PLATINUM UNDERWRITERS HOLDINGS LTD - 10-K Annual Report

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

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004

[ ] 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 98-0416483
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

THE BELVEDERE BUILDING
69 PITTS BAY ROAD
PEMBROKE, BERMUDA HM 08
(Address of principal executive offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (441) 295-7195

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

COMMON SHARES, PAR VALUE $0.01 PER SHARE NEW YORK STOCK EXCHANGE
(Title of each class) (Name of each exchange on which registered)

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is an accelerated filer as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes [X] No [ ]

The aggregate market value of common shares held by non-affiliates of
the registrant as of June 30, 2004, the last business day of our most recently
completed second fiscal quarter, was $1,191,311,069 based on the closing sale
price of $30.43 per common share on the New York Stock Exchange on that date.
For purposes of this computation only, all officers, directors, and 10%
beneficial owners of the registrant are deemed to be affiliates.

As of February 15, 2005, there were outstanding 43,109,407 common shares,
par value $0.01 per share, of the registrant.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive proxy statement for the 2005
Annual General Meeting of Shareholders are incorporated by reference into Part
III of this report.

TABLE OF CONTENTS

PAGE
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PART I
Item 1. Business .................................................... 2
Item 2. Properties .................................................. 31
Item 3. Legal Proceedings ........................................... 31
Item 4. Submission of Matters to a Vote of Security Holders ......... 31

PART II
Item 5. Market For Registrant's Common Equity, Related
Shareholder Matters and Issuer Purchases of Equity
Securities .................................................. 32
Item 6. Selected Financial Data ..................................... 33
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations ................................... 34
Item 7A. Quantitative and Qualitative Disclosures About Market Risk .. 65
Item 8. Financial Statements and Supplementary Data ................. 66
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure .................................... 67
Item 9A. Controls and Procedures ..................................... 67
Item 9B. Other Information ........................................... 70

PART III
Item 10. Directors and Executive Officers of the Registrant .......... 70
Item 11. Executive Compensation ...................................... 70
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Shareholder Matters .................. 70
Item 13. Certain Relationships and Related Transactions .............. 70
Item 14. Principal Accountant Fees and Services ...................... 71

PART IV
Item 15. Exhibits and Financial Statement Schedules .................. 71

Signatures ............................................................. 80
Platinum Underwriters Holdings, Ltd. and Subsidiaries Financial
Statements ........................................................... F-1
Platinum Underwriters Holdings, Ltd. and Subsidiaries Financial
Statement Schedules .................................................. S-1
The Predecessor Business Combined Financial Statements ................. P-1
Exhibits

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PART I

The "Company," "Platinum," "we," "us," and "our" refer to Platinum
Underwriters Holdings, Ltd. and its consolidated subsidiaries, unless the
context otherwise indicates. "Platinum Holdings" refers to Platinum Underwriters
Holdings, Ltd., a Bermuda holding company. "Platinum Bermuda" refers to Platinum
Underwriters Bermuda, Ltd., a Bermuda reinsurance company and wholly owned
subsidiary of Platinum Holdings. "Platinum Ireland" refers to Platinum Regency
Holdings, an intermediate holding company domiciled in Ireland and a wholly
owned subsidiary of Platinum Holdings. "Platinum UK" refers to Platinum Re (UK)
Limited, a reinsurance company domiciled in the U.K. and a wholly owned
subsidiary of Platinum Ireland. "Platinum Finance" refers to Platinum
Underwriters Finance, Inc., a finance company in the U.S. and a wholly owned
subsidiary of Platinum Ireland. "Platinum US" refers to Platinum Underwriters
Reinsurance, Inc., a reinsurance company based in the U.S. and a wholly owned
subsidiary of Platinum Finance. "Platinum Services" refers to Platinum
Administrative Services, Inc., a U.S. company and a wholly owned subsidiary of
Platinum Finance that provides administrative services to the Company. The
"Initial Public Offering" refers to our initial public offering of common
shares, which was completed on November 1, 2002. The "ESU Offering" refers to
our offering of equity security units, consisting of a contract to purchase
common shares in 2005 and an ownership interest in a senior note of Platinum
Finance due 2007, which was completed concurrently with the Initial Public
Offering. "St. Paul" refers to The St. Paul Travelers Companies, Inc. (formerly
The St. Paul Companies, Inc.). "St. Paul Re" refers to the reinsurance
underwriting segment of St. Paul prior to the Initial Public Offering. "St. Paul
Investment" refers to our issuance to St. Paul of common shares and an option to
purchase additional common shares. "RenaissanceRe" refers to RenaissanceRe
Holdings Ltd., and "RenaissanceRe Investment" refers to our issuance to
RenaissanceRe of common shares and an option to purchase additional common
shares. The St. Paul Investment and the RenaissanceRe Investment each occurred
concurrently with the Initial Public Offering.

NOTE ON FORWARD-LOOKING STATEMENTS

This Form 10-K 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 (the "Exchange Act"). 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-K 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.

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

(1) conducting operations in a competitive environment;

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

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

(4) the effectiveness of our loss limitation methods and pricing models;

(5) the adequacy of the Company's liability for unpaid losses and loss
adjustment expenses;

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

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

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

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

(10) market volatility and interest rate and currency exchange rate
fluctuation;

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

(12) 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, which are
discussed in more detail in "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Risk Factors," should not be construed as
exhaustive. Additionally, forward-looking statements speak only as of the date
they are made, and we undertake no obligation to 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.

ITEM 1. BUSINESS

INDUSTRY OVERVIEW

GENERAL

Reinsurance is an arrangement in which an insurance company, referred to as
the reinsurer, agrees to assume from another insurance company, referred to as
the ceding company, all or a portion of the insurance risks that the ceding
company has underwritten under one or more insurance policies. In return, the
reinsurer receives a premium for the risks that it assumes from the ceding
company. Reinsurance, however, does not discharge the ceding company from its
liabilities to policyholders. Reinsurance can provide ceding companies with
three principal benefits: a reduction in net liability on individual risks,
catastrophe protection from large or multiple losses and assistance in
maintaining acceptable financial ratios. Reinsurance also provides a ceding
company with additional underwriting capacity by permitting it to accept larger
risks or write more business than would be possible without an accompanying
increase in capital.

TYPES OF REINSURANCE

Reinsurance is typically classified into two categories based on the
underlying insurance coverage: property and casualty reinsurance, and life and
annuity reinsurance.

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PROPERTY AND CASUALTY REINSURANCE

We write property and casualty reinsurance. Property reinsurance protects a
ceding company against financial loss arising out of damage to property or loss
of its use caused by an insured peril. Examples of property reinsurance are
property catastrophe and property per-risk coverages. Property catastrophe
reinsurance protects a ceding company against losses arising out of multiple
claims for a single event while property per-risk reinsurance protects a ceding
company against loss arising out of a single claim for a single event.

Casualty reinsurance protects a ceding company against financial loss
arising out of the obligation to others for loss or damage to persons or
property. Examples of casualty reinsurance are general and automobile liability,
professional liability, workers' compensation, accident and health, surety and
trade credit coverages.

Although property reinsurance involves a high degree of volatility,
property reinsurance claims are generally reported soon after the event giving
rise to the claim and tend to be assessed and paid relatively expeditiously. In
comparison, there tends to be a greater time lag between the occurrence,
reporting and payment of casualty reinsurance claims.

LIFE AND ANNUITY REINSURANCE

We do not currently write any life or annuity reinsurance although we may
do so in the future. Life reinsurance provides coverage with respect to
individual and group life risks to primary life insurers. Annuity reinsurance
provides coverage to insurers who issue annuity contracts to consumers who seek
to accumulate personal wealth or as protection against outliving their financial
resources. We may write this business through treaty arrangements.

EXCESS-OF-LOSS AND PROPORTIONAL REINSURANCE

Reinsurance can be written on either an excess-of-loss basis or a pro rata,
or proportional, basis. In the case of excess-of-loss reinsurance, the reinsurer
assumes all or a specified portion of the ceding company's risks in excess of a
specified claim amount, referred to as the ceding company's retention or the
reinsurer's attachment point, subject to a negotiated reinsurance contract
limit. For example, property catastrophe excess-of-loss reinsurance provides
coverage to a ceding company when its aggregate claims, arising from a single
occurrence during a covered period, such as a hurricane or an earthquake, exceed
the attachment point specified in the reinsurance contract. Other forms of
excess-of-loss reinsurance respond when each single claim exceeds the ceding
company's retention. Premiums for excess-of-loss reinsurance may be either a
specified dollar amount or a percentage of the premium charged by the ceding
company.

Excess-of-loss contracts can help reinsurers manage their underwriting risk
by increasing their ability to determine reinsurance premiums at specific
retention levels, independent of the premiums charged by primary insurers, and
based upon their own underwriting assumptions. Also, because primary insurers
typically retain a larger loss exposure under excess-of-loss contracts, we
believe that they have a greater incentive to underwrite risks and adjust losses
in a prudent manner.

In the case of proportional reinsurance, the reinsurer assumes a
predetermined portion of the ceding company's risks under the covered primary
insurance contract or contracts. The frequency of claims under a proportional
contract is usually greater than under an excess-of-loss contract, since the
reinsurer shares proportionally in all losses. Premiums for proportional
reinsurance are typically a predetermined portion of the premiums the ceding
company receives from its insureds.

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TREATY AND FACULTATIVE REINSURANCE

Reinsurance can be written either through treaty or facultative reinsurance
arrangements. In treaty reinsurance, the ceding company cedes, and the reinsurer
assumes, a specified portion of a type or category of risks insured by the
ceding company. In facultative reinsurance, the ceding company cedes, and the
reinsurer assumes, all or part of a specific risk or risks. Substantially all of
the reinsurance that we underwrite is on a treaty basis. We underwrite
facultative reinsurance in limited and opportunistic circumstances.

Generally, treaty reinsurers do not separately evaluate each of the
individual risks assumed under their treaties and are largely dependent on the
original risk underwriting decisions made by the ceding company's underwriters.
Accordingly, reinsurers will carefully evaluate the ceding company's risk
management and underwriting practices, as well as claims settlement practices
and procedures, in deciding whether to provide treaty reinsurance and in
appropriately pricing the treaty.

Generally, reinsurers who provide facultative reinsurance do so separately
from their treaty operations. Facultative reinsurance is normally purchased by
ceding companies for risks not covered by their reinsurance treaties, for
amounts in excess of the claims limits of their reinsurance treaties and for
unusual and complex risks. In addition, facultative reinsurance often provides
coverages for relatively large exposures, which may result in greater potential
claims volatility. Facultative reinsurance typically has higher underwriting and
other expenses than treaty reinsurance because each risk is individually
underwritten and administered.

FINITE REINSURANCE

Finite reinsurance, often referred to as non-traditional reinsurance,
involves structured reinsurance contracts designed to meet an individual ceding
company's strategic objectives. The same types of risks that are reinsured on a
traditional basis can be reinsured on a finite basis and usually involve an
excess-of-loss or proportional treaty. Typically, the amount of claims we might
pay is finite or capped. In return for this limit on claims, we often accept a
cap on our potential profit margin specified in the treaty and return profits
above this margin to the ceding company.

BROKER AND DIRECT REINSURANCE

Reinsurance can be written through reinsurance brokers or directly with
ceding companies. We believe that a ceding company's decision to select either
the broker market or the direct market is influenced by various factors
including, among others, market capacity, market competition, the value of the
broker's advocacy on the ceding company's behalf, the spread of risk,
flexibility in the terms and conditions, the ability to efficiently compare the
analysis and quotes of several reinsurers, the speed of a reinsurance placement,
the historical relationship with the reinsurer and the efficiency of claims
settlement with respect to a coverage.

We underwrite substantially all of our reinsurance through brokers, as we
believe that the use of reinsurance brokers enables us to operate on a more
cost-effective basis and to maintain the flexibility to enter and exit
reinsurance lines in a quick and efficient manner. We believe that brokers are
particularly useful in assisting with placements of excess-of-loss reinsurance
programs.

RETROCESSION

Reinsurers typically purchase reinsurance to reduce their own risk
exposure. Reinsurance of a reinsurer's risks is called retrocession. Reinsurance
companies cede risks under retrocessional

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agreements to other reinsurers, known as retrocessionaires, for reasons that
include reducing liability on individual risks, protecting against catastrophic
losses, stabilizing financial ratios and obtaining additional underwriting
capacity. We purchase and issue retrocessional contracts.

OUR BUSINESS

GENERAL

Platinum Holdings is a Bermuda holding company organized in 2002. We
provide property and marine, casualty and finite risk reinsurance coverages,
through reinsurance intermediaries, to a diverse clientele of insurers and
select reinsurers on a worldwide basis. We operate through three licensed
reinsurance subsidiaries: Platinum US, Platinum Bermuda and Platinum UK.

Platinum UK and Platinum Bermuda were formed in 2002 and have no prior
operating history or loss reserves subject to development prior to January 1,
2002. Platinum US had been an inactive licensed insurance company with no
underwriting activity prior to January 1, 2002. Platinum Ireland has no business
operations other than activity necessary to maintain its corporate existence and
its ownership of Platinum Finance and Platinum UK. Platinum Finance's activities
have generally been limited to raising funds for Platinum US through the
issuance of the senior note component of the ESU Offering. Platinum Services'
activities are limited to providing administrative services to the Company,
including legal, finance, actuarial, information technology and human resources
services. The following chart summarizes our corporate structure:

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(CORPORATE STRUCTURE CHART)

OUR STRATEGY

Our goal is to achieve attractive long-term returns for our shareholders,
while establishing Platinum as a disciplined risk manager and market leader in
selected classes of property and casualty reinsurance, through the following
strategies:

- Operate as a Multi-Class Reinsurer. We seek to offer a broad range of
reinsurance coverage to our ceding companies. We believe that this
approach enables us to more effectively serve our clients, diversify our
risk and leverage our capital.

- Focus on profitability, not market share. Our management team pursues a
strategy that emphasizes profitability rather than market share. Key
elements of this strategy are prudent risk selection, appropriate pricing
and adjustment of our business mix to respond to changing market
conditions.

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- Exercise disciplined underwriting and risk management. We exercise
underwriting and risk management discipline by (i) maintaining a diverse
spread of risk in our book of business across product lines and geographic
zones, (ii) emphasizing excess-of-loss contracts over proportional
contracts, (iii) managing our aggregate catastrophe exposure through the
application of sophisticated property catastrophe modeling tools and (iv)
monitoring our accumulating exposures on our non-property catastrophe
exposed coverages.

- Operate from a position of financial strength. As of December 31, 2004, we
had a total capitalization of $1,270,503,000. Our capital position is
unencumbered by any potential adverse development of unpaid losses for
business written prior to January 1, 2002. Our investment strategy focuses
on security and stability in our investment portfolio by maintaining a
diversified portfolio that consists primarily of investment grade
fixed-income securities. We believe these factors, combined with our
strict underwriting discipline, allow us to maintain our strong financial
position and to be opportunistic when market conditions are most
attractive.

OPERATING SEGMENTS

We have organized our worldwide reinsurance business around the following
three operating segments: Property and Marine, Casualty and Finite Risk. In each
of our operating segments, we offer our reinsurance products to providers of
commercial and personal lines of insurance. The following table sets forth the
net premiums written by the Company for the years ended December 31, 2004 and
2003 and the two-month period ended December 31, 2002 by operating segment and
by type of reinsurance ($ in thousands):

Years Ended December 31,
------------------------------------------------------ Period Ended
2004 2003 December 31, 2002
--------------------- -------------------- ---------------------

Property and Marine
Excess-of-loss .................... $ 366,184 22% 224,715 19% $ 56,549 19%
Proportional ...................... 138,255 8% 128,193 11% 32,792 11%
--------------------- -------------------- ---------------------
Total Property and Marine ....... 504,439 30% 352,908 30% 89,341 30%
--------------------- -------------------- ---------------------
Casualty
Excess-of-loss .................... 593,752 37% 389,992 33% 155,377 52%
Proportional ...................... 83,647 5% 84,008 7% 9,552 3%
--------------------- -------------------- ---------------------
Total Casualty .................. 677,399 42% 474,000 40% 164,929 55%
--------------------- -------------------- ---------------------
Finite Risk
Excess-of-loss .................... 270,629 16% 264,473 23% 43,844 15%
Proportional ...................... 193,546 12% 80,761 7% -- 0%
--------------------- -------------------- ---------------------
Total Finite Risk ............... 464,175 28% 345,234 30% 43,844 15%
--------------------- -------------------- ---------------------
Total
Excess-of-loss .................... 1,230,565 75% 879,180 75% 255,770 86%
Proportional ...................... 415,448 25% 292,962 25% 42,344 14%
--------------------- -------------------- ---------------------
Total ........................... $1,646,013 100% 1,172,142 100% $ 298,114 100%
--------------------- -------------------- ---------------------

The following table sets forth the net premiums written by the Company for
years ended December 31, 2004 and 2003 and the two-month period ended December
31, 2002 by operating segment and by geographic location of the ceding company
($ in thousands):

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Years Ended December 31,
------------------------------------------------------ Period Ended
2004 2003 December 31, 2002
--------------------- -------------------- ---------------------

Property and Marine
United States ..................... $ 320,506 19% 211,324 18% $ 37,523 13%
International ..................... 183,933 11% 141,584 12% 51,818 17%
--------------------- -------------------- ---------------------
Total Property and Marine ....... 504,439 30% 352,908 30% 89,341 30%
--------------------- -------------------- ---------------------
Casualty
United States ..................... 601,878 37% 436,789 37% 87,412 29%
International ..................... 75,521 5% 37,211 3% 77,517 26%
--------------------- -------------------- ---------------------
Total Casualty .................. 677,399 42% 474,000 40% 164,929 55%
--------------------- -------------------- ---------------------
Finite Risk
United States ..................... 428,024 26% 264,473 23% 28,937 10%
International ..................... 36,151 2% 80,761 7% 14,907 5%
--------------------- -------------------- ---------------------
Total Finite Risk ............... 464,175 28% 345,234 30% 43,844 15%
--------------------- -------------------- ---------------------
Total
United States ..................... 1,350,408 82% 912,586 78% 153,872 52%
International ..................... 295,605 18% 259,556 22% 144,242 48%
--------------------- -------------------- ---------------------
Total ........................... $1,646,013 100% 1,172,142 100% $ 298,114 100%
--------------------- -------------------- ---------------------

PROPERTY AND MARINE

The Property and Marine operating segment includes principally property and
marine reinsurance coverages that are written in the United States and
international markets. This business includes catastrophe excess-of-loss
reinsurance treaties, per-risk excess-of-loss treaties and proportional
treaties. We write a limited amount of other types of reinsurance on an
opportunistic basis. We employ underwriters and actuaries with expertise in each
of the following areas:

- Property. We provide reinsurance coverage for damage to property and
crops. Our catastrophe excess-of-loss reinsurance contracts provide a
defined limit of liability, permitting us to quantify our aggregate
maximum loss exposure for various catastrophe events. Quantification of
loss exposure is fundamental to our ability to manage our loss exposure
through geographical zone limits and program limits. In addition, when our
pricing standards are met, we write other property coverages, including
per-risk excess-of-loss or proportional treaties. We have also entered
into an agreement with an underwriting manager to underwrite property
facultative and program reinsurance risks.

- Marine. We provide reinsurance coverage for marine and offshore energy
insurance programs. Coverages reinsured include hull damage, protection
and indemnity, cargo damage, satellite damage and general marine
liability. Within Marine, we also write commercial and general aviation
reinsurance. Marine reinsurance treaties include excess-of-loss as well as
proportional treaties. We emphasize excess-of-loss treaties that allow our
evaluation using experience and exposure pricing models.

CASUALTY

The Casualty operating segment includes principally reinsurance treaties
that cover umbrella liability, general and product liability, professional
liability, workers' compensation, casualty clash, automobile liability, surety
and trade credit. This segment also includes accident and health reinsurance

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treaties, which are predominantly reinsurance of health insurance products. We
generally write casualty reinsurance on an excess-of-loss basis. Most
frequently, we respond to claims on an individual risk basis, providing coverage
when a claim for a single, original insured reaches our attachment point. We
write some excess-of-loss treaties on an occurrence basis that respond when all
of a ceding company's claims from multiple original insureds arising from a
single claims event exceed our attachment point. On an opportunistic basis, we
may write proportional treaties.

We seek reinsurance treaties covering established books of insurance
products where we believe that past experience permits a reasonable estimation
of the reinsurance premium adequacy. We underwrite new exposures selectively and
only after a comprehensive evaluation of the risk being reinsured and the
capabilities of the ceding company. We employ underwriters and pricing actuaries
with expertise in each of the following areas:

- Umbrella Liability. An umbrella policy is an excess insurance policy that
provides coverage, typically for general liability or automobile liability,
when claims, individually or in the aggregate, exceed the limit of the
original policy underlying the excess policy. A claim must exceed the limit
of some underlying policy for the claim to be considered under an umbrella
policy. We primarily reinsure commercial umbrella liability policies.

- General and Product Liability. We provide reinsurance of third party
liability coverages for commercial and personal insureds. We provide,
predominantly on an excess-of-loss basis, various coverages of both small
and large companies, including commercial, farmowners and homeowners
policies as well as third party liability coverages such as product
liability.

- Professional Liability. We write reinsurance treaties for professional
liability programs, including directors and officers, employment practices
liability, and errors and omissions for professionals such as lawyers,
medical professionals, architects, engineers and other professionals. In
most circumstances, the underlying insurance products for these lines of
business are written on a claims made basis, which requires claims related
to the liabilities insured under the policy to be submitted to the insurer
during a specified coverage period.

- Accident and Health. We provide accident and health reinsurance, often in
the form of quota share reinsurance of a ceding company writing aggregate
and per-person stop loss coverage of self-insured employer medical plans. We
also write reinsurance of first dollar health insurance, student health
insurance, Medicare and Medicare supplement, and other forms of accident and
health insurance.

- Workers' Compensation. We reinsure workers' compensation on a catastrophic
basis as well as on a per-claimant basis. We may provide full statutory
coverage or coverage that is subject to specific carve-outs. Our predominant
exposure to workers' compensation would generally arise from a single claims
occurrence, such as a factory explosion, involving more than one claimant.

- Casualty Clash. Casualty clash reinsurance responds to claims arising from a
single set of circumstances covered by more than one insurance policy or
multiple claimants on one policy. This type of reinsurance is analogous to
property catastrophe reinsurance, but written for casualty lines of
business. Our casualty clash treaties are generally excess-of-loss contracts
with both occurrence limits and aggregate limits.

- Automobile Liability. Automobile insurance policies provide first party
coverage for damage to the insured's vehicle and third party coverage for
the insured's liability to other parties for injuries and for damage to
their property due to the use of the insured vehicle. These insurance

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policies may also provide coverage for uninsured motorists and medical
payments. We generally reinsure automobile liability on an excess-of-loss
basis, generally for claims greater than $100,000. Our predominant exposure
arises from third party liability claims and the related legal defense
costs.

- Surety. Our surety business relates to the reinsurance of risks associated
with commercial and contract surety bonds issued to third parties to
guarantee the performance of an obligation by the principal under the bond.
Commercial bonds guarantee the performance of compliance obligations arising
out of regulatory or statutory requirements. Contract bonds guarantee the
performance of contractual obligations between two parties and include
payment and performance bonds. The majority of our surety treaties are
written on an excess-of-loss basis with an aggregate limit.

- Trade Credit. Trade credit insurance is purchased by companies to ensure
that invoices for goods and services provided to their customers are paid on
time. Our trade credit coverages provide reinsurance for financial losses
sustained through the failure of an insured's customers to pay for goods or
services supplied to them. We reinsure trade credit both on a proportional
and an excess-of-loss basis.

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 classes of risks
underwritten through finite risk contracts are generally consistent with the
classes covered by traditional products. Typically, the amount of claims we
might pay is finite or capped. In return for this limit on claims, we often
accept a cap on our potential profit margin specified in the treaty and return
profits above this margin to the ceding company. The three main categories of
finite risk contracts that we underwrite are described below:

- Finite quota share. Under finite quota share reinsurance contracts, the
reinsurer agrees to indemnify a ceding company for a percentage of its
losses up to an aggregate maximum or cap in return for a percentage of the
ceding company's premium, less a ceding commission. The contracts typically
include certain risk mitigation features.

- Multi-year excess-of-loss. These reinsurance contracts often complement
ceding companies' traditional excess-of-loss reinsurance programs. In
general, these contracts are designed so that the ceding company funds the
expected level of loss activity over a multi-year period. The reinsurer
incorporates a profit margin to cover its costs and the risk that losses are
worse than expected. This type of product often carries an up-front premium
plus additional premiums, which are dependent on the magnitude of losses
claimed by the ceding company under the contract.

- Whole account aggregate stop loss. Aggregate stop loss reinsurance contracts
provide broad protection against a wide range of contingencies that are
difficult to address with traditional reinsurance. The reinsurer agrees to
indemnify a ceding company for aggregate losses in excess of a deductible
specified in the contract. These contracts can be offered on a single or
multi-year basis, and provide either catastrophic or attritional loss
protection.

- 10 -

MARKETING

We market our reinsurance products worldwide through our underwriting
offices and non-exclusive relationships with the leading reinsurance brokers
active in the U.S. and non-U.S. markets.

Based on in-force premiums written by the Company at December 31, 2004, the
five brokers from which we derived the largest portions of our business (with
the approximate percentage of business derived from such brokers and their
affiliates) are Benfield Blanch Inc. (28%), Marsh & McLennan Companies (25%),
Aon Corporation (16%), Willis Group Holdings (8%) and Towers Perrin (7%). The
loss of business relationships with any of these top five brokers could have a
material adverse effect on our business.

In addition to their role as intermediaries in placing risk, brokers
perform data collection, contract preparation and other administrative tasks. We
believe that by relying largely on reinsurance brokers we are able to avoid the
expense and regulatory complications of a worldwide network of offices, thereby
minimizing fixed costs associated with marketing activities. We believe that by
maintaining close relationships with brokers we are able to obtain access to a
broad range of potential ceding companies.

UNDERWRITING AND RISK MANAGEMENT

Our disciplined approach to underwriting and risk management emphasizes
profitability rather than premium volume or market share.

We seek to limit our overall exposure to risk by limiting the amount of
reinsurance we write by geographic zone, by peril and by type of program or
contract. Our risk management uses a variety of means, including the use of
contract terms, diversification criteria, probability analysis and analysis of
comparable historical loss experience. We estimate the impact of certain
catastrophic events using catastrophe modeling software and contract information
to evaluate our exposure to losses from individual contracts and in the
aggregate.

For catastrophe coverages exposed to natural perils, we measure our
exposure to aggregate catastrophe claims using a catastrophe computer model that
analyzes the effect of wind speed and earthquakes on the property values within
our portfolio. We seek to limit the amount of capital that we can potentially
lose from a severe catastrophe event, however there can be no assurance that we
will successfully limit actual losses from such a catastrophe event. We also
monitor our exposures from non-natural peril catastrophe exposed accumulating
risks, including surety, umbrella liability, directors and officers liability,
trade credit and terrorism reinsurance.

Many of our reinsurance contracts do not contain an aggregate loss limit or
a loss ratio limit, which means that there is no contractual limit to the number
of claims that we may be required to pay pursuant to such reinsurance contracts.
However, substantially all of our property reinsurance contracts with natural
catastrophe exposure have occurrence limits that limit our exposure. In
addition, substantially all of our high layer property, casualty and marine
excess-of-loss contracts contain aggregate loss limits. Our actuaries and
underwriters work together to establish appropriate pricing models for these
purposes.

In connection with the review of any program proposal, we consider the
quality of the ceding company, including the experience and reputation of its
management, its capital and its risk management strategy. In addition, we seek
to obtain information on the nature of the perils to be included and, in the
case of natural peril catastrophe exposures, aggregate information as to the
location or locations of the risks covered under the reinsurance contract. We
request information on the ceding company's loss

- 11 -

history for the perils proposed to be reinsured, together with relevant
underwriting considerations, which would impact exposures to reinsurers. If the
program meets all these initial underwriting criteria, we then evaluate the
proposal in terms of its risk/reward profile to assess the adequacy of the
proposed pricing and its potential impact on our overall return on capital.

We use sophisticated modeling techniques to measure and estimate loss
exposure under both simulated and actual loss scenarios and in comparing
exposure portfolios to both single and multiple events. We take an active role
in the evaluation of commercial catastrophe exposure models, which form the
basis for our own proprietary pricing models. These computer-based loss modeling
systems primarily utilize direct exposure information obtained from our clients
in addition to independent external data, including data compiled by A.M. Best
Company ("Best's"), to assess each client's potential for catastrophe losses. We
believe that modeling is an important part of the underwriting process for
catastrophe exposure pricing. Our client base may also use one or more of the
various modeling consulting firms in their exposure management analysis. We also
have access to the historical loss experience of St. Paul Re to assist us in
pricing individual treaties and overall lines of business.

In 2002, we entered into a five-year Services and Capacity Reservation
Agreement with RenaissanceRe, pursuant to which RenaissanceRe provides
consulting services to us in connection with our property catastrophe book of
business. No more than twice per year, at our request, RenaissanceRe analyzes
our property catastrophe treaties and contracts and assists us in measuring risk
and managing our aggregate catastrophe exposures.

RISK DIVERSIFICATION

In addition to the strategies described above to manage our risks, we seek
to diversify our property catastrophe exposure across geographic zones around
the world in order to obtain a favorable spread of risk. We attempt to limit our
coverage for risks located in a particular zone to a predetermined level.
Currently, our greatest property exposures are in states on the west and gulf
coasts and in the southeastern part of the United States, as well as in the
Caribbean, Japan and northern Europe.

We maintain a database of our exposures in each geographic zone and
estimate our probable maximum loss for each zone and for each peril (e.g.,
earthquakes, hurricanes and floods) to which that zone is subject based on
catastrophe models and underwriting assessments. We also use catastrophe
modeling to review exposures on events that cross country borders such as wind
events that may affect the Caribbean and Florida or the United Kingdom and
continental Europe. The largest exposures are in the United States for
earthquake and hurricane, in Europe for flood and wind, and in Japan for
earthquake and typhoons.

We seek to diversify our casualty exposure by writing casualty business
throughout the United States and internationally. In addition, we seek to
diversify our casualty exposure by writing casualty reinsurance across a broad
range of product lines.

RETROCESSIONAL REINSURANCE

We may obtain retrocessional reinsurance to reduce liability on individual
risks, protect against catastrophic losses and obtain additional underwriting
capacity. The major types of retrocessional coverage that we purchase or may
purchase include specific coverage for certain property, marine and casualty
exposures and catastrophe coverage for property exposures.

We may purchase other retrocessional coverage on a selective basis. Our
decisions with respect to purchasing retrocessional coverage take into account
both the potential coverage and market conditions

- 12 -

with respect to the pricing, terms, conditions and availability of such
coverage, with the aim of securing cost-effective protection. We expect that the
type and level of retrocessional coverage will vary over time, reflecting our
view of the changing dynamics of both the underlying exposure and the
reinsurance markets. There can be no assurance that retrocessional coverage will
be available on terms acceptable to us.

We consider the financial strength of retrocessionaires when determining
whether to purchase retrocessional coverage from them. Retrocessional coverage
is generally derived from companies rated "A" or better by Best's unless the
retrocessionaire's obligations are fully collateralized. For exposures where
losses become known and are paid in a relatively short period of time, we may
obtain retrocessional coverage from companies rated "A-" or better by Best's.
The financial performance and rating status of all material retrocessionaires is
routinely monitored. Retrocessional agreements do not relieve us from our
obligations to the insurers and reinsurers from whom we assume business.
Consequently, the failure of retrocessionaires to honor their obligations would
result in losses to us.

For the year ended December 31, 2004, Platinum Bermuda reinsured in the
aggregate approximately 70% of Platinum US' reinsurance business and 55% of
Platinum UK's reinsurance business. Platinum Bermuda established and funded
trusts to collateralize its retrocessional obligations to Platinum US and
Platinum UK. Platinum US and Platinum UK also obtained from third party
retrocessionaires excess-of-loss per occurrence coverage of $21.25 million in
excess of $10 million with respect to marine business and aggregate
excess-of-loss coverage of $5 million with respect to crop business. In
addition, Platinum US reinsured Platinum UK for $60 million per occurrence on an
excess-of-loss basis in excess of $50 million with respect to international
property business.

Pursuant to the Services and Capacity Reservation Agreement with
RenaissanceRe described above, at our request RenaissanceRe will provide us
with quotations for non-marine property catastrophe retrocessional coverage with
aggregate limits up to $100 million annually, either on an excess-of-loss or
proportional basis. These quotations, which are in RenaissanceRe's sole
discretion, reflect, among other things, an analysis of exposure, limit,
retention, exclusions and other treaty terms. The annual fee that we pay to
RenaissanceRe for this coverage commitment and the consulting services is the
greater of (i) $4 million or (ii) 3.5% of our aggregate gross written non-marine
non-finite property catastrophe premium (including reinstatements), adjusted
annually 30 days after each anniversary. This annual fee is in addition to any
retrocessional premium otherwise payable to RenaissanceRe for retrocessional
coverage purchased by us from RenaissanceRe. The fees under this agreement were
approximately $6.1 million for the contract period from October 1, 2003 through
September 30, 2004.

CLAIMS ADMINISTRATION

Our claims personnel administer claims arising from our reinsurance
contracts. The responsibilities of our claims personnel include reviewing loss
reports, monitoring claims, handling activities of clients, requesting
additional information where appropriate, posting case reserves and approving
payment of individual claims. Authority for payment and establishing reserves is
based upon the level and experience of claims personnel.

In addition to managing reported claims and conferring with ceding
companies on claims matters, our claims personnel conduct periodic audits of
specific claims and the overall claims procedures of our ceding companies at
their offices. We rely on our ability to effectively monitor the claims handling
and claims reserving practices of ceding companies in order to establish the
proper reinsurance premium for reinsurance agreements and to establish proper
loss reserves. Moreover, prior to accepting certain risks, our underwriters will
often request that our claims personnel conduct pre-underwriting claims audits
of prospective ceding companies. Through these audits, we attempt to evaluate
the ceding company's

- 13 -

claims-handling practices, including the organization of their claims
department, their fact-finding and investigation techniques, their loss
notifications, the adequacy of their reserves, their negotiation and settlement
practices and their adherence to claims-handling guidelines. Following these
audits, our claims personnel provide feedback to the ceding company, including
an assessment of the claims operation and, if appropriate, recommendations
regarding procedures, processing and personnel.

With respect to the reinsurance contracts that we assumed from St. Paul Re,
claims are managed by St. Paul Re's claims department, subject to our
supervision and management, pursuant to the quota share retrocession agreements
that we entered into with St. Paul. Under those agreements, St. Paul's
subsidiaries transferred to us the liabilities, related assets and rights and
risks under substantially all of the reinsurance contracts entered into by St.
Paul's subsidiaries on or after January 1, 2002 (except for certain liabilities
relating to the flooding in Europe in August 2002 and reinsurance underwritten
in London covering exposures arising from financial institutions). We reimburse
St. Paul for its costs of managing these claims. We may, at our discretion and
expense, take over administration of any specific claims.

UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES

Under applicable insurance laws and regulations and accounting principles
generally accepted in the United States of America ("U.S. GAAP"), we establish
liabilities for payment of losses and loss adjustment expenses ("LAE") that will
arise from our reinsurance products. These liabilities are balance sheet
estimates of future amounts required to pay losses and LAE for reinsured claims
that have occurred on or before the balance sheet date. Unpaid losses and LAE
fall into two categories: estimates of liabilities for losses and LAE incurred
but not reported ("IBNR") and case basis estimates for reported losses and LAE.
Estimates of IBNR are balance sheet liabilities established to provide for
losses for claims arising from occurrences or events that have given rise to a
loss before any claims are reported. Significant periods of time can elapse
between the occurrence of a reinsured claim, its reporting by the insured to the
primary insurer and from the primary insurer to the reinsurer. Under U.S. GAAP,
we do not establish liabilities until the occurrence of an event that may give
rise to a loss.

Upon receipt of a notice of claim from a ceding company, we establish an
estimate of the case basis liability for our portion of the ultimate settlement.
Case basis liabilities are usually based upon the liability estimate and other
information reported by the ceding company and may be increased or reduced as
deemed necessary by our claims personnel. We establish liabilities for losses
and LAE based on past experience (including the historical loss experience of
St. Paul Re, current developments and likely trends). Because estimation of
unpaid losses and LAE is an inherently uncertain process, we believe that
quantitative techniques are enhanced by professional and managerial judgment.
The establishment of liabilities for losses and LAE, and adjustments to
liabilities resulting from changes in our estimates, are reflected in current
income.

Unpaid losses and LAE represent our best estimates, at a given point in
time, of the ultimate settlement and administration costs of claims incurred,
and it is possible that the ultimate liability may materially differ from such
estimates. Such estimates are not precise because, among other things, they are
based on predictions of future developments and estimates of future trends in
claim severity and frequency and other factors. During the claim settlement
period, it often becomes necessary to refine and adjust the case basis estimates
of liability, and thus the estimates may be adjusted either upward or downward,
based on periodic reviews of developments. Even after such adjustments, ultimate
liability may materially differ from the revised estimates.

