retrocessionaires, investment income and
proceeds from sales and redemption of investments. Net cash flow provided by
operations for the six months ended June 30, 2003 was $261,894,,000 and was used
primarily to acquire additional investments.

Platinum Holdings is a holding company that conducts no reinsurance
operations of its own. All of its reinsurance operations are conducted through
its wholly owned operating subsidiaries Platinum US (which it owns through
Platinum Ireland and Platinum Finance), Platinum UK (which it owns through
Platinum Ireland) and Platinum Bermuda. As a holding company, the cash flow of
Platinum Holdings consists primarily of dividends, interest and other
permissible payments from its subsidiaries. Platinum Holdings depends on such
payments to receive funds for general corporate purposes and to meet its
obligations, including the contract adjustment payments related to the Equity
Security Units and the payment of any dividends to its shareholders.

Platinum Holdings has a 364-day committed credit facility with a group
of banks which provides $100,000,000 of aggregate borrowing capacity. The credit
facility contains various covenants and agreements, including the requirement to
maintain a specified tangible net worth and leverage ratios. The credit facility
has been extended through August 19, 2003. Platinum has decided not to renew its
credit facility because of the Company's strong balance sheet and adequate
available liquidity. As of June 30, 2003, there were no amounts outstanding
pursuant to the credit facility and the Company was in compliance with all
covenants.

LIQUIDITY REQUIREMENTS

The principal consolidated cash requirements of the Company are the
payment of losses and LAE, commissions, brokerages, operating expenses,
dividends to its shareholders, the servicing of debt, (including interest
payments on the senior notes and contract adjustment payments on the purchase
contracts included in the Company's equity security units), the acquisition of
and investment in businesses, capital expenditures, premiums retroceded and
excise taxes.

Platinum UK and Platinum Bermuda are not licensed, approved or
accredited as reinsurers anywhere in the United States and therefore, under the
terms of most of their contracts with United States ceding companies, they are
required to provide security to these ceding companies for unpaid ceded
liabilities in a form acceptable to state insurance commissioners. Typically,
this type of security takes the form of a letter of credit issued by an
acceptable bank, the establishment of a trust, or a cash advance. Platinum UK
and Platinum Bermuda expect to obtain letters of credit through commercial banks
and may be required to provide the banks a security interest in certain of
Platinum UK's and Platinum Bermuda's investments.

The payment of dividends and other distributions from the Company's
regulated reinsurance subsidiaries is limited by applicable laws and statutory
requirements of the jurisdictions in which the subsidiaries operate, including
Bermuda, the United States and the United Kingdom. Based on the regulatory
restrictions of the applicable jurisdictions, the maximum amount available for
payment of dividends or other distributions by the reinsurance subsidiaries of
the Company in 2003 without prior regulatory approval is estimated to be
$127,313,000.

- 18 -

Platinum Holdings operates a treasury department which is responsible
for the following functions: (1) managing banking relationships, (2) capital
raising activities, including equity and debt issues, (3) managing Platinum
Holdings's overall cash and liquidity positions, and (4) overseeing the payment
of internal and external dividends.

Management believes that the cash flow generated by the operating
activities of the Company's subsidiaries will provide sufficient funds for the
Company to meet its liquidity needs over the next twelve months. Beyond the next
twelve months, cash flow available to the Company may be influenced by a variety
of factors, including general economic conditions and conditions in the
insurance and reinsurance markets, as well as fluctuations from year to year in
claims experience.