The uncertainty inherent in loss estimation is particularly pronounced for
casualty coverages, such as umbrella, general and product liability,
professional liability and automobile liability, where information, such as
required medical treatment and costs for bodily injury claims, only emerges over

- 14 -

time. In the overall reserve setting process, provisions for economic inflation
and changes in the social and legal environment are considered. The uncertainty
inherent in the reserving process for primary insurers is even greater for the
reinsurer. This is because of, but not limited to, the time lag inherent in
reporting information from the primary insurer to the reinsurer and differing
reserving practices among ceding companies.

Development of liability for unpaid losses and LAE for the years ended
December 31, 2004 and 2003 and the two-month period ended December 31, 2002 is
summarized as follows ($ in thousands):

2002
2004 2003 Period
----------- ----------- -----------

Net unpaid losses and LAE as of the beginning of period.. $ 731,918 281,659 $ --
----------- ----------- -----------
Net incurred related to:
Current year .......................................... 1,101,820 648,137 60,356
Prior years ........................................... (82,016) (63,966) --
----------- ----------- -----------
Total net incurred losses and LAE ............... 1,019,804 584,171 60,356
----------- ----------- -----------
Unpaid losses and LAE assumed from St. Paul ............. -- -- 221,303
----------- ----------- -----------
Net paid losses and LAE:

Current year .......................................... 174,870 102,669 --
Prior years ........................................... 205,889 41,709 --
----------- ----------- -----------
Total net paid losses and LAE ................... 380,759 144,378 --

Effects of foreign currency exchange rate changes ....... 8,264 10,466 --
----------- ----------- -----------
Net unpaid losses and LAE as of the end of period ....... 1,379,227 731,918 281,659

Reinsurance recoverable ................................. 1,728 5,016 --
----------- ----------- -----------
Gross unpaid losses and LAE at end of period ............ $ 1,380,955 736,934 $ 281,659
----------- ----------- -----------

The favorable development in 2004 related to the prior year of $82,016,000
includes approximately $57,151,000 of net favorable development on property and
certain other lines of business with relatively short patterns of reported
losses, including approximately $7,700,000 attributable to prior years'
catastrophe losses. In addition, the favorable development in 2004 includes
approximately $24,865,000 of reductions in unpaid losses and LAE associated with
changes in 2004 of estimates of premiums and the patterns of their earnings
across current and prior accident years. Such changes did not have a significant
net effect on the current year's results of operations.

The lines experiencing favorable development are principally property
coverages provided in both the Property and Marine and Finite Risk segments.
During 2004 and 2003, actual reported losses were significantly less than
expected for these short-tailed property lines resulting in reductions in
estimated ultimate losses.

The favorable development in 2003 related to the prior year of $63,966,000
includes approximately $50,866,000 of net favorable development on property and
certain other lines of business with relatively short patterns of reported
losses. The favorable development also includes approximately $13,100,000 of
reductions in unpaid losses and LAE associated with the reduction in 2003 of
casualty premiums originally estimated and earned in 2002.

The following table shows the development of liability for net unpaid
losses and LAE for the years ended December 31, 2004 and 2003 and the two-month
period ended December 31, 2002. The re-

- 15 -

estimated liabilities reflect additional information regarding claims incurred
prior to the end of the preceding financial year. A redundancy or deficiency
will result from changes in estimates of liabilities recorded at the end of the
prior year. The cumulative redundancy reflects the cumulative differences
between the original estimate and the currently re-estimated liability. Annual
changes in the estimates are reflected in the statement of income for each year
as the liabilities are revalued. Unpaid losses and LAE denominated in foreign
currencies are restated at the foreign exchange rates in effect at December 31,
2004 and the resulting cumulative foreign exchange effect is shown as an
adjustment to the cumulative redundancy. Each amount in the tables includes the
effects of all changes in amounts for the prior year. The table does not present
accident year or underwriting year development data. Conditions and trends that
have affected the development of liabilities in the past may not necessarily
occur in the future. Therefore, it would not be appropriate to extrapolate
future deficiencies or redundancies based on the following table ($ in
thousands):

2002 2003 2004
--------- --------- ---------

Net unpaid losses and LAE....................... $ 281,659 731,918 $1,379,227
Net unpaid losses and LAE re-estimated as of:
One year later................................ 224,693 680,173
Two years later............................... 194,422

Net cumulative redundancy............... 87,237 51,745
Less deficiency due to foreign currency exchange 8,986 7,000
--------- --------
Cumulative redundancy excluding foreign currency
exchange...................................... 96,223 58,745
--------- --------
Net cumulative paid losses and LAE paid as of:

One year later................................ 41,709 287,663
Two years later............................... 62,604

Gross liability -- end of year.................. 281,659 736,934 1,380,955
Reinsurance recoverable......................... -- 5,016 1,728
--------- -------- ----------
Net liability -- end of year.................... 281,659 731,918 $1,379,227
--------- -------- ----------

Gross liability -- re-estimated................. 194,422 685,189
Gross cumulative redundancy..................... $ 87,237 51,745

INVESTMENTS

Reinsurance company investments must comply with applicable laws and
regulations, which prescribe the kind, quality and concentration of investments.
In general, these laws and regulations permit investments, within specified
limits and subject to some qualifications, in federal, state and municipal
obligations, corporate bonds, mortgage and asset backed securities, preferred
and common equity securities, sovereign and supranational securities, mortgage
loans, real estate and some other investments.

INVESTMENT MANAGEMENT AGREEMENT

We have entered into an investment management agreement with Alliance
Capital Management L.P. ("Alliance"), which provides investment advisory
services to us. The agreement may be terminated by either party by giving 30
days' notice of termination. We pay Alliance a fee based on the amount of assets
managed. We intend to consider alternative investment management firms during
2005.

- 16 -

GENERAL GUIDELINES

We have developed investment guidelines for the management of our
investment portfolio by Alliance. Although these guidelines stress
diversification of risk, preservation of capital and market liquidity,
investments are subject to market risks and fluctuations, as well as risks
inherent in particular securities. Interest rates and levels of inflation also
affect investment returns. The primary objective of the portfolio, set forth in
the guidelines, is to maximize investment returns consistent with appropriate
safety, diversification, tax and regulatory considerations and to provide
sufficient liquidity to enable us to meet our obligations on a timely basis.

Our investment strategy takes into consideration the risks inherent in our
business. For this reason, our investment policy is conservative with a strong
emphasis on high quality, fixed maturity investments. Consistent with this
policy, the duration of our portfolio takes into account the estimated duration
of our reinsurance liabilities and other contractual liabilities.

Within our fixed maturity portfolio we invest only in investment grade
securities. We currently do not intend to invest in real estate, common equity
securities or other classes of alternative investments, although from time to
time we make equity investments of a strategic nature. Our investment guidelines
contain restrictions on the portion of the portfolio that may be invested in the
securities of any single issue or issuer, with the exception of governments or
government agencies with prescribed minimum ratings. Our investment managers may
be instructed to invest some of the investment portfolio in currencies other
than U.S. dollars based upon the business we anticipate writing, the exposures
and unpaid losses and LAE on our books, or regulatory requirements. Our
investment guidelines provide that financial futures and options and foreign
exchange contracts may not be used in a speculative manner but may be used only
as part of a defensive hedging strategy.

From time to time, we expect to reevaluate our investment guidelines to
reflect any changes in our assumptions about liability duration, market
conditions, prevailing interest rates and other factors discussed above. Any
change in our guidelines will be subject to the ongoing oversight and approval
of the Board of Directors.

CLASSIFICATION

We classify our investments as available-for-sale, trading or other
invested assets. Our available-for-sale and trading portfolios are comprised
entirely of investment grade fixed maturity investments. Other invested assets
currently represent a strategic equity investment in a privately held
reinsurance company.

VALUATION

All of our fixed maturity securities are carried at their estimated fair
value. For our available-for-sale securities, the difference between amortized
cost and the fair value, net of any deferred tax, (commonly referred to as net
unrealized gain or loss) is charged or credited directly to our shareholders'
equity. For our trading securities, the difference is charged or credited to our
statement of income. We calculate the fair value based on quoted market prices,
as reported by reputable market data providers. If quoted market prices are not
available, fair values are estimated either based on values obtained from
independent pricing services or based on cash flow estimates. Realized gains and
losses on disposal of our fixed maturity investments are determined based upon
specific identification of the cost of investments sold and are recorded in our
statement of income. We routinely review our available-for-sale investments to
determine whether unrealized losses represent temporary changes in fair value or
are the result of "other than temporary impairments." The process of determining
whether a security is other than

- 17 -

temporarily impaired is subjective and involves analyzing many factors,
including the duration and magnitude of an unrealized loss, specific credit
events, the overall financial condition of the issuer, and the Company's intent
to hold a security for a sufficient period of time for the value to recover the
unrealized loss. The Company believes it has the ability to hold any specific
security to its stated maturity. This is based on current and anticipated future
positive cash flow from operations that generates sufficient liquidity in order
to meet our obligations. If we determine that an unrealized loss on a security
is other than temporary, we write down the carrying value of the security and
record a realized loss in our statement of income.

Other invested assets, which do not have a quoted market price, are carried
at estimated fair value.

Cash equivalents and short-term investments are carried at cost, which
approximates fair value.

The following table shows, in the aggregate, the fair value of our
portfolio of invested assets (except for other invested assets) at December 31,
2004 ($ in thousands):

U.S. Government and U.S. Government agencies ................ $ 4,203
Corporate bonds ............................................. 1,158,797
Mortgage and asset-backed securities ........................ 511,069
Municipal bonds ............................................. 215,251
Foreign governments, states and foreign corporate ........... 347,206
----------
Total bonds ......................................... 2,236,526
Redeemable preferred stocks ................................. 3,676
----------
Total fixed maturities .............................. $2,240,202
----------

QUALITY

Our current investment guidelines call for our invested asset portfolio to
have at least an average A2 rating as measured by Moody's Investors Service
("Moody's"). At December 31, 2004, our fixed maturity portfolio had a dollar
weighted average rating of Aa3. The average yield of our portfolio for the year
ended December 31, 2004 was 4.3%.

The following table summarizes the composition of the fair value of the
fixed maturity portfolio at December 31, 2004 by rating as assigned by Moody's:

Fair Value % of Total
---------- ----------

Aaa ............................................. $ 764,002 34.1%
Aa - Aa3 ........................................ 447,071 20.0%
A - A3 .......................................... 909,403 40.6%
Baa ............................................. 119,726 5.3%
---------- ----------
Total ....................................... $2,240,202 100.0%
---------- ----------

DURATION

At December 31, 2004, our fixed maturity portfolio had an average weighted
duration of 3.9 years. The following table summarizes the fair value of our
available-for-sale fixed maturity portfolio by contractual maturities at
December 31, 2004; actual maturities may differ from contractual maturities
because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties ($ in thousands):

- 18 -

Amortized
Cost Fair Value
---------- ----------

Due in one year or less ............................ $ 54,567 $ 54,390
Due from one to five years ......................... 929,647 932,655
Due from five to ten years ......................... 411,388 415,697
Due in ten or more years ........................... 236,181 240,042
Mortgage and asset backed securities ............... 508,757 511,069
---------- ----------
Total bonds ................................ 2,140,540 2,153,853
Redeemable preferred stocks ........................ 3,750 3,676
---------- ----------
Total available-for-sale fixed maturities .. $2,144,290 $2,157,529
---------- ----------

COMPETITION

The property and casualty reinsurance industry is highly competitive. We
compete with reinsurers worldwide, some of which have greater financial,
marketing and management resources than ours. Some of our competitors are large
financial institutions that have reinsurance segments, while others are
specialty reinsurance companies. Financial institutions have also created
alternative capital market products that compete with reinsurance products, such
as reinsurance securitization. Our principal competitors vary by type of
business. Bermuda-based reinsurers are significant competitors on property
catastrophe business. Lloyd's of London syndicates are significant competitors
on marine business. On international business, the large European reinsurers are
significant competitors. Large U.S. direct reinsurers, as well as lead
U.S.-based broker market reinsurers, are significant competitors on U.S.
casualty business. On an overall basis, we expect that our most significant
competitors include ACE Limited, Arch Capital Group Ltd., Axis Capital Holdings,
The Chubb Corporation, White Mountains Insurance Group, Ltd., Endurance
Specialty Holdings, Everest Re Group, General Re Corporation, IPC Holdings Ltd.,
Lloyd's of London, Montpelier Re Holdings Ltd., Munich Re Group, Odyssey Re
Holdings Corp., Partner Re Limited, RenaissanceRe, Swiss Reinsurance Company,
Transatlantic Holdings and XL Capital Limited.

Following the September 11, 2001 terrorist attack, a number of individuals
and companies in the reinsurance industry established new, well-capitalized,
Bermuda-based reinsurers to benefit from improved market conditions, and a
number of existing competitors raised additional capital. Many of the reinsurers
that entered the reinsurance markets have more capital than we have. In
addition, there may be established companies or new companies of which we are
not aware that may be planning to commit capital to this market. The full effect
of this additional capital on the reinsurance market and on the terms and
conditions of the reinsurance contracts of the types we expect to underwrite may
not be known for some time. Competition in the types of reinsurance business
that we underwrite is based on many factors, including premium charges and other
terms and conditions offered, services provided, ratings assigned by independent
rating agencies, speed of claims payment, claims handling experience, perceived
financial strength and experience and reputation of the reinsurer in the line of
reinsurance to be underwritten.

Traditional as well as new capital market participants from time to time
produce alternative products (such as reinsurance securitizations, catastrophe
bonds and various derivatives such as swaps) that may compete with certain types
of reinsurance, such as property catastrophe. Over time, these numerous
initiatives could significantly affect supply, pricing and competition in our
industry.

RATINGS AND COLLATERAL

Best's is generally considered to be a significant rating agency for the
evaluation of insurance and reinsurance companies. Best's ratings are based on a
quantitative evaluation of performance with respect

- 19 -

to profitability, capital adequacy and liquidity and a qualitative evaluation of
spread of risk, reinsurance programs, investments, unpaid losses and management.

Best's has assigned a financial strength rating of "A" (Excellent) to our
operating subsidiaries. This rating is the third highest of sixteen rating
levels. According to Best's, a rating of "A" indicates Best's opinion that a
company has an excellent ability to meet its ongoing obligations to
policyholders.

Ratings are used by ceding companies and reinsurance intermediaries as an
important means of assessing the financial strength and quality of reinsurers.
In addition, a ceding company's own rating may be adversely affected by a
downgrade in the rating of its reinsurer. Therefore, a downgrade of our rating
may dissuade a ceding company from reinsuring with us and may influence a ceding
company to reinsure with a competitor of ours that has a higher rating.

Furthermore, it is increasingly common for our reinsurance contracts to
contain terms that would allow the ceding companies to cancel the contract or
require us to provide collateral if we are downgraded below a certain rating
level. Whether a client would exercise this cancellation right would depend,
among other factors, on the reason for such downgrade, the extent of the
downgrade, the prevailing market conditions and the pricing and availability of
replacement reinsurance coverage. Therefore, we cannot predict the extent to
which this cancellation right would be exercised, if at all, or what effect any
such cancellations would have on our financial condition or future operations,
but such effect potentially could be material.

We may from time to time secure our obligations under our various
reinsurance contracts using trusts and letters of credit. We have entered into
agreements with several ceding companies that require us to provide collateral
for our obligations under certain reinsurance contracts with these ceding
companies under various circumstances, including where our obligations to these
ceding companies exceed negotiated thresholds. These thresholds may vary
depending on our rating from Best's or other rating agencies and a downgrade of
our ratings or a failure to achieve a certain rating may increase the amount of
collateral we are required to provide. We may provide the collateral by
delivering letters of credit to the ceding company, depositing assets into trust
for the benefit of the ceding company or permitting the ceding company to
withhold funds that would otherwise be delivered to us under the reinsurance
contract. The amount of collateral we are required to provide typically
represents a portion of the obligations we may owe the ceding company, often
including estimates of IBNR made by the ceding company. Since we may be required
to provide collateral based on the ceding company's estimate, we may be
obligated to provide collateral that exceeds our estimates of the ultimate
liability to the ceding company.

EMPLOYEES

At December 31, 2004, we employed 159 people. None of our employees is
subject to collective bargaining agreements. We are not aware of any efforts to
implement such agreements at any of our subsidiaries.

Certain of the Bermuda-based employees of Platinum Holdings, including our
Chief Executive Officer, Chief Financial Officer and General Counsel, are
employed pursuant to work permits granted by Bermuda authorities. These permits
expire at various times during the next few years. We have no reason to believe
that these permits would not be extended at expiration upon request, although no
assurance can be given in this regard.

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REGULATION

GENERAL

The business of reinsurance is regulated in most countries, although the
degree and type of regulation varies significantly from one jurisdiction to
another. Reinsurers are generally subject to less direct regulation than primary
insurers. In Bermuda, we operate under relatively less intensive regulatory
requirements. However, in the United States and in the United Kingdom, licensed
reinsurers must comply with financial supervision standards comparable to those
governing primary insurers. Accordingly, Platinum US and Platinum UK are subject
to extensive regulation under applicable statutes. In the United States, those
statutes delegate regulatory, supervisory and administrative powers to state
insurance commissioners.

BERMUDA REGULATION

Platinum Holdings and Platinum Bermuda are organized and domiciled in
Bermuda. As a holding company, Platinum Holdings is not subject to Bermuda
insurance regulations.

The Insurance Act 1978 (the "Insurance Act"), which regulates the insurance
business of Platinum Bermuda, provides that no person may carry on any insurance
business in or from within Bermuda unless registered as an insurer under the
Insurance Act by the Bermuda Monetary Authority (the "Authority"), which is
responsible for the day-to-day supervision of insurers. Under the Insurance Act,
insurance business includes reinsurance business.

An insurer's registration may be canceled by the Authority on certain
grounds specified in the Insurance Act, including failure of the insurer to
comply with its obligations under the Insurance Act or if, in the opinion of the
Authority, the insurer has not been carrying on business in accordance with
sound insurance principles. The Insurance Act also imposes solvency and
liquidity standards and auditing and reporting requirements on Bermuda insurance
companies and grants to the Authority powers to supervise, investigate and
intervene in the affairs of insurance companies. Certain significant aspects of
the Bermuda insurance regulatory framework are set forth below.

The Insurance Act distinguishes between insurers carrying on long-term
business and insurers carrying on general business. There are four
classifications of insurers carrying on general business, with Class 4 insurers
being the largest and, consequently, subject to the strictest regulation.
Platinum Bermuda is registered as a Class 4 and long-term insurer and is
regulated as such under the Insurance Act.

Principal Representative. An insurer is required to maintain a principal
office in Bermuda and to appoint and maintain a principal representative in
Bermuda. For the purpose of the Insurance Act, the principal office of Platinum
Bermuda is at our principal executive offices in Bermuda, and Platinum Bermuda's
principal representative is Barton W. Hedges, the President and Chief Operating
Officer of Platinum Bermuda. Without a reason acceptable to the Authority, an
insurer may not terminate the appointment of its principal representative, and
the principal representative may not cease to act as such, unless 30 days'
notice in writing to the Authority is given of the intention to do so. It is the
duty of the principal representative, within 14 days of reaching the view that
there is a likelihood of the insurer for which the principal representative acts
becoming insolvent or that a reportable "event" has, to the principal
representative's knowledge, occurred or is believed to have occurred, to make a
report in writing to the Authority setting out all the particulars of the case
that are available to the principal representative. Examples of such a
reportable "event" include failure by the insurer to comply substantially with a
condition imposed upon the insurer by the Authority relating to a solvency
margin or liquidity or other ratio.

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Independent Approved Auditor. Every registered insurer must appoint an
independent auditor who will annually audit and report on the statutory
financial statements and the statutory financial return of the insurer, both of
which, in the case of Platinum Bermuda, are required to be filed annually with
the Authority. The independent auditor of Platinum Bermuda must be approved by
the Authority and may be the same person or firm that audits Platinum Bermuda's
financial statements and reports for presentation to its shareholders. Platinum
Bermuda's independent auditor is KPMG Bermuda.

Loss Reserve Specialist. As a registered Class 4 insurer, Platinum Bermuda
is required to submit an opinion of its approved loss reserve specialist with
its statutory financial return in respect of its loss and LAE provisions. The
loss reserve specialist, who will normally be a qualified casualty actuary, must
be approved by the Authority. Platinum Bermuda's loss reserve specialist is Neal
J. Schmidt, our Chief Actuary. Mr. Schmidt is a fellow of the Casualty Actuarial
Society and a member of the American Academy of Actuaries.

Approved Actuary. Platinum Bermuda, as a registered long-term insurer, is
required to submit an annual actuary's certificate when filing its statutory
financial return. The actuary's certificate shall state whether or not (in the
opinion of the insurer's approved actuary) the aggregate amount of the
liabilities of the insurer in relation to long-term business as at the end of
the relevant year, exceeds the aggregate amount of those liabilities as shown in
the insurer's statutory balance sheet. The actuary must be approved by the
Authority and will normally be a qualified life actuary. Platinum Bermuda's
approved actuary is William Hines. Mr. Hines is a Fellow of the Society of
Actuaries and a Member of the American Academy of Actuaries.

Statutory Financial Statements. Platinum Bermuda, as a general business
insurer, will be required to submit its annual statutory financial statements as
part of its annual statutory financial return. The Insurance Act prescribes
rules for the preparation and substance of such statutory financial statements
(which include, in statutory form, a balance sheet, an income statement, a
statement of capital and surplus and notes thereto). The statutory financial
statements are not prepared in accordance with U.S. GAAP and are distinct from
the financial statements prepared for presentation to the insurer's shareholders
under the Bermuda Companies Act 1981 (the "Companies Act"), which financial
statements will be prepared in accordance with U.S. GAAP.

Annual Statutory Financial Return. Platinum Bermuda is required to file
with the Authority a statutory financial return no later than four months after
its financial year-end (unless specifically extended). The statutory financial
return for an insurer registered as a Class 4 general business and long-term
insurer includes, among other matters, a report of the approved independent
auditor on the statutory financial statements of such insurer, a general
business solvency certificate, a long-term business solvency certificate, the
statutory financial statements themselves, the opinion of the loss reserve
specialist, an actuary's certificate and a schedule of reinsurance ceded. The
solvency certificates must be signed by the principal representative and at
least two directors of the insurer who are required to certify, among other
matters, whether the minimum solvency margin has been met and whether the
insurer complied with the conditions attached to its certificate of
registration. The independent approved auditor is required to state whether in
its opinion it was reasonable for the directors to so certify.

Minimum Solvency Margin and Restrictions on Dividends and Distributions.
Under the Insurance Act, the value of its long-term business assets must exceed
the amount of its long-term liabilities by at least $250,000. The Insurance Act
also provides that the general business assets of a Class 4 insurer, such as
Platinum Bermuda, must exceed the amount of an insurer's general business
liabilities by an amount greater than the prescribed minimum solvency margin.
Platinum Bermuda:

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(1) is required, with respect to its general business, to maintain a minimum
solvency margin equal to the greatest of:

(A) $100,000,000;

(B) 50% of net premiums written (being gross premiums written less any
premiums ceded by Platinum Bermuda, but Platinum Bermuda may not
deduct more than 25% of gross premiums when computing net premiums
written); and

(C) 15% of loss and other insurance reserves;

(2) is prohibited from declaring or paying any dividends during any financial
year if it is in breach of its minimum solvency margin or minimum
liquidity ratio or if the declaration or payment of such dividends would
cause it to fail to meet such margin or ratio (and if it has failed to
meet its minimum solvency margin or minimum liquidity ratio on the last
day of any financial year, Platinum Bermuda is prohibited, without the
approval of the Authority, from declaring or paying any dividends during
the next financial year);

(3) is prohibited from declaring or paying in any financial year dividends of
more than 25% of its total statutory capital and surplus (as shown on its
previous financial year's statutory balance sheet) unless it files with
the Authority (at least seven days before payment of such dividends) an
affidavit stating that it will continue to meet the required margins;

(4) is prohibited, without the approval of the Authority, from reducing by 15%
or more its total statutory capital as set out in its previous year's
financial statements, and any application for such approval must include
an affidavit stating that it will continue to meet the required margins;
and

(5) is required, at any time it fails to meet its solvency margin, within 30
days (45 days where total statutory capital and surplus falls to $75
million or less) after becoming aware of that failure or having reason to
believe that such failure has occurred, to file with the Authority a
written report containing certain information.

Additionally, under the Companies Act, Platinum Holdings and Platinum
Bermuda may not declare or pay a dividend if Platinum Holdings or Platinum
Bermuda, as the case may be, has reasonable grounds for believing that it is, or
after the payment would be, unable to pay its liabilities as they become due, or
that the realizable value of its assets would thereby be less than the aggregate
of its liabilities and its issued share capital and share premium accounts.

Minimum Liquidity Ratio. The Insurance Act provides a minimum liquidity
ratio for general business insurers. An insurer engaged in general business is
required to maintain the value of its relevant assets at not less than 75% of
the amount of its relevant liabilities. Relevant assets include cash and time
deposits, quoted investments, unquoted bonds and debentures, first liens on real
estate, investment income due and accrued, accounts and premiums receivable and
reinsurance balances receivable. There are certain categories of assets which,
unless specifically permitted by the Authority, do not automatically qualify as
relevant assets, such as unquoted equity securities, investments in and advances
to affiliates and real estate and collateral loans. The relevant liabilities are
total general business insurance reserves and total other liabilities less
deferred income tax and sundry liabilities (by interpretation, those not
specifically defined).

Long-term Business Fund. An insurer carrying on long-term business is
required to keep its accounts in respect of its long-term business separate from
any accounts kept in respect of any other business. All receipts of its
long-term business form part of its long-term business fund. No payment may be
made directly or indirectly from an insurer's long-term business fund for any
purpose other than a purpose related to the insurer's long-term business, unless
such payment can be made out of any surplus

- 23 -

(certified by the insurer's approved actuary) to be available for distribution
otherwise than to policyholders. Platinum Bermuda may not declare or pay a
dividend to any person other than a policyholder unless the value of the assets
in its long-term business fund (as certified by its approved actuary) exceeds
the liabilities of the insurer's long-term business (as certified by the
insurer's approved actuary) by the amount of the dividend and at least the
$250,000 minimum solvency margin prescribed by the Insurance Act, and the amount
of any such dividend may not exceed the aggregate of that excess (excluding the
said $250,000) and any other funds properly available for payment of dividends,
such as funds arising out of business of the insurer other than long-term
business.

Restrictions on Transfer of Business and Winding-Up. As a long-term
insurer, Platinum Bermuda is subject to the following provisions of the
Insurance Act:

(1) all or any part of the long-term business, other than long-term business
that is reinsurance business, may be transferred only with and in
accordance with the sanction of the applicable Bermuda court; and

(2) an insurer or reinsurer carrying on long-term business may only be
wound-up or liquidated by order of the applicable Bermuda court, and this
may increase the length of time and costs incurred in the winding-up of
Platinum Bermuda when compared with a voluntary winding-up or liquidation.

Supervision and Intervention. If it appears to the Authority that there is
a risk of the insurer becoming insolvent, or that it is in breach of the
Insurance Act or any conditions imposed upon its registration, the Authority
may, among other things, direct the insurer (i) not to take on any new insurance
business, (ii) not to vary any insurance contract if the effect would be to
increase the insurer's liabilities, (iii) not to make certain investments, (iv)
to realize certain investments, (v) to maintain in, or transfer to the custody
of, a specified bank, certain assets, (vi) not to declare or pay any dividends
or other distributions or to restrict the making of such payments, and/or (vii)
to limit its premium income.

Although Platinum Bermuda is organized in Bermuda, it is classified as a
non-resident of Bermuda for exchange control purposes by the Authority. Pursuant
to its non-resident status, Platinum Bermuda may hold any currency other than
Bermuda dollars and convert that currency into any other currency (other than
Bermuda dollars) without restriction. Platinum Bermuda is permitted to hold
Bermuda dollars to the extent necessary to pay its expenses in Bermuda.

As "exempted" companies, Platinum Holdings and Platinum Bermuda may not,
without the express authorization of the Bermuda legislature or under a license
granted by the Minister of Finance, participate in certain business
transactions. Platinum Bermuda is a licensed reinsurer in Bermuda and so may
carry on activities in Bermuda that are related to and in support of its
reinsurance business.

The Bermuda government actively encourages foreign investment in "exempted"
entities like Platinum Holdings that are based in Bermuda, but do not operate in
competition with local businesses. As well as having no restrictions on the
degree of foreign ownership, Platinum Holdings and Platinum Bermuda are not
currently subject to taxes on income or dividends or to any foreign exchange
controls in Bermuda. In addition, currently there is no capital gains tax in
Bermuda.

Under Bermuda law, non-Bermudians (other than spouses of Bermudians) may
not engage in any gainful occupation in Bermuda without the specific permission
of the appropriate governmental authority. None of our executive officers is a
Bermudian, and all such officers will be working in Bermuda under work permits.
The Bermuda government recently announced a new policy that places a six-year
term limit on individuals with work permits, subject to certain exceptions for
key employees.

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U.S. REGULATION

Platinum US is organized and domiciled in the State of Maryland, is
licensed in Maryland as a property and casualty insurer, and is licensed,
authorized or accredited to write reinsurance in all 50 states of the United
States and the District of Columbia. Although Platinum US is regulated by state
insurance departments and applicable state insurance laws in each state where it
is licensed, authorized or accredited, Platinum US' principal insurance
regulatory authority is the Maryland Insurance Administration. In connection
with the acquisition of Platinum US by Platinum Holdings, the Maryland Insurance
Administration issued a consent order relating to Platinum US pursuant to which,
among other things, we have agreed to comply with the notice and approval
requirements with respect to certain transactions with RenaissanceRe and its
affiliates.

U.S. Insurance Holding Company Regulation of Platinum Holdings, Platinum
Ireland and Platinum Finance. Platinum Holdings and Platinum Ireland as the
indirect parent companies of Platinum US, and Platinum Finance as the direct
parent company of Platinum US, are subject to the insurance holding company laws
of Maryland, where Platinum US is organized and domiciled. These laws generally
require an authorized insurer that is a member of a holding company system to
register with the insurance department of the State of Maryland and to furnish
annually financial and other information about the operations of companies
within the holding company system. Generally, all transactions among companies
in the holding company system affecting Platinum US, including sales, loans,
reinsurance agreements, service agreements and dividend payments, must be fair
and, if material or of a specified category, require prior notice and approval
or non-disapproval by the Maryland Insurance Commissioner (the "Commissioner").

The insurance laws of Maryland prohibit any person from acquiring control
of Platinum Holdings, Platinum Ireland, Platinum Finance or Platinum US unless
that person has filed a notification with specified information with the
Commissioner and has obtained the Commissioner's prior approval. Under the
Maryland statutes, acquiring 10% or more of the voting stock of an insurance
company or its parent company is presumptively considered a change of control,
although such presumption may be rebutted. Accordingly, any person or entity who
acquires, directly or indirectly, 10% or more of the voting securities of
Platinum Holdings without the prior approval of the Commissioner will be in
violation of these laws and may be subject to injunctive action requiring the
disposition or seizure of those securities by the Commissioner or prohibiting
the voting of those securities, or to other actions that may be taken by the
Commissioner. In addition, many U.S. state insurance laws require prior
notification to state insurance departments of a change in control of a
nondomiciliary insurance company doing business in that state. While these
pre-notification statutes do not authorize the state insurance departments to
disapprove the change in control, they authorize regulatory action in the
affected state if particular conditions exist, such as undue market
concentration. In addition, any transactions that would constitute a change in
control of Platinum Holdings, Platinum Ireland or Platinum Finance may require
prior notification in those states that have adopted pre-acquisition
notification laws.

These laws may discourage potential acquisition proposals and may delay,
deter or prevent a change of control of Platinum Holdings, including through
transactions, and in particular unsolicited transactions, that some or all of
the shareholders of Platinum Holdings might consider to be desirable.

U.S. Insurance Regulation of Platinum US. The terms and conditions of
reinsurance agreements generally are not subject to regulation by any state
insurance department in the U.S. with respect to rates or policy terms. 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 do have an effect on the
rates that can be charged by reinsurers.

- 25 -

State insurance authorities have broad administrative powers with respect
to various aspects of the reinsurance business, including licensing to transact
business, admittance of assets to statutory surplus, regulating unfair trade and
claims practices, establishing reserve requirements and solvency standards, and
regulating investments and dividends. State insurance laws and regulations
require Platinum US to file financial statements with insurance departments in
each state where it is licensed, authorized or accredited to do business, and
the operations of Platinum US are subject to examination by those departments at
any time. Platinum US prepares statutory financial statements in accordance with
accounting practices and procedures prescribed or permitted by these
departments. State insurance departments conduct periodic examinations of the
books and records and financial reporting of insurance companies domiciled in
their states and of policy filing and market conduct of insurance companies
doing business in their states, generally once every three to five years.
Examinations are generally carried out in cooperation with the insurance
departments of other states under guidelines promulgated by the National
Association of Insurance Commissioners ("NAIC").

Under Maryland insurance law, Platinum US must give ten days' prior notice
to the Commissioner of its intention to pay any dividend or make any
distribution other than an extraordinary dividend or extraordinary distribution.
The Commissioner has the right to prevent payment of such a dividend or such a
distribution if the Commissioner determines, in the Commissioner's discretion,
that after the payment thereof, Platinum US' policyholders' surplus would be
inadequate or could cause Platinum US to be in a hazardous financial condition.

In addition, Platinum US must give at least 30 days prior notice to the
Commissioner before paying an "extraordinary dividend" or making an
"extraordinary distribution" out of earned surplus. Extraordinary dividends and
extraordinary distributions are dividends or distributions which, together with
any other dividends and distributions paid during the immediately preceding
twelve-month period, would exceed the lesser of:

(1) 10% of Platinum US' statutory policyholders' surplus (as determined under
statutory accounting principles) as of December 31 of the prior year; or

(2) Platinum US' net investment income excluding realized capital gains (as
determined under statutory accounting principles) for the twelve-month
period ending on December 31 of the prior year and pro rata distribution
of any class of Platinum US' own securities, plus any amounts of net
investment income (excluding realized capital gains) in the three calendar
years prior to the preceding year which have not been distributed.

In order to enhance the regulation of insurers' solvency, the NAIC adopted
a model law to implement risk-based capital ("RBC") requirements for life,
health, and property and casualty insurance companies. Maryland has adopted the
NAIC's model law. The RBC calculation, which regulators use to assess the
sufficiency of an insurer's capital, measures the risk characteristics of a
company's assets, liabilities and certain off-balance sheet items. RBC is
calculated by applying factors to various asset, premium and liability items.
Within a given risk category, these factors are higher for those items with
greater underlying risk and lower for items with lower underlying risk. Insurers
that have less statutory capital than the RBC calculation requires are
considered to have inadequate capital and are subject to varying degrees of
regulatory action depending upon the level of capital inadequacy. The RBC ratios
of Platinum US are above the ranges that would require any regulatory or
corrective action.

The NAIC assists state insurance departments in achieving insurance
regulatory objectives, including the maintenance and improvement of state
regulation. From time to time various regulatory and legislative changes have
been proposed in the insurance industry, some of which could have an effect on
reinsurers. The NAIC has instituted its Financial Regulatory Accreditation
Standards Program

- 26 -

("FRASP") in response to federal initiatives to regulate the business of
insurance. FRASP provides a set of standards designed to establish effective
state regulation of the financial condition of insurance companies. Under FRASP,
a state must adopt certain laws and regulations, institute required regulatory
practices and procedures, and have adequate insurance department personnel for
enforcement thereof in order to become an "accredited" state. The NAIC
determines whether individual states should be accredited, and each state's
accreditation is determined by the NAIC periodically. If a state is not
accredited or loses its accreditation, accredited states are not able to accept
certain financial examination reports of insurers prepared solely by the
regulatory agency in such unaccredited state. The State of Maryland is currently
accredited under FRASP.

Platinum Holdings has entered into a guaranty pursuant to which it has
agreed to guarantee Platinum US' payment obligations under reinsurance contracts
written by Platinum US on or after December 31, 2003 to the extent such payment
obligations are not disputed or contested by Platinum US. In addition, Platinum
Holdings has entered into a capital support agreement with Platinum US pursuant
to which Platinum Holdings may be required from time to time to contribute
capital to Platinum US in such amounts as shall be necessary to ensure that
Platinum US will have adequate capital and surplus.

The ability of a primary insurer to take credit for the reinsurance
purchased from reinsurance companies is a significant component of reinsurance
regulation. Typically, a primary insurer will only enter into a reinsurance
agreement if it can obtain credit to statutory reserves on its statutory
financial statements for the reinsurance ceded to the reinsurer. With respect to
U.S. domiciled reinsurers that reinsure U.S. insurers, credit is usually granted
when the reinsurer is licensed or accredited in a state where the primary
insurer is domiciled.

Platinum UK and Platinum Bermuda. Platinum UK and Platinum Bermuda are not
licensed, accredited or approved in any state in the U.S. The great majority of
states, however, permit a credit to statutory surplus resulting from reinsurance
obtained from a non-licensed or non-accredited reinsurer to the extent that the
reinsurer provides a letter of credit, trust fund or other acceptable collateral
arrangement. A few states do not allow credit for reinsurance ceded to
non-licensed reinsurers except in certain limited circumstances and others
impose additional requirements that make it difficult to become accredited.
Platinum UK or Platinum Bermuda may be subject to reinsurance premium excise
taxes in the United States (1%) and certain other jurisdictions.