ECONOMIC CONDITIONS

Periods of moderate economic recession or inflation tend not to have a
significant direct effect on the Company's underwriting operations. Significant
inflationary or recessionary periods can, however, impact the Company's
underwriting operations and investment portfolio. Management considers the
potential impact of economic trends in estimating its unpaid losses and LAE.
Management believes that the underwriting controls it maintains assist in
estimating ultimate claim costs and lessen the potential adverse impact of the
economy on the Company. A decrease in interest rates will tend to decrease the
Company's market based yield and increase the fair value of its invested assets.
An increase in interest rates will tend to increase the Company's market based
yield and decrease the fair value of its invested assets.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MARKET AND CREDIT RISK

The Company's principal invested assets are fixed maturities, which are
subject to the risk of potential losses from adverse changes in market rates and
prices and credit risk resulting from adverse changes in the borrower's ability
to meet its debt service obligations. The Company's strategy to limit this risk
is to place its investments in high quality credit issues and to limit the
amount of credit exposure with respect to any one issuer or industry. The
Company also selects investments with characteristics such as duration, yield,
currency and liquidity to reflect the underlying characteristics of related
estimated claim liabilities. The Company attempts to minimize the credit risk by
actively monitoring the portfolio and requiring a minimum average credit rating
of A2 as defined by Moody's Investor Service. As of June 30, 2003, the portfolio
has a dollar weighted average rating of AA3.

The Company has other receivable amounts subject to credit risk. The
most significant of these are reinsurance premiums receivable from ceding
companies and losses recoverable from retrocessionaires. To mitigate credit risk
related to losses recoverable from retrocessionaires, we establish business and
financial standards for retrocessionaire approval, incorporate ratings by major
rating agencies, consider current market information, and obtain letters of
credit or other forms of security where deemed necessary. To mitigate credit
risk related to premium receivables, we establish standards for ceding
companies.

FOREIGN CURRENCY RISK

The Company's principal exposure to foreign currency risk is its
obligation to settle claims in foreign currencies. The Company intends to
minimize its exposure to foreign currency exchange rates by holding invested
assets denominated in foreign currencies and in amounts approximately equivalent
to the estimated liabilities denominated in foreign currencies. The Company
realigned a portion of its

- 19 -

investment portfolio to be invested in foreign currencies to match its
liabilities denominated in a foreign currency, principally British pounds and
Euros.

SOURCES OF FAIR VALUE

The following table presents the carrying amounts and estimated fair
values of the Company's financial instruments as of June 30, 2003 ($ in
thousands):

Carrying Fair
Amount Value
----------- -----------

Financial assets:
Fixed maturities $ 1,496,797 $ 1,496,797

Financial liabilities:
Debt obligations $ 137,500 $ 160,875

The fair values of financial instruments are based on quoted market
prices at the reporting date for those or similar investments.

ITEM 4. CONTROLS AND PROCEDURES

The Company carried out an evaluation, under the supervision and with
the participation of our management, including the Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures as the end of the period covered by this
report pursuant to Rule 13a-15 promulgated under the Securities Exchange Act of
1934. Based on that evaluation, our management, including the Chief Executive
Officer and Chief Financial Officer, concluded that our disclosure controls and
procedures are effective in timely alerting them to material information
required to be included in our periodic reports to be filed with the Securities
and Exchange Commission. In addition, there have been no significant changes in
our internal control over financial reporting that have materially affected or
are reasonably likely to affect the Company's internal control over financial
reporting subsequent to the date of their evaluation, including any corrective
actions with regard to significant deficiencies or material weaknesses. It
should be noted that the design of any system of controls is based in part upon
certain assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions, regardless of how remote.

- 20 -

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the normal course of business, the Company may become involved in
various claims and legal proceedings. The Company is not currently aware of any
pending or threatened material litigation.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

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

None

- 21 -

ITEM 5. OTHER INFORMATION

THE PREDECESSOR BUSINESS
The St. Paul Companies, Inc.
Reinsurance Underwriting Segment

Following is selected historical combined financial data for the three and six
months ended June 30, 2002 of the reinsurance underwriting segment of The St.
Paul Companies, Inc. (the "Predecessor") prior to the initial public offering of
Platinum Underwriters Holdings, Ltd. ("Platinum"). The Predecessor operations
include the continuing business and related assets transferred to Platinum upon
completion of its initial public offering as well as the reinsurance business
that remained with The St. Paul Companies, Inc. ("St. Paul") after the public
offering. Accordingly, underwriting results and combined statements of the
Predecessor presented in this report are not indicative of the actual results of
Platinum subsequent to the public offering.