U.K. REGULATION

The framework for supervision of insurance companies in the U.K. is largely
formed by European Union Directives ("Directives"), which are required to be
implemented in member states through national legislation. Directives aim to
harmonize insurance regulation and supervision throughout the European Union by
establishing minimum standards in key areas, and requiring member states to give
mutual recognition to each other's standards of prudential supervision.

On December 1, 2001, the Financial Services Authority (the "FSA") assumed
its full powers and responsibilities under the Financial Services and Markets
Act 2000 ("FSMA"). The FSA is now the single statutory regulator responsible for
regulating deposit-taking, insurance, investment and most other financial
services business. It is a criminal offense for any person to carry on a
regulated activity in the U.K. unless that person is authorized by the FSA or
falls under an exemption.

Insurance business (which includes reinsurance business) is authorized and
supervised by the FSA. On December 4, 2002, Platinum UK received approval from
the FSA to write the business formerly conducted by St. Paul Re in the U.K.

- 27 -

Supervision. In its role as supervisor of insurance companies, the primary
objective of the FSA is to fulfill its responsibilities under the FSMA regime
relating to the safety and soundness of insurance companies with the aim of
strengthening, but not guaranteeing, the protection of insureds. The FSA has
adopted a risk-based approach to the supervision of insurance companies. Under
this approach, the FSA performs a formal risk assessment of every insurance
company or group carrying on business in the U.K. during each supervisory
period, which varies in length according to the risk profile of the insurer.
After each risk assessment, the FSA will inform the insurer of its views on the
insurer's risk profile. This report will include details of any remedial action
which the FSA requires and the likely consequences if this action is not taken.

Solvency Requirements. Insurance companies are required to maintain a
margin of solvency at all times in respect of any general insurance undertaken
by the insurance company, the calculation of which in any particular case
depends on the type and amount of insurance business a company writes. The
method of calculation of the solvency margin is set out in the FSA rules, and
for these purposes, an insurer's assets and its liabilities are subject to
specific valuation rules. Failure to maintain the required solvency margin is
one of the grounds on which wide powers of intervention conferred upon the FSA
may be exercised.

Platinum Holdings has entered into a guaranty pursuant to which it has
agreed to guarantee Platinum UK's undisputed payment obligations under
reinsurance contracts written by Platinum UK on or after December 31, 2003. In
addition, Platinum Holdings has entered into a capital support agreement with
Platinum UK pursuant to which Platinum Holdings may be required from time to
time to contribute capital to Platinum UK by way of interest-free, subordinated
debt in such amounts as shall be necessary to ensure that Platinum UK will have
adequate capital and surplus.

Restrictions on Dividend Payments. English law prohibits Platinum UK from
declaring a dividend to its shareholders unless it has "profits available for
distribution." The determination of whether a company has profits available for
distribution is based on its accumulated realized profits less its accumulated
realized losses. While the U.K. insurance regulatory laws impose no statutory
restrictions on a general insurer's ability to declare a dividend, the FSA
strictly controls the maintenance of each insurance company's solvency margin
within its jurisdiction and may restrict Platinum UK from declaring a dividend
at a level that the FSA determines would adversely affect Platinum UK's solvency
requirements. It is common practice in the U.K. to notify the FSA in advance of
any significant dividend payment.

Reporting Requirements. Insurance companies incorporated in England or
Wales must prepare their financial statements under the Companies Act 1985 (as
amended), which requires the filing with Companies House of audited financial
statements and related reports.

Equalization Reserves. Each insurance company writing property, aviation,
marine, business interruption or nuclear insurance or reinsurance business is
required to maintain an equalization reserve in respect of business written in
the financial years ending on or after December 23, 1996. Insurance companies
writing credit insurance business must maintain equalization reserves calculated
in accordance with certain provisions related specifically to credit insurance
business.

Supervision of Management. The FSA closely supervises the management of
insurance companies through the approved persons regime, by which any
appointment of a person to a position of significant influence within an
insurance company must be approved by the FSA. The FSA also has the authority to
require there to be one or more independent directors on the board of directors
of an insurance company.

- 28 -

Change of Control. FSMA regulates changes in "control" of any insurance
company authorized under FSMA. Any company or individual that (together with the
associates thereof) directly or indirectly holds 10% or more of the shares in
the parent company of a U.K. authorized insurance company, or is entitled to
exercise or control the exercise of 10% or more of the voting power in such a
parent company, would be considered to be a "controller" for the purposes of the
relevant legislation, as would a person who had significant influence over the
management of such parent company by virtue of his shareholding in it. A
purchaser of more than 10% of the common shares of Platinum Holdings would
therefore be considered to have acquired "control" of Platinum UK.

Under FSMA, any person proposing to acquire "control" over an authorized
insurance company must give prior notification to the FSA of his intention to do
so. In addition, if an existing controller proposed to increase its control in
excess of certain thresholds set out in FSMA, that person must also notify the
FSA in advance. The FSA then has three months to consider that person's
application to acquire or increase "control". In considering whether to approve
such application, the FSA must be satisfied both that the person is a fit and
proper person to have such "control" and that the interests of consumers would
not be threatened by such acquisition of or increase in "control". Failure to
make the relevant prior application would constitute a criminal offense.

Intervention and Enforcement. The FSA has extensive powers to intervene in
the affairs of an authorized person. FSMA imposes on the FSA statutory
obligations to monitor compliance with the requirements imposed by FSMA, and to
enforce the provisions of FSMA and its related secondary legislation and take
disciplinary measures.

The FSA has a general power on giving notice to require information and
documents from authorized persons that the FSA reasonably requires in connection
with the exercise of its functions under the regulatory regime. The FSA also has
distinct statutory powers to appoint investigators under FSMA.

Proposed Regulatory Developments in the U.K. and at the European Union
Level. The legal and regulatory framework under which financial institutions
(including insurance and reinsurance companies) conduct regulated business in
the U.K. has been subject to significant reform over the past few years and
further reforms are both imminent and contemplated.

Recent reforms include the production by the FSA of the final form of those
Rules in the Integrated Prudential Sourcebook ("PSB") (the single prudential
regulatory framework for all financial institutions in the U.K.) that govern the
calculation of capital resources requirements for insurers (which includes pure
reinsurers). These Rules came into force on December 31, 2004, replacing the
majority of the provisions in the FSA's Interim Prudential Sourcebook for
insurers.

These Rules implement the FSA's proposals for the calculation by companies
of a Minimum Capital Requirement ("MCR"), and the obligation on companies to
maintain capital resources equal to this capital requirement. The Rules also
require Platinum UK to calculate an Enhanced Capital Requirement ("ECR"), and to
report this calculation privately to the FSA. The ECR is intended to provide a
risk-responsive, but standardized, method for benchmarking a company's capital
requirements.

Platinum UK is required to make an individual assessment of its capital
needs, which, together with the result of the ECR calculation, is used as a
starting point in the FSA's discussions with Platinum UK concerning its
individual capital assessment and when the FSA gives individual capital guidance
("ICG"). The FSA has stated that it intends to give authorized companies ICG
reflecting its views as to what level of capital would be adequate for their
particular businesses. The view of the FSA is that a decrease in a company's
capital below the level of its ICG would represent a regulatory intervention
point.

- 29 -

The FSA has also announced that it will review by 2006 whether to implement
the ECR as a `hard' test, requiring that companies maintain capital resources at
least equal to their ECR. This aspect of the new regime may mean that Platinum
UK is required to increase the level of capital held, and it will therefore be
necessary for Platinum UK to monitor developments in this area.

The PSB also contains provisions aimed at ensuring adequate diversification
of an insurer's or reinsurer's exposures to reinsurers (whether intra- or
extra-group). In particular, in each financial year, a company will need to
restrict the gross earned premiums which it pays to a reinsurer or group of
closely related reinsurers to the higher of (a) 20% of the firm's projected
gross earned premiums for that financial year; or (b) L4 million. Where a
company exceeds, or anticipates exceeding, this limit, it will need to notify
the FSA and explain how, despite the excess reinsurance concentration, the
credit risk is being safely managed.

The PSB requires a company to notify the FSA as soon as it first becomes
aware that a reinsurance exposure to a reinsurer or group of closely related
reinsurers is reasonably likely to exceed or has exceeded 100% of the capital
resources of the reinsurer or group. This notification must demonstrate that
prudent provision has been made for the reinsurance exposure in excess of the
100% limit (or detail why in the opinion of the firm no provision is required)
and explain how the reinsurance exposure is being safely managed.

Significant current regulatory developments at the European Union level
include the proposed adoption of a Directive creating a single market within the
European Union in reinsurance (the "Reinsurance Directive"). The Reinsurance
Directive is currently in draft form, but is likely to include rules on the
establishment of technical provisions (the amount that a reinsurance undertaking
must set aside in order to enable it to pay its contractual commitments) and on
the investment of assets covering those technical provisions. It is also likely
to contain rules on required solvency margins and minimum capital requirements
as well as rules on measures to be adopted by regulators if reinsurance
undertakings are in financial difficulty. Although the Reinsurance Directive is
currently in draft form, it may, once implemented, affect the level of capital
that Platinum UK is required to hold, and it will therefore be necessary for
Platinum UK to monitor developments in this area.

In the longer term, the European Union is running the "Solvency II"
project, which, on the basis of a review of all aspects of the insurance
industry, is intended to establish a solvency system that is better matched to
the risks incurred by insurance undertakings than the framework imposed under
current European legislation. It contains a fundamental and wide-ranging review
of the current solvency regime for European insurers in light of current
developments in insurance, risk management, finance techniques and financial
reporting. However, the Solvency II project is not expected to be implemented
for several years, and it is not currently possible to point to legislative
developments with any certainty. It will therefore also be necessary for
Platinum UK to monitor developments in this area.

IRELAND REGULATION

Platinum Ireland is organized and domiciled in Ireland. As a holding
company, Platinum Ireland is not subject to Irish insurance regulation. Irish
law prohibits Platinum Ireland from declaring a dividend to its shareholders
unless it has "profits available for distribution." The determination of whether
a company has profits available for distribution is based on its accumulated
realized profits less its accumulated realized losses.

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AVAILABLE INFORMATION

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and any amendments to those reports, are available free of
charge on our Internet website at www.platinumre.com as soon as reasonably
practicable after such reports are electronically filed with the SEC. We also
post on our website the charters of our Audit, Compensation, Governance and
Executive Committees, our Corporate Governance Guidelines, our Code of Business
Conduct and Ethics and Compliance Procedures, and any amendments or waivers
thereto, and any other corporate governance materials required to be posted by
SEC or New York Stock Exchange ("NYSE") regulations. These documents are also
available in print to any shareholder requesting a copy from our corporate
secretary at our principal executive offices. Information contained on Platinum
Holdings' website is not part of this report.

On May 7, 2004, our Chief Executive Officer submitted to the NYSE his
Section 303A.12(a) Annual CEO Certification in which he stated that he is not
aware of any violations by the Company of the NYSE's Corporate Governance
listing standards.

ITEM 2. PROPERTIES

Platinum Holdings' principal executive offices are located in approximately
3,837 square feet of office space subleased from Platinum Bermuda at The
Belvedere Building, 69 Pitts Bay Road, Pembroke, Bermuda. Platinum Bermuda
leases a total of 7,674 square feet of office space, using approximately 3,837
square feet for its principal offices. The term of this lease ends on December
31, 2006.

The principal offices of Platinum US are located at Two World Financial
Center, New York, New York, where Platinum US leases approximately 49,600 square
feet of office space. The term of this lease ends on September 29, 2013.
Platinum US has also entered into assignments of leases with St. Paul with
respect to approximately 4,000 square feet of office space in Chicago, 6,300
square feet of office space in Miami and 540 square feet of office space in
Tokyo. The terms of these leases will end in 2005, 2006 and 2006, respectively.

The principal offices of Platinum UK are located at Fitzwilliam House, 10
St. Mary Axe, London, where Platinum UK leases approximately 7,265 square feet
of office space. The term of this lease ends on February 15, 2006.

ITEM 3. LEGAL PROCEEDINGS

In November and December 2004, we received subpoenas from the SEC and the
Office of the Attorney General for the State of New York for documents and
information relating to certain non-traditional, or loss mitigation, insurance
products. We are fully cooperating in responding to all such requests. Other
reinsurance companies have reported receiving similar subpoenas and requests.
This investigation appears to be at a very preliminary stage and, accordingly,
we are unable to predict the direction the investigation will take and the
impact, if any, it may have on our business.

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

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

No matters were submitted to a vote of Platinum Holdings shareholders
during the fourth quarter of 2004.

- 31 -

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES

Our common shares are listed on the NYSE under the symbol "PTP." The
following table shows the high and low per share sale prices of our common
shares, as reported on the NYSE for the periods indicated:

Price Range of Common Shares
----------------------------
Period High Low
- ------------------------------------------ ----------- -----------

2003:
First Quarter .......................... $26.45 $21.29
Second Quarter ......................... 28.70 24.00
Third Quarter .......................... 28.55 25.66
Fourth Quarter ......................... 32.05 26.80

2004:
First Quarter .......................... 34.20 29.00
Second Quarter ......................... 34.00 30.00
Third Quarter .......................... 31.13 27.49
Fourth Quarter ......................... $31.13 $27.30

On February 15, 2005, the last reported sale price for our common shares on
the NYSE was $30.46 per share.

At February 15, 2005, there were approximately 29 holders of record and
approximately 2,800 beneficial holders of our common shares.

During the years ended December 31, 2004 and 2003, we paid quarterly
dividends of $0.08 per common share. The Board has declared a dividend for the
first quarter of 2005 of $0.08 per common share, payable on March 31, 2005 to
shareholders of record at the close of business on March 1, 2005. The
declaration and payment of dividends is at the discretion of the Board of
Directors and depend upon our results of operations and cash flows, the
financial positions and capital requirements of Platinum US, Platinum UK and
Platinum Bermuda, general business conditions, legal, tax and regulatory
restrictions on the payment of dividends and other factors the Board of
Directors deems relevant; however, the declaration and payment of dividends will
be prohibited if certain contract adjustment payments in respect of the
Company's equity security units are deferred. Additionally, under the Bermuda
Companies Act 1981, Platinum Holdings may declare or pay a dividend only if,
among other things, it has reasonable grounds for believing that it is, or after
the payment would be, able to pay its liabilities as they become due.
Accordingly, there is no assurance that dividends will be declared or paid in
the future. Currently, there is no Bermuda withholding tax on dividends paid by
Platinum Holdings.

Platinum US is subject to regulatory constraints imposed by Maryland
insurance law, Platinum UK is subject to regulatory constraints imposed by U.K.
insurance law, Platinum Ireland is subject to constraints imposed by Irish law,
and Platinum Bermuda is subject to regulatory constraints imposed by Bermuda
insurance law, which constraints affect the ability of each to pay dividends to
Platinum Holdings. See "Business - Regulation."

We have agreed to adjust the exercise price of the options granted to St.
Paul and RenaissanceRe as part of the St. Paul Investment and RenaissanceRe
Investment, respectively, to the extent dividend

- 32 -

increases exceed 10% per year; however, we do not expect that dividend
increases, if any, will exceed such rate.

We did not issue any common shares that were not registered under the
Securities Act of 1933 during the quarter ended December 31, 2004.

On August 4, 2004, the board of directors of the Company approved a plan to
purchase up to $50,000,000 of its common shares. During the year ended December
31, 2004 the Company purchased 349,700 of its common shares in the open market
at an aggregate amount of $9,985,000 at a weighted average price of $28.55 per
share. The shares purchased by the Company were canceled. No repurchases of the
Company's common shares were made during the quarter ended December 31, 2004.

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth certain selected financial data of the
Company as of and for the years ended December 31, 2004 and 2003 and as of and
for the period ended December 31, 2002, and of St. Paul Re for the period from
January 1, 2002 through November 1, 2002 and for the years ended December 31,
2001 and 2000. The data for the Company as of and for the years ended December
31, 2004 and 2003 and as of and for the period ended December 31, 2002 were
derived from the Company's consolidated financial statements beginning on page
F-1 of this Form 10-K. The data for St. Paul Re for the period ended November 1,
2002 were derived from the audited combined financial statements of St. Paul Re
prior to the Initial Public Offering (the Predecessor Business) beginning on
page P-1 of this Form 10-K. The data for the years ended December 31, 2001 and
2000 were derived from the selected historical combined financial statements of
St. Paul Re not included in this Form 10-K. You should read the selected
financial data in conjunction with the Company's consolidated financial
statements as of and for the years ended December 31, 2004 and 2003 and the
period ended December 31, 2002 beginning on page F-1 of this Form 10-K, and the
related "Management's Discussion and Analysis of Financial Condition and Results
of Operations" beginning on page 34 of this Form 10-K. You should also read the
selected financial data in conjunction with the Predecessor financial
information beginning on page P-1 of this Form 10-K.

THE UNDERWRITING RESULTS AND THE AUDITED HISTORICAL COMBINED FINANCIAL
STATEMENTS OF ST. PAUL RE PRIOR TO THE INITIAL PUBLIC OFFERING (THE PREDECESSOR
BUSINESS) ARE NOT INDICATIVE OF THE ACTUAL RESULTS OF THE COMPANY SUBSEQUENT TO
THE INITIAL PUBLIC OFFERING.

- 33 -

FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA
($ in millions, except per share amounts)

Platinum Underwriters Holdings, Ltd. St. Paul Re (Predecessor)
-------------------------------------------- --------------------------------------
As of and for
the period Period from
from January 1,
November 1, 2002 Years ended
Years ended December 31, 2002 through through December 31,
------------------------- December 31, November ----------------------
2004 2003 2002 1, 2002 2001 2000
--------- ------- ----------- ----------- -------- --------

Statement of Income Data:

Net premiums written ..................... $ 1,646.0 1,172.1 $ 298.1 $ 1,007 1,677 $ 1,073
Net premiums earned ...................... 1,447.9 1,067.5 107.1 1,102 1,593 1,121
Net investment income .................... 84.5 57.6 5.2
Losses and LAE ........................... 1,019.8 584.2 60.4 791 1,922 811
Underwriting expenses .................... $ 381.0 320.7 $ 37.6 319 397 424
Underwriting gain (loss) ................. $ (8) (726) $ (114)

Net income ............................... 84.8 144.8 6.4
Basic earnings per share ................. 1.96 3.37 0.15
Diluted earnings per share ............... 1.81 3.09 0.15
Dividends declared per share ............. $ 0.32 0.32 $ --

Balance Sheet Data:

Total investments and cash ............... $ 2,456.9 1,790.5 $ 1,346.7
Premiums receivable ...................... 580.0 487.4 5.6
Total assets ............................. 3,422.0 2,485.6 1,644.9
Net unpaid losses and LAE ................ 1,379.2 731.9 281.7
Net unearned premiums .................... 499.5 299.9 191.0
Debt obligations ......................... 137.5 137.5 137.5
Shareholders' equity ..................... 1,133.0 1,067.2 921.2

Book value per share ..................... $ 26.30 24.79 $ 21.42

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

The following discussion and analysis should be read in conjunction with
the Company's consolidated financial statements and the related notes included
on pages F-1 through F-34 of this Form 10-K. 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").

OVERVIEW

Platinum Underwriters Holdings, Ltd. ("Platinum Holdings") is a Bermuda
holding company organized in 2002. 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 and marine, casualty and finite risk reinsurance
coverages, through reinsurance intermediaries, to a diverse clientele of
insurers and select reinsurers on a worldwide basis.

In November 2002, Platinum Holdings completed the Initial Public Offering.
Concurrent with the Initial Public Offering, Platinum Holdings sold 6,000,000
common shares to The St. Paul Travelers

- 34 -

Companies, Inc., formerly The St. Paul Companies, Inc., ("St. Paul"), and
3,960,000 common shares to RenaissanceRe Holdings Ltd. ("RenaissanceRe") in
private placements. As part of the Public Offering, St. Paul and RenaissanceRe
received options to purchase up to 6,000,000 and 2,500,000 of additional common
shares, respectively, at any time during the ten years following the Initial
Public Offering at a price of $27.00 per share. St. Paul subsequently sold its
6,000,000 common shares in June 2004. Also, concurrent with the transactions in
November 2002, 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"). In addition to these transactions, the Company
issued Equity Security Units ("ESU's"), consisting of a contract to purchase
common shares in 2005 and an ownership interest in a senior note due 2007.

CRITICAL ACCOUNTING POLICIES

It is important to understand the Company's accounting policies in order to
understand its financial position and results of operations. Management
considers certain of these policies to be critical to the presentation of the
financial results since they require management to make estimates and
assumptions. These estimates and assumptions affect the reported amounts of
assets, liabilities, revenues, expenses, and related disclosures at the
financial reporting date and throughout the relevant periods. Certain of the
estimates and assumptions result from judgments that can be subjective and
complex, and consequently actual results may differ from these estimates. The
Company's most critical accounting policies involve written and unearned
premium, unpaid losses and LAE, reinsurance, investments, income taxes and
stock-based compensation.

PREMIUMS

Assumed reinsurance premiums are recognized as revenues when premiums
become earned proportionately over the coverage period. Net premiums earned are
recorded in the statement of income, net of the cost of retrocession. Net
premiums written not yet recognized as revenue are recorded on the balance sheet
as unearned premiums, gross of any ceded unearned premiums.

Due to the nature of reinsurance, ceding companies routinely report and
remit premiums subsequent to the contract coverage period. Consequently,
reinsurance premiums written include amounts reported by the ceding companies,
supplemented by estimates of premiums that are written but not reported
("WBNR"). In addition to estimating WBNR, the Company estimates the portion of
premium earned but not reported ("EBNR"). The Company also estimates the
expenses associated with these premiums in the form of losses, LAE and
commissions. As actual premiums are reported by the ceding companies, management
evaluates the appropriateness of the premium estimates and any adjustments to
these estimates are accounted for as changes in estimates and are reflected in
results of operations in the period in which they are made. Adjustments to
original premium estimates could be material and could significantly impact
earnings in the period they are recorded. Due to the time lag inherent in the
reporting of premiums by ceding companies, a significant portion of amounts
included as premiums written and premiums receivable represents estimated
premiums, net of commissions, and are not currently due based on the terms of
the underlying contracts.

Certain of our reinsurance contracts include provisions that adjust
premiums or acquisition expenses based upon the loss experience under the
contracts. Reinstatement premiums and additional premiums are recognized in
accordance with the provisions of assumed reinsurance contracts, based on loss
experience under such contracts. Reinstatement premiums are the premiums charged
for the

- 35 -

restoration of the reinsurance limit of a reinsurance contract to its full
amount, generally coinciding with the payment by the reinsurer of losses. These
premiums relate to the future coverage obtained for the remainder of the initial
policy term and are earned over the remaining policy term. Additional premiums
are those premiums triggered by losses and not related to reinstatement of
limits and are earned immediately. An allowance for uncollectible premiums is
established for possible non-payment of such amounts due, as deemed necessary.

UNPAID LOSSES AND LAE

The most significant judgment made by management in the preparation of
financial statements is the estimation of unpaid losses and LAE, also referred
to as "loss reserves." These liabilities are balance sheet estimates of future
amounts required to pay losses and LAE for reinsured claims which have occurred
at or before the balance sheet date. Every quarter, the Company's actuaries
prepare estimates of the loss reserves based on established actuarial
techniques. Because the ultimate amount of unpaid losses and LAE is uncertain,
we believe that quantitative techniques to estimate these amounts are enhanced
by professional and managerial judgment. Company management reviews these
estimates and determines its best estimate of the liabilities to record in the
Company's financial statements.

Unpaid losses and LAE include estimates of the cost of claims that were
reported but not yet paid ("case reserves") and the cost of claims that were
incurred but not reported ("IBNR"). Case reserves are usually based upon claim
reports received from ceding companies, and may be increased or reduced by the
Company's claims personnel. IBNR is based on actuarial methods including the
loss ratio method, the Bornhuetter-Ferguson method and the chain ladder method.
IBNR related to a specific event may be based on the Company's estimated
exposure to an industry loss and may include the use of catastrophe modeling
software.

Generally, initial actuarial estimates of IBNR not related to a specific
event are based on the loss ratio method applied to each underwriting year for
each class of business. Actual paid losses and case reserves ("reported losses")
are subtracted from expected ultimate losses to determine IBNR. The initial
expected ultimate losses involve management judgment and are based on: (i)
contract by contract expected loss ratios derived from the Company's pricing
process, and (ii) historical loss ratios of the Company and St. Paul Re adjusted
for rate changes and trends. These judgments will take into account management's
view of past, current and future: (i) market conditions, (ii) changes in the
business underwritten, (iii) changes in timing of the emergence of claims and
(iv) other factors that may influence expected ultimate losses.

Over time, as a greater number of claims are reported, actuarial estimates
of IBNR are based on the Bornhuetter-Ferguson and the chain ladder techniques.
The Bornhuetter-Ferguson technique utilizes actual reported losses and expected
patterns of reported losses, taking the initial expected ultimate losses into
account to determine a new estimate of expected ultimate losses. This technique
is most appropriate when there are few reported claims and a relatively less
stable pattern of reported losses. The chain ladder technique utilizes actual
reported losses and expected patterns of reported losses to determine a new
estimate of expected ultimate losses that is independent of the initial expected
ultimate losses. This technique is most appropriate when there are a large
number of reported losses with significant statistical credibility and a
relatively stable pattern of reported losses. The pattern of reported losses is
determined utilizing actuarial analysis, including management's judgment, and is
based on historical patterns of the recording of paid losses and case reserves
to the Company, as well as industry patterns. Information that may cause
historical patterns to differ from future patterns is considered and reflected
in expected patterns as appropriate. For property and health coverages these
patterns indicate that a substantial portion of the ultimate losses are reported
within 2 to 3 years after the contract is effective. Casualty patterns can vary
from 3 years to over 20 years depending on the type of business.

- 36 -

While the Company commenced operations in 2002, the business written is
sufficiently similar to the historical business of St. Paul Re that the Company
uses the historical loss experience of this business to estimate its initial
expected ultimate losses and its expected patterns of reported losses. These
patterns can span more than a decade and, given its own limited history, the
availability of the St. Paul Re data is a valuable asset to the Company.

We do not establish liabilities until the occurrence of an event that may
give rise to a loss. When an event of sufficient magnitude occurs, we may
establish a specific IBNR reserve. Generally, this involves a catastrophe
occurrence that affects many ceding companies. Ultimate losses and LAE are based
on management's judgment that reflects estimates gathered from ceding companies,
estimates of insurance industry losses gathered from public sources and
estimates from catastrophe modeling software.

Estimated amounts recoverable from retrocessionaires on unpaid losses and
LAE are determined based on the Company's estimate of ultimate losses and LAE
and the terms and conditions of its retrocessional contracts. These amounts are
reflected as assets.

Unpaid losses and LAE represent management's best estimates, at a given
point in time, of the ultimate settlement and administration costs of claims
incurred, and it is possible that the ultimate liability may materially differ
from such estimates. Such estimates are not precise because, among other things,
they are based on predictions of future developments and estimates of future
trends in claim severity and frequency and other factors.

The uncertainty inherent in loss estimation is particularly pronounced for
casualty coverages, such as umbrella liability, general and product liability,
professional liability, directors and officers liability and automobile
liability, where information, such as required medical treatment and costs for
bodily injury claims, only emerges over time. In the overall loss reserving
process, provisions for economic inflation and changes in the social and legal
environment are considered. The uncertainty inherent in the reserving process
for primary insurers is even greater for the reinsurer. This is because of, but
not limited to, the time lag inherent in reporting information from the primary
insurer to the reinsurer and differing reserving practices among ceding
companies.

Estimates of unpaid losses and LAE are periodically re-estimated and
adjusted as new information becomes available. Any such adjustments are
accounted for as changes in estimates and are reflected in results of operations
in the period in which they are made.

REINSURANCE

Premiums written, premiums earned and losses and LAE reflect the net
effects of assumed and ceded reinsurance transactions. Reinsurance accounting is
followed for assumed and ceded transactions when risk transfer requirements have
been met. Evaluating risk transfer involves significant assumptions relating to
the amount and timing of expected cash flows, as well as the interpretation of
underlying contract terms. Reinsurance contracts that do not transfer
significant insurance risk are generally accounted for as reinsurance deposit
liabilities with interest expense charged to other income and credited to the
liability.

INVESTMENTS

In accordance with our investment guidelines, our investments consist
largely of high-grade marketable fixed income securities. Fixed maturities owned
that the Company may not have the positive intent to hold until maturity are
classified as available-for-sale and reported at fair value, with unrealized
gains and losses excluded from net income and reported in other comprehensive
income as a separate

- 37 -

component of shareholders' equity, net of deferred taxes. Fixed maturities owned
that the Company has the intent to sell prior to maturity are classified as
trading securities and reported at fair value, with unrealized gains and losses
included in other income. Securities classified as trading securities are
generally denominated in foreign currencies and intended to match foreign net
liabilities denominated in foreign currencies in order to minimize net exposures
arising from fluctuations in foreign currency exchange rates. Realized gains and
losses on sales of investments are determined on a specific identification
basis. Investment income is recorded when earned and includes the amortization
of premiums and discounts on investments.

The Company believes it has the ability to hold any specific security to
maturity. This is based on current and anticipated future positive cash flow
from operations that generates sufficient liquidity in order to meet our
obligations. However, in the course of managing investment credit risk, asset
liability duration or other aspects of the investment portfolio, the Company may
decide to sell any specific security. The Company routinely reviews its
available-for-sale investments to determine whether unrealized losses represent
temporary changes in fair value or are the result of "other than temporary
impairments." The process of determining whether a security is other than
temporarily impaired is subjective and involves analyzing many factors. These
factors include, but are not limited to, the length and magnitude of an
unrealized loss, specific credit events, the overall financial condition of the
issuer, and the Company's intent to hold a security for a sufficient period of
time for the value to recover the unrealized loss. If the Company has determined
that an unrealized loss on a security is other than temporary, the Company
writes down the carrying value of the security to its current fair value and
records a realized loss in the statement of income. During 2004 and as of
December 31, 2004, the Company's investment portfolio does not contain any
securities that were determined to have other than temporary impairments.

INCOME TAXES

Platinum Holdings and Platinum Bermuda are domiciled in Bermuda. Under
current Bermuda law, they are not taxed on any Bermuda income or capital gains
and they have received an undertaking from the Bermuda Minister of Finance that,
in the event of any Bermuda income or capital gains taxes being imposed, they
will be exempt from those taxes until 2016. The Company also has subsidiaries in
the United States, United Kingdom and Ireland that are subject to the tax laws
thereof.

The Company applies the asset and liability method of accounting for income
taxes. Under the asset and liability method, 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. Deferred tax assets and liabilities
are measured using enacted tax rates applicable to taxable income in the years
in which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period the change is enacted. A valuation allowance
is established for deferred tax assets where it is more likely than not that
future tax benefits will not be realized.

STOCK-BASED COMPENSATION

During 2003, the Company adopted Statement of Financial Accounting
Standards No. 123 "Accounting for Awards of Stock Based Compensation to
Employees" ("SFAS 123") and Statement of Financial Accounting Standards No. 148
"Accounting for Stock-Based Compensation-Transition and Disclosure" ("SFAS
148"). SFAS 123 requires that the fair value of shares granted under the
Company's share option plan subsequent to adoption of SFAS 148 be amortized in
earnings over the vesting periods. The fair value of the share options granted
is determined through the use of an option-pricing model. SFAS 148 amends SFAS
123 and provides transitioning guidance for a voluntary adoption of FAS 123 as

- 38 -

well as amends the disclosure requirements of SFAS 123. For the period from
November 1, 2002 through December 31, 2002, the Company used 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 shares on the date of the grant, no compensation expense is recorded.
For share options granted in 2002, the Company continues to use APB25.

In December 2004, the Financial Accounting Standards Board issued the
Statement of Financial Accounting Standards No. 123R "Share Based Payment"
("SFAS 123R"). SFAS 123R requires that, prospectively, compensation costs be
recognized for the fair value of all share options, including the costs related
to the unvested portion of all outstanding share options as of December 31,
2004. The share based compensation expense for share options currently
outstanding are to be based on the same cost model used to calculate the pro
forma disclosures under SFAS 123. Consequently, the pro forma share based
compensation expense and pro forma income as disclosed in the consolidated
financial statements are the same as if the Company had adopted SFAS 123R in
2004.

REINSURANCE INDUSTRY CONDITIONS AND TRENDS

The reinsurance industry historically has been cyclical, characterized by
periods of price competition due to excessive underwriting capacity as well as
periods of favorable pricing due to shortages of underwriting capacity. Cyclical
trends in the industry and the industry's profitability can also be affected
significantly by volatile developments, including natural and other disasters,
such as hurricanes, windstorms, earthquakes, floods, fires, explosions and other
catastrophic events, including terrorist attacks, the frequency and severity of
which are inherently difficult to predict. Property and casualty reinsurance
rates often rise in the aftermath of significant catastrophe losses. To the
extent that actual claim liabilities are higher than anticipated, the industry's
capacity to write new business diminishes. The industry is also affected by
changes in the propensity of courts to expand insurance coverage and grant large
liability awards, as well as fluctuations in interest rates, inflation and other
changes in the economic environment that affect market prices of investments.

As a result of favorable loss development and strong investment returns
beginning in the mid-1990's, the reinsurance industry entered a cycle of
increased competition and industry capacity that pushed property and casualty
premium rates down. In 1999, there were several significant worldwide
catastrophic events that resulted in industry insured losses of approximately
$31 billion. These losses, and the subsequent contraction of reinsurance
capacity in the market, resulted in improvements in rates, terms and conditions
beginning with January 2000 renewals. These improvements continued in 2001 as
capacity continued to contract due to a number of catastrophe events,
particularly the terrorist attack of September 11, 2001. With insured losses
currently estimated to be in excess of $30 billion, the terrorist attack
resulted in the largest insured loss ever experienced by the industry. By
comparison, the largest industry insured catastrophic event prior to the attack
was Hurricane Andrew in 1992 with $16 billion in estimated losses. Shortly after
the property catastrophe events of 1999 and 2001, many reinsurance companies
began to recognize poor results in their casualty business stemming from
business underwritten from 1997 to 2000. The result was substantial loss reserve
charges summing to tens of billions of dollars and a further decrease in
industry capacity. In addition, the capital of a number of large companies was
further reduced by poor investment results. In late 2001 and through 2002
several new companies were started. Some existing companies raised new capital
and others exited the business. The new capital invested in the industry was
substantially less than the capital reductions caused by losses, exiting
companies and poor investment results. As a result, rate increases in 2002 were
significantly higher than 2001. Rates on most lines of business still increased
in 2003 though at a lower rate of increase than in 2002. Recent competition has
led to lower rate increases and/or rate reductions in certain

-39-

property and casualty classes in 2004. Despite the Florida and Caribbean
catastrophe claims in the third quarter of 2004, property rate reductions still
occurred. Nonetheless, we believe rates should provide adequate returns.

RESULTS OF OPERATIONS

Platinum Holdings was incorporated on April 19, 2002 under the laws of
Bermuda to hold subsidiaries that provide property and casualty reinsurance to
insurers and reinsurers on a worldwide basis and, in November 2002, completed
the Initial Public Offering and assumed certain rights and obligations of the
reinsurance business from St. Paul. Consequently, the 2002 consolidated
statements of income and comprehensive income, shareholders' equity and cash
flows include all activity from incorporation on April 19, 2002 through December
31, 2002. The underwriting operations, as well as substantially all other
operations of the Company commenced in November 2002. Generally, the 2002
results of operations reflect the period from November 1, 2002 through December
31, 2002 (the "2002 Period") and are not comparable to the results of operations
for the years ended December 31, 2004 and 2003.

Year Ended December 31, 2004 as Compared with the Year Ended December 31,
2003

Net income for the years ended December 31, 2004 and 2003 was as follows ($
in thousands):

2004 2003 Decrease
----------- ------- ------------

Net income ......................... $ 84,783 144,823 $ (60,040)

The decrease in net income in 2004 as compared with 2003 is attributable to
a decline in underwriting income of $115,429,000. The decline in underwriting
income was due primarily to the combination of four significant named
hurricanes, Charley, Frances, Ivan and Jeanne (the "Hurricanes"), causing severe
damage in the Caribbean and the southeast United States in August and September
of 2004, partially offset by growth of profitable business in all segments and
favorable loss development. Net income in 2004 as compared with 2003 was also
favorably impacted by an increase in investment income of $26,887,000 and
reductions in corporate expenses of $9,871,000 and income tax expense of
$18,526,000.

The aggregate adverse impact on net income of the Company in 2004 from the
Hurricanes is summarized as follows ($ in thousands):

Losses ....................................................... $ 230,475
Less:
Additional premiums earned ................................. (29,265)
Profit commissions ......................................... (10,243)
------------
Net adverse impact before income tax benefit ........... 190,967
Income tax benefit ........................................... (14,537)
------------
Net adverse impact after income tax benefit ............ $ 176,430
------------

The impact of the Hurricanes was consistent with our expectations for
storms of this magnitude and location.

Net premiums written and net premiums earned for the years ended December
31, 2004 and 2003 were as follows ($ in thousands):

-40-

2004 2003 Increase
----------- --------- -----------

Net premiums written ............... $ 1,646,013 1,172,142 $ 473,871
Net premiums earned ................ $ 1,447,935 1,067,527 $ 380,408

The increase in net premiums written and earned in 2004 as compared with
2003 is attributable to growth in all segments, and includes approximately
$29,265,000 of additional premiums related to losses arising from the
Hurricanes. The increase in net premiums earned is related to the growth in
current and prior periods' net premiums written and is affected by changes in
the mix of business and the structure of the underlying reinsurance contracts.