In addition to the effect of the retention of certain portions of the
Predecessor business by St. Paul and the exclusion of the corporate aggregate
excess-of-loss reinsurance program of St. Paul, other factors may cause the
actual results of Platinum to differ materially from the results of the
Predecessor. For example, although Platinum continues to be afforded the
benefits of St. Paul Re's retrocessional program for the 2002 underwriting year,
Platinum has entered into reinsurance contracts with significantly different
terms and conditions from those that have been made available to the Predecessor
from St. Paul and which form the basis of the Predecessor's results. In
addition, the Predecessor's combined statements reflect the discounting of the
liability for certain assumed reinsurance contracts using rates up to 7.5%,
based on its return on invested assets or, in many cases, on yields
contractually guaranteed to it on funds held by the ceding company, as permitted
by applicable law. If arrangements permitting Platinum to discount reserves to
the same extent as the Predecessor are not made, reinsurance contracts of a
similar type entered into in the future would be reported on an undiscounted
basis.

- 22 -

The St. Paul Companies, Inc.
Reinsurance Underwriting Segment (Predecessor)

Combined Statement of Underwriting Results (Unaudited)
For the Three and Six Months Ended June 30, 2002
($ in millions)

Three Months Six Months
Ended Ended
June 30, 2002 June 30, 2002
------------- --------------

Net premiums earned
Net premiums written $ 200 $ 663
Net change in unearned premiums 105 19
-------- --------
Net premiums earned 305 682
-------- --------
Underwriting deductions
Losses and loss adjustment expenses incurred 213 460
Policy acquisition costs 78 178
Other underwriting expenses 20 35
-------- --------
Total underwriting deductions 311 673

-------- --------
Net underwriting gain (loss) $ (6) $ 9
======== ========

Combined Statement of Identifiable Underwriting Cash Flows (Unaudited)
For the Three and Six Months Ended June 30, 2002
($ in millions)

Three Months Six Months
Ended Ended
June 30, 2002 June 30, 2002
------------- -------------

Premiums collected, net $ 359 $ 829
Losses and loss adjustment expenses paid (289) (573)
Policy acquisition expenses paid (82) (186)
Other underwriting expenses paid (97) (132)
-------- --------
Net cash (used) by underwriting $ (109) $ (62)
======== ========

See accompanying notes to combined statements

- 23 -

The St. Paul Companies, Inc.
Reinsurance Underwriting Segment (Predecessor)
Notes to Combined Statements (Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying combined statements include the identifiable
reinsurance underwriting activity of the reinsurance underwriting segment of The
St. Paul Companies, Inc. ("St. Paul"), for the three and six months ended June
30, 2002. The reinsurance underwriting segment of St. Paul represent the
predecessor operations to Platinum Underwriters Holdings, Ltd. ("Platinum") and
is hereinafter referred to as "Predecessor". The Predecessor statements are
presented on a combined basis and include certain insurance and reinsurance
subsidiaries of St. Paul, as well as the underwriting results of the reinsurance
departments of St. Paul Fire and Marine Insurance Company ("Fire and Marine")
and United States Fidelity and Guarantee Company ("USF&G"). Fire and Marine and
USF&G are the two largest U.S. insurance subsidiaries of St. Paul.

The amounts included in this report as of and for the three months
ended are unaudited but include those adjustments, consisting of normal
recurring items, that management considers necessary for a fair presentation
under U.S. GAAP. These combined financial statements should be read in
conjunction with the combined statements of the Predecessor and related notes
included in the Annual Report on Form 10-K for the year ended December 31, 2002
of Platinum.