Net investment income for the years ended December 31, 2004 and 2003 was
$84,532,000 and $57,645,000, respectively. Net investment income increased
during 2004 primarily due to increased invested assets attributable to positive
cash flow from operations, excluding trading securities activities, which was
$698,223,000 and $469,168,000 in 2004 and 2003, respectively. Fixed maturities
were $2,240,202,000 and $1,678,138,000 at December 31, 2004 and 2003,
respectively. The book basis yields on fixed maturities were 4.3% and 4.1% at
December 31, 2004 and 2003, respectively. Net investment income included
$2,651,000 and $776,000 of interest earned on funds held for the years ended
December 31, 2004 and 2003, respectively. Net investment income for the year
ended December 31, 2003 included $1,357,000 of interest received from St. Paul
on balances due relating to the Quota Share Retrocession Agreements. Net
realized gains on investments of $1,955,000 and $2,781,000 for the years ended
December 31, 2004 and 2003, respectively, were the result of investment sale
activity to manage the quality, diversity, currency exposure, duration and tax
profile of the investment portfolio.

Other income for the years ended December 31, 2004 and 2003 was $3,211,000
and $3,343,000, respectively. Other income in 2004 includes $1,036,000 of net
unrealized gains relating to changes in fair value of fixed maturities
classified as trading, $758,000 of earnings on reinsurance contracts accounted
for as deposits and a gain of $1,000,000 on the sale of assets. Other income in
2003 includes $1,282,000 of net unrealized losses relating to changes in fair
value of fixed maturities classified as trading and, $4,625,000 of earnings on
reinsurance contracts accounted for as deposits. Earnings on reinsurance
contracts accounted for as deposits decreased in 2004 from 2003 due to a fewer
number of such contracts.

Net foreign currency exchange gains (losses) for the years ended December
31, 2004 and 2003 were $725,000 and ($114,000), respectively. The Company
routinely does business in various foreign currencies. The decrease in net
foreign currency exchange losses is due to efforts to better manage exposures to
foreign currency exchange rate fluctuations by holding invested assets
denominated in the foreign currencies in which the related net insurance
liabilities are denominated. The Company periodically reviews its largest
foreign currency exposures and purchases or sells foreign currency denominated
invested assets to match these exposures.

Losses and LAE and the resulting loss and LAE ratios for the years ended
December 31, 2004 and 2003 were as follows ($ in thousands):

2004 2003 Increase
----------- ------- -------------

Losses and LAE ....................... $ 1,019,804 584,171 $ 435,633
Losses and LAE ratios ................ 70.4% 54.7% 15.7 points

The increase in losses and LAE in 2004 from 2003 is due primarily to losses
of approximately $230,475,000 from the Hurricanes and the growth in business in
all segments. The increase in the loss ratio in 2004 from 2003 is due primarily
to losses from the Hurricanes that contributed 15.9% to the loss and LAE ratio
in 2004. Net favorable development of $57,151,000 reduced the loss and LAE ratio
by

-41-

3.9% in 2004 as compared with favorable development of $50,866,000 that reduced
the loss and LAE ratio by 4.8% in 2003.

Acquisition expenses and resulting acquisition expense ratios for the years
ended December 31, 2004 and 2003 were as follows ($ in thousands):

Increase
2004 2003 (decrease)
----------- -------- --------------

Acquisition expenses ............... $ 327,821 251,226 $ 76,595
Acquisition expense ratios ......... 22.6% 23.5% (0.9) points

The increase in acquisition expenses in 2004 from 2003 is consistent with
the growth in business in all segments, partially offset by reductions of profit
commissions under reinsurance contracts that incurred losses from the
Hurricanes. The decrease in the acquisition expense ratio in 2004 from 2003 is
primarily due to changes in the mix of business as well as reductions of profit
commissions related to losses from the Hurricanes.

Operating expenses for the years ended December 31, 2004 and 2003 were
$66,333,000 and $92,595,000, respectively. Operating expenses include costs such
as salaries, rent and like items related to reinsurance operations as well as
costs associated with Platinum Holdings. The decline of $26,262,000 in operating
expenses in 2004 as compared with 2003 was attributable to a reduction of
$11,408,000 in incentive-based compensation in 2004 as compared with 2003 due to
the decline in the Company's net income, a charge of $9,289,000 in 2003 related
to the separation and consulting agreement with the Company's former chief
executive officer, as well as various non-recurring start-up costs of
approximately $9,239,000 incurred in 2003.

Interest expense for the years ended December 31, 2004 and 2003 was
$9,268,000 and $9,492,000, respectively, and relates to the Company's ESU's,
which are classified as debt obligations on the Company's balance sheet.

Income taxes and the effective income tax rate for the years ended December
31, 2004 and 2003 were as follows ($ in thousands):

Increase
2004 2003 (decrease)
----------- ------ -------------

Income taxes ....................... $ 30,349 48,875 $ (18,526)
Effective income tax rate .......... 26.4% 25.2% 1.2 points

Income taxes decreased in 2004 from 2003 due to the decline in income
before income taxes. The effective tax rate in any given year is based on income
before taxes of the Company's subsidiaries that operate in several jurisdictions
with varying corporate income tax rates. Platinum Holdings and Platinum Bermuda
are not subject to corporate income tax. While the effective income tax rates in
2004 and 2003 are comparable, both years include events that increased the
effective income tax rate. In 2004 approximately 80% of the losses from the
Hurricanes were incurred by Platinum Bermuda without tax benefit and in 2003
expenses related to the severance payment to and share option expense of the
Company's former chief executive officer were incurred by Platinum Holdings
without tax benefit.

-42-

Year Ended December 31, 2003 as Compared with the Period Ended December 31,
2002

Net income for the year ended December 31, 2003 and the 2002 Period was as
follows ($ in thousands):

2003 2002 Period Increase
----------- ----------- -----------

Net income ......................... $ 144,823 6,438 $ 138,385

The Company's first complete year of operations was 2003 and, consequently,
net income increased significantly as compared with the 2002 Period which
represents a two-month period during which the Company had minimal underwriting
activity. Additional factors affecting the comparison include the growth in the
business underwritten in 2003 over 2002, favorable development in 2003 of unpaid
losses and LAE of approximately $50,866,000, improved profitability relating to
net premiums earned in 2003, and increased investment income resulting from
growth in invested assets in 2003. The United States insurance industry incurred
some significant catastrophe losses in 2003; however, catastrophe losses in the
Company's portfolio were relatively low as most catastrophe claims remained at
the primary or ceding company level. Operating expenses for the year ended
December 31, 2003 include a charge of $9,289,000 for expenses related to the
separation and consulting agreement with the Company's former chief executive
officer.

Net premiums written and earned for the year ended December 31, 2003 and
the 2002 Period was as follows ($ in thousands):

2003 2002 Period Increase
----------- ----------- -----------

Net premiums written ............... $ 1,172,142 298,114 $ 874,028
Net premiums earned ................ $ 1,067,527 107,098 $ 960,429

The Company's first complete year of operations was 2003 and, as a result,
net premiums written and earned increased significantly as compared with the
2002 Period which represents a two-month period during which the Company had
minimal underwriting activity. Generally, the last two months of a year have a
relatively small amount of net premiums written. However, net premiums written
in the 2002 Period include $244,000,000 of unearned premiums assumed from St.
Paul under the Quota Share Retrocession Agreements representing the remaining
unearned premiums related to contracts written by St. Paul Re during the first
ten months of 2002. Premiums written are based partially on estimates of
ultimate premiums from reinsurance contracts and the estimates are updated
quarterly. Reductions in premiums estimated for the 2002 underwriting year in
the Casualty segment, a portion of which was written and earned by St. Paul Re,
reduced the Company's net premiums written in 2003 by approximately $35,300,000.

Similar to net premiums written, net premiums earned in 2003 represents
twelve months of underwriting activity whereas the 2002 Period represents two
months. Net premiums earned are recognized subsequent to net premiums written.
Net premiums earned in the 2002 Period are relatively low due to the
commencement of operations during 2002. Net premiums earned for 2003 reflect
business underwritten in 2003 and 2002 while net premiums earned in the 2002
Period reflect only business underwritten in 2002. The reduction in 2003 of net
premiums written in the Casualty segment resulted in a reduction of net premiums
earned of approximately $16,100,000.

Net investment income was $57,645,000 and $5,211,000 for the year ended
December 31, 2003 and the 2002 Period, respectively. The increase is primarily
due to the comparison of 2003 with twelve

-43-

months of investment income to the 2002 Period. Net investment income increased
during 2003 as the Company's invested assets increased as a result of positive
cash flow from operations. Net realized gains on investments were $2,781,000 and
$25,300 in 2003 and the 2002 Period, respectively, and are the result of
investment sale activity to manage the quality, diversity, currency exposure,
duration and tax profile of the investment portfolio.

Other income was $3,343,000 and $167,000 for the year ended December 31,
2003 and the 2002 Period, respectively, and represents earnings on a small
number of reinsurance contracts in the Finite Risk segment accounted for as
deposits. Other income in 2003 also includes $1,282,000 of net unrealized losses
relating to changes in fair value of fixed maturities classified as trading.

Net foreign currency exchange gains (losses) for the year ended December
31, 2003 and the 2002 Period, were ($114,000) and $2,017,000, respectively.
Foreign currency exchange gains and losses arise from the valuation in U.S.
dollars of assets and liabilities denominated in foreign currencies. During
2003, the Company established procedures to manage exposure to foreign currency
exchange rates by matching foreign currency denominated assets and liabilities.

Losses and LAE for the years ended December 31, 2003 and the 2002 Period,
respectively were as follows ($ in thousands):

Increase
2003 2002 Period (decrease)
----------- ----------- -------------

Losses and LAE ..................... $ 584,171 60,356 $ 523,815
Losses and LAE ratio ............... 54.7% 56.4% (1.7) points

The increase in losses and LAE is primarily due to the comparison of 2003
with twelve months of underwriting operations to the 2002 Period. Losses and LAE
in 2003 were favorably impacted by improved profitability relating to net
premiums earned in 2003 on business underwritten in 2002. While losses and LAE
in 2003 include provisions for various catastrophe losses, the 2002 Period had
no catastrophe losses. The United States insurance industry incurred some
significant catastrophe losses in 2003. However, catastrophe losses in the
Company's portfolio were relatively low as most catastrophe claims remained at
the primary or ceding company level. Losses and LAE in 2003 included a reduction
in the estimated liability as of December 31, 2002 of $63,966,000 of which
$13,100,000 relates to the reduction in 2003 of premiums originally estimated
and earned in 2002 in the Casualty segment. The remaining $50,866,000 represents
net favorable development. Unpaid losses and LAE at December 31, 2002 were based
largely on initial expected ultimate loss ratios. Throughout 2003 actual
reported losses were monitored against expected patterns of reported loss. As
actual reported losses continued to be less than expected reported losses,
estimates of expected ultimate losses were reduced. This principally affected
property coverages in the Property and Marine and Finite Risk segments where a
substantial portion of the ultimate losses is expected to be reported to the
Company within two years.

Acquisition expenses, including brokerage, commissions and other direct
underwriting expenses associated with underwriting activities, and resulting
acquisition expense ratios for the year ended December 31, 2003 and the 2002
Period were as follows ($ in thousands):

Increase
2003 2002 Period (decrease)
----------- ----------- -------------

Acquisition expenses ................. $ 251,226 25,474 $ 225,752
Acquisition expense ratio ............ 23.5% 23.8% (0.3) points

-44-

The increase in acquisition expenses is primarily due to the comparison of
2003 with twelve months of underwriting operations to the 2002 Period. Although
acquisition ratios in 2003 varied by operating segment and by type of business,
the resulting ratios of acquisition expenses to net premiums earned for 2003 and
the 2002 Period were comparable at 23.5% and 23.8%, respectively.

Operating expenses include other underwriting expenses related to the
reinsurance operations as well as costs associated with the holding company
operations of Platinum Holdings and were $92,595,000 and $16,334,000 for the
year ended December 31, 2003 and the 2002 Period, respectively. The increase in
operating expenses is due to the comparison of 2003 with twelve months of
operations to the 2002 Period. Additionally there were increases in staff, fees
relating to the Services and Capacity Reservation Agreement dated November 1,
2002 with RenaissanceRe (the "RenRe Agreement") that provides for a periodic
review of aggregate property catastrophe exposures by RenaissanceRe and office
relocation expenses in 2003. Operating expenses in 2003 include a charge of
$9,289,000 for the expenses related to the separation and consulting agreement
with the Company's former chief executive officer. Operating expenses in the
2002 Period include one-time expenses of $5,353,000 incurred in connection with
the completion of the Initial Public Offering, the formation of the Company and
the assumption of business from St. Paul.

Interest expense for the year ended December 31, 2003 and the 2002 Period
was $9,492,000, and $1,261,000, respectively, and relates to amounts payable
under the Company's ESU's which are classified as debt obligations on the
Company's balance sheet. The increase is due to the comparison of 2003 with
twelve months of interest expense to the 2002 Period.

Income taxes and the effective income tax rate for the year ended December
31, 2003 and the 2002 Period were as follows ($ in thousands):

Increase
2003 2002 Period (decrease)
----------- ----------- ---------------

Income taxes ....................... $ 48,875 4,655 $ 44,220
Effective income tax rate .......... 25.2% 42.0% (16.8) points

The increase in income tax expense is due to the increase in net income
before taxes in 2003 over the 2002 Period. The effective tax rate for 2003 was
affected by a significant amount of income derived from business underwritten in
2002, which was assumed and retained by Platinum US and subject to U.S.
corporate tax. The effective tax rate for 2003 was also affected by expenses
related to the separation and consulting agreement with the Company's former
chief executive officer that were incurred by Platinum Holdings without tax
benefit, thereby increasing the 2003 effective tax rate. The effective tax rate
in the 2002 Period was higher than any tax rate of the taxable jurisdictions in
which the Company operates due to significant start-up expenses incurred by
Platinum Holdings for which no tax benefit was available.

SEGMENT INFORMATION

The Company conducts its worldwide reinsurance business through three
operating segments: Property and Marine, Casualty and Finite Risk. In managing
the Company's operating segments, management uses measures such as underwriting
income and underwriting ratios to evaluate segment performance. Management does
not allocate by segment its assets or certain income and expenses such as
investment income, interest expense and certain corporate expenses. Segment
underwriting income is reconciled to income before income taxes. The measures
used by management in evaluating the Company's operating segments should not be
used as a substitute for measures determined under U.S. GAAP. The following
table summarizes underwriting activity and ratios for the three operating
segments for the years ended December 31, 2004 and 2003 and the 2002 Period ($
in thousands):

-45-

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

Year ended December 31, 2004:

Net premiums written ............... $ 504,439 677,399 464,175 $ 1,646,013
---------- ------- ------- -----------
Net premiums earned ................ 485,135 611,893 350,907 1,447,935
Losses and LAE ..................... 349,557 418,355 251,892 1,019,804
Acquisition expenses ............... 76,360 151,649 99,812 327,821
Other underwriting expenses ........ 27,827 19,086 6,224 53,137
---------- ------- ------- -----------

Segment underwriting income
(loss)......................... $ 31,391 22,803 (7,021) $ 47,173
---------- ------- -------

Corporate expenses not allocated to segment ..... ......................... (13,196)
Net foreign currency exchange gains ............. ......................... 725
Interest expense ................................ ......................... (9,268)
Other income .................................... ......................... 3,211
Net investment income and net realized gain on in vestments ............... 86,487
-----------
Income before income taxes ................... ......................... $ 115,132
-----------
Ratios:
Losses and LAE ................... 72.1% 68.4% 71.8% 70.4%
Acquisition expense .............. 15.7% 24.8% 28.4% 22.6%
Other underwriting expense ....... 5.7% 3.1% 1.8% 3.7%
---------- ------- ------- -----------
Combined ........................ 93.5% 96.3% 102.0% 96.7%
---------- ------- ------- -----------

Year ended December 31, 2003:

Net premiums written ............... $ 352,908 474,000 345,234 $ 1,172,142
---------- ------- ------- -----------
Net premiums earned ................ 355,556 391,170 320,801 1,067,527
Losses and LAE ..................... 169,944 266,836 147,391 584,171
Acquisition expenses ............... 52,154 101,005 98,067 251,226
Other underwriting expenses ........ 35,598 21,060 12,870 69,528
---------- ------- ------- -----------
Segment underwriting income ..... $ 97,860 2,269 62,473 $ 162,602
---------- ------- -------
Corporate expenses not allocated to segment ..... ......................... (23,067)
Net foreign currency exchange losses ............ ......................... (114)
Interest expense ................................ ......................... (9,492)
Other income .................................... ......................... 3,343
Net investment income and net realized gain on in vestments ............... 60,426
-----------
Income before income taxes ................... ......................... $ 193,698
-----------
Ratios:
Losses and LAE ................... 47.8% 68.2% 45.9% 54.7%
Acquisition expense .............. 14.7% 25.8% 30.6% 23.5%
Other underwriting expense ....... 10.0% 5.4% 4.0% 6.5%
---------- ------- ------- -----------
Combined ........................ 72.5% 99.4% 80.5% 84.7%
---------- ------- ------- -----------

-46-

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

2002 Period:
Net premiums written ............... $ 89,341 164,929 43,844 $ 298,114
----------- --------- ------- -----------
Net premiums earned ................ 43,047 39,320 24,731 107,098
Losses and LAE ..................... 21,558 29,498 9,300 60,356
Acquisition expenses ............... 7,798 9,269 8,407 25,474
Other underwriting expenses ........ 5,960 4,136 2,068 12,164
----------- --------- ------- -----------
Segment underwriting income
(loss) ........................ $ 7,731 (3,583) 4,956 $ 9,104
----------- --------- ------- -----------
Corporate expenses not allocated to segments .............................. (4,170)
Net foreign currency exchange gains ....................................... 2,017
Interest expense .......................................................... (1,261)
Other income .............................................................. 167
Net investment income and net realized gains on investments ............... 5,236
-----------
Income before income taxes ............................................. $ 11,093
-----------
Ratios:
Losses and LAE ................... 50.1% 75.0% 37.6% 56.4%
Acquisition expense .............. 18.1% 23.6% 34.0% 23.8%
Other underwriting expense ....... 13.8% 10.5% 8.4% 11.4%
----------- --------- ------- -----------
Combined ........................ 82.0% 109.1% 80.0% 91.6%
----------- --------- ------- -----------

PROPERTY AND MARINE

The Property and Marine operating segment includes principally property
(including crop) and marine reinsurance coverages that are written in the United
States and international markets. This business includes catastrophe
excess-of-loss treaties, per-risk excess-of-loss treaties and proportional
treaties. This operating segment generated 30.6%, 30.1% and 30.0% of the
Company's net premiums written in 2004, 2003 and the 2002 Period, respectively.

Year Ended December 31, 2004 as Compared with the Year Ended December 31,
2003

Net premiums written and net premiums earned for the years ended December
31, 2004 and 2003 were as follows ($ in thousands):

2004 2003 Increase
----------- ------- -----------

Net premiums written ............... $ 504,439 352,908 $ 151,531
Net premiums earned ................ $ 485,135 355,556 $ 129,579

Net premiums written and earned increased in 2004, as compared with 2003,
due to growth across all property classes. The increase in net premiums written
is also the result of a more efficient use of catastrophe capacity through
enhanced modeling capabilities, an increase of property pro-rata business and a
transfer of catastrophe capacity from the Finite Risk segment to the Property
and Marine segment. Net premiums written and earned also include approximately
$16,198,000 of additional premiums from reinsurance contracts that incurred
losses arising from the Hurricanes.

-47-

Losses and LAE and the resulting loss ratios for the years ended December
31, 2004 and 2003 were as follows ($ in thousands):

2004 2003 Increase
----------- ------- -------------

Losses and LAE ..................... $ 349,557 169,944 $ 179,613
Losses and LAE ratio ............... 72.1% 47.8% 24.3 points

The increase in losses and LAE and the related losses and LAE ratio in 2004
is due to losses of $169,652,000 from the Hurricanes as compared with the low
level of catastrophe losses in 2003. Also contributing to the increase in losses
and LAE in 2004 as compared with 2003 is the growth in business. Partially
offsetting the increased losses and LAE relating to the Hurricanes is
approximately $50,980,000 of favorable development of prior years' unpaid losses
and LAE in 2004 as compared with approximately $31,600,000 of favorable
development in 2003. During 2004 and 2003, actual reported losses were
significantly less than expected for the short-tailed non-catastrophe property
lines resulting in reductions in estimated ultimate losses.

Acquisition expenses and resulting acquisition expense ratios for the years
ended December 31, 2004 and 2003 were as follows ($ in thousands):

2004 2003 Increase
----------- ------ ------------

Acquisition expenses ............... $ 76,360 52,154 $ 24,206
Acquisition expense ratio .......... 15.7% 14.7% 1.0 point

The increase in acquisition expenses in 2004 as compared with 2003 is
consistent with the growth in business. The increase in the acquisition expense
ratio is primarily due to profit commissions related to the favorable
development of non-catastrophe losses and LAE and changes in the mix of
business.

Other underwriting expenses for the years ended December 31, 2004 and 2003
were $27,827,000 and $35,598,000, respectively. The decrease in other
underwriting expenses is due to cost reductions in the Property and Marine
segment in 2004, the reduction of incentive based compensation in 2004, as well
as various non-recurring start-up costs incurred in 2003. Other underwriting
expenses for the years ended December 31, 2004 and 2003 include fees of
$6,396,000 and $5,350,000, respectively, relating to the RenRe Agreement.

Year Ended December 31, 2003 as Compared with the Period Ended December 31,
2002

Net premiums written and net premiums earned for the year ended December
31, 2003 and the 2002 Period were as follows ($ in thousands):

2003 2002 Period Increase
----------- ----------- -----------

Net premiums written ............... $ 352,908 89,341 $ 263,567
Net premiums earned ................ $ 355,556 43,047 $ 312,509

The Company's first complete year of operations was 2003 as compared with
the 2002 Period which represents a two-month period during which the Company had
minimal underwriting activity. Consequently, net premiums written and earned
increased by $263,567 and $312,509, respectively. Net premiums written in the
2002 Period include $77,049,000 of premiums assumed from St. Paul under the
Quota Share Retrocession Agreements representing unearned premiums related to
contracts written by St. Paul during the first ten months of 2002. Net premiums
written in 2003 reflect a growth in business underwritten in 2003 over 2002.
Similar to net premiums written, net premiums earned in 2003 represent twelve
months of underwriting activity whereas the 2002 Period represents two months.
Net premiums

-48-

earned are recognized subsequent to net premiums written. Net premiums earned in
the 2002 Period are relatively low due to the commencement of operations during
2002. Net premiums earned for 2003 reflect business underwritten in 2003 and
2002.

Losses and LAE and the resulting loss ratios for the year ended December
31, 2003 and the 2002 Period were as follows ($ in thousands):

Increase
2003 2002 Period (decrease)
----------- ----------- --------------

Losses and LAE ..................... $ 169,944 21,558 $ 148,386
Losses and LAE ratio ............... 47.8% 50.1% (2.3) points

The increase in losses and LAE is primarily due to the comparison of 2003
with twelve months of underwriting operations to the 2002 Period. Losses and LAE
in 2003 were favorably affected by a relatively low level of catastrophe losses
while the 2002 Period had no catastrophe losses. Losses and LAE in 2003 also
included favorable development in 2003 of losses and LAE as of December 31, 2002
of approximately $31,600,000. Additionally, the losses and LAE in 2003 were
favorably impacted by improved profitability relating to net earned premium in
2003 on business underwritten in 2002.

Acquisition expenses and resulting acquisition expense ratios for the year
ended December 31, 2003 and the 2002 Period were as follows ($ in thousands):

Increase
2003 2002 Period (decrease)
----------- ----------- --------------

Acquisition expenses ............... $ 52,154 7,798 $ 44,356
Acquisition expense ratio .......... 14.7% 18.1% (3.4) points

The increase in acquisition expenses is primarily due to the comparison of
2003 with twelve months of underwriting operations to the 2002 Period. The
ratios fluctuate as a result of the changes in mix of business and the contract
terms and conditions.

Other underwriting expenses for the year ended December 31, 2003 and the
2002 Period were $35,598,000 and $5,960,000, respectively, and represent costs
such as salaries, rent and like items. The increase is primarily due to the
comparison of 2003 with twelve months of operations to the 2002 Period. Other
underwriting expenses include fees of $5,350,000 in 2003 and $46,000 in the 2002
Period relating to the RenRe Agreement. Operating expenses for the 2002 Period
include one-time expenses incurred in connection with the completion of the
Initial Public Offering, the formation of the Company and the assumption of
business from St. Paul.

CASUALTY

The Casualty operating segment includes reinsurance treaties that
principally cover umbrella liability, general and product liability,
professional liability, workers' compensation, casualty clash, automobile
liability, surety and trade credit. This operating segment also includes
accident and health treaties, which are predominantly reinsurance of health
insurance products. This operating segment generated 41.2%, 40.4% and 55.3% of
the Company's net premiums written for the years ended December 31, 2004 and
2003 and the 2002 Period, respectively. The percentage in the 2002 Period was
impacted by the unearned premiums assumed from St. Paul under the Quota Share
Retrocession Agreements which was also included in net premiums written.

-49-

Year Ended December 31, 2004 as Compared with the Year Ended December 31,
2003

Net premiums written and net premiums earned for the years ended December
31, 2004 and 2003 were as follows ($ in thousands):

2004 2003 Increase
----------- ------- -----------

Net premiums written ............... $ 677,399 474,000 $ 203,399
Net premiums earned ................ $ 611,893 391,170 $ 220,723

The increase in premiums written and earned is due to the growth in
contracts bound in both 2003 and 2004 and rate increases in certain lines of
business in 2004 that together generate net premiums written in 2004. The
Company continues to expand its treaty participation with existing clients and
form new client relationships. Additionally, in 2004 the Company expanded its
participation in surety and trade credit business. In response to deteriorating
market conditions in 2004 in the directors and officers liability line of
business, the Company has begun to significantly decrease its involvement in
that line. Also, increases in premiums written were offset by revisions of
estimates of Casualty premiums that resulted in reductions of net premiums
written and earned in 2004 of approximately $21,000,000 and $14,300,000,
respectively, as compared with similar reductions of net premiums written and
earned in 2003 of $35,300,000 and $16,100,000, respectively. The revisions to
estimates are based on reported premiums from ceding companies and revised
projections of ultimate premiums written under reinsurance contracts. The net
effect on underwriting income of the revisions of estimates, after related
reductions in losses, LAE and acquisitions expenses, was not significant. The
increase in net premium earned is related to and consistent with the increase in
net premiums written and is affected by changes in the mix of business and the
structure of the underlying reinsurance contracts.

Losses and LAE and the resulting loss ratios for the years ended December
31, 2004 and 2003 were as follows ($ in thousands):

2004 2003 Increase
----------- ------- -------------

Losses and LAE ..................... $ 418,355 266,836 $ 151,519
Losses and LAE ratio ............... 68.4% 68.2% 0.2 points

The increase in losses and LAE in 2004 as compared with 2003 is consistent
with the growth in net premiums earned. The resulting losses and LAE ratios in
2004 and 2003 are comparable. Improvements in the loss ratio in 2004, due to
increased profitability of the 2004 and 2003 underwriting years over the 2002
underwriting year, were offset by adverse development with respect to automobile
liability reinsurance in the United Kingdom and losses arising from the partial
collapse of the new airport terminal in Paris, France.

Acquisition expenses and resulting acquisition expense ratios for the years
ended December 31, 2004 and 2003 were as follows ($ in thousands):

Increase
2004 2003 (decrease)
----------- ------- -------------

Acquisition expenses ............... $ 151,649 101,005 $ 50,644
Acquisition expense ratio .......... 24.8% 25.8% (1.0) point

The increase in acquisition expenses is due primarily to the increase in
net premiums earned in 2004 as compared with 2003. The decrease in acquisition
expense ratios for the year ended December 31,

-50-

2004 as compared with 2003 is due to changes in the mix of business toward lines
with higher expected loss ratios and lower acquisition expense ratios.

Other underwriting expenses for the years ended December 31, 2004 and 2003
were $19,086,000 and $21,060,000, respectively. The decrease in other
underwriting expenses is due to the reduction of incentive based compensation in
2004, as well as various non-recurring start-up costs incurred in 2003. The
resulting other underwriting expense ratios for the years ended December 31,
2004 and 2003 were 3.1% and 5.4%, respectively. The decrease in the ratio in
2004 as compared with 2003 is due to both the increase in net premiums earned
and the decline in other underwriting expenses.

Year Ended December 31, 2003 as Compared with the Period Ended December 31,
2002

Net premiums written and net premiums earned for the year ended December
31, 2003 and the 2002 Period were as follows ($ in thousands):

2003 2002 Period Increase
----------- ----------- -----------

Net premiums written ............... $ 474,000 164,929 $ 309,071
Net premiums earned ................ $ 391,170 39,320 $ 351,850

The Company's first complete year of operations was 2003 as compared with
the 2002 Period which represents a two-month period during which the Company had
minimal underwriting activity. Consequently, net premiums written and net
premiums earned increased by $309,071 and $351,850, respectively. Net premiums
written in the 2002 Period include $140,386,000 of premiums assumed from St.
Paul under the Quota Share Retrocession Agreements representing unearned
premiums related to contracts written by St. Paul during the first ten months of
2002. Net premiums written in 2003 reflect a growth in business underwritten in
2003 over 2002. Premiums written are based partially on estimates of ultimate
premiums from reinsurance contracts and the estimates are updated quarterly. Net
premiums written in 2003 include a reduction in premiums estimated in the 2002
underwriting year, a portion of which were written and earned by St. Paul Re,
that reduced net premiums written in the Company's Casualty segment in 2003 by
approximately $35,300,000.

Similar to net premiums written, net premiums earned in 2003 represent
twelve months of underwriting activity whereas the 2002 Period represents two
months. Net premiums earned for 2003 reflect business underwritten in 2003 and
2002 while net premiums earned in the 2002 Period reflect only business
underwritten in 2002. The reduction, in 2003, of net premiums written and earned
in the 2002 Period resulted in a reduction of net premiums earned in 2003 of
approximately $16,100,000.

Losses and LAE and the resulting loss ratios for the year ended December
31, 2003 and the 2002 Period were as follows ($ in thousands):

Increase
2003 2002 Period (decrease)
----------- ----------- --------------

Losses and LAE ..................... $ 266,836 29,498 $ 237,338
Losses and LAE ratio ............... 68.2% 75.0% (6.8) points

The increase in losses and LAE is primarily due to the comparison of 2003
with twelve months of underwriting operations to the 2002 Period. The loss ratio
on business underwritten in 2003 is lower than the loss ratio for business
underwritten in the 2002 Period primarily due to rate increases achieved during
2003. Losses and LAE in 2003 includes amounts from business underwritten in 2003
and business underwritten in 2002 while the 2002 Period includes amounts only
from business underwritten in 2002. Losses and LAE in 2003 included a reduction
in the estimated liability as of December 31, 2002 of

-51-

$14,500,000, of which $13,100,000 relates to the reduction in 2003 of net
premiums written and earned in the 2002 Period. The remaining $1,400,000 relates
to favorable development. The decline in the loss ratio was further influenced
by a shift in the mix of business toward contracts that have lower loss ratios
and higher expense ratios.

Acquisition expenses and resulting acquisition expense ratios for the year
ended December 31, 2003 and the 2002 Period were as follows ($ in thousands):

2003 2002 Period Increase
----------- ----------- -------------

Acquisition expenses ............... $ 101,005 9,269 $ 91,736
Acquisition expense ratio .......... 25.8% 23.6% 2.2 points

The increase in acquisition expenses is due primarily to the comparison of
2003 with twelve months of underwriting operations to the 2002 Period. The
resulting acquisition expense ratios reflect a shift in the mix of business and
effects of differences in contract terms and conditions.

Other underwriting expenses for the year ended December 31, 2003 and the
2002 Period were $21,060,000 and $4,136,000, respectively, and represent costs
such as salaries, rent and like items. The increase is primarily due to the
comparison of 2003 with twelve months of operations to the 2002 Period. Other
underwriting expenses in the 2002 Period include one-time expenses incurred in
connection with the completion of the Initial Public Offering, the formation of
the Company and the assumption of business from St. Paul.

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 classes of risks
underwritten through finite risk contracts are generally consistent with the
classes covered by traditional products. Typically, the amount of claims we
might pay is finite or capped. In return for this limit on claims, we often
accept a cap on the potential profit margin specified in the treaty and return
profits above this margin to the ceding company. The three main categories of
finite risk contracts are finite quota share, multi-year excess-of-loss and
whole account aggregate stop loss. This operating segment generated 28.2%, 29.5%
and 14.7% of the Company's net premiums written for the years ended December 31,
2004 and 2003 and the 2002 Period, respectively. Due to the direct
inter-relationship between losses and commissions for this segment, the Company
believes it is important to evaluate the overall combined ratio, rather than its
component parts of loss and loss adjustment expense ratios.

Year Ended December 31, 2004 as Compared with the Year Ended December 31,
2003

Net premiums written and net premiums earned for the years ended December
31, 2004 and 2003 were as follows ($ in thousands):

2004 2003 Increase
----------- ------- -----------

Net premiums written ............... $ 464,175 345,234 $ 118,941
Net premiums earned ................ $ 350,907 320,801 $ 30,106

The increase in net premiums written and net premiums earned is primarily
attributable to several large capped quota share contracts that were written in
2004. Net premiums earned are related to current and prior periods' net premiums
written and are affected by changes in the mix of business and the structure of
the underlying reinsurance contracts. Net premiums written and earned also
include

-52-

approximately $13,067,000 of additional premiums from reinsurance contracts that
incurred losses arising from the Hurricanes.

Losses and LAE, acquisition expenses and the resulting ratios for the years
ended December 31, 2004 and 2003 were as follows ($ in thousands):

2004 2003 Increase
----------- ------- ------------

Losses and LAE ........................ $ 251,892 147,391 $ 104,501

Acquisition expenses .................. 99,812 98,067 1,745

Losses, LAE and acquisition expenses .. $ 351,704 245,458 $ 106,246
Losses, LAE and acquisition expenses
ratio ............................... 100.2% 76.5% 23.7 points

The increase in losses, LAE and acquisition expenses and the losses, LAE
and acquisition expense ratio in 2004 as compared with 2003 is primarily due to
losses of $60,823,000 from the Hurricanes, partially offset by a reduction in
profit commissions of $10,243,000. There were no catastrophe losses in 2003. In
addition, several capped quota share contracts were written in 2004 that
included primarily casualty business as compared with business written in 2003
that included a higher percentage of finite property business with lower loss
ratios. Favorable development impacting both losses and LAE and acquisition
expenses occurred in both 2004 and 2003. Net favorable development in 2004 and
2003 amounted to $9,348,000 and $17,900,000, respectively.

Other underwriting expenses for the years ended December 31, 2004 and 2003
were $6,224,000 and $12,870,000, respectively. The decrease in other
underwriting expenses is due to cost reductions in the Finite Risk segment in
2004, the reduction of incentive based compensation in 2004, as well as various
non-recurring start-up costs incurred in 2003.

Year Ended December 31, 2003 as Compared with the Period Ended December 31,
2002

Net premiums written and net premiums earned for the year ended December
31, 2003 and the 2002 Period were as follows ($ in thousands):

2003 2002 Period Increase
----------- ----------- -----------

Net premiums written ............... $ 345,234 43,844 $ 301,390
Net premiums earned ................ $ 320,801 24,731 $ 296,070

The Company's first complete year of operations was 2003 as compared with
the 2002 Period which represents a two-month period during which the Company had
minimal underwriting activity. Consequently, net premiums written and net
premiums earned increased by $301,390 and $296,070, respectively. The Finite
Risk portfolio consists of a small number of contracts which can be large in
premium size and are written on an intermittent basis. Consequently net premiums
written are expected to vary significantly from year to year. A few significant
finite quota share treaties were underwritten in the latter part of 2002 and
early 2003 that together produced net premiums written of $220,000,000 in 2003.

Similar to net premiums written, net premiums earned in 2003 includes
twelve months of underwriting activity whereas the net premiums earned in the
2002 Period includes two months. In addition, net premiums earned are recognized
subsequent to net premiums written. The net premiums earned in 2003 reflect
premiums from contracts underwritten in 2003 and 2002 whereas the net premiums
earned in the 2002 Period only reflects premiums from contracts underwritten in
2002 as there was no business underwritten prior to 2002.

-53-

Losses and LAE, acquisition expenses and the resulting ratios year ended
December 31, 2003 and the 2002 Period were as follows ($ in thousands):

2003 2002 Period Increase
----------- ----------- -----------

Losses and LAE ........................ $ 147,391 9,300 $ 138,091

Acquisition expenses .................. 98,067 8,407 89,660

Losses, LAE and acquisition expenses .. $ 245,458 17,707 $ 227,751
Losses, LAE and acquisition expense
ratio ............................... 76.5% 71.6% 4.9 points

The increase in losses and LAE and acquisition expenses is primarily due to
the comparison of 2003 with twelve months of underwriting operations to the 2002
Period. Both 2003 and the 2002 Period benefited from the absence of any
catastrophe losses. In 2003 there was a significantly greater amount of finite
quota share contracts that had higher loss ratios. The resulting effect was
partially mitigated by favorable development in 2003 of losses and LAE as of
December 31, 2002 of approximately $17,900,000, which includes the effect of
commutations. The increase in acquisition expenses is related to the increase in
net premiums earned in 2003 over the 2002 Period. The ratios reflect the mix of
business and effects of differences in terms and conditions of various
contracts.

Other underwriting expenses for the year ended December 31, 2003 and the
2002 Period were $12,870,000 and $2,068,000, respectively, and represent costs
such as salaries, rent and like items. The increase is due to the comparison of
2003 with twelve months of operations to the 2002 Period. Other underwriting
expenses in 2002 include one-time expenses incurred in connection with the
completion of the Initial Public Offering, the formation of the Company and the
assumption of business from St. Paul.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

FINANCIAL CONDITION

Cash and cash equivalents were $209,897,000 and $105,461,000 as of December
31, 2004 and 2003, respectively. Fixed maturities were $2,240,202,000 and
$1,678,138 as of December 31, 2004 and 2003 respectively. The investment
portfolio increased due to positive cash flow from operations, excluding trading
securities activities, which was $698,223,000 and $469,168,000 in 2004 and 2003,
respectively. The Company's fixed maturity available-for-sale and trading
portfolios are comprised entirely of publicly traded fixed maturity investments.
The investment portfolio, which includes cash and cash equivalents, had a
weighted average duration of 3.6 years and 3.7 years as of December 31, 2004 and
2003, respectively. Other invested assets currently represent a strategic equity
investment in a privately held reinsurance company. The Company maintains and
periodically updates an overall duration target for the portfolio and routinely
monitors the composition of, and cash flows from, the portfolio to maintain
liquidity necessary to meet the Company's obligations.

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 all include significant estimates. Premiums receivable as of
December 31, 2004 of $580,048,000 include $530,066,000 that is based upon
estimates. Premiums receivable as of December 31, 2003 of $487,441,000 include
$396,541,000 that is based upon estimates. Net unpaid losses and LAE, net of
reinsurance recoverable, as of December 31, 2004 of $1,378,950,000 include
$1,151,222,000 of net IBNR. Net unpaid losses and LAE, net of reinsurance
recoverable, as of December 31, 2003 of $731,918,000 include $639,218,000 of net
IBNR. Commissions payable as of December 31, 2004 of $181,925,000 include
$165,050,000 that is based upon estimates. Commissions payable as of December
31, 2003 of $176,310,000 include $146,637,000 that is based upon estimates.

-54-

SOURCES OF LIQUIDITY

The consolidated sources of funds of the Company consist primarily of
premiums written, investment income, proceeds from sales and redemption of
investments, losses recovered from retrocessionaires, and actual cash and cash
equivalents held by the Company. Net cash flows provided by operations,
excluding trading securities activities, for the years ended December 31, 2004
and 2003 and the 2002 Period were $698,223,000, $469,168,000 and $281,393,000,
respectively, 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, Platinum UK 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 for general corporate
purposes and to meet its obligations, including the contract adjustment payments
related to the ESU's and the payment of any dividends to its shareholders.

The Company has filed an unallocated universal shelf registration statement
with the Securities and Exchange Commission ("SEC"), which the SEC declared
effective on April 5, 2004. The securities registered under the shelf
registration statement for possible future sales include up to $750,000,000 of
common shares, preferred shares and various types of debt securities. The
registration statement included common shares held by St. Paul and RenaissanceRe
and common shares issuable upon exercise of options owned by St. Paul and
RenaissanceRe. On June 25, 2004, the Company announced St. Paul's intent to sell
6,000,000 of the Company's common shares in an underwritten public offering,
which was effected pursuant to a prospectus supplement to the shelf registration
statement dated June 28, 2004 and completed on June 30, 2004. The 6,000,000
common shares sold by St. Paul amounted to $177,330,000 of the $750,000,000
securities registered under the shelf registration statement. The Company did
not sell any common shares in the offering and did not receive any proceeds from
the sale of the common shares by St Paul.

The Company issued the ESUs in November 2002, which consist of a contract
to purchase common shares from the Company in 2005 (the "Purchase Contracts")
and an ownership interest in a senior note due 2007 issued by Platinum Finance
(the "Senior Notes"). During 2005, the Company expects to issue common shares in
accordance with the Purchase Contracts and remarket the Senior Notes, which the
Company expects to generate cash of approximately $137,500,000, less fees and
expenses associated with the remarketing.

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 ESU's), the acquisition of and investment in businesses, capital
expenditures, premiums retroceded and taxes. The contract adjustment payments
will cease upon issuance of the common shares in accordance with the Purchase
Contracts.

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

-55-

ceding companies, they are required to provide collateral to these ceding
companies for unpaid ceded liabilities in a form acceptable to state insurance
commissioners. Typically, this type of collateral 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 with a
security interest in certain of Platinum UK's and Platinum Bermuda's
investments. As of December 31, 2004, $29,159,000 of unsecured letters of credit
were issued to various cedants.

Platinum US and Platinum Bermuda have reinsurance and other contracts that
require them to provide collateral to ceding companies should certain events
occur, such as a decline in the rating by A.M. Best below specified levels or a
decline in statutory equity below specified amounts, or when certain levels of
assumed liabilities are attained. Some reinsurance contracts also have special
termination provisions that permit early termination should certain events
occur. As of December 31, 2004, investments with a carrying value of $5,779,000
and cash and cash equivalents of $1,153,000 were held in trust and an unsecured
letter of credit of $8,128,000 was issued to satisfy these requirements.

Platinum US is obligated to collateralize the liabilities assumed from St.
Paul under the Quota Share Retrocession Agreements. Investments with a carrying
value of $318,586,000 and cash and cash equivalents of $4,846,000 at December
31, 2004 were held in trust to collateralize an equivalent amount of liabilities
ceded by St. Paul to the Company under the Quota Share Retrocession Agreements.

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 2005 without prior regulatory approval is estimated to be
$139,620,000.

On August 4, 2004, the board of directors of the Company approved a plan to
purchase up to $50,000,000 of its common shares. During the year ended December
31, 2004 the Company purchased 349,700 of its common shares in the open market
at an aggregate amount of $9,985,000 at a weighted average price of $28.55 per
share. The shares purchased by the Company were canceled.

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 economic conditions in general and in the insurance and
reinsurance markets, legal and regulatory changes as well as fluctuations from
year to year in claims experience and the presence or absence of large
catastrophic events. If the Company's liquidity needs accelerate beyond our
ability to fund such obligations from current operating cash flows, the Company
may need to liquidate a portion of its investment portfolio or raise additional
capital in the capital markets. The Company's ability to meet its liquidity
needs by selling investments or raising additional capital is subject to the
timing and pricing risks inherent in the capital markets.

ECONOMIC CONDITIONS

Periods of moderate economic recession or inflation tend not to have a
significant direct effect on the Company's underwriting operations. Significant
unexpected inflationary or recessionary periods can, however, impact the
Company's underwriting operations and investment portfolio. Management considers
the potential impact of economic trends in the estimation process for
establishing unpaid losses and LAE.

-56-

CAPITAL EXPENDITURES

None of Platinum Holdings, Platinum US, Platinum UK or Platinum Bermuda has
any material commitments for capital expenditures.

CONTRACTUAL OBLIGATIONS

The company has the following contractual obligations:

Less More
than 1 - 3 3 - 5 than
Contractual Obligations Total 1 year years years 5 years
------------------------------ ---------- --------- ------- ------- ---------

Equity Security Units (1) .... $ 137,500 - 137,500 - $ -
Operating Leases (2) ......... 17,255 2,570 4,121 3,794 6,770

Gross unpaid losses and LAE (3) $1,380,955 496,189 327,172 164,267 $ 393,327

- ----------
(1) See note 6 of the Notes to the Consolidated Financial Statements.

(2) See note 11 of the Notes to the Consolidated Financial Statements.

(3) There are generally no stated amounts related to reinsurance contracts.
Both the amounts and timing of future loss and LAE payments are estimates
and subject to the inherent variability of legal and market conditions
affecting the obligations and make the timing of cash outflows uncertain.
The ultimate amount and timing of unpaid losses and LAE could differ
materially from the amounts in the table above. Further, the gross unpaid
losses and LAE do not represent all of the obligations that will arise
under the contracts, but rather only the estimated liability incurred
through December 31, 2004. There are reinsurance contracts that have terms
extending into 2005 under which additional obligations will be incurred.

OFF BALANCE SHEET ARRANGEMENTS

The Company does not have any arrangements that are not accounted for or
disclosed in the consolidated financial statements.

CURRENT OUTLOOK

We expect that terms and conditions on most reinsurance treaties will
remain acceptable to reinsurers, while rate level adequacy will decline thereby
reducing expected profitability. Given our strategy of underwriting for
profitability, not market share, a decline in expected treaty profitability may
eventually result in lower net written premium. We anticipate that our total net
premium written in 2005 will be approximately the same as for 2004. If rates
deteriorate more quickly than we anticipate, then our 2005 net written premium
will likely be lower than the 2004 level.

For the Property and Marine segment underlying primary rates are declining
at a rapid pace for commercial properties in the US and abroad rendering some
proportional business unattractive in light of the catastrophe risks assumed.
The level of rate increase in Florida that will be allowed by regulators for
residential properties is not currently known and may not be sufficient to
compensate for the perceived riskiness of the business. Consequently, our level
of business written on a proportional basis may decline as compared to 2004. To
the extent that excess-of-loss reinsurance rates adjust to partially mitigate
the negative impact of underlying rate decreases we are more likely to renew
this business and therefore anticipate premium volume for 2005 that is
substantially similar to 2004. With selective and disciplined underwriting, we
believe that the business we accept will generate acceptable profitability.

For the Casualty segment, we believe that differences of opinion between
primary insurers and reinsurers regarding the profitability of the casualty
business will persist. Accordingly, we anticipate that

-57-

well capitalized primary carriers will retain more of their business. Less well
capitalized carriers may seek reinsurance with more restrictions on risk
transfer to drive down costs. Although the overall quantity of casualty
reinsurance ceded may decrease in 2005 versus 2004, we believe that our strong
capitalization and reputation as a lead casualty reinsurer will allow us to
write approximately the same level of premium for 2005 as for 2004 at good
levels of expected profitability provided that rate levels do not deteriorate
more rapidly than we anticipate.

In the Finite Risk segment, we expect that the ongoing investigations by
the SEC and New York Attorney General will reduce, but not eliminate, demand for
limited risk transfer products in the short term. Although we cannot predict
with certainty the outcome of these investigations, we believe that once the
buyers and sellers of these products perceive that the accounting, headline and
regulatory risk has receded, demand will increase. Accordingly, the likelihood
of writing a significant volume of new finite business is lower for 2005 than
for 2004. Our existing portfolio of finite risk contracts is expected to
generate premium volume for 2005 that is substantially the same as for 2004.

Given our current mix of business by segment and expected profitability of
that business we anticipate continued positive cash flow, and consequently
believe that our 2005 net investment income will exceed that of 2004.

RISK FACTORS

Numerous factors could cause our actual results to differ materially from
those in the forward-looking statements set forth in this Form 10-K and in other
documents that we file with the Securities and Exchange Commission. Those
factors include the following:

INCREASED COMPETITION COULD ADVERSELY AFFECT OUR PROFITABILITY.

The property and casualty reinsurance industry is highly competitive. We
compete with reinsurers worldwide, many of which have greater financial,
marketing and management resources than ours. Some of our competitors are large
financial institutions that have reinsurance segments, while others are
specialty reinsurance companies. Financial institutions have also created
alternative capital market products that compete with reinsurance products, such
as reinsurance securitization.

Following the September 11, 2001 terrorist attack, a number of individuals
and companies in the reinsurance industry established new, well-capitalized,
Bermuda-based reinsurers to benefit from improved market conditions, and a
number of existing competitors raised additional capital. Many of the reinsurers
that entered the reinsurance markets have or could have more capital than we
have. In addition, there may be established companies or new companies of which
we are not aware that may be planning to commit capital to this market. The full
effect of this additional capital on the reinsurance market and on the terms and
conditions of the reinsurance contracts of the types we expect to underwrite may
not be known for some time. Competition in the types of reinsurance business
that we underwrite is based on many factors, including premium charges and other
terms and conditions offered, services provided, ratings assigned by independent
rating agencies, speed of claims payment, claims experience, perceived financial
strength and experience and reputation of the reinsurer in the line of
reinsurance to be underwritten.

Traditional as well as new capital market participants from time to time
produce alternative products (such as reinsurance securitizations, catastrophe
bonds and various derivatives such as swaps) that may compete with certain types
of reinsurance, such as property catastrophe. Over time, these numerous
initiatives could significantly affect supply, pricing and competition in our
industry.

-58-

A DOWNGRADE IN THE RATING ASSIGNED BY BEST'S TO OUR OPERATING SUBSIDIARIES COULD
ADVERSELY AFFECT OUR ABILITY TO WRITE NEW BUSINESS.

Best's has assigned a financial strength rating of "A" (Excellent) to our
operating subsidiaries. This rating is the third highest of sixteen rating
levels. According to Best's, a rating of "A" indicates Best's opinion that a
company has an excellent ability to meet its ongoing obligations to
policyholders. This rating is subject to periodic review by Best's and may be
revised downward or revoked at the sole discretion of Best's. Best's may
increase its scrutiny of rated companies, revise their rating standards or take
other action. If Best's revises the rating standard associated with our current
rating, our rating may be downgraded or we may need to raise additional capital
to maintain our rating.

Best's is generally considered to be a significant rating agency with
respect to the evaluation of insurance and reinsurance companies. Ratings are
used by ceding companies and reinsurance intermediaries as an important means of
assessing the financial strength and quality of reinsurers. In addition, a
ceding company's own rating may be adversely affected by a downgrade in the
rating of its reinsurer. Therefore, a downgrade of our rating may dissuade a
ceding company from reinsuring with us and may influence a ceding company to
reinsure with a competitor of ours that has a higher insurance rating.

It is increasingly common for our reinsurance contracts to contain terms
that would allow the ceding companies to cancel the contract if we are
downgraded below a certain rating level or require collateral to be posted for a
portion of our obligations. Whether a client would exercise this cancellation
right would depend, among other factors, on the reason for such downgrade, the
extent of the downgrade, the prevailing market conditions and the pricing and
availability of replacement reinsurance coverage. Therefore, we cannot predict
in advance the extent to which this cancellation right would be exercised, if at
all, or what effect such cancellations would have on our financial condition or
future operations, but such effect potentially could be material.

We may from time to time secure our obligations under our various
reinsurance contracts using trusts and letters of credit. We have entered into
agreements with several ceding companies that require us to provide collateral
for our obligations under certain reinsurance contracts with these ceding
companies under various circumstances, including where our obligations to these
ceding companies exceed negotiated thresholds. These thresholds may vary
depending on our rating from Best's or other rating agencies and a downgrade of
our ratings or a failure to achieve a certain rating may increase the amount of
collateral we are required to provide. We may provide the collateral by
delivering letters of credit to the ceding company, depositing assets into trust
for the benefit of the ceding company or permitting the ceding company to
withhold funds that would otherwise be delivered to us under the reinsurance
contract. The amount of collateral we are required to provide typically
represents a portion of the obligations we may owe the ceding company, often
including estimates of IBNR made by the ceding company. Since we may be required
to provide collateral based on the ceding company's estimate, we may be
obligated to provide collateral that exceeds our estimates of the ultimate
liability to the ceding company.

We are not currently rated by any rating agencies other than Best's. We may
from time to time obtain ratings from other rating agencies, though we are
unable to predict the impact of any such ratings at this time.

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THE OCCURRENCE OF SEVERE CATASTROPHIC EVENTS COULD HAVE A MATERIAL ADVERSE
EFFECT ON OUR FINANCIAL CONDITION OR RESULTS OF OPERATIONS.

Because we underwrite property and casualty reinsurance and have large
aggregate exposures to natural and man-made disasters, we expect that our loss
experience generally will include infrequent events of great severity. The
frequency and severity of catastrophe losses are inherently unpredictable.
Consequently, the occurrence of losses from a severe catastrophe or series of
catastrophes could have a material adverse effect on our results of operations
and financial condition. In addition, catastrophes are an inherent risk of our
business and a severe catastrophe or series of catastrophes could have a
material adverse effect on our ability to write new business, and our financial
condition and results of operations, possibly to the extent of eliminating our
shareholders' equity and statutory surplus (which is the amount remaining after
all liabilities, including liabilities for losses and LAE, are subtracted from
all admitted assets, as determined under statutory accounting principles
prescribed or permitted by U.S. insurance regulatory authorities). Increases in
the values and geographic concentrations of insured property and the effects of
inflation have historically resulted in increased severity of industry losses in
recent years, and, although we seek to limit our overall exposure to risk by
limiting the amount of reinsurance we write by geographic zone, we expect that
those factors will increase the severity of catastrophe losses in the future.

IF THE LOSS LIMITATION METHODS AND PRICING MODELS WE EMPLOY ARE NOT EFFECTIVE,
OUR FINANCIAL CONDITION OR RESULTS OF OPERATIONS COULD BE MATERIALLY ADVERSELY
AFFECTED.

Our property and casualty reinsurance contracts cover unpredictable events
such as hurricanes, windstorms, hailstorms, earthquakes, volcanic eruptions,
fires, industrial explosions, freezes, riots, floods and other natural or
man-made disasters. We seek to limit our overall exposure to risk by limiting
the amount of reinsurance we write by geographic zone, peril and type of program
or contract. Our risk management uses a variety of means, including the use of
contract terms, diversification criteria, probability analysis and analysis of
comparable historical loss experience. We estimate the impact of certain
catastrophic events using catastrophe modeling software and contract information
to evaluate our exposure to losses from individual contracts and in the
aggregate. For example, the majority of the natural peril catastrophe
reinsurance we write relates to exposures within the United States, Europe and
Japan. Accordingly, we monitor our exposure to events that affect these regions,
such as hurricanes and earthquakes in the United States, flood and wind in
Europe and typhoons and earthquakes in Japan.

We take an active role in the evaluation of commercial catastrophe exposure
models, which form the basis for our own proprietary pricing models. These
computer-based loss modeling systems utilize direct exposure information
obtained from our clients and independent external data to assess each client's
potential for catastrophe losses. We believe that modeling is an important part
of the underwriting process for catastrophe exposure pricing. However, these
models depend on the quality of the information obtained from our clients and
the external data we obtain from third parties and may prove inadequate for
determining the pricing for certain catastrophe exposures.

Many of our reinsurance contracts do not contain an aggregate loss limit or
a loss ratio limit, which means that there is no contractual limit to the losses
that we may be required to pay pursuant to such reinsurance contracts.
Substantially all of our property reinsurance contracts with natural catastrophe
exposure have occurrence limits that limit our exposure. Substantially all of
our high layer property, casualty and marine excess-of-loss contracts also
contain aggregate loss limits, with limited reinstatements of an occurrence
limit, which restore the original limit under the contract after the limit has
been depleted by losses incurred on that treaty.

Various provisions of our contracts, such as limitations or exclusions from
coverage or choice of forum, may not be enforceable in the manner we intend, due
to, among other things, disputes relating to

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coverage and choice of legal forum. Underwriting is a matter of judgment,
involving important assumptions about matters that are inherently difficult to
predict and beyond our control, and for which historical experience and
probability analysis may not provide sufficient guidance. One or more
catastrophic or other events could result in claims that substantially exceed
our expectations, which could have a material adverse effect on our financial
condition or our results of operations, possibly to the extent of eliminating
our shareholders' equity and statutory surplus.

IF WE ARE REQUIRED TO INCREASE OUR LIABILITIES FOR LOSSES AND LAE, OUR OPERATING
RESULTS MAY BE ADVERSELY AFFECTED.

We are required by applicable insurance laws and regulations and U.S. GAAP
to establish liabilities on our consolidated balance sheet for payment of losses
and LAE that will arise from our reinsurance products. At any time, these
liabilities may prove to be inadequate to cover our actual losses and LAE. To
the extent these liabilities may be insufficient to cover actual losses or LAE,
we will have to add to these liabilities and incur a charge to our earnings,
which could have a material adverse effect on our financial condition, results
of operations and cash flows.

The liabilities established on our consolidated balance sheet do not
represent an exact calculation of liability, but rather are estimates of the
expected cost of the ultimate settlement of losses. All of our liability
estimates are based on actuarial and statistical projections at a given time,
facts and circumstances known at that time and estimates of trends in loss
severity and other variable factors, including new concepts of liability and
general economic conditions. Changes in these trends or other variable factors
could result in claims in excess of the liabilities that we have established.

Unforeseen losses, the type or magnitude of which we cannot predict, may
emerge in the future. These additional losses could arise from changes in the
legal environment, catastrophic events, extraordinary events affecting our
clients such as reorganizations and liquidations or changes in general economic
conditions.

In addition, because we, like other reinsurers, do not separately evaluate
each of the individual risks assumed under reinsurance treaties, we are largely
dependent on the original underwriting decisions made by ceding companies. We
are subject to the risk that our ceding companies may not have adequately
evaluated the risks to be reinsured and that the premiums ceded to us may not
adequately compensate us for the risks we assume.

Under U.S. GAAP, Platinum US, Platinum UK and Platinum Bermuda are not
permitted to establish liabilities until an event occurs which may give rise to
a loss. Once such an event occurs, liabilities are established based upon
estimates of the total losses incurred by the ceding companies and an estimate
of the portion of such loss our three operating subsidiaries have reinsured. As
a result, only liabilities applicable to losses incurred up to the reporting
date may be established, with no allowance for the provision of a contingency
reserve to account for unexpected future losses. Losses arising from future
events will be estimated and recognized at the time the loss is incurred. Such
future losses could be substantial.

RETROCESSIONAL REINSURANCE MAY BECOME UNAVAILABLE ON ACCEPTABLE TERMS.

In order to limit the effect on our financial condition of large and
multiple losses, we may buy retrocessional reinsurance, which is reinsurance for
our own account. From time to time, market conditions have limited, and in some
cases have prevented, insurers and reinsurers from obtaining the types and
amounts of reinsurance that they consider adequate for their business needs. If
we are unable or unwilling to obtain retrocessional reinsurance, our financial
position and results of operations may be

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materially adversely affected by catastrophic losses. Elimination of all or
portions of our retrocessional coverage could subject us to increased, and
possibly material, exposure or could cause us to underwrite less business.

A retrocessionaire's insolvency or its inability or unwillingness to make
payments under the terms of its reinsurance treaty with us could have a material
adverse effect on us. Therefore, our retrocessions subject us to credit risk
because the ceding of risk to retrocessionaires does not relieve a reinsurer of
its liability to the ceding companies.

WE ARE DEPENDENT ON THE BUSINESS PROVIDED TO US BY REINSURANCE BROKERS AND WE
MAY BE EXPOSED TO LIABILITY FOR BROKERS' FAILURE TO MAKE PAYMENTS TO CLIENTS FOR
THEIR CLAIMS.

We market most of our reinsurance products through reinsurance brokers. The
reinsurance brokerage industry generally, and our sources of business
specifically, are concentrated. The loss of business relationships with any of
our top five brokers could have a material adverse effect on our business. In
addition, some of these brokers have invested in new Bermuda reinsurance
companies that may compete with us.

In accordance with industry practice, we expect to frequently pay amounts
owing in respect of claims under our policies to reinsurance brokers, for
payment over to the ceding companies. In the event that a broker fails to make
such a payment, depending on the jurisdiction, we may remain liable to the
ceding company for the deficiency. Conversely, in certain jurisdictions, when
premiums for such policies are paid to reinsurance brokers for payment over to
us, such premiums will be deemed to have been paid and the ceding company will
no longer be liable to us for those amounts whether or not actually received by
us. Consequently, we assume a degree of credit risk associated with our brokers
during the payment process.

In October 2004, the Office of the Attorney General of the State of New
York announced that it had commenced a civil suit against Marsh & McLennan
Companies ("Marsh"), alleging that certain of its business practices were
fraudulent and violated antitrust and securities laws. This action resulted from
an industry-wide investigation relating to the conduct of insurance and
reinsurance brokers, which is ongoing. Regulatory authorities in several other
states have opened similar investigations. In January 2005, Marsh agreed to pay
$850 million to settle these charges. The Company was not a party to this
litigation and did not receive any subpoena or information requests with respect
to this litigation. We underwrite substantially all of our reinsurance through
brokers, including a substantial portion through Marsh. We are unable to predict
the impact, if any, that these investigations, and any increased regulatory
oversight that might result therefrom, may have on our business.

THE CURRENT INVESTIGATIONS INTO CERTAIN NON-TRADITIONAL, OR LOSS MITIGATION,
INSURANCE PRODUCTS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR FINANCIAL
CONDITION OR RESULTS OF OPERATIONS.

In November and December 2004, we received subpoenas from the SEC and the
Office of the Attorney General for the State of New York for documents and
information relating to certain non-traditional, or loss mitigation, insurance
products. We are fully cooperating in responding to all such requests. Other
reinsurance companies have reported receiving similar subpoenas and requests.
This investigation appears to be at a very preliminary stage and, accordingly,
we are unable to predict the direction the investigation will take and the
impact, if any, it may have on our business.

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THE PROPERTY AND CASUALTY REINSURANCE BUSINESS IS HISTORICALLY CYCLICAL, AND WE
EXPECT TO EXPERIENCE PERIODS WITH EXCESS UNDERWRITING CAPACITY AND UNFAVORABLE
PRICING.

Historically, property and casualty reinsurers have experienced significant
fluctuations in operating results. Demand for reinsurance is influenced
significantly by underwriting results of primary insurers and prevailing general
economic and market conditions, all of which affect ceding companies' decisions
as to the amount or portion of risk that they retain for their own accounts and
consequently reinsurance premium rates. The supply of reinsurance is related to
prevailing prices, the levels of insured losses and levels of industry surplus
which, in turn, may fluctuate in response to changes in rates of return on
investments being earned in the reinsurance industry. As a result, the property
and casualty reinsurance business historically has been a cyclical industry,
characterized by periods of intense price competition due to excessive
underwriting capacity as well as periods when shortages of capacity permitted
favorable pricing. We can expect to experience the effects of such cyclicality.

The cyclical trends in the industry and the industry's profitability can
also be affected significantly by volatile and unpredictable developments,
including what management believes to be a trend of courts to grant increasingly
larger awards for certain damages, natural disasters (such as catastrophic
hurricanes, windstorms, tornadoes, earthquakes and floods), fluctuations in
interest rates, changes in the investment environment that affect market prices
of and income and returns on investments and inflationary pressures that may
tend to affect the size of losses experienced by primary insurers. We cannot
predict whether market conditions will improve, remain constant or deteriorate.
A return to unfavorable market conditions may affect our ability to write
reinsurance at rates that we consider appropriate relative to the risk assumed.
If we cannot write property and casualty reinsurance at appropriate rates, our
ability to transact reinsurance business would be significantly and adversely
affected.

OUR INVESTED ASSETS ARE SUBJECT TO MARKET VOLATILITY AND INTEREST RATE AND
CURRENCY EXCHANGE RATE FLUCTUATION.

The Company's principal invested assets are fixed maturities, which are
subject to the market risk of potential losses from adverse changes in interest
rates. Depending on our classification of our investments as available-for-sale,
trading or other assets, changes in the market value of our securities are
reflected in either our consolidated balance sheet or statement of income. The
Company's investment portfolio is also subject to credit risk resulting from
adverse changes in the issuer's ability to repay the debt. These risks could
materially adversely affect our results of operations.

The Company's principal exposure to foreign currency risk is its obligation
to settle claims in foreign currencies. The possibility exists that the Company
may incur foreign currency exchange gains or losses as it ultimately settles
claims required to be paid in foreign currencies. To the extent the Company does
not seek to hedge its foreign currency risk or hedges prove ineffective, the
resulting impact of a movement in foreign currency exchange rate could
materially adversely affect our results of operations.

PLATINUM HOLDINGS IS A HOLDING COMPANY AND, CONSEQUENTLY, ITS CASH FLOW IS
DEPENDENT ON DIVIDENDS, INTEREST AND OTHER PERMISSIBLE PAYMENTS FROM ITS
SUBSIDIARIES.

Platinum Holdings is a holding company that conducts no reinsurance
operations of its own. All operations are conducted by its wholly owned
operating subsidiaries, Platinum US, Platinum UK and Platinum Bermuda. As a
holding company, Platinum Holdings' cash flow consists primarily of dividends,
interest and other permissible payments from its subsidiaries. Platinum Holdings
depends on such payments for general corporate purposes and to meet its
obligations, including the payment of any dividends to its shareholders.
Additionally, under the Bermuda Companies Act 1981, Platinum Holdings

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may declare or pay a dividend only if, among other things, it has reasonable
grounds for believing that it is, or after the payment would be, able to pay its
liabilities as they become due. For a discussion of the legal limitations on our
subsidiaries' ability to pay dividends to Platinum Holdings, see "Business -
Regulation."

THE IMPOSITION OF U.S. CORPORATE INCOME TAX ON PLATINUM HOLDINGS AND ITS
NON-U.S. SUBSIDIARIES COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

We believe that Platinum Holdings, Platinum UK, Platinum Bermuda and
Platinum Ireland each operate in such a manner that none of these companies is
subject to U.S. corporate income tax because they are not engaged in a trade or
business in the U.S. Nevertheless, because definitive identification of
activities which constitute being engaged in a trade or business in the U.S. is
not provided by the tax authorities, the U.S. Internal Revenue Service might
contend that any of these companies is engaged in a trade or business in the
U.S., which would subject such company to U.S. tax at regular corporate rates on
the income that is effectively connected with the U.S. trade or business, plus
an additional 30% "branch profits" tax on such income remaining after the
regular tax in certain circumstances. Any such tax could materially adversely
affect our results of operations.

THE REGULATORY SYSTEM UNDER WHICH WE OPERATE, AND POTENTIAL CHANGES THERETO,
COULD SIGNIFICANTLY AND ADVERSELY AFFECT OUR BUSINESS.

The business of reinsurance is regulated in most countries, although the
degree and type of regulation varies significantly from one jurisdiction to
another. Reinsurers are generally subject to less direct regulation than primary
insurers. In Bermuda, we operate under relatively less intensive regulatory
requirements. However, in the United States and in the United Kingdom licensed
reinsurers are highly regulated and must comply with financial supervision
standards comparable to those governing primary insurers. For a detailed
discussion of the regulatory requirements to which Platinum Holdings and its
subsidiaries are subject, see "Business -- Regulation." Any failure to comply
with applicable laws could result in the imposition of significant restrictions
on our ability to do business, and could also result in fines and other
sanctions, any or all of which could materially adversely affect our financial
results and operations. In addition, these statutes and regulations may, in
effect, restrict the ability of our subsidiaries to write new business or, as
indicated above, distribute funds to Platinum Holdings. In recent years, some
state legislatures have considered or enacted laws that may alter or increase
state authority to regulate insurance companies and insurance holding companies.
Moreover, the NAIC and state insurance regulators regularly reexamine existing
laws and regulations, interpretations of existing laws and the development of
new laws that may be more restrictive or may result in higher costs to us than
current statutory requirements.

Platinum Bermuda is not registered or licensed as an insurance company in
any jurisdiction outside Bermuda. Platinum Bermuda conducts its business solely
through its offices in Bermuda and does not maintain an office, and its
personnel do not conduct any insurance activities, in the U.S. or elsewhere.
Although Platinum Bermuda does not believe it is in violation of insurance laws
of any jurisdiction outside Bermuda, inquiries or challenges to Platinum
Bermuda's insurance activities may still be raised in the future.

The offshore insurance and reinsurance regulatory framework recently has
become subject to increased scrutiny in many jurisdictions, including U. S.
federal and various state jurisdictions. In the past, there have been
congressional and other proposals in the United States regarding increased
supervision and regulation of the insurance industry, including proposals to
supervise and regulate reinsurers domiciled outside the United States. If
Platinum Bermuda were to become subject to any insurance laws and regulations of
the United States or any U.S. state, which are generally more restrictive

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than those applicable to it in Bermuda, Platinum Bermuda might be required to
post deposits or maintain minimum surplus levels and might be prohibited from
engaging in lines of business or from writing specified types of policies or
contracts. Complying with those laws could have a material adverse effect on the
ability of the Company to conduct its business.

ITEM 7A. 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
for its portfolio of A2 as defined by Moody's Investor Service. As of December
31, 2004, 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.
To mitigate credit risk related to premium receivables, we have established
standards for ceding companies and, in most cases, have a contractual right of
offset thereby allowing the Company to settle claims net of any premium
receivable. While credit risk related to amounts recoverable from
retrocessionaires is not material as of December 31, 2004, we consider the
financial strength of retrocessionaires when determining whether to purchase
coverage from them. Retrocessional coverage is generally obtained from companies
rated "A" or better by Best's unless the retrocessionaire's obligations are
fully collateralized. For exposures where losses become known and are paid in a
relatively short period of time, we may obtain retrocessional coverage from
companies rated "A-" or better by Best's. The financial performance and rating
status of all material retrocessionaires is routinely monitored.

In accordance with industry practice, the Company frequently pays amounts
in respect of claims under contracts to reinsurance brokers, for payment over to
the ceding companies. In the event that a broker fails to make such a payment,
depending on the jurisdiction, the Company may remain liable to the ceding
company for the payment. Conversely, in certain jurisdictions, when premiums for
such contracts are paid to reinsurance brokers for payment over to the Company,
such premiums will be deemed to have been paid and the ceding company will no
longer be liable to the Company for those amounts whether or not actually
received by the Company. Consequently, the Company assumes a degree of credit
risk associated with its brokers during the payment process. To mitigate credit
risk related to reinsurance brokers, the Company has established guidelines for
brokers and intermediaries.

INTEREST RATE RISK

The Company is exposed to fluctuations in interest rates. Movements in
rates can result in changes in the market value of our fixed income portfolio
and can cause changes in the actual timing of receipt of certain principal
payments. Rising interest rates result in a decline in the market value of our
fixed income portfolio and can expose our portfolio, in particular our mortgage
backed securities, to extension risk. Conversely, a decline in interest rates
will result in a rise in the market value of our fixed income portfolio and can
expose our portfolio, in particular our mortgage backed securities, to
prepayment risk. The aggregate hypothetical impact on our fixed income
portfolio, generated from an

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immediate parallel shift in the treasury yield curve, as of December 31, 2004 is
approximately as follows ($ in thousands):

Interest Rate Shift in Basis Points
-------------------------------------------------------------------
- 100 bp - 50 bp Current + 50 bp + 100 bp
---------- --------- --------- --------- ----------

Total market value .................. $2,320,272 2,279,434 2,240,202 2,194,504 2,151,497
Percent change in market value ...... 3.6% 1.8% -- (2.0%) (4.0%)
Resulting unrealized appreciation /
(depreciation) .................... $ 93,051 52,213 12,981 (32,717) $ (75,724)

FOREIGN CURRENCY RISK

The Company writes business on a worldwide basis. Consequently, the
Company's principal exposure to foreign currency risk is its transaction of
business in foreign currencies. Changes in foreign currency exchange rates can
impact revenues, costs, receivables and liabilities, as measured in the U.S.
dollar, our financial reporting currency. The Company seeks to minimize its
exposure to its largest foreign currency risks by holding invested assets
denominated in foreign currencies to offset liabilities denominated in foreign
currencies.

SOURCES OF FAIR VALUE

The following table presents the carrying amounts and estimated fair values
of the Company's financial instruments as of December 31, 2004 ($ in thousands):

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

Financial assets:
Fixed maturities available-for-sale $2,157,529 $2,157,529
Fixed maturity trading securities . 82,673 82,673
---------- ----------
Total fixed maturities ...... 2,240,202 2,240,202
---------- ----------
Other invested asset .............. 6,769 6,769

Financial liabilities:
Debt obligations .................. $ 137,500 $ 165,000

The fair value of fixed maturities is based on quoted closing market prices
at the reporting date for those or similar investments. The fair values of debt
obligations are based on quoted market prices. Other invested asset represents a
strategic investment in a non-public reinsurance company and is carried at
estimated fair value.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements of the Company as of December 31,
2004 and 2003 and for the years then ended and for the period from April 19,
2002 (date of inception) through December 31, 2002, together with the report
thereon by KPMG LLP, the Company's independent registered public accounting
firm, are set forth on pages F-1 through F-34 hereto. The combined statements of
the reinsurance underwriting segment of St. Paul prior to the Initial Public
Offering (the "Predecessor") for the period from January 1, 2002 through
November 1, 2002, together with the report thereon by

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KPMG LLP, the Predecessor's independent registered public accounting firm, are
set forth on pages P-1 through P-14 hereto.

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

None.

ITEM 9A. CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES

Our management, including the Chief Executive Officer and Chief Financial
Officer, carried out an evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures (as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the
period covered by this report. Based on that evaluation, our management,
including the Chief Executive Officer and Chief Financial Officer, concluded
that our disclosure controls and procedures are effective to provide reasonable
assurance that information required to be disclosed by us in reports that we
file or submit under the Exchange Act is recorded, processed, summarized and
timely reported as specified in the SEC's rules and forms.

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management, including the Chief Executive Officer and Chief Financial
Officer, is responsible for establishing and maintaining adequate internal
control over financial reporting (as such term is defined in Rules 13a-15(f) and
15(d)-15(f) under the Exchange Act). Our management, under the supervision and
with the participation of the Chief Executive Officer and Chief Financial
Officer, conducted an evaluation of the effectiveness of our internal control
over financial reporting as of December 31, 2004 based on the integrated
framework published in September 1992 by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this evaluation, our
management concluded that our internal control over financial reporting was
effective in that it provides reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with accounting principles generally accepted in the
United States of America and includes those policies and procedures that provide
reasonable assurance that transactions are recorded as necessary and that
expenditures are being made only with proper authorization.

Our management, including the Chief Executive Officer and Chief Financial
Officer, does not expect that our disclosure controls and procedures or our
internal control over financial reporting will prevent all error and all fraud.
A control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. Further, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within the Company have been
detected.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

No changes occurred during the quarter ended December 31, 2004 in our
internal control over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
Platinum Underwriters Holdings, Ltd:

We have audited management's assessment, included in the accompanying
Management's Report on Internal Control Over Financial Reporting, that Platinum
Underwriters Holdings, Ltd. maintained effective internal control over financial
reporting as of December 31, 2004, based on criteria established in Internal
Control -- Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Company's management is
responsible for maintaining effective internal control over financial reporting
and for its assessment of the effectiveness of internal control over financial
reporting. Our responsibility is to express an opinion on management's
assessment and an opinion on the effectiveness of the Company's internal control
over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over
financial reporting, evaluating management's assessment, testing and evaluating
the design and operating effectiveness of internal control, and performing such
other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial reporting includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

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In our opinion, management's assessment that Platinum Underwriters Holdings,
Ltd. maintained effective internal control over financial reporting as of
December 31, 2004, is fairly stated, in all material respects, based on criteria
established in Internal Control -- Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO). Also in our
opinion, Platinum Underwriters Holdings, Ltd. maintained, in all material
respects, effective internal control over financial reporting as of December 31,
2004, based on criteria established in Internal Control - Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO).

We have also audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheets of
Platinum Underwriters Holdings, Ltd. and subsidiaries as of December 31, 2004
and 2003, and the related consolidated statements of income and comprehensive
income, shareholders' equity, and cash flows for the years ended December 31,
2004 and 2003, and the period from April 19, 2002 (date of inception) to
December 31, 2002, and our report dated February 25, 2005 expressed an
unqualified opinion on these consolidated financial statements.

/s/ KPMG LLP

New York, New York
February 25, 2005

-69-

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this Item relating to our directors and
executive officers is incorporated herein by reference to "Proposal 1 - Election
of Directors" under the headings "Information Concerning Nominees," "Information
Concerning Executive Officers" and "Section 16(a) Beneficial Ownership Reporting
Compliance" of our definitive proxy statement to be filed pursuant to Regulation
14A of the Exchange Act for our 2005 Annual General Meeting of Shareholders (our
"Proxy Statement"). The Company intends to file the Proxy Statement prior to
April 30, 2005.

CODE OF ETHICS

We have adopted a Code of Ethics within the meaning of Item 406 of
Regulation S-K of the Exchange Act. Our Code of Ethics applies to all of our
directors and employees including, without limitation, our principal executive
officer, our principal financial officer, our principal accounting officer and
all of our employees performing financial or accounting functions. A copy of our
Code of Ethics is posted on our website at www.platinumre.com and may be found
under the "Investor Relations" section by clicking on "Corporate Governance." In
the event that we make any amendment to, or grant any waiver from, a provision
of our Code of Ethics that requires disclosure under Item 5.05 of Form 8-K, we
will post such information on our website at the location specified above.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item relating to executive compensation is
incorporated herein by reference to "Proposal 1 - Election of Directors" under
the heading "Executive Compensation" of our Proxy Statement.

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

The information required by this Item relating to security ownership of
certain beneficial owners and management and related shareholder matters is
incorporated herein by reference to "Proposal 1 - Election of Directors" under
the headings "Equity Based Compensation Information," "Security Ownership of
Certain Beneficial Owners" and "Security Ownership of Management" of our Proxy
Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item relating to certain relationships and
related transactions is incorporated herein by reference to "Proposal 1 -
Election of Directors" under the heading "Related Party Transactions" of our
Proxy Statement.

-70-

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item relating to principal accountant fees
and services is incorporated herein by reference to "Proposal 2 - Ratification
of Selection of the Independent Registered Public Accounting Firm" of our Proxy
Statement.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

FINANCIAL STATEMENTS

The consolidated financial statements of the Company as of December 31,
2004 and 2003 and for the years then ended and for the period from April 19,
2002 (date of inception) through December 31, 2002, together with the report
thereon by KPMG LLP, the Company's independent registered public accounting
firm, are set forth on pages F-1 through F-34 hereto. The combined statements of
the Predecessor for the period from January 1, 2002 through November 1, 2002,
together with the report thereon by KPMG LLP, the Predecessor's independent
registered public accounting firm, are set forth on pages P-1 through P-14
hereto.

SCHEDULES SUPPORTING FINANCIAL STATEMENTS

The schedules relating to the consolidated financial statements of the Company
as of December 31, 2004 and 2003 and for the years then ended and for the period
from April 19, 2002 (date of inception) through December 31, 2002, together with
the independent registered public accounting firm's report thereon, are set
forth on pages S-1 through S-8 hereto. Schedules not referred to have been
omitted as inapplicable or not required by Regulation S-X.

EXHIBITS

Exhibit
Number Description
- ------ -----------

2.1 Formation and Separation Agreement dated October 28, 2002 between The
St. Paul Companies, Inc. and Platinum Holdings. (2)
3(i).1 Memorandum of Association of Platinum Holdings. (1)
3(ii).2 Bye-Laws of Platinum Holdings. (8)
4.1 Form of Certificate of the Common Shares of Platinum Holdings. (2)
4.2 Indenture dated October 10, 2002 among Platinum Holdings, Platinum
Finance and JPMorgan Chase Bank. (2)
4.3 Indenture Supplement dated November 1, 2002 among Platinum Holdings,
Platinum Finance and JPMorgan Chase Bank. (2)
4.4 Purchase Contract Agreement dated November 1, 2002 between Platinum
Holdings and JPMorgan Chase Bank. (2)
4.5 Pledge Agreement dated November 1, 2002 among Platinum Holdings, State
Street Bank and Trust Company and JPMorgan Chase Bank. (2)
4.6 Form of Senior Note of Platinum Finance. (2)
4.7 Form of Guarantee of Platinum Holdings. (2)

-71-

Exhibit
Number Description
- ------ -----------

4.8 Form of Normal Unit. (2)
4.9 Form of Stripped Unit. (2)
10.1* Share Unit Plan for Non-Employee Directors. (2)
10.2* Summary of Director Compensation
10.3* 2002 Share Incentive Plan. (2)
10.4* 2002 Share Incentive Plan (UK Sub-Plan). (7)
10.5* Annual Incentive Plan. (7)
10.6* Section 162(m) Performance Incentive Plan. (7)
10.7* Executive Retirement Savings Plan. (7)
10.8* Executive Bonus Deferral Plan. (7)
10.9* Executive Incentive Plan. (7)
10.10* First Amendment to the Executive Incentive Plan dated November 5, 2004.
(9)
10.11* Capital Accumulation Plan. (2)
10.12* Employment Agreement dated July 5, 2002 between Michael E. Lombardozzi
and St. Paul Re, Inc. and assumed by Platinum Holdings. (1)
10.13* Amendment dated August 15, 2002 to the Employment Agreement dated July
5, 2002 between Michael E. Lombardozzi and St. Paul Re, Inc. and
assumed by Platinum Holdings. (1)
10.14* Amendment dated March 12, 2004 to the Employment Agreement dated July
5, 2002 between Michael E. Lombardozzi and St. Paul Re, Inc. and
assumed by Platinum Holdings. (7)
10.15* Letter Agreement dated March 1, 2002 between Steven H. Newman and The
St. Paul Companies, Inc. (1)
10.16* Amendment dated June 14, 2002 to the Letter Agreement dated March 1,
2002 between Steven H. Newman and The St. Paul Companies, Inc. (1)
10.17* Consulting Agreement dated March 1, 2002 between Steven H. Newman and
The St. Paul Companies, Inc. and assumed by Platinum US. (1)
10.18* Amendment dated March 12, 2004 to the Consulting Agreement dated March
1, 2002 between Steven H. Newman and The St. Paul Companies, Inc. and
assumed by Platinum US. (7)
10.19* Employment Agreement dated August 4, 2004 between Michael D. Price and
Platinum US. (8)
10.20* Employment Agreement dated July 3, 2002 between William A. Robbie and
St. Paul Re, Inc. and assumed by Platinum Holdings. (1)
10.21* Amendment dated August 16, 2002 to the Employment Agreement dated July
3, 2002 between William A. Robbie and St. Paul Re, Inc. (1)

-72-

Exhibit
Number Description
- ------ -----------

10.22* Amendment dated March 12, 2004 to the Employment Agreement dated July
3, 2002 between William A. Robbie and St. Paul Re, Inc. and assumed by
Platinum Holdings. (7)
10.23* Separation Agreement dated June 24, 2004 between William A. Robbie and
Platinum Holdings. (8)
10.24* Letter Agreement dated August 14, 2002 between Neal J. Schmidt and St.
Paul Re, Inc. and assumed by Platinum US. (2)
10.25* Separation and Consulting Agreement dated May 13, 2003 between Jerome
T. Fadden and Platinum Holdings. (3)
10.26* Letter Agreement, dated June 20, 2003 between Gregory E.A. Morrison and
Platinum Holdings. (4)
10.27* Amendment dated January 7, 2004 to the Letter Agreement dated June 20,
2003 between Gregory E.A. Morrison and Platinum Holdings. (6)
10.28 Securities Purchase Agreement dated July 20, 2003 between Gregory E.A.
Morrison and Platinum Holdings. (4)
10.29* Employment Agreement dated June 24, 2004 between Joseph F. Fisher and
Platinum Holdings. (8)
10.30* Letter Agreement dated June 24, 2004 between H. Elizabeth Mitchell and
Platinum US. (8)
10.31 Capital Support Agreement dated November 1, 2002 between Platinum
Holdings and Platinum UK. (2)
10.32 Capital Support Agreement dated November 26, 2002 between Platinum
Holdings and Platinum US. (2)
10.33 Registration Rights Agreement dated November 1, 2002 between The St.
Paul Companies, Inc. and Platinum Holdings. (2)
10.34 Option Agreement dated November 1, 2002 among St. Paul Reinsurance
Company Limited, Platinum Holdings and St. Paul. (2)
10.35 Option Agreement dated November 1, 2002 between St. Paul and Platinum
Holdings. (2)
10.36 Amendment dated January 10, 2005 to the Option Agreement dated November
1, 2002 among St. Paul Reinsurance Company Limited, Platinum Holdings
and St. Paul. (11)
10.37 Amendment dated January 10, 2005 to the Option Agreement dated November
1, 2002 between St. Paul and Platinum Holdings. (11)
10.38 Employee Benefits and Compensation Matters Agreement dated November 1,
2002 between St. Paul and Platinum US. (2)
10.39 Master Services Agreement dated November 1, 2002 between Platinum
Holdings and St. Paul. (2)
10.40 Letter Agreement dated June 30, 2003 extending the Master Services
Agreement dated November 1, 2002 between Platinum Holdings and St.
Paul. (4)

-73-

Exhibit
Number Description
- ------ -----------

10.41 Letter Agreement dated May 19, 2004 extending the Master Services
Agreement dated November 1, 2002 between Platinum Holdings and St.
Paul. (8)
10.42 UK Master Services Agreement dated November 1, 2002 between St. Paul
Reinsurance Company Limited and Platinum UK. (2)
10.43 Addendum dated December 10, 2003 to the UK Master Services Agreement
dated November 1, 2002 between St. Paul Reinsurance Company Limited and
Platinum UK. (6)
10.44 Runoff Services Agreement dated November 1, 2002 among Platinum US,
Mountain Ridge Insurance Company and St. Paul Fire and Marine Insurance
Company. (2)
10.45 U.K. Runoff Services Agreement dated November 1, 2002 between St. Paul
Reinsurance Company Limited and Platinum UK. (2)
10.46 Underwriting Management Agreement dated November 1, 2002 between St.
Paul Fire and Marine Insurance Company and Platinum US. (2)
10.47 U.K. Underwriting Agency and Underwriting Management Agreement dated
November 1, 2002 between St. Paul Reinsurance Company Limited and
Platinum US. (2)
10.48 U.K. Business Transfer Agreement dated November 1, 2002 among St. Paul
Reinsurance Company Limited, Platinum UK and St. Paul Management
Limited. (2)
10.49 Intra-Group Asset Transfer Agreement dated November 1, 2002 among
Platinum Holdings, St. Paul Reinsurance Company Limited and St. Paul
Management Limited. (2)
10.50 Form of Transitional Trademark License Agreement between St. Paul and
Platinum Holdings. (2)
10.51 Investment Agreement dated September 20, 2002 among Platinum Holdings,
St. Paul, and RenaissanceRe Holdings Ltd. (2)
10.52 First Amendment dated November 1, 2002 to the Investment Agreement
dated September 20, 2002 among Platinum Holdings, St. Paul, and
RenaissanceRe Holdings Ltd. (2)
10.53 Transfer Restrictions, Registration Rights and Standstill Agreement
dated November 1, 2002 between St. Paul and Platinum Holdings. (2)
10.54 Amendment dated March 22, 2004 to Registration Rights Agreement dated
November 1, 2002 between St. Paul and Platinum Holdings. (7)
10.55 Reimbursement Letter Agreement dated March 25, 2004 between St. Paul
and Platinum Holdings. (7)
10.56 Option Agreement dated November 1, 2002 between Platinum Holdings and
RenaissanceRe Holdings Ltd. (2)
10.57 Amended and Restated Option Agreement dated November 18, 2004 between
Platinum Holdings and RenaissanceRe Holdings Ltd. (10)

-74-

Exhibit
Number Description
- ------ -----------

10.58 Services and Capacity Reservation Agreement dated November 1, 2002
between Platinum Holdings and RenaissanceRe Holdings Ltd. (2)
10.59 100% Quota Share Retrocession Agreement (traditional) dated November 1,
2002 between St. Paul Fire and Marine Insurance Company and Platinum
US. (2)
10.60 100% Quota Share Retrocession Agreement (non-traditional - A) dated
November 1, 2002 between St. Paul Fire and Marine Insurance Company and
Platinum US. (2)
10.61 100% Quota Share Retrocession Agreement (non-traditional - B-1) dated
November 1, 2002 between St. Paul Fire and Marine Insurance Company and
Platinum US. (2)
10.62 100% Quota Share Retrocession Agreement (non-traditional - B-2) dated
November 1, 2002 between St. Paul Fire and Marine Insurance Company and
Platinum US. (2)
10.63 100% Quota Share Retrocession Agreement (non-traditional - C) dated
November 1, 2002 between St. Paul Fire and Marine Insurance Company and
Platinum US. (2)
10.64 100% Quota Share Retrocession Agreement (non-traditional - D-3) dated
November 1, 2002 between St. Paul Fire and Marine Insurance Company and
Platinum US. (2)
10.65 100% Quota Share Retrocession Agreement (non-traditional - D-4) dated
November 1, 2002 between St. Paul Fire and Marine Insurance Company and
Platinum US. (2)
10.66 100% Quota Share Retrocession Agreement (non-traditional - D-1) dated
November 1, 2002 between Mountain Ridge Insurance Company and Platinum
US. (2)
10.67 100% Quota Share Retrocession Agreement (non-traditional - D-2) dated
November 1, 2002 between Mountain Ridge Insurance Company and Platinum
US. (2)
10.68 Commutation and Release Agreement dated June 11, 2003 between Platinum
US and Mountain Ridge Insurance Company. (4)
10.69 100% Quota Share Retrocession Agreement (non-traditional - D Stop Loss)
dated November 1, 2002 between Mountain Ridge Insurance Company and
Platinum US. (2)
10.70 100% Quota Share Retrocession Agreement (non-traditional - D Spread
Loss) dated November 1, 2002 between Mountain Ridge Insurance Company
and Platinum US. (2)
10.71 100% Quota Share Retrocession Agreement (non-traditional - E) dated
November 1, 2002 between Mountain Ridge Insurance Company and Platinum
US. (2)
10.72 UK 100% Quota Share Retrocession Agreement (traditional) dated November
1, 2002 between St. Paul Reinsurance Company Limited and Platinum US.
(2)
10.73 UK 100% Quota Share Retrocession Agreement (non-traditional - A) dated
November 1, 2002 between St. Paul Reinsurance Company Limited and
Platinum US. (2)
10.74 UK 100% Quota Share Retrocession Agreement (non-traditional - B-1)
dated November 1, 2002 between St. Paul Reinsurance Company Limited and
Platinum US. (2)
10.75 100% Quota Share Retrocession Agreement dated November 27, 2002 between
St. Paul Reinsurance Company Limited and Platinum UK. (2)
10.76 Property Catastrophe Excess of Loss Reinsurance Contract dated
September 10, 2003 between the Glencoe Group of Companies and Platinum
US (15% participation). (7)

-75-

Exhibit
Number Description
- ------ -----------

10.77 Property Catastrophe Excess of Loss Reinsurance Contract dated
September 10, 2003 between the Glencoe Group of Companies and Platinum
US (5% participation). (7)
10.78 Security Agreement dated November 27, 2002 between Platinum UK and St.
Paul Reinsurance Company Limited. (2)
10.79 Control Agreement dated November 27, 2002 between Platinum UK, St. Paul
Reinsurance Company Limited and State Street Bank and Trust Company.
(2)
10.80 Discretionary Investment Advisory Agreement dated November 27, 2002
between Platinum UK and Alliance Capital Management L.P. (2)
10.81 Revised and Amended Trust Agreement dated November 1, 2002 and amended
December 12, 2002, among Platinum US, St. Paul Fire and Marine
Insurance Company and State Street Bank and Trust Company. (2)
10.82 Letter Amendment dated December 12, 2002 to the Revised and Amended
Trust Agreement dated November 1, 2002 and amended December 12, 2002,
among Platinum US, St. Paul Fire and Marine Insurance Company, Mountain
Ridge Insurance Company, and State Street Bank and Trust Company. (2)
10.83 Discretionary Investment Advisory Agreement dated November 4, 2002
between Platinum US and Alliance Capital Management L.P. (2)
10.84 Revised and Amended Trust Agreement dated November 1, 2002 and amended
December 12, 2002, among Platinum US, Mountain Ridge Insurance Company
and State Street Bank and Trust Company. (2)
10.85 Discretionary Investment Advisory Agreement dated November 4, 2002
between Platinum US and Alliance Capital Management L.P. (2)
10.86 Quota Share Retrocession Agreement dated November 26, 2002 between
Platinum Bermuda and Platinum UK. (2)
10.87 Quota Share Retrocession Agreement dated March 27, 2003 between
Platinum Bermuda and Platinum UK. (7)
10.88 Addendum No. 1 effective April 1, 2003 to the Quota Share Retrocession
Agreement dated March 27, 2003, between Platinum Bermuda and Platinum
UK. (7)
10.89 Addendum No. 2 effective March 27, 2003 to the Quota Share Retrocession
Agreement dated March 27, 2003, between Platinum Bermuda and Platinum
UK. (7)
10.90 Security Agreement dated November 26, 2002 between Platinum Bermuda and
Platinum UK. (2)
10.91 Addendum No. 1 effective January 1, 2004 to the Security Agreement
dated November 26, 2002, between Platinum Bermuda and Platinum UK. (7)
10.92 Control Agreement dated November 26, 2002 among Platinum Bermuda,
Platinum UK and State Street Bank and Trust Company. (2)
10.93 Discretionary Investment Advisory Agreement dated November 26, 2002
between Platinum Bermuda and Platinum UK. (2)

-76-

Exhibit
Number Description
- ------ -----------

10.94 Trust Agreement effective January 1, 2003 among Platinum Bermuda,
Platinum US and State Street Bank and Trust Company. (4)
10.95 Quota Share Retrocession Agreement dated May 13, 2003 between Platinum
Bermuda and Platinum US. (4)
10.96 Addendum No. 1 dated December 31, 2003 to the Quota Share Retrocession
Agreement dated May 13, 2003, between Platinum Bermuda and Platinum US.
(6)
10.97 Quota Share Retrocession Agreement dated May 6, 2004 between Platinum
Bermuda and Platinum US. (8)
10.98 Aggregate Excess of Loss Retrocession Agreement dated June 11, 2003
between Platinum US and Mountain Ridge Insurance Company. (4)
10.99 Excess of Loss Retrocession Agreement dated April 15, 2004 between
Platinum UK and Platinum US. (7)
10.100 Referral Agreement between Platinum Bermuda and Renaissance
Underwriting Managers Ltd. (4)
10.101 Referral Agreement between Platinum US and Renaissance Underwriting
Managers Ltd. (6)
10.102 Novation and Transfer Agreement for the Multi-Line Excess of Loss
Reinsurance Agreement dated September 16, 2003, among Platinum US, St.
Paul Fire and Marine Insurance Company and Wisconsin Mutual Insurance
Company, effective as of January 1, 2003. (5)
10.103 Novation and Transfer Agreement for the Casualty Excess of Loss
Reinsurance Agreement dated September 16, 2003, among Platinum US, St.
Paul Fire and Marine Insurance Company and Wisconsin Mutual Insurance
Company, effective as of January 1, 2003. (5)
10.104 Novation and Transfer Agreement for the First Property Catastrophe
Excess of Loss Reinsurance Agreement dated September 16, 2003, among
Platinum US, St. Paul Fire and Marine Insurance Company and Wisconsin
Mutual Insurance Company, effective as of January 1, 2003. (5)
10.105 Novation and Transfer Agreement for the Second Property Catastrophe
Excess of Loss Reinsurance Agreement dated September 16, 2003, among
Platinum US, St. Paul Fire and Marine Insurance Company and Wisconsin
Mutual Insurance Company, effective as of January 1, 2003. (5)
10.106 Novation and Transfer Agreement for the Third Property Catastrophe
Excess of Loss Reinsurance Agreement dated September 16, 2003, among
Platinum US, St. Paul Fire and Marine Insurance Company and Wisconsin
Mutual Insurance Company, effective as of January 1, 2003. (5)
10.107 Novation and Transfer Agreement for the Casualty Clash Excess of Loss
Reinsurance Contract effective as of January 1, 2003, among Platinum
US, St. Paul Fire and Marine Insurance Company and Crusader Insurance
Company. (6)

-77-

Exhibit
Number Description
- ------ -----------

10.108 Novation and Transfer Agreement for the Property Clash Excess of Loss
Reinsurance Contract effective as of January 1, 2003, among Platinum
US, St. Paul Fire and Marine Insurance Company and Crusader Insurance
Company. (6)
10.109 Novation and Transfer Agreement for the Multi Line Excess of Loss
Reinsurance Contract effective as of January 1, 2003, among Platinum
US, St. Paul Fire and Marine Insurance Company and Crusader Insurance
Company. (6)
10.110 Novation and Transfer Agreement for the Property Catastrophe Excess of
Loss Reinsurance Agreement dated February 19, 2004, among Platinum US,
St. Paul Fire and Marine Insurance Company and Germantown Mutual
Insurance Company, effective as of January 1, 2003. (7)
10.111 Novation and Transfer Agreement for the Workers' Compensation and
Employers' Liability Excess of Loss Reinsurance Agreement dated
February 19, 2004, among Platinum US, St. Paul Fire and Marine
Insurance Company and Germantown Mutual Insurance Company, effective as
of January 1, 2003. (7)
10.112 Novation and Transfer Agreement for the Property Per Risk Excess of
Loss Reinsurance Agreement dated February 19, 2004, among Platinum US,
St. Paul Fire and Marine Insurance Company and Germantown Mutual
Insurance Company, effective as of January 1, 2003. (7)
10.113 Novation and Transfer Agreement for the Casualty Excess of Loss
Reinsurance Agreement dated February 19, 2004, among Platinum US, St.
Paul Fire and Marine Insurance Company and Germantown Mutual Insurance
Company, effective as of January 1, 2003. (7)
10.114 Combined Catastrophe Excess of Loss Reinsurance Contract effective
January 1, 2003 for the Alfa Insurance Group. (6)
10.115 Addendum No. 6 to the Interests and Liabilities Agreement with respect
to the Combined Catastrophe Excess of Loss Reinsurance Contract between
members of the Alfa Insurance Group, St. Paul Fire and Marine Insurance
Company and Platinum US. (6)
10.116 Guaranty dated December 31, 2003 between Platinum Holdings, as
Guarantor, and Platinum US. (6)
10.117 Guarantee dated December 31, 2003 between Platinum Holdings, as
Guarantor, and Platinum UK. (6)
21.1 Subsidiaries of Platinum Holdings.
23.1 Independent Registered Public Accounting Firm's Consent (New York, New
York)
23.2 Independent Registered Public Accounting Firm's Consent (Minneapolis,
Minnesota)
31.1 Certification of Gregory E.A. Morrison, Chief Executive Officer of
Platinum Holdings, pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the
Securities Exchange Act of 1934, as amended.
31.2 Certification of Joseph F. Fisher, Chief Financial Officer of Platinum
Holdings, pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the
Securities Exchange Act of 1934, as amended.

-78-

Exhibit
Number Description
- ------ -----------

32.1 Certification of Gregory E.A. Morrison, 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 Joseph F. Fisher, Chief Financial Officer of Platinum
Holdings, pursuant to 18 U.S.C. section 1350, as adopted pursuant to
section 906 of the Sarbanes-Oxley Act of 2002.

* Items denoted with an asterisk represent management contracts or compensatory
plans or arrangements.

- -----------------------

(1) Incorporated by reference from the Registration Statement on Form S-1
(Registration No. 333-86906) of Platinum Holdings.

(2) Incorporated by reference from Platinum Holdings' Annual Report on Form
10-K for the year ended December 31, 2002, filed with the Commission on
March 31, 2003.

(3) Incorporated by reference from Platinum Holdings' Report on Form 8-K,
filed with the Commission on May 13, 2003.

(4) Incorporated by reference from Platinum Holdings' Quarterly Report on Form
10-Q for the quarter ended June 30, 2003, filed with the Commission on
August 14, 2003.

(5) Incorporated by reference from Platinum Holdings' Quarterly Report on Form
10-Q for the quarter ended September 30, 2003, filed with the Commission
on November 14, 2003.

(6) Incorporated by reference from Platinum Holdings' Annual Report on Form
10-K for the year ended December 31, 2003, filed with the Commission on
March 15, 2004.

(7) Incorporated by reference from Platinum Holdings' Quarterly Report on Form
10-Q for the quarter ended March 31, 2004, filed with the Commission on
May 10, 2004.

(8) Incorporated by reference from Platinum Holdings' Quarterly Report on Form
10-Q for the quarter ended June 30, 2004, filed with the Commission on
August 6, 2004.

(9) Incorporated by reference from Platinum Holdings' Current Report on Form
8-K, filed with the Commission on November 9, 2004.

(10) Incorporated by reference from Platinum Holdings' Current Report on Form
8-K, filed with the Commission on November 18, 2004.

(11) Incorporated by reference from Platinum Holdings' Current Report on Form
8-K, filed with the Commission on January 11, 2005.

-79-

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 of the undersigned, thereunto duly authorized in Pembroke, Bermuda.

Date: March 15, 2005
PLATINUM UNDERWRITERS HOLDINGS, LTD.

/s/ Gregory E.A. Morrison
-------------------------
Gregory E.A. Morrison
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

Signature Title Date
--------- ----- ----

/s/ Gregory E.A. Morrison President, Chief Executive Officer *
- ------------------------------------- and Director
Gregory E.A. Morrison

/s/ Joseph F. Fisher Executive Vice President and Chief *
- ------------------------------------- Financial Officer (Principal
Joseph F. Fisher Financial and Accounting Officer)

/s/ Steven H. Newman Chairman of the Board of Directors *
- -------------------------------------
Steven H. Newman

/s/ H. Furlong Baldwin Director *
- -------------------------------------
H. Furlong Baldwin

/s/ Jonathan F. Bank Director *
- -------------------------------------
Jonathan F. Bank

/s/ Dan R. Carmichael Director *
- -------------------------------------
Dan R. Carmichael

/s/ Neill A. Currie Director *
- -------------------------------------
Neill A. Currie

/s/ Jay S. Fishman Director *
- -------------------------------------
Jay S. Fishman

/s/ Peter T. Pruitt Director *
- -------------------------------------
Peter T. Pruitt

*Signed as of March 15, 2005.

-80-

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

TABLE OF CONTENTS PAGE

Page
----

Report of Independent Registered Public Accounting Firm ......... F-2
Consolidated Balance Sheets as of December 31, 2004 and 2003 .... F-3
Consolidated Statements of Income and Comprehensive Income
for the years ended December 31, 2004 and 2003 and the
period from April 19, 2002 (date of inception) through
December 31, 2002 ........................................... F-4
Consolidated Statements of Shareholders' Equity for the years
ended December 31, 2004 and 2003 and the period from
April 19, 2002 (date of inception) through December 31,
2002 ........................................................ F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 2004 and 2003 and the period from April 19,
2002 (date of inception) through December 31, 2002 .......... F-6
Notes to Consolidated Financial Statements ...................... F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
Platinum Underwriters Holdings, Ltd:

We have audited the accompanying consolidated balance sheets of Platinum
Underwriters Holdings, Ltd. and subsidiaries as of December 31, 2004 and 2003,
and the related consolidated statements of income and comprehensive income,
shareholders' equity, and cash flows for the years ended December 31, 2004 and
2003 and the period from April 19, 2002 (date of inception) to December 31,
2002. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Platinum
Underwriters Holdings, Ltd. and subsidiaries as of December 31, 2004 and 2003,
and the results of their operations and their cash flows for the years ended
December 31, 2004 and 2003 and the period from April 19, 2002 (date of
inception) to December 31, 2002 in conformity with accounting principles
generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the effectiveness of
Platinum Underwriters Holdings, Ltd. and subsidiaries' internal control over
financial reporting as of December 31, 2004, based on criteria established in
Internal Control--Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report dated February
25, 2005 expressed an unqualified opinion on management's assessment of, and the
effective operation of, internal control over financial reporting.

/s/ KPMG LLP

New York, New York
February 25, 2005

F-2

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Consolidated Balance Sheets
December 31, 2004 and 2003

(amounts in thousands, except share data)

2004 2003
---------- ----------

ASSETS
Investments:
Fixed maturities available-for-sale at fair value
(amortized cost -- $2,144,290 and $1,560,807,
respectively) ................................... $2,157,529 $1,583,505
Fixed maturity trading securities at fair value
(amortized cost -- $82,931 and $95,926,
respectively) ................................... 82,673 94,633
Other invested asset .............................. 6,769 6,910
---------- ----------
Total investments ........................... 2,246,971 1,685,048
Cash and cash equivalents ......................... 209,897 105,461
Accrued investment income ......................... 23,663 17,492
Reinsurance premiums receivable ................... 580,048 487,441
Reinsurance recoverable on ceded losses and loss
adjustment expenses ............................. 2,005 5,102
Prepaid reinsurance premiums ...................... 2,887 6,129
Funds held by ceding companies .................... 198,048 65,060
Deferred acquisition costs ........................ 136,038 79,307
Income tax recoverable ............................ 1,325 9,360
Deferred tax assets ............................... 8,931 3,711
Other assets ...................................... 12,182 21,461
---------- ----------
Total assets ................................ $3,421,995 $2,485,572
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Unpaid losses and loss adjustment expenses ........ $1,380,955 $ 736,934
Unearned premiums ................................. 502,423 305,985
Reinsurance deposit liabilities ................... 20,189 5,699
Debt obligations .................................. 137,500 137,500
Ceded premiums payable ............................ 2,384 6,205
Commissions payable ............................... 181,925 176,310
Funds withheld .................................... 11,999 --
Deferred tax liabilities .......................... 10,404 5,503
Other liabilities ................................. 41,213 44,233
---------- ----------
Total liabilities ........................... 2,288,992 1,418,369
---------- ----------
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, 43,087,407 and 43,054,125 shares
issued and outstanding, respectively ............ 430 430
Additional paid-in capital ........................ 911,851 910,505
Accumulated other comprehensive income ............ 12,252 18,774
Retained earnings ................................. 208,470 137,494
---------- ----------
Total shareholders' equity .................. 1,133,003 1,067,203
---------- ----------
Total liabilities and shareholders' equity .. $3,421,995 $2,485,572
========== ==========

See accompanying notes to consolidated financial statements.

F-3

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Consolidated Statements of Income and Comprehensive Income
For the years ended December 31, 2004 and 2003 and
for the Period from April 19, 2002 (date of inception) through December 31, 2002

(amounts in thousands, except share data)

2004 2003 2002
----------- ----------- -----------

Revenue:
Net premiums earned ........................ $ 1,447,935 1,067,527 $ 107,098
Net investment income ...................... 84,532 57,645 5,211
Net realized gains on investments .......... 1,955 2,781 25
Other income ............................... 3,211 3,343 167
----------- ----------- -----------
Total revenue ........................ 1,537,633 1,131,296 112,501
----------- ----------- -----------
Expenses:
Losses and loss adjustment expenses ........ 1,019,804 584,171 60,356
Acquisition expenses ....................... 327,821 251,226 25,474
Operating expenses ......................... 66,333 92,595 16,334
Net foreign currency exchange losses (gains) (725) 114 (2,017)
Interest expense ........................... 9,268 9,492 1,261
----------- ----------- -----------
Total expenses ....................... 1,422,501 937,598 101,408
----------- ----------- -----------
Income before income tax expense ..... 115,132 193,698 11,093
Income tax expense ........................... 30,349 48,875 4,655
----------- ----------- -----------
Net income ........................... $ 84,783 144,823 $ 6,438
=========== =========== ===========
Earnings per share:
Basic earnings per share ................... $ 1.96 3.37 $ 0.15
Diluted earnings per share ................. $ 1.81 3.09 $ 0.15
Comprehensive income:
Net income ................................. $ 84,783 144,823 $ 6,438
Other comprehensive income:
Unrealized gains on available-for-sale
securities, net of deferred tax ........ (6,910) 7,570 10,581
Cumulative translation adjustments, net of
deferred tax ........................... 388 623 --
----------- ----------- -----------
Comprehensive income ................. $ 78,261 153,016 $ 17,019
=========== =========== ===========
Shareholder dividends:
Dividends declared ......................... $ 13,807 13,767 $ --
Dividends declared per share ............... $ 0.32 0.32 $ --

See accompanying notes to consolidated financial statements.

F-4

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Consolidated Statements of Shareholders' Equity
For the years ended December 31, 2004 and 2003 and
for the Period from April 19, 2002 (date of inception) through December 31, 2002

(amounts in thousands)

2004 2003 2002
----------- ----------- -----------

Preferred shares:
Balances at beginning and end of period ................ $ -- -- $ --
----------- ----------- -----------
Common shares:
Balances at beginning of period ........................ 430 430
Initial capitalization ................................. -- -- 12
Redemption of shares issued in initial capitalization .. -- -- (12)
Exercise of share options .............................. 2 -- --
Issuance of common shares .............................. 1 -- 430
Purchase of common shares .............................. (3) -- --
----------- ----------- -----------
Balances at end of period ........................ 430 430 430
----------- ----------- -----------
Additional paid-in-capital:
Balances at beginning of period ........................ 910,505 903,797 --
Initial capitalization ................................. -- -- 108
Redemption of shares issued in initial capitalization .. -- -- (108)
Exercise of share options .............................. 7,405 678 --
Share based compensation ............................... 2,358 5,510 --
Issuance of common shares .............................. 1,565 520 904,658
Purchase of common shares .............................. (9,982) -- --
Purchase contract adjustment payments .................. -- -- (6,639)
Assets contributed by St. Paul ......................... -- -- 5,778
----------- ----------- -----------
Balances at end of period ........................ 911,851 910,505 903,797
----------- ----------- -----------
Accumulated other comprehensive income (loss):
Balances at beginning of period ........................ 18,774 10,581 --
Net change in unrealized (losses) gains and losses on
available-for-sale securities, net of deferred tax ... (6,910) 7,570 10,581
Net change in cumulative translation adjustments, net of
deferred tax ......................................... 388 623 --
----------- ----------- -----------
Balances at end of period ........................ 12,252 18,774 10,581
----------- ----------- -----------
Retained earnings:
Balances at beginning of period ........................ 137,494 6,438 --
Net income ............................................. 84,783 144,823 6,438
Dividends paid to shareholders ......................... (13,807) (13,767) --
----------- ----------- -----------
Balances at end of period ........................ 208,470 137,494 6,438
----------- ----------- -----------
Total shareholders' equity ....................... $ 1,133,003 1,067,203 $ 921,246
=========== =========== ===========

See accompanying notes to consolidated financial statements.

F-5

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows
For the years ended December 31, 2004 and 2003 and
for the Period from April 19, 2002 (date of inception) through December 31, 2002

(amounts in thousands)

2004 2003 2002
----------- ----------- -----------

Operating Activities:
Net income ........................................................ $ 84,783 144,823 $ 6,438
Adjustments to reconcile net income to cash used in operations:
Depreciation and amortization ................................... 20,642 23,321 2,469
Net realized gains on investments ............................... (1,955) (2,781) (25)
Net foreign currency exchange (gains) losses .................... (725) 114 --
Share based compensation ........................................ 2,358 5,510 --
Trading securities activities ................................... 16,510 (85,861) --
Changes in assets and liabilities:
Increase in accrued investment income ......................... (6,171) (7,499) (9,993)
Increase in reinsurance premiums receivable ................... (92,607) (481,843) (5,599)
(Increase) decrease in amounts receivable from St. Paul ....... -- 54,096 (39,750)
Increase in funds held by ceding companies .................... (132,988) (10,158) --
(Increase) decrease in deferred acquisition costs ............. (56,731) (29,975) 4,058
Increase in net unpaid losses and loss adjustment expenses .... 641,062 440,859 60,356
Increase (decrease) in net unearned premiums .................. 199,680 108,840 (52,984)
Increase (decrease) in reinsurance deposit liabilities ........ 14,490 (17,962) (167)
Increase (decrease) in ceded premiums payable ................. (3,821) 6,205 --
Increase in commissions payable ............................... 5,615 138,749 6,595
Increase in funds withheld .................................... 11,999 -- --
Changes in other assets and liabilities ....................... 12,210 (12,094) 19,152
Cash from St. Paul related to the November 1, 2002 assumption of
liabilities on reinsurance contracts becoming effective in 2002 . -- 108,336 288,648
Other net ......................................................... 382 627 2,195
----------- ----------- -----------
Net cash provided by operating activities ................... 714,733 383,307 281,393
----------- ----------- -----------
Investing Activities:
Proceeds from sale of available-for-sale fixed maturities ......... 498,945 393,245 120,421
Proceeds from maturity or paydown of available-for-sale fixed
maturities ...................................................... 136,472 132,979 --
Acquisition of available-for-sale fixed maturities ................ (1,230,895) (1,066,077) (1,157,416)
Other invested asset acquired ..................................... -- (6,910) --
----------- ----------- -----------
Net cash used in investing activities ....................... (595,478) (546,763) (1,036,995)
----------- ----------- -----------
Financing Activities:
Net proceeds from shares issued in initial capitalization ......... -- -- 120
Redemption of shares issued in initial capitalization ............. -- -- (120)
Dividends paid to shareholders .................................... (13,807) (13,767) --
Proceeds from exercise of share options ........................... 7,406 678 --
Proceeds from issuance of common shares ........................... 1,567 520 905,088
Net proceeds from issuance of debt securities ..................... -- -- 132,000
Purchase of common shares ......................................... (9,985) -- --
----------- ----------- -----------
Net cash (used in) provided by financing activities ........ (14,819) (12,569) 1,037,088
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents ........ 104,436 (176,025) 281,486
Cash and cash equivalents at beginning of period .................... 105,461 281,486 --
----------- ----------- -----------
Cash and cash equivalents at end of period .......................... $ 209,897 105,461 $ 281,486
=========== =========== ===========
Supplemental disclosures of cash flow information:
Income taxes paid ................................................. $ 8,549 65,912 $ --
Interest paid ..................................................... $ 7,442 7,888 $ --

See accompanying notes to consolidated financial statements.

F-6

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND CONSOLIDATION

Platinum Underwriters Holdings, Ltd. ("Platinum Holdings") is a Bermuda
holding company organized in 2002. 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 and marine, casualty and finite risk reinsurance
coverages, through reinsurance intermediaries, to a diverse clientele of
insurers and select reinsurers on a worldwide basis.

The consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America
("U.S. GAAP"). These financial statements reflect the consolidated position of
the Company, including Platinum US, Platinum UK, Platinum Bermuda, Platinum
Underwriters Finance, Inc. ("Platinum Finance"), Platinum Regency Holdings and
Platinum Administrative Services, Inc. All material intercompany transactions
have been eliminated in preparing these consolidated financial statements.

In November 2002, Platinum Holdings completed an initial public offering
of 33,044,000 common shares (the "Initial Public Offering"). Concurrent with the
Initial Public Offering, Platinum Holdings sold 6,000,000 common shares to The
St. Paul Travelers Companies, Inc., formerly The St. Paul Companies, Inc., ("St.
Paul"), and 3,960,000 common shares to RenaissanceRe Holdings Ltd.
("RenaissanceRe") in private placements. St. Paul subsequently sold its
6,000,000 common shares in June 2004. As part of the Initial Public Offering,
St. Paul and RenaissanceRe received options to purchase up to 6,000,000 and
2,500,000 of additional common shares, respectively, at any time during the ten
years following the Initial Public Offering at a price of $27.00 per share.

In addition to the common shares issued, the Company issued Equity
Security Units ("ESU"). The ESU's consist of a contract to purchase common
shares in 2005 and an ownership interest in a senior note due 2007.

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").

The underwriting operations, as well as substantially all other operations
of the Company commenced in November 2002. The 2002 consolidated statements of
income and comprehensive income, shareholders' equity and cash flows include all
activity from incorporation on April 19, 2002 through December 31, 2002 (the
"2002 Period").

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Investments

Fixed maturities owned that the Company may not have the positive intent
to hold until maturity

F-7

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued

are classified as available-for-sale and reported at fair value, with unrealized
gains and losses excluded from net income and reported in other comprehensive
income as a separate component of shareholders' equity, net of deferred tax.
Fixed maturities owned that the Company has the intent to sell prior to maturity
are classified as trading securities and reported at fair value, with unrealized
gains and losses included in other income. Securities classified as trading
securities are generally foreign currency denominated securities intended to
match net liabilities denominated in foreign currencies in order to minimize net
exposures arising from fluctuations in foreign currency exchange rates. The fair
values of fixed maturities are based on quoted market prices at the reporting
date for those or similar investments.

Premiums and discounts on fixed maturity securities are amortized into
interest income over the life of the security under the effective yield method.
Premiums and discounts on mortgage and asset-backed securities are amortized
into interest income based on prepayment assumptions obtained from outside
investment managers. These assumptions are consistent with the current interest
rate and economic environment. The retrospective adjustment method is used to
value asset-backed securities.

Realized gains and losses on sales of investments are determined on the
basis of the specific identification method. If the Company has determined that
an unrealized loss on a security is "other than temporary," the Company writes
down the carrying value of the security and records a realized loss in the
statement of income.

Other invested asset represents a strategic investment in a non-public
reinsurance company and is carried at estimated fair value.

Short-Term Investments and Cash Equivalents

Short-term investments are carried at cost, which approximates fair value.
Short-term investments mature within one year from the purchase date. Cash
equivalents are carried at amortized cost, which approximates fair value, and
include all securities that, at their purchase date, have a maturity of less
than 90 days.

Premium Revenues

Assumed reinsurance premiums are recognized as revenues when premiums
become earned proportionately over the coverage period. Net premiums earned are
recorded in the statement of income, net of the cost of retrocession. Net
premiums written not yet recognized as revenue are recorded in the balance sheet
as unearned premiums, gross of any ceded unearned premiums.

Due to the nature of reinsurance, ceding companies routinely report and
remit premiums subsequent to the contract coverage period and, consequently,
include estimates of premiums that are written but not reported ("WBNR"). In
addition to estimating WBNR, the Company estimates the portion of premium earned
but not reported ("EBNR"). The estimates of WBNR and EBNR include amounts
reported by the ceding companies, information obtained during audits and other
information received from ceding companies. The Company also estimates the
expenses associated with these premiums in the form of losses, loss adjustment
expenses ("LAE") and commissions. As actual premiums are reported by ceding
companies, management evaluates the appropriateness of the premium estimates and
any adjustments to these estimates are accounted for as changes in estimates and
are reflected in the results of operations in the period in which they are made.
Adjustments to original premium estimates could be material and could
significantly impact earnings in the period they are recorded. Due to the time
lag

F-8

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued

inherent in the reporting of premiums by ceding companies, a significant portion
of amounts included as premiums written and receivable represent estimated
premiums, net of commissions, and is not currently due based on the terms of the
underlying contracts.

Certain of our reinsurance contracts include provisions that adjust
premiums or acquisition expenses based upon the experience under the contracts.
Reinstatement premiums are the premiums charged for the restoration of the
reinsurance limit of a reinsurance contract to its full amount, generally
coinciding with the payment by the reinsurer of losses. These premiums relate to
the future coverage obtained for the remainder of the initial policy term and
are earned over the remaining policy term. Additional premiums are premiums
triggered by losses and are earned immediately. Reinstatement premiums and
additional premiums are recognized in accordance with the provisions of assumed
reinsurance contracts, based on loss experience under such contracts. An
allowance for uncollectible premiums is established for possible non-payment of
such amounts due, as deemed necessary.

Funds Held by Ceding Companies

The Company writes business on a funds held basis. Under these contractual
arrangements, the ceding company holds the net funds that would otherwise be
remitted to the Company and generally credits the funds held balance with
interest income. The general objective of the funds held balances is to provide
the ceding company with collateral for obligations of the Company. The Company
bears the credit risk in the event that the ceding company fails to remit the
net funds held balances, however, that credit risk is somewhat mitigated by the
contractual ability to offset funds held balances with any loss amounts owed by
the Company.

Deferred Acquisition Costs

Costs of acquiring business, primarily commissions and other direct
underwriting expenses, which vary with and are directly related to the
production of business, are deferred and amortized over the same period as the
corresponding premiums are recorded as revenues. On a regular basis, an analysis
of the recoverability of deferred acquisition costs is performed based on the
profitability of the underlying reinsurance contracts including anticipated
investment income. Any adjustments are reflected in the results of operations in
the period in which they are made. Should the analysis indicate that the
acquisition costs deferred are not recoverable, further analyses are performed
to determine if a liability is required to provide for losses that may exceed
the related unearned premiums. Deferred acquisition costs amortized in 2004,
2003 and the 2002 Period were $224,307,000, $227,240,000 and $14,449,000,
respectively.

Debt Obligations and Deferred Debt Issuance Costs

The net proceeds from the sale of the Company's ESU's were allocated
between the purchase contracts and the senior notes based on the underlying fair
value of each instrument. The present value of the purchase contract adjustment
payments were initially charged to shareholders' equity, with an offsetting
credit to liabilities. Subsequent contract adjustment payments are allocated
between this liability account and interest expense based on a constant rate
calculation over the life of the transaction.

Costs incurred in issuing debt are capitalized and amortized over the life
of the debt. If the effect of the issuance of common shares in exchange for the
senior notes is dilutive to earnings per share, it is included in the
calculation of diluted earnings per share as if the common shares were issued
and the

F-9

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued

proceeds received were used to pay down the senior notes at the beginning of the
reporting period.

Unpaid Losses and LAE

Unpaid losses and LAE are estimated based upon reports received from
ceding companies, supplemented by the Company's estimates of losses for which
ceding company reports have not been received and historical company and
industry experience for unreported claims. Unpaid losses and LAE include
estimates of the cost of claims that were reported, but not yet paid, and the
cost of claims incurred but not yet reported ("IBNR"). Estimated amounts
recoverable from reinsurers on unpaid losses and LAE are reflected as assets.
While the Company commenced operations in 2002, the business written is
sufficiently similar to the historical reinsurance business of St. Paul that the
Company is able to use the historical loss experience of the reinsurance
business of St. Paul to estimate its ultimate losses and LAE.

Unpaid losses and LAE represent management's best estimate at a given
point in time and are subject to the effects of trends in loss severity and
frequency. These estimates are reviewed regularly and adjusted as experience
develops or new information becomes available. Any such adjustments are
accounted for as changes in estimates and reflected in the results of operations
in the period in which they are made. It is possible that the ultimate liability
may materially differ from such estimates.

Reinsurance Deposit Liabilities

Reinsurance contracts entered into by the Company which are not deemed to
transfer significant insurance risk are accounted for as deposits, whereby
liabilities are initially recorded at the same amount as assets received. Risk
transfer involves evaluating significant assumptions relating to the amount and
timing of expected cash flows, as well as the interpretation of underlying
contract terms. Interest expense related to the deposit is recognized as
incurred.

Earnings Per Share

Basic earnings per share is computed by dividing net income by the
weighted average number of shares outstanding for the period. Diluted earnings
per share reflects the basic earnings per share adjusted for the potential
dilution that would occur if the issued options were exercised and considers the
outstanding purchase contracts relating to the ESU. Securities that are
convertible into common shares that are anti-dilutive are not included in the
calculation of diluted earnings per share.

Reinsurance Ceded

Reinsurance ceded, which transfers risk and the related premiums,
commissions and losses incurred to the reinsurer, is reflected as reductions of
the respective income and expense accounts. Unearned premiums ceded and
estimates of amounts recoverable from reinsurers on paid and unpaid losses are
reflected as assets.

Income Taxes

The Company applies the asset and liability method of accounting for
income taxes. Under the asset and liability method, 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. Deferred tax assets and
liabilities are measured using enacted tax rates applicable to taxable income in
the years in which those temporary differences are

F-10

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued

expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period the
change is enacted. A valuation allowance is established for deferred tax assets
where it is more likely than not that future tax benefits will not be realized.

Stock-Based Compensation

During 2003, the Company adopted Statement of Financial Accounting
Standards No. 123 "Accounting for Awards of Stock Based Compensation to
Employees" ("SFAS 123") and Statement of Financial Accounting Standards No. 148
"Accounting for Stock-Based Compensation-Transition and Disclosure" ("SFAS
148"). SFAS 123 requires that the fair value of shares granted under the
Company's share option plan subsequent to the adoption of SFAS 148 be amortized
in earnings over the vesting periods. The fair value of the share options
granted is determined through the use of an option-pricing model. SFAS 148
amends SFAS 123 and provides transitioning guidance for a voluntary adoption of
SFAS 123 as well as amends the disclosure requirements of SFAS 123. For the 2002
Period, the Company used 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 shares on the
date of the grant, no compensation expense is recorded. For share options
granted in 2002, the Company continues to use APB25. The adoption of SFAS 148
did not have a material effect on the Company's financial position or results of
operations.

Had the Company calculated and recorded compensation expense for share
option grants based on the "fair value" method described in SFAS 123 for options
granted prior to 2003, net income and earnings per share, net of tax, for the
years ended December 31, 2004 and 2003 and the 2002 Period would have been the
pro forma amounts as indicated below ($ in thousands, except per share data):

2004 2003 2002 Period
---------- ---------- -----------

Share based compensation expense:
As reported ......................... $ 2,358 5,510 $ --
Pro forma ........................... 7,026 14,774 1,070
Net income:
As reported ......................... 84,783 144,823 6,438
Pro forma ........................... 80,115 135,559 5,368
Basic earnings per share:
As reported ......................... 1.96 3.37 0.15
Pro forma ........................... 1.86 3.15 0.12
Diluted earnings per share:
As reported ......................... 1.81 3.09 0.15
Pro forma ........................... $ 1.72 2.90 $ 0.12

In December 2004, the Financial Accounting Standards Board issued the
Statement of Financial Accounting Standards No. 123R "Share Based Payment"
("SFAS 123R"). SFAS 123R establishes standards for the accounting for
transactions in which an entity exchanges its equity instruments for goods or
services and focuses primarily on accounting for transactions in which an entity
obtains employee services in share-based payment transactions. SFAS 123R
requires that, prospectively, compensation

F-11

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued

costs be recognized for the fair value of all share options, including the cost
related to the unvested portion of all outstanding share options as of December
31, 2004. The share based compensation expense for share options currently
outstanding are to be based on the same cost model used to calculate the pro
forma disclosures under SFAS 123. Consequently, the pro forma share based
compensation expense and pro forma income above are the same as if the Company
had adopted SFAS 123R in 2004.

Foreign Currency Exchange

The Company's functional currency is generally the currency of the local
operating environment. Transactions conducted in other than functional
currencies are remeasured to the Company's functional currency, and the
resulting foreign exchange gains and losses are included in net foreign currency
exchange gains or losses. Functional currency based assets and liabilities are
translated into U.S. dollars using current rates of exchange prevailing at the
balance sheet date and the related translation adjustments are recorded as a
separate component of accumulated other comprehensive income, net of applicable
deferred income tax.

Organizational Cost

Costs incurred by the Company relating to its organization were expensed
as incurred.

Use of Estimates

The Company's financial statements include estimates and assumptions that
have an effect on the amounts reported. The most significant estimates are those
relating to unpaid losses and LAE. These estimates are continually reviewed and
adjustments made as necessary, but actual results could be significantly
different than expected at the time such estimates are made. Results of changes
in estimates are reflected in results of operations in the period in which the
change is made.

Reclassifications

Certain reclassifications have been made to the 2003 financial statements
in order to conform to the 2004 presentation.

2. SEPARATION FROM AND CONTINUING RELATIONSHIP WITH ST. PAUL

As discussed more fully in Note 8, on November 1, 2002, Platinum Holdings
completed the Initial Public Offering as well as an offering of ESU's.
Concurrently with the Initial Public Offering, Platinum Holdings sold 6,000,000
common shares to St. Paul in a private placement and issued to St. Paul an
option to purchase up to 6,000,000 additional common shares at any time during
the ten years following the Initial Public Offering at a price of $27.00 per
share. St. Paul subsequently sold its 6,000,000 common shares in June 2004.

Concurrent with the transactions in the November 2002, 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 LAE, unearned premiums and
certain other liabilities on reinsurance contracts becoming effective in 2002. A
summary of the liabilities assumed and assets received on November 2, 2002 are
as follows ($ in thousands):

F-12

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued

Liabilities assumed:
Net unpaid losses and LAE ............................. $ 221,303
Net unearned premiums ................................. 244,000
Reinsurance deposit liabilities ....................... 23,828
Profit commission liabilities ......................... 16,145
---------
505,276
Ceding commission to St. Paul ............................ (53,390)
---------
451,886
---------
Assets received:
Cash .................................................. 288,648
Funds held ............................................ 54,902
---------
343,550
---------
Amount due from St. Paul ................................. $ 108,336
---------

Amounts due from St. Paul at December 31, 2002 were settled during 2003.

Included in assumed premiums written in the 2002 Period is $292,302,000
assumed from St. Paul. Premiums assumed from St. Paul includes $244,000,000 of
unearned premiums as of November 2, 2002 on reinsurance contracts becoming
effective in 2002 and additional assumed premiums written of approximately
$48,302,000 for the 2002 Period. While the Company did not cede any premiums in
the 2002 Period, it assumed business from St. Paul net of retrocessional
reinsurance and may be subject to the credit risk related to such retrocessional
reinsurance.

The Company entered into an Employee Benefits and Compensation Matters
Agreement with St. Paul that provided for the transfer of employees from St.
Paul and provided for the allocation of assets and liabilities and certain other
agreements with respect to employee compensation and benefit plans. In addition,
St. Paul reimbursed the Company for the annual bonuses of the Company's
employees prorated for the period from January 1, 2002 through the date of
completion of the Initial Public Offering. The agreement also provided for
reimbursement of a portion of severance and retention payments to the Company's
employees.

3. INVESTMENTS

The Company's available-for-sale fixed maturities at December 31, 2004 and
2003 were as follows ($ in thousands):

F-13

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued

Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
---------- ---------- ---------- ----------

December 31, 2004:

U.S. Government and U.S. Government agencies .... $ 4,227 -- 24 $ 4,203
Corporate bonds ................................. 1,349,167 14,960 4,775 1,359,352
Mortgage and asset-backed securities ............ 508,757 3,898 1,586 511,069
Municipal bonds ................................. 214,088 1,751 588 215,251
Foreign governments and states .................. 64,301 57 380 63,978
---------- ---------- ---------- ----------
Total bonds ............................. 2,140,540 20,666 7,353 2,153,853
Redeemable preferred stocks ..................... 3,750 -- 74 3,676
---------- ---------- ---------- ----------
Total available-for-sale fixed maturities $2,144,290 20,666 7,427 $2,157,529
---------- ---------- ---------- ----------
December 31, 2003:

U.S. Government and U.S. Government agencies .... $ 5,065 22 55 $ 5,032
Corporate bonds ................................. 1,077,399 20,412 1,856 1,095,955
Mortgage and asset-backed securities ............ 267,774 1,386 785 268,375
Municipal bonds ................................. 91,019 1,130 106 92,043
Foreign governments and states .................. 115,800 2,891 273 118,418
---------- ---------- ---------- ----------
Total bonds ............................. 1,557,057 25,841 3,075 1,579,823
Redeemable preferred stocks ..................... 3,750 -- 68 3,682
---------- ---------- ---------- ----------
Total available-for-sale fixed maturities $1,560,807 25,841 3,143 $1,583,505
---------- ---------- ---------- ----------

Amortized cost and fair value of available-for-sale fixed maturities by
contractual maturity at December 31, 2004 are shown below; actual maturities
could differ from contractual maturities due to call or prepayment provisions ($
in thousands):

Amortized
Cost Fair Value
---------- ----------

Due in one year or less ......................... $ 54,567 $ 54,390
Due from one to five years ...................... 929,647 932,655
Due from five to ten years ...................... 411,388 415,697
Due in ten or more years ........................ 236,181 240,042
Mortgage and asset backed securities ............ 508,757 511,069
---------- ----------
Total bonds ............................. 2,140,540 2,153,853
Redeemable preferred stocks ..................... 3,750 3,676
---------- ----------
Total available-for-sale fixed maturities $2,144,290 $2,157,529
---------- ----------

Investment income for the years ended December 31, 2004 and 2003 and the
2002 Period is summarized as follows ($ in thousands):

F-14

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued

2002
2004 2003 Period
------- ------- -------

Fixed maturities .................. $82,038 55,727 $ 4,389
Cash and cash equivalents ......... 2,261 3,133 1,183
Funds held ........................ 2,651 776 --
------- ------- -------
86,950 59,636 5,572
Less investment expenses ........ 2,418 1,991 361
------- ------- -------
Net investment income ............. $84,532 57,645 $ 5,211
------- ------- -------

Net realized gains and losses from investments for the years ended
December 31, 2004 and 2003 and the 2002 Period were as follows ($ in thousands):

2002
2004 2003 Period
------ ------ ------

Gross realized gains ................. $5,706 4,639 $ 423
Gross realized losses ................ 3,751 1,858 398
------ ------ ------
Net realized gains ........... $1,955 2,781 $ 25
------ ------ ------

Proceeds from sales, maturities and calls of available-for-sale fixed
maturities were $635,417,000, $526,224,000 and $120,421,000 for the years ended
December 31, 2004 and 2003 and the 2002 Period, respectively. Proceeds from
sales, maturities and calls of trading securities were $50,542,000 for the year
ended December 31, 2004. There were no sales in the trading securities portfolio
in 2003 or the 2002 Period.

Net change in unrealized investment gains (losses) for the years ended
December 31, 2004 and 2003 and the 2002 Period were as follows ($ in thousands):

2002
2004 2003 Period
------- ------- -------

Fixed maturities available for sale ....... $(9,459) 10,405 $12,293
Less deferred tax ......................... 2,549 2,835 1,712
------- ------- -------
Net change in unrealized gains .... $(6,910) 7,570 $10,581
------- ------- -------

Investments with a carrying value of $4,355,000 were on deposit with
regulatory authorities as of December 31, 2004. Investments with a carrying
value of $318,586,000 and cash and cash equivalents of $4,846,000 at December
31, 2004 were held in trust to collateralize liabilities ceded by St. Paul to
the Company under the Quota Share Retrocession Agreements. Investments with a
carrying value of $5,779,000 and cash and cash equivalents of $1,153,000 at
December 31, 2004 were held in trust to collateralize obligations under various
other reinsurance contracts.

The unrealized losses of fixed maturities available-for-sale aggregated by
investment category and length of time that individual securities have been in a
continuous unrealized loss position are as follows:

F-15

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued

Fair Unrealized
Value Loss
-------- --------

Less than twelve months:

U.S. Government and U.S. Government agencies ..... $ 4,203 $ 24
Corporate bonds .................................. 526,856 4,396
Mortgage and asset-backed securities ............. 150,597 1,131
Municipal bonds .................................. 50,227 588
Foreign governments and states ................... 38,574 337
Redeemable preferred stock ....................... 3,677 74
-------- --------
Total .................................... $774,134 $ 6,550
-------- --------
Twelve months or more:

Corporate bonds .................................. $ 13,758 $ 422
Mortgage and asset-backed securities ............. 29,124 455
-------- --------
Total .................................... $ 42,882 $ 877
-------- --------
Total unrealized losses:

U.S. Government and U.S. Government agencies ..... $ 4,203 $ 24
Corporate bonds .................................. 540,614 4,818
Mortgage and asset-backed securities ............. 179,721 1,586
Municipal bonds .................................. 50,227 588
Foreign governments and states ................... 38,574 337
Redeemable preferred stocks ...................... 3,677 74
-------- --------
Total .................................... $817,016 $ 7,427
-------- --------

The Company routinely reviews its available-for-sale investments to
determine whether unrealized losses represent temporary changes in fair value or
are the result of "other than temporary impairments." The process of determining
whether a security is other than temporarily impaired is subjective and involves
analyzing many factors. These factors include but are not limited to: the length
and magnitude of an unrealized loss, specific credit events, overall financial
condition of the issuer; and the Company's intent to hold a security for a
sufficient period of time for the value to recover the unrealized loss. This is
based on current and anticipated future positive cash flow from operations that
generates sufficient liquidity in order to meet our obligations. If the Company
has determined that an unrealized loss on a security is other than temporary,
the Company writes down the carrying value of the security and records a
realized loss in the statement of income. As of December 31, 2004 management
believes that the Company's investment portfolio does not contain any securities
that have other-than-temporary impairments.

The following table presents the carrying amounts and estimated fair
values of the Company's financial instruments as of December 31, 2004 and 2003
($ in thousands):

F-16

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued

December 31, 2004 December 31, 2003
------------------------- -------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------

Financial assets:
Fixed maturities ... $2,240,202 2,240,202 1,678,138 $1,678,138
Other invested asset 6,769 6,769 6,910 6,910

Financial liabilities:
Debt obligations ... $ 137,500 165,000 137,500 $ 170,445

The fair values of financial instruments are based on quoted market prices
at the reporting date for those or similar instruments. The fair values of debt
obligations are based on quoted market prices. Other invested asset represents a
strategic investment in a non-public reinsurance company and is carried at
estimated fair value.

4. UNPAID LOSSES AND LAE

In late August and September of 2004, there were four significant named
hurricanes, Charley, Frances, Ivan and Jeanne (the "Hurricanes"), that caused
severe damage in the Caribbean and the southeast United States. As a result of
losses arising from these catastrophic events, certain reinsurance contracts
generated additional premiums. Further, previously accrued profit commissions
for certain reinsurance contracts were reduced. The aggregate adverse impact on
net income of the Company for the year ended December 31, 2004 from the
Hurricanes is summarized as follows ($ in thousands):

Losses ....................................................... $ 230,475
Less:
Additional premiums earned ................................. (29,265)
Profit commissions ......................................... (10,243)
---------
Net adverse impact before income tax benefit ......... $ 190,967
---------

Activity in the liability for unpaid losses and LAE for the years ended
December 31, 2004, 2003 and the 2002 Period is summarized as follows ($ in
thousands):

F-17

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued

2004 2003 2002 Period
----------- ----------- -----------

Net unpaid losses and LAE as of the beginning of period $ 731,918 281,659 $ --
----------- ----------- -----------
Net incurred related to:
Current year ........................................ 1,101,820 648,137 60,356
Prior year .......................................... (82,016) (63,966) --
----------- ----------- -----------
Total net incurred losses and LAE ............. 1,019,804 584,171 60,356
----------- ----------- -----------
Unpaid losses and LAE assumed from St. Paul ........... -- -- 221,303
----------- ----------- -----------
Net paid losses and LAE:
Current year ........................................ 174,870 102,669 --
Prior year .......................................... 205,889 41,709 --
----------- ----------- -----------
Total net paid losses and LAE ................. 380,759 144,378 --
----------- ----------- -----------
Effects of foreign currency exchange rate changes ..... 8,264 10,466 --
----------- ----------- -----------
Net unpaid losses and LAE as of the end of period ..... 1,379,227 731,918 281,659
Reinsurance recoverable ............................... 1,728 5,016 --
----------- ----------- -----------
Gross unpaid losses and LAE at end of period .......... $ 1,380,955 736,934 $ 281,659
----------- ----------- -----------

The favorable development in 2004 related to the prior year of $82,016,000
includes approximately $57,151,000 of net favorable development on property and
certain other lines of business with relatively short patterns of reported
losses, including approximately $7,700,000 attributable to prior years'
catastrophe losses. In addition, the favorable development in 2004 includes
approximately $24,865,000 of reductions in unpaid losses and LAE associated with
changes in 2004 of estimates of premiums and the patterns of their earnings
across current and prior accident years. Such changes did not have a significant
net effect on the current year's results of operations.

The lines experiencing favorable development are principally property
coverages provided in both the Property and Marine and Finite Risk segments.
During 2004 and 2003, actual reported losses were significantly less than
expected for these short-tailed property lines resulting in reductions in
estimated ultimate losses.

The favorable development in 2003 related to the prior year of $63,966,000
includes approximately $50,866,000 of net favorable development on property and
certain other lines of business with relatively short patterns of reported
losses. The favorable development also includes approximately $13,100,000 of
reductions in unpaid losses and LAE associated with changes in 2003 of estimates
of casualty premiums and their patterns of earnings between 2002 and 2003.

Because many of the reinsurance coverages offered by the Company will
likely involve claims that may not ultimately be settled for many years after
they are incurred, subjective judgments as to ultimate exposure to losses are an
integral and necessary component of the process of estimating unpaid losses and
LAE. The inherent uncertainties of estimating unpaid losses and LAE are further
exacerbated with respect to reinsurers by the significant amount of time that
often elapses between the occurrence of an insured loss, the reporting of that
loss to the primary reinsurer and then to the reinsurer, and the primary
insurer's payment of that loss to the insured and subsequent payment by the
reinsurer to the primary insurer. Unpaid losses and LAE are reviewed quarterly
using a variety of statistical and actuarial

F-18

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued

techniques to analyze current claim costs, frequency and severity data and
prevailing economic, social and legal factors. Unpaid losses and LAE established
in prior years are adjusted as loss experience develops and new information
becomes available. Adjustments to previously estimated unpaid losses and LAE are
reflected in financial results in the periods in which they are made.

5. RETROCESSIONAL REINSURANCE

Reinsurance is the transfer of risk, by contract, from one insurance
company to another for consideration of premium. Retrocessional reinsurance is
reinsurance ceded by a reinsurer to insure against all or a portion of its
reinsurance written. Retrocessional reinsurance agreements provide the Company
with increased capacity to write larger risks, limit its maximum loss arising
from any one occurrence and maintain its exposure to loss within its capital
resources. Retrocessional reinsurance contracts do not relieve the Company from
its obligations under its contracts. Failure of reinsurers to honor their
obligations could result in losses to the Company. Consequently, the Company has
a contingent liability to the extent of any unpaid losses and LAE ceded to
another company. The Company evaluates the financial condition of its reinsurers
and monitors concentrations of credit risk arising from similar geographic
regions, activities, or economic characteristics of the reinsurers to minimize
its exposure to significant losses from reinsurer insolvencies.

The effects of reinsurance on premiums, losses and LAE for the years ended
December 31, 2004 and 2003 and the 2002 Period are as follows ($ in thousands):

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

As of and for the year ended December 31, 2004:

Premiums written ............................ $1,659,790 13,777 $1,646,013
Premiums earned ............................. 1,465,058 17,123 1,447,935
Losses and LAE .............................. 1,018,106 (1,698) 1,019,804
Unpaid losses and LAE ....................... $1,380,955 1,728 $1,379,227

As of and for the year ended December 31, 2003:

Premiums written ............................ $1,198,473 26,331 $1,172,142
Premiums earned ............................. 1,088,109 20,582 1,067,527
Losses and LAE .............................. 589,656 5,485 584,171
Unpaid losses and LAE ....................... $ 736,934 5,016 $ 731,918

As of December 31, 2002 and the 2002 Period:

Premiums written ............................ $ 298,114 -- $ 298,114
Premiums earned ............................. 107,098 -- 107,098
Losses and LAE .............................. 60,356 -- 60,356
Unpaid losses and LAE ....................... $ 281,659 -- $ 281,659

Effective January 1, 2004, Platinum US and Platinum UK entered into an
excess-of-loss retrocessional contract, with an unaffiliated reinsurer, that
provided up to $100 million of coverage.

F-19

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued

Premiums ceded under this contract vary depending on the amount of the ceded
losses under the contract and the severity of individual loss events on the
insurance industry. The Company evaluated the Hurricane losses and the effect of
the contract on the Company's results of operations and commuted the contract
effective November 8, 2004. Results for the year ended December 31, 2004 do not
include any benefit from the contract.

In 2003, Platinum US and Platinum UK entered into a quota share
retrocession agreements with Platinum Bermuda. Platinum US retrocedes
approximately 70% of its business to Platinum Bermuda and Platinum UK retrocedes
approximately 55% of its business to Platinum Bermuda. Following is a summary of
the premiums earned and losses ceded from Platinum US and Platinum UK to
Platinum Bermuda for the years ended December 31, 2004 and 2003 ($ in
thousands):

2004 2003
-------- --------

Retroceded by Platinum US to Platinum Bermuda:
Premiums earned ................................ $515,869 $270,913
Incurred losses and LAE ........................ 562,193 214,796

Retroceded by Platinum UK to Platinum Bermuda:
Premiums earned ................................ 89,394 43,998
Incurred losses and LAE ........................ $ 57,830 $ 17,542

These transactions had no net effect on underwriting results in the
consolidated financial statements.

6. EQUITY SECURITY UNITS AND CREDIT AGREEMENTS

Concurrently with the completion of the Initial Public Offering, Platinum
Holdings completed an offering of 5,500,000 Equity Security Units at a price of
$25 per unit (the "ESU Offering"). Each Equity Security Unit ("ESU") consists of
a contract to purchase common shares of the Company in 2005, and an ownership
interest in a senior note, due 2007, of Platinum Finance. Platinum Holdings
makes quarterly contract adjustment payments under the purchase contracts of
1.75 percent per year of the stated amount of $25 per unit. In addition,
Platinum Finance makes quarterly interest payments on the senior notes at an
annual rate of 5.25 percent. The senior notes are guaranteed by Platinum
Holdings on a senior, unsecured basis and are pledged to collateralize the
holders' obligations to acquire common shares in 2005. As of December 31, 2004,
the fair value of the ESU's was $165,000,000 and was based on quoted market
prices. The Company made interest payments in cash of $7,442,000 and $7,888,000
for the years ended December 31, 2004 and 2003, respectively. There were no cash
payments of interest in the 2002 Period.

Based on the fair value of the Company's common shares, the Company would
issue 5,008,850 common shares of the Company in exchange for the senior notes if
the contract holders were able to purchase common shares at December 31, 2004. A
decrease in the fair value of the Company's common shares from the fair value at
December 31, 2004 would increase the number of common shares that would be
issued by as much as 1,102,200 additional shares. An increase in the fair value
of the Company's common shares from the fair value at December 31, 2004 would
not alter the number of common shares that would be issued. The maximum number
of common shares that the Company is obligated to issue in exchange for the
senior notes is 6,111,050 should the fair value of the common shares be $22.50
per share or less. The ESU related agreements provides for the issuance of
additional common shares as well as the

F-20

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued

remarketing of the ESU debt obligations in 2005.

Credit Agreement

The Company does not currently have a committed credit facility in place;
however, as of December 31, 2004, the Company had approximately $37,287,000 of
unsecured letters of credit outstanding in favor of various cedants. These
letters of credit are issued, by various banks, on an uncommitted basis, and
subject the Company to certain terms and conditions including the requirement to
collateralize, these currently unsecured obligations, to the extent certain
thresholds or ratings criteria are exceeded.

7. INCOME TAXES

The Company provides income taxes based upon amounts reported in the
financial statements and the provisions of currently enacted tax laws. Platinum
Holdings and Platinum Bermuda are incorporated under the laws of Bermuda and are
subject to Bermuda law with respect to taxation. Under current Bermuda law, they
are not taxed on any Bermuda income or capital gains and they have received an
undertaking from the Bermuda Minister of Finance that, in the event of any
Bermuda income or capital gains taxes being imposed, they will be exempt from
those taxes until 2016. Platinum Holdings has subsidiaries based in the United
States, the United Kingdom and Ireland that are subject to the tax laws thereof.

Under current United States law, Platinum US will be subject to the 35
percent corporate tax rate. Under current United Kingdom law, Platinum UK is
taxed at the U.K. corporate tax rate (generally 30 percent). There is no
withholding tax on dividends distributed from Platinum UK to Platinum Ireland.
Under current Irish law, Platinum Ireland is taxed at a 25 percent corporate tax
rate on non-trading income and a 12.5 percent corporate tax rate on trading
income. There is no withholding tax on dividends distributed from Platinum
Ireland to Platinum Holdings.

Income (loss) before income taxes for the years ended December 31, 2004
and 2003 and the 2002 Period by location is as follows ($ in thousands):

2004 2003 2002 Period
-------- ------- -----------

United States .............................. $ 73,020 122,485 $13,858
Bermuda .................................... 19,423 48,191 (1,735)
Other ...................................... 22,689 23,022 (1,030)
-------- ------- --------
Income before income taxes ......... $115,132 193,698 $11,093
-------- ------- --------

Income tax expense for the years ended December 31, 2004 and 2003 and the
2002 Period is comprised of current and deferred as follows ($ in thousands):

2004 2003 2002 Period
------- ------ -----------

Current .................................... $28,133 56,681 $ (129)
Deferred ................................... 2,216 (7,806) 4,784
------- ------ ------
Total .............................. $30,349 48,875 $4,655
------- ------ ------

A reconciliation of expected income tax expense, computed by applying a
35 percent income tax

F-21

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued

rate to income before income taxes, to income tax expense for the years ended
December 31, 2004 and 2003 and the 2002 Period is as follows ($ in thousands):

2004 2003 2002 Period
------- ------ -----------

Expected income tax expense at 35% ........................ $40,296 67,794 $3,883
Effect of foreign income or loss subject to tax at rates
other than 35% ........................................... (8,222) (18,316) 712
Tax exempt investment income .............................. (1,084) (740) --
Other, net ................................................ (641) 137 60
------- ------ ------
Income tax expense ................................ $30,349 48,875 $4,655
------- ------- ------

The tax effects of temporary differences that give rise to the deferred
tax assets and deferred tax liabilities are as follows ($ in thousands):

2004 2003
------- -------

Deferred tax assets:
Unpaid losses and LAE .................................... $31,314 $27,492
Unearned premiums ........................................ 15,095 11,142
Other deferred tax assets ................................ 188 325
------- -------
Total deferred tax assets .......................... 46,597 38,959
------- -------
Deferred tax liabilities:
Deferred acquisition costs ............................... 36,892 25,783
Difference in tax basis carrying value of assets ......... -- 5,337
Timing differences in recognition of expenses ............ 558 1,172
Unrealized net foreign currency exchange losses .......... 7,766 3,625
Net unrealized gains on investments ...................... 1,999 4,547
Other deferred tax liabilities ........................... 855 287
------- -------
Total deferred tax liabilities ..................... 48,070 40,751
------- -------
Total net deferred tax liabilities ................. $ 1,473 $ 1,792
------- -------

Income tax assets and liabilities are recorded by offsetting assets and
liabilities by tax jurisdiction. The deferred tax assets and liabilities at
December 31, 2004 and 2003 are included in the balance sheet as follows ($ in
thousands):

2004 2003
------- -------

Platinum US deferred tax assets ............................ $49,254 $39,848
Platinum US deferred tax liabilities ....................... 40,323 36,137
------- -------
Net Platinum US deferred tax assets ................ $ 8,931 $ 3,711
------- -------

F-22

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued

2004 2003
------- -------

Platinum UK deferred tax assets ............................ -- 28
Platinum UK deferred tax liabilities ....................... $10,404 $ 5,531
------- -------
Net Platinum UK deferred tax liabilities ........... 10,404 5,503
------- -------
Total net deferred tax liabilities ................. $ 1,473 $ 1,792
------- -------

To evaluate the realization of the deferred tax assets, management
considers the timing of the reversal of deferred income and expense items as
well as the likelihood that the Company will generate sufficient taxable income
to realize the future tax benefits. Management believes that the Company will
generate sufficient taxable income to realize the deferred assets and,
consequently, did not consider a valuation allowance necessary. The Company has
a net operating loss carryforward arising from its operation in the U.K. The net
operating loss carryforward does not have an expiration date.

Income taxes paid in 2004 and 2003 were $8,549,000 and $65,912,000,
respectively. There were no cash payments of income taxes in the 2002 Period.

8. SHAREHOLDERS' EQUITY AND REGULATION

The Company's initial capitalization of $120,000 was provided by an
organizing trust. On May 29, 2002, Platinum Holdings completed a 100-for-1 split
of its common shares, resulting in 135,000,000 common shares authorized and
1,200,000 common shares issued and outstanding, all with a par value of $0.01
per share. On October 28, 2002, the shareholder of Platinum Holdings increased
the number of common shares authorized to 200,000,000 common shares and
25,000,000 preferred shares. Concurrent with the Initial Public Offering, the
1,200,000 common shares were redeemed and canceled.

On November 1, 2002, Platinum Holdings completed the Initial Public
Offering of 33,044,000 common shares at a price to the public of $22.50 per
share. Concurrently with the completion of the Initial Public Offering, Platinum
Holdings sold 6,000,000 common shares (or 14 percent of the then outstanding
common shares) to St. Paul at a price of $22.50 per share less the underwriting
discount (the "St. Paul Investment") in a private placement pursuant to a
Formation and Separation Agreement dated as of October 28, 2002 between Platinum
Holdings and St. Paul (the "Formation Agreement"). The Bye-laws of Platinum
Holdings provide that the voting power of St. Paul's common shares is limited to
9.9 percent of the voting power of the outstanding common shares. Pursuant to
the Formation Agreement, St. Paul received an option to purchase up to 6,000,000
additional common shares at any time during the ten years following the Initial
Public Offering at a price of $27.00 per share (the "St. Paul Option"). In
return for the common shares and the St. Paul Option, St. Paul contributed to
the Company cash in the amount of $122 million and substantially all of the
continuing reinsurance business and related assets of the reinsurance segment of
St. Paul, including all of the outstanding capital stock of Platinum US. Among
the fixed assets transferred were furniture, equipment, systems and software,
and intangible assets including broker lists, contract renewal rights and
licenses. These assets were recorded at the values reflected on St. Paul's books
at the time of transfer.

Concurrent with the completion of the Initial Public Offering, Platinum
Holdings also sold 3,960,000 common shares (or nine percent of the outstanding
common shares) to RenaissanceRe Holdings Ltd. ("RenaissanceRe") at a price of
$22.50 per share less the underwriting discount in a private placement pursuant
to an Investment Agreement dated as of September 20, 2002 by and among Platinum

F-23

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued

Holdings, St. Paul and RenaissanceRe (the "Investment Agreement"). Pursuant to
the Investment Agreement, RenaissanceRe received an option to purchase up to
2,500,000 additional common shares at any time during the ten years following
the Initial Public Offering at a purchase price of $27.00 per share (the "RenRe
Option").

On November 18, 2004, Platinum Holdings and RenaissanceRe amended the
terms of the RenRe Option. As a result of the amendment, in lieu of paying
$27.00 per share, any exercise by RenaissanceRe of its option will be settled on
a net share basis, which will result in Platinum issuing to RenaissanceRe a
number of common shares equal to the excess of the market price per share,
determined in accordance with the amendment, over $27.00 less the par value per
share multiplied by the number of common shares issuable upon exercise of the
option, divided by that market price per share. On January 10, 2005, Platinum
Holdings and St. Paul amended the terms of the St. Paul Option. As a result of
this amendment, any exercise by St. Paul of its option will be settled on a net
share basis, similar that of RenaissanceRe. This amendment had no effect on the
consolidated financial statements.

The Company filed an unallocated universal shelf registration statement
with the Securities and Exchange Commission ("SEC"), which the SEC declared
effective on April 5, 2004. The securities registered under the shelf
registration statement for possible future sales include up to $750,000,000 of
common shares, preferred shares and various types of debt securities. The
registration statement included common shares held by St. Paul and RenaissanceRe
and common shares issuable upon exercise of the St. Paul Option and the RenRe
Option. On June 30, 2004, St. Paul completed the sale of its 6,000,000 common
shares in an underwritten public offering, which was effected pursuant to a
prospectus supplement to the shelf registration statement dated June 28, 2004.
The Company did not sell any common shares in the offering and did not receive
any proceeds from the sale of the common shares by St Paul. The 6,000,000 common
shares sold by St. Paul amounted to $177,330,000 of the securities registered
under the $750,000,000 shelf registration statement.

On August 4, 2004, the board of directors of the Company approved a plan
to purchase up to $50,000,000 of its common shares. During the year ended
December 31, 2004 the Company purchased 349,700 of its common shares in the open
market at an aggregate amount of $9,985,000 at a weighted average price of
$28.55 per share. The common shares purchased by the Company were canceled.

The Company's ability to pay dividends is subject to certain regulatory
restrictions on the payment of dividends by its subsidiaries. The payment of
dividends 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 2005 without prior regulatory
approval is estimated to be $139,620,000.

The combined statutory capital and surplus and statutory net income as
reported to relevant regulatory authorities for the reinsurance subsidiaries of
the Company were as follows ($ in thousands):

2004 2003 2002 Period
---------- --------- -----------

Statutory capital and surplus ..................... $1,124,446 1,096,398 $965,956
Statutory net income .............................. $ 51,803 117,172 $ 32,093

F-24

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued

The Company's insurance subsidiaries file financial statements prepared in
accordance with statutory accounting practices prescribed or permitted by
domestic or foreign insurance regulatory authorities. The differences between
statutory financial statements in the United States and financial statements
prepared in accordance with U.S. GAAP vary between domestic and foreign
jurisdictions. The principal differences are that statutory financial statements
do not reflect deferred acquisition costs, bonds are carried at amortized cost,
deferred income tax is charged or credited directly to equity, subject to
limits, and reinsurance assets and liabilities are presented net of reinsurance.
The Company has not used any statutory accounting practices that are not
prescribed.

9. EARNINGS PER SHARE

Following is a reconciliation of the basic and diluted earnings per share
computations for the years ended December 31, 2004 and 2003 and the 2002 Period
($ in thousands, except per share data):

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

Year Ended December 31, 2004:
Basic earnings per share:
Net income......................................... $ 84,783 43,158 $1.96

Effect of dilutive securities:
Share options and restricted shares ............... -- 2,094
Interest expense related to ESU's ................. 6,097 --
Common share conversion of ESU's .................. -- 5,009

Diluted earnings per share:
-------- ------
Income available to common shareholders ........... $ 90,880 50,261 $1.81
-------- ------

Year Ended December 31, 2003:
Basic earnings per share:
Net income......................................... $144,823 43,019 $3.37

Effect of dilutive securities:
Share options ..................................... -- 717
Interest expense related to ESU's ................. 6,290 --
Common share conversion of ESU's .................. -- 5,137

Diluted earnings per share:
-------- ------
Income available to common shareholders ........... $151,113 48,873 $3.09
-------- ------

2002 Period:
Basic earnings per share:
Net income......................................... $ 6,438 43,004 $0.15

Effect of dilutive securities:
Share options ..................................... -- 518

Diluted earnings per share:
-------- ------
Income available to common shareholders ........... $ 6,438 43,522 $0.15
-------- ------

F-25

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued

10. SHARE INCENTIVE COMPENSATION AND EMPLOYEE BENEFIT PLANS

Share Incentive Compensation

The Company has a share incentive plan under which key employees and
directors of the Company and its subsidiaries may be granted options, restricted
share awards or share units. An option award under the Company's share incentive
plan allows for the purchase of common shares at a price equal to the closing
price of common shares on the New York Stock Exchange on the date immediately
preceding the date of the grant. Options to purchase common shares are granted
periodically by the Compensation Committee of the Board of Directors, generally
vest over three or four years, and expire ten years from the date of grant. The
following summary sets forth option activity for the years ended December 31,
2004 and 2003 and the 2002 Period (in thousands, except per share exercise
price):

As and for the As and for the As and for the
year ended year ended period ended
December 31, 2004 December 31, 2003 December 31, 2002
------------------ ------------------ ------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------- -------- ------- -------- ------- --------

Outstanding - beginning of the period.. 4,614 $22.92 4,347 $22.50 -- $ --
Granted ............................. 227 31.43 670 25.41 4,352 22.50
Exercised ........................... 329 22.50 30 22.50 -- --
Forfeited ........................... 84 22.50 373 22.50 5 22.50
----- ----- -----
Outstanding - end of the period ....... 4,428 $23.40 4,614 $22.92 4,347 $22.50
----- ----- -----

Options exercisable at year-end ....... 3,636 1,834 --
Weighted average exercise price of
options exercisable at year-end ..... $22.99 $22.50

The following table summarizes information about share options outstanding at
December 31, 2004 (in thousands, except per share exercise price):

Exercisable
Weighted -----------------------
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
exercise prices Outstanding Life Price Outstanding Price
--------------- ----------- ----------- -------- ----------- --------

$22.50 3,530 7.8 $22.50 3,198 $22.50

22.51 - 25.00 165 8.2 22.79 91 22.76

25.01 - 30.00 520 8.2 26.32 269 26.31

$30.01 - $35.00 213 9.4 $31.67 78 $31.74

The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted average
assumptions:

F-26

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued

Dividend yield ............................................ 1.4%
Risk free interest rate ................................... 3.0%
Expected volatility ....................................... 30.0%
Expected option life ...................................... 7 years

These assumptions would have resulted in the following stock-based
compensation expense, net of tax ($ in thousands):

2004 2003 2002 Period
------ ------ -----------

Stock-based compensation expense, net of tax ........... $6,640 14,511 $1,070

Stock-based compensation expense, net of tax included
in financial statements .............................. $1,814 5,175 $ --

The Company's share incentive plan also provides for the issuance of
restricted shares to key employees. During 2004, the Company granted 98,531
restricted shares that vest over a five year period. The fair value of the
shares at the date of grant were $2,750,000. There were no restricted share
awards in 2003 and 2002.

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.

Defined Contribution Plan

In 2003, the Company adopted an employee savings plan as a defined
contribution plan intended to qualify under Section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code") and covering substantially all
U.S. employees. The savings plan allows eligible employees to contribute up to
50 percent of their annual compensation on a tax-deferred basis up to limits
under the Code and the Company will match up to the first four percent. In
addition, the Company may, at its discretion, make additional contributions.
Expenses related to the savings plan were $1,255,000 and $1,718,000, for the
years ended December 31, 2004 and 2003, respectively.

11. LEASE COMMITMENTS

Future minimum annual lease commitments under various non-cancelable
operating leases for the Company's office facilities are as follows: ($ in
thousands):

F-27

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued

Years Ending December 31,
2005 ..................................... $ 2,570
2006 ..................................... 2,336
2007 ..................................... 1,785
2008 ..................................... 1,860
2009 ..................................... 1,934
Thereafter ............................... 6,770
-------
Total .............................. $17,255
-------

Rent expense was $3,070,000 and, $3,636,000 for the years ended December
31, 2004 and 2003, respectively.

12. RELATED PARTY TRANSACTIONS AND AGREEMENTS

In connection with the Initial Public Offering and the transfer of
business, the Company entered into various agreements with St. Paul and its
affiliates and RenaissanceRe and its affiliates. These agreements include
several quota share retrocession agreements pursuant to which St. Paul's
subsidiaries transferred the liabilities, related assets and rights and risks
under substantially all of the reinsurance contracts entered into by St. Paul's
subsidiaries on or after January 1, 2002 (except for certain liabilities
relating to the flooding in Europe in August 2002, named storms in existence at
the time of the completion of the Initial Public Offering, and business
underwritten in London for certain financial services companies) (the "Quota
Share Retrocession Agreements"). These agreements provided for the transfer to
subsidiaries of the Company of cash and other assets in an amount equal to
substantially all of the existing unpaid losses (excluding reserves relating to
liabilities retained by St. Paul), unpaid allocated LAE, other liabilities
related to non-traditional reinsurance treaties, unearned premium reserves
(subject to agreed upon adjustments) and other related reserves, which relate to
contracts entered into on and after January 1, 2002, as of the date of the
transfer (as determined 90 days after such date) and 100 percent of future
premiums (less any ceding commission under the Quota Share Retrocession
Agreements) associated with the reinsurance contracts relating to periods after
the date of the transfer.

In connection with the Initial Public Offering and transfer of the
business, certain subsidiaries of the Company entered into several agreements
with St. Paul pursuant to which St. Paul provides various services, including
accounting and administration of the business assumed under the Quota Share
Retrocession Agreements. The Company paid St. Paul a total of $326,000 and
$274,000 and $0 for such services provided in 2004, 2003 and the 2002 Period,
respectively.

Platinum Holdings also entered into a five-year Services and Capacity
Reservation Agreement with RenaissanceRe, effective October 1, 2002, pursuant to
which RenaissanceRe will provide services to subsidiaries of the Company in
connection with their property catastrophe book of business. At the Company's
request, RenaissanceRe will analyze the Company's property catastrophe treaties
and contracts twice per year and will assist the Company in measuring risk and
managing the Company's property catastrophe treaties and contacts. Based upon
such analysis, RenaissanceRe will provide the Company with quotations for rates
for non-marine non-finite property catastrophe retrocessional coverage with
aggregate limits up to $100 million annually, either on an excess-of-loss or
proportional basis. The Company and RenaissanceRe may then enter into
retrocessional agreements on the basis of the quotations. The fee for the
coverage commitment and the services provided by RenaissanceRe under this

F-28

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued

agreement is 3.5 percent of the Company's gross written non-marine non-finite
property catastrophe premium for the contract year, subject to a minimum of $4
million. Either party may terminate this agreement if the other is deemed
impaired or insolvent by applicable regulatory or judicial authorities or is the
subject of conservation, rehabilitation, liquidation, bankruptcy or similar
insolvency proceedings. Fees related to this agreement were $6,395,000,
$5,350,000 and $46,000 for the years ended December 31, 2004 and 2003 and the
2002 Period, respectively. Fees related to this agreement are included in
operating expenses.

Renaissance Underwriting Managers Ltd. ("RUM"), a subsidiary of
RenaissanceRe, and Platinum Bermuda entered into an agreement whereby RUM will,
from time to time, provide referrals of treaty and facultative reinsurance
contracts to Platinum Bermuda for a fee. The fee is 1.0% of gross premiums
written for all pro-rata business, 2.5% of gross premiums written on all excess
of loss business, and 7.5% of the margin on all finite business. The Company
paid $846,000 and $400,000 in fees for such referrals for the years ended
December 31, 2004 and 2003, respectively. The business referred is also subject
to a profit commission. Included in the fees under this agreement in 2004 was
$727,000 of profit commissions. There were no profit commissions paid under this
agreement in 2003.

Platinum US is a party to two property catastrophe excess of loss programs
with the Glencoe Group of Companies, which are affiliates of RenaissanceRe.
Platinum US has a 5% participation across four layers of reinsurance on one
program and a 15% participation on the other program. Platinum US is a party to
a quota share retrocession agreement with Glencoe Insurance Ltd., an affiliate
of RenaissanceRe, pursuant to which Platinum US cedes to Glencoe Insurance Ltd.
85% of all liabilities under the subject property facultative certificates.
Premium ceded in 2004 under this agreement was approximately $3,400,000.

Pursuant to the employment agreement between the Company's chief executive
officer (the "CEO") and the Company, dated as of June 20, 2003, the CEO
purchased 20,000 common shares from the Company on July 30, 2003 for an
aggregate purchase price of $520,000. These common shares were sold to the CEO
at a price of $26.00 per common share, which was the closing price of the common
shares on the date prior to the date that the Company's Board of Directors
approved his employment agreement.

The Company is a party to an investment management agreement with Alliance
Capital Management L.P. ("Alliance"), pursuant to which Alliance provides
investment advisory services to the Company. The Company pays a fee to Alliance
for these services based on the amount of the Company's assets managed by
Alliance. The Company paid $2,248,000, $1,629,000 and $0 in investment advisory
fees to Alliance for the years ended December 31, 2004, 2003 and the 2002
Period, respectively. A Senior Vice President at AllianceBernstein Institutional
Investment Management, a unit of Alliance, is the wife of a senior officer of
Platinum US.

13. OPERATING SEGMENT INFORMATION

The Company has organized its worldwide reinsurance business around three
operating segments: Property and Marine, Casualty and Finite Risk. The Property
and Marine operating segment includes principally property (including crop) and
marine reinsurance coverages that are written in the United States and
international markets. This business includes property per-risk excess-of-loss
treaties, property proportional treaties and catastrophe excess-of-loss
treaties. The Casualty operating segment includes

F-29

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued

principally reinsurance treaties that cover umbrella liability, general and
product liability, professional liability, directors and officers liability,
workers' compensation, casualty clash, automobile liability, surety and trade
credit. 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.

In managing the Company's operating segments, management uses measures
such as underwriting income and underwriting ratios to evaluate segment
performance. Management does not allocate by segment its assets or certain
income and expenses such as investment income, interest expense and certain
corporate expenses. The measures used by management in evaluating the Company's
operating segments should not be used as a substitute for measures determined
under U.S. GAAP. The following table summarizes underwriting activity and ratios
for the three operating segments together with a reconciliation of underwriting
profit or loss to income before income tax expense for the years ended December
31, 2004 and 2003 and the 2002 Period ($ in thousands):

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

Year ended December 31, 2004:

Net premiums written ....................... $504,439 677,399 464,175 $1,646,013
-------- ------- ------- ----------
Net premiums earned ........................ 485,135 611,893 350,907 1,447,935
Losses and LAE ............................. 349,557 418,355 251,892 1,019,804
Acquisition expenses ....................... 76,360 151,649 99,812 327,821
Other underwriting expenses ................ 27,827 19,086 6,224 53,137
-------- ------- ------- ----------
Segment underwriting income (loss)...... $ 31,391 22,803 (7,021) $ 47,173
-------- ------- -------
Corporate expenses not allocated to segments ............................................... (13,196)
Net foreign currency exchange gains ........................................................ 725
Interest expense ........................................................................... (9,268)
Other income ............................................................................... 3,211
Net investment income and net realized gains on investments ................................ 86,487
----------
Income before income taxes ............................................................. $ 115,132
----------
Ratios:
Losses and LAE ........................... 72.1% 68.4% 71.8% 70.4%
Acquisition expense ...................... 15.7% 24.8% 28.4% 22.6%
Other underwriting expense ............... 5.7% 3.1% 1.8% 3.7%
-------- ------- ------- ----------
Combined ............................... 93.5% 96.3% 102.0% 96.7%
-------- ------- ------- ----------

F-30

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued

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

Year ended December 31, 2003:

Net premiums written ....................... $352,908 474,000 345,234 $1,172,142
-------- ------- ------- ----------
Net premiums earned ........................ 355,556 391,170 320,801 1,067,527
Losses and LAE ............................. 169,944 266,836 147,391 584,171
Acquisition expenses ....................... 52,154 101,005 98,067 251,226
Other underwriting expenses ................ 35,598 21,060 12,870 69,528
-------- ------- ------- ----------
Segment underwriting income ............ $ 97,860 2,269 62,473 $ 162,602
-------- ------- -------
Corporate expenses not allocated to segments ............................................... (23,067)
Net foreign currency exchange losses ....................................................... (114)
Interest expense ........................................................................... (9,492)
Other income ............................................................................... 3,343
Net investment income and net realized gains on investments ................................ 60,426
----------
Income before income taxes ......................................................... $ 193,698
----------
Ratios:
Losses and LAE ........................... 47.8% 68.2% 45.9% 54.7%
Acquisition expense ...................... 14.7% 25.8% 30.6% 23.5%
Other underwriting expense ............... 10.0% 5.4% 4.0% 6.5%
-------- ------- ------- ----------
Combined ........................... 72.5% 99.4% 80.5% 84.7%
-------- ------- ------- ----------

2002 Period:

Net premiums written ....................... $ 89,341 164,929 43,844 $ 298,114
-------- ------- ------- ----------
Net premiums earned ........................ 43,047 39,320 24,731 107,098
Losses and LAE ............................. 21,558 29,498 9,300 60,356
Acquisition expenses ....................... 7,798 9,269 8,407 25,474
Other underwriting expenses ................ 5,960 4,136 2,068 12,164
-------- ------- ------- ----------
Segment underwriting income (loss) $ 7,731 (3,583) 4,956 $ 9,104
-------- ------- -------
Corporate expenses not allocated to segments ............................................... (4,170)
Net foreign currency exchange gains ........................................................ 2,017
Interest expense ........................................................................... (1,261)
Other income ............................................................................... 167
Net investment income and net realized gains on investments ................................ 5,236
----------
Income before income taxes ............................................................. $ 11,093
----------
Ratios:
Losses and LAE ........................... 50.1% 75.0% 37.6% 56.4%
Acquisition expense ...................... 18.1% 23.6% 34.0% 23.8%
Other underwriting expense ............... 13.8% 10.5% 8.4% 11.4%
-------- ------- ------- ----------
Combined ............................... 82.0% 109.1% 80.0% 91.6%
-------- ------- ------- ----------

Corporate expenses, interest expenses, net investment income, net realized
investment gains and other income or expense items that are not specifically
attributable to operating segments are not

F-31

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued

allocated.

The following table sets forth the net premiums written by the Company for
the years ended December 31, 2004 and 2003 and the 2002 Period by geographic
location of the ceding company ($ in thousands):

2004 2003 2002 Period
---------- --------- -----------

United States .................................... $1,350,408 912,586 $153,872
International .................................... 295,605 259,556 144,242
---------- --------- --------
Total .................................... $1,646,013 1,172,142 $298,114
---------- --------- --------

14. COMPREHENSIVE INCOME

The components of comprehensive income for the years ended December 31,
2004, 2003 and the 2002 Period are as follows ($ in thousands, except per share
data):

2004 2003 2002 Period
-------- ------ -----------

Before tax amounts:
Foreign currency translation adjustment .................. $ 555 890 $ --
Net unrealized holding gains (losses) arising during the
period ................................................. (12,054) 13,388 12,293
Less: reclassification adjustment for net (gains) losses
realized in net income ................................. 2,594 (2,982) --
-------- ------ -------
Other comprehensive income before tax .............. (8,905) 11,296 12,293
-------- ------ -------

Deferred income tax expense:
Foreign currency translation adjustment .................. (167) (267) --
Net unrealized holding gains (losses) arising during the
period ................................................. 2,763 (2,983) 1,712
Less: reclassification adjustment for net (gains) losses
realized in net income ................................. (213) 147 --
-------- ------ -------
Deferred tax on other comprehensive income (loss) .. 2,383 (3,103) 1,712
-------- ------ -------
Net of tax amounts:
Net foreign currency translation adjustment .............. 388 623 --
Net unrealized holding gains (losses) arising during the
period ................................................. (9,291) 10,405 10,581
Less: reclassification adjustment for net (gains) losses
realized in net income ................................. 2,381 (2,835) --
-------- ------ -------
Other comprehensive income (loss), net of tax ...... $ (6,522) 8,193 $10,581
-------- ------ -------

15. QUARTERLY FINANCIAL DATA (UNAUDITED)

The following quarterly financial information for each of the three months
ended March 31,

F-32

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued

June 30, September 30 and December 31, 2004 and 2003 is unaudited. However, in
the opinion of management, all adjustments (consisting of normal recurring
adjustments) necessary to present fairly the results of operations for such
periods, have been made for a fair presentation of the results shown ($ in
thousands, except per share data):

Three months ended
---------------------------------------------------
March 31, June 30, September 30, December 31,
2004 2004 2004 2004
--------- -------- ------------- ------------

Net premiums earned ...................... $321,042 310,867 383,090 $432,936
Net investment income .................... 17,484 19,377 21,429 26,242
Losses and LAE ........................... 161,969 189,466 384,724 283,645
Acquisition expenses ..................... 88,921 62,694 81,271 94,935
Operating expenses ....................... 18,774 19,262 15,400 12,897

Net income ............................... 54,814 49,799 (69,752) 49,922

Net income per share:
Basic .................................. 1.27 1.15 (1.62) 1.16
Diluted ................................ $ 1.10 1.01 (1.62) $ 1.03

Average common shares outstanding:
Basic .................................. 43,143 43,290 43,127 43,073
Diluted ................................ 50,984 50,788 43,127 49,819

Three months ended
---------------------------------------------------
March 31, June 30, September 30, December 31,
2003 2003 2003 2003
--------- -------- ------------- ------------

Net premiums earned ...................... $238,069 279,376 272,265 $277,817
Net investment income .................... 14,203 13,431 14,780 15,231
Losses and LAE ........................... 138,803 156,801 157,208 131,359
Acquisition expenses ..................... 51,719 60,376 60,408 78,723
Operating expenses ....................... 20,169 32,995 18,499 20,932

Net income ............................... 30,586 26,605 37,817 49,815

Net income per share:
Basic .................................. 0.71 0.62 0.88 1.16
Diluted ................................ $ 0.66 0.57 0.81 $ 1.03

Average common shares outstanding:
Basic .................................. 43,004 43,004 43,022 43,043
Diluted ................................ 49,008 48,871 48,876 49,868

16. INVESTIGATIONS BY THE SEC AND THE NEW YORK ATTORNEY GENERAL

In November and December 2004, the Company received subpoenas from the SEC
and the Office of the Attorney General for the State of New York for documents
and information relating to certain non-traditional, or loss mitigation,
insurance products. The Company is fully cooperating in responding to all such
requests. Other reinsurance companies have reported receiving similar subpoenas
and requests.

F-33

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements, continued

This investigation appears to be at a very preliminary stage and, accordingly,
we are unable to predict the direction the investigation will take and the
impact, if any, it may have on the consolidated financial statements.

F-34

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Index to Schedules to Consolidated Financial Statements

PAGE
----

Report of Independent Registered Public Accounting Firm ............................... S-2
Schedule I Summary of Investments - Other Than Investments in Related Parties as of
December 31, 2004 ...................................................... S-3
Schedule II Condensed Financial Information of the Registrant ...................... S-4
Schedule III Supplementary Insurance Information for the years ended December 31,
2004 and 2003 and the period from April 19, 2002 (date of inception)
to December 31, 2002 ................................................... S-7
Schedule IV Reinsurance for the years ended December 31, 2004 and 2003 and the
period from April 19, 2002 (date of inception) to December 31, 2002 .... S-8

Schedules other than those listed above are omitted for the reason that they are
not applicable or the information is provided elsewhere in the consolidated
financial statements.

S-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
Platinum Underwriters Holdings, Ltd.:

Under date of February 25, 2005, we reported on the consolidated balance
sheets of Platinum Underwriters Holdings, Ltd. and subsidiaries as of December
31, 2004 and 2003, and the related consolidated statements of income and
comprehensive income, shareholders' equity and cash flows for the years ended
December 31, 2004 and 2003 and the period from April 19, 2002 (date of
inception) to December 31, 2002, which are included in the Form 10-K. In
connection with our audits of the aforementioned consolidated financial
statements, we also audited the related consolidated financial statement
schedules appearing on pages S-3 through S-8 of the Form 10-K. These financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statement schedules
based on our audits.

In our opinion, such financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.

/s/ KPMG LLP

New York, New York
February 25, 2005

S-2

SCHEDULE I

PLATINUM UNDERWRITERS HOLDINGS, LTD. AND SUBSIDIARIES

Summary of Investments - Other Than Investments in Related Parties
As of December 31, 2004
($ in thousands)

Amount at
which
shown in
Balance
Cost Fair Value Sheet
----------- ------------ -----------

Fixed maturities:
Bonds:
United States Government and government agencies and
authorities ...................................................... $ 124,844 124,954 $ 124,954
State, municipalities and political subdivisions ................... 156,427 157,337 157,337
Foreign governments ................................................ 65,285 64,923 64,923
Foreign corporate .................................................. 280,270 282,284 282,284
Public utilities ................................................... 136,173 136,848 136,848
All other corporate ................................................ 1,460,472 1,470,180 1,470,180
---------- --------- ----------
Total bonds .................................................... 2,223,471 2,236,526 2,236,526
Redeemable preferred stock ........................................... 3,750 3,676 3,676
---------- --------- ----------
Total fixed maturities ......................................... 2,227,221 2,240,202 2,240,202
Other long term investments ............................................ 6,749 6,769 6,769
---------- --------- ----------
Total investments .............................................. $2,233,970 2,246,971 $2,246,971
=========== ========= ==========

*Original cost of fixed maturities reduced by repayments and adjusted for
amortization of premiums and discounts.

S-3

SCHEDULE II

PLATINUM UNDERWRITERS HOLDINGS, LTD.
(Parent Company)

Condensed Balance Sheets
December 31, 2004 and 2003
($ in thousands, except share data)

2004 2003
---------- ----------

ASSETS

Investment in affiliates ..................................................... $1,135,434 $1,069,521
Cash ......................................................................... 1,945 3,413
Other assets ................................................................. 1,648 1,740
---------- ----------
Total assets ......................................................... $1,139,027 $1,074,674
========== ==========

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities
Contract adjustment payments ............................................... $ 2,335 $ 4,535
Accrued expenses and other liabilities ..................................... 3,689 2,936
---------- ----------
Total liabilities .................................................... 6,024 7,471
---------- ----------
Shareholders' equity
Preferred share, $.01 par value, 25,000,000 shares authorized,
no shares issued or outstanding .......................................... -- --
Common shares, $.01 par value, 200,000,000 shares
authorized, 43,087,407 and 43,054,125 shares issued and
outstanding respectively ................................................. 430 430
Additional paid-in capital ................................................. 911,851 910,505
Accumulated other comprehensive income ..................................... 12,252 18,774
Retained earnings .......................................................... 208,470 137,494
---------- ----------
Total shareholders' equity ........................................... 1,133,003 1,067,203

---------- ----------
Total liabilities and shareholders' equity ........................... $1,139,027 $1,074,674
========== ==========

S-4

SCHEDULE II

PLATINUM UNDERWRITERS HOLDINGS, LTD.
(Parent Company)

Condensed Statements of Income
For the years ended December 31, 2004 and 2003, and
the period from April 19, 2002 (date of inception) through December 31, 2002
($ in thousands)

2002
2004 2003 PERIOD
-------- -------- --------

Revenues:
Net investment income ....................... $ 53 $ 46 $ 179
Other income ................................ 2,944 -- --
------- -------- -------
2,997 46 179
------- -------- -------
Expenses:
Interest expenses ........................... 207 344 58
Operating expenses .......................... 12,722 22,661 3,986
------- -------- -------
Total expenses .............................. 12,929 23,005 4,044

------- -------- -------
Net loss before equity in earnings of
affiliate ................................... (9,932) (22,959) (3,865)

Equity in earnings of affiliates .............. 94,715 167,782 10,303
------- -------- -------
Net income .................................... $84,783 $144,823 $ 6,438
======= ======== =======

S-5

SCHEDULE II

PLATINUM UNDERWRITERS HOLDINGS, LTD.
(Parent Company)

Condensed Statements of Cash Flows
For the years ended December 31, 2004 and 2003 and
the Period from April 19, 2002 through December 31, 2002
($ in thousands)

2004 2003 2002
--------- --------- ---------

Operating Activities:
Net loss before equity in earnings of affiliates .............. $ (9,932) (22,959) $ (3,865)
Adjustments to reconcile net income to net cash provided in
operations:
Share based compensation .................................. 1,777 5,510 --
Depreciation and amortization ............................. 125 -- --
Net increase in other assets and liabilities .............. 1,830 (1,550) 2,226
-------- --------- ---------
Net cash used in operating activities ................... (6,200) (18,999) (1,639)
-------- --------- ---------

Investing Activities:
Dividends and distributions from subsidiaries ................. 22,000 33,150 --
Contributions to subsidiaries ................................. (250) -- (896,000)
-------- --------- ---------
Net cash provided by (used in) investing activities ..... 21,750 33,150 (896,000)
-------- --------- ---------

Financing Activities:
Net proceeds from shares issued in initial capitalization ..... -- -- 120
Redemption of shares issued in initial capitalization ......... -- -- (120)
Net proceeds from issuance of common shares ................... 1,566 520 693,314
Net proceeds from issuance of common shares in private
placements .................................................. -- -- 208,260
Proceeds from exercise of options ............................. 7,406 678 --
Purchase of common shares ..................................... (9,985) -- --
Change in contract adjustment payment liability ............... (2,199) (2,104) --
Dividends paid to shareholders ................................ (13,807) (13,767)
-------- --------- ---------
Net cash provided by (used in) financing activities ..... (17,019) (14,673) 901,574
-------- --------- ---------
Net increase (decrease) in cash and cash equivalents..... (1,469) (522) 3,935
Cash and cash equivalents at beginning of period ................ 3,413 3,935 --
-------- --------- ---------
Cash and cash equivalents at end of period ...................... $ 1,944 3,413 $ 3,935
======== ========= =========

S-6

SCHEDULE III

PLATINUM UNDERWRITERS HOLDINGS, LTD.

Supplementary Insurance Information
($ in thousands)

Unpaid Other Losses
Deferred losses policy and loss
policy and loss claims and Net Net adjustment
acquisition adjustment Unearned benefits earned investment expenses
Period costs expenses premiums payable premium income incurred
------ ----------- ---------- -------- ---------- ------- ---------- ----------

Year ended December 31, 2004:
Property and Marine .............. $ 15,747 410,347 64,985 485,135 $ 349,557
Casualty ......................... 72,454 715,314 278,634 611,893 418,355
Finite Risk ...................... 47,837 253,566 155,917 350,907 251,892
------- --------- ------- --------- ----------
Total ...................... 136,038 1,379,227 499,536 -- 1,447,935 84,532 1,019,804
------- --------- ------- --------- ----------
Year ended December 31, 2003:
Property and Marine .............. 9,076 231,719 44,667 355,556 169,944
Casualty ......................... 61,181 320,585 224,611 391,170 266,836
Finite Risk ...................... 9,050 179,614 30,578 320,801 147,391
------- --------- ------- --------- ----------
Total ...................... 79,307 731,918 299,856 -- 1,067,527 57,645 584,171
------- --------- ------- --------- ----------
Period from November 1, 2002
through December 31, 2002:
Property and Marine .............. 11,307 101,473 46,294 43,047 21,558
Casualty ......................... 33,568 121,586 125,609 39,320 29,498
Finite Risk ...................... 4,457 58,600 19,113 24,731 9,300
------- --------- ------- --------- ----------
Total ...................... $49,332 281,659 191,016 -- 