The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates. The results of operations for any interim period are not necessarily
indicative of results for the full year.

The statements of underwriting results reconcile to the reinsurance
underwriting segment results as reported in the Quarterly Report of St. Paul on
Form 10-Q as of June 30, 2002 as filed with the Securities and Exchange
Commission. It is the practice of St. Paul to evaluate the performance of its
property-liability insurance underwriting segments on the basis of underwriting
results.

The combined statements of underwriting results and identifiable cash
flows represent activity that is specifically attributable to the underwriting
operations of the Predecessor. St. Paul manages its property-liability
investment portfolio in the aggregate, as part of a separate segment and does
not allocate assets, or investment income, to its respective underwriting
segments. Additionally, the statement of identifiable cash flows includes only
cash flow activity that is specifically attributable to the underwriting
operations of Predecessor, and does not include any cash flows from investment
and financing activities.

2. REINSURANCE

The primary purpose of Predecessor's ceded reinsurance program is to
protect its operations from potential losses in excess of acceptable levels.
Reinsurers are expected to honor their obligations under ceded reinsurance
contracts. In the event these companies are unable to honor their obligations,
Predecessor will pay these amounts. Allowances have been established for
possible nonpayment of such amounts due.

In the first six months of 2002, St. Paul was not party to an
all-lines, corporate excess-of-loss reinsurance treaty. Predecessor was party to
a separate aggregate excess-of-loss reinsurance treaty,

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The St. Paul Companies, Inc.
Reinsurance Underwriting Segment (Predecessor)
Notes to Combined Statements (Unaudited), continued

unrelated to the corporate treaty in 2002. Coverage was not triggered under that
treaty in the first quarter of 2002; however, Predecessor did record ceded
written and earned premiums of $4 million, representing the initial premium for
this treaty.

The effect of assumed and ceded reinsurance on premiums written,
premiums earned and insurance losses and loss adjustment expenses for the three
and six months ended June 30, 2002 was as follows ($ in millions):

Assumed Ceded Net
---------- --------- ---------

Three months ended June 30, 2002:
Premium written $ 209 9 $ 200
Premium earned 315 10 305
Insurance losses and LAE 186 (27) 213

Six months ended June 30, 2002:
Premium written 702 39 663
Premium earned 711 29 682
Insurance losses and LAE $ 432 (28) $ 460

3. FOURTH QUARTER 2001 STRATEGIC REVIEW

In December 2001, St. Paul announced the results of a strategic review
of all of its operations, which included a decision to exit a number of
businesses and countries. These decisions included the narrowing of product
offerings and geographic presence relative to Predecessor's businesses. As part
of that review, it was determined that Predecessor would no longer underwrite
aviation or bond and credit reinsurance, or offer certain financial risk and
capital markets reinsurance products. Predecessor would also substantially
reduce the North American business underwritten in London. Predecessor would
focus on several areas, including property catastrophe reinsurance,
excess-of-loss casualty reinsurance, marine and traditional finite reinsurance.

The net premiums earned and underwriting loss for the three and six
months ended June 30, 2002 for the businesses exited under these actions were as
follows ($ in millions):

Three Months Six Months
Ended Ended
June 30, 2002 June 30, 2002
-------------- -------------

Premium earned $ 80 $ 167
Underwriting loss $ 41 $ 44

During the six months ended June 30, 2002, St. Paul did not enter into
a corporate aggregate excess-of loss reinsurance program.

4. SEGMENT INFORMATION

Predecessor has four reportable segments: North American Property,
North American Casualty, International, and Finite Reinsurance. These segments
are consistent with the manner in which

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The St. Paul Companies, Inc.
Reinsurance Underwriting Segment (Predecessor)
Notes to Combined Statements (Unaudited), continued

Predecessor's business has been managed. Predecessor monitors and evaluates the
performance of its segments based principally on their underwriting results.
Assets are not specifically identifiable for these segments.

The summary below presents premiums earned and underwriting results for
Predecessor's reportable segments for the three and six months ended June 30,
2002 ($ in millions):

Premium Underwriting
earned gain (loss)
------- ------------

Three Months Ended June 30, 2002
North American Property $ 61 $ (9)
North American Casualty 103 (22)
International 63 12
Finite Risk 78 13
------- ------
Total $ 305 $ (6)
------- ------
Six Months Ended June 30, 2002
North American Property $ 125 $ 16
North American Casualty 271 (50)
International 120 40
Finite Risk 166 3
------- ------
Total $ 682 $ 9
------- ------

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

10.1 Trust Agreement effective as of January 1, 2003 among
Platinum Bermuda, Platinum US and State Street Bank
and Trust Company.

10.2 Quota Share Retrocession Agreement by and between
Platinum Bermuda and Platinum US dated as of May 13,
2003.

10.3 Commutation and release Agreement dated June 11,
2003, between Platinum US and Mountain Ridge
Insurance Company.

10.4 Aggregate Excess of Loss Retrocession Agreement,
dated June 11, 2003, between Platinum US and Mountain
Ridge Insurance Company.

10.5 Letter Agreement, dated June 20, 2003, between
Platinum Holdings and Gregory E.A. Morrison.

10.6 Letter Amendment to the 364-Day Credit Agreement,
dated June 20, 2003, between Platinum Holdings and
Citibank, N.A., JPMorgan Chase Bank, Bank of America,
N.A, Fleet National Bank and State Street Bank and
Trust Company.

10.7 Letter Agreement, dated June 30, 2003, extending the
Master Services Agreement, between Platinum Holdings
and St. Paul.

10.8 Referral Agreement between Platinum Bermuda and
Renaissance Underwriting Managers Ltd.

10.9 Letter Amendment, dated July 16, 2003, between
Platinum US and Michael D. Price.

10.10 Securities Purchase Agreement, dated July 20, 2003,
between Platinum Holdings and Gregory E.A. Morrison.

31.1 Certification of Gregory E.A. Morrison, President and
Chief Executive Officer of Platinum Holdings,
pursuant to Rule 13(a) of the Securities Exchange
Act, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

31.2 Certification of William A. Robbie, Chief Financial
Officer of Platinum Holdings, pursuant to Rule 13(a)
of the Securities Exchange Act, as adopted pursuant
to Section 302 at the Sarbanes-Oxley Act of 2002.

32.1 Certification of Gregory E.A. Morrison, President and
Chief Executive Officer of Platinum Holdings,
pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.

32.2 Certification of William A. Robbie, Chief Financial
Officer of Platinum Holdings, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 at
the Sarbanes-Oxley Act of 2002.

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(b) Reports on Form 8-K

Platinum Holdings filed a report on Form 8-K on May
14, 2003 reporting the appointment of Gregory E.A.
Morrison as President and Chief Executive Officer of
Platinum Holdings and Platinum Bermuda effective June
1, 2003, the appointment of Neill A. Currie to
Platinum Holdings' Board of Directors, and the
declaration by the Board of Directors of a quarterly
dividend of $0.08 per common share payable June 30,
2003 to shareholders of record on June 2, 2003.

Platinum Holdings filed a report on Form 8-K on May
14, 2003 updating its guidance with respect to
financial results for fiscal year 2003.

Platinum Holdings filed a report on Form 8-K on June
27, 2003 containing slides utilized in presentations
to investors and analysts from time to time.

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.

PLATINUM UNDERWRITERS HOLDINGS, LTD

Date: August 13, 2003 /s/ GREGORY E. A. MORRISON
-----------------------------------------------------
By: Gregory E. A. Morrison
President and Chief Executive Officer

Date: August 13, 2003 /s/ WILLIAM A. ROBBIE
-----------------------------------------------------
By: William A. Robbie
Executive Vice President and Chief Financial Officer

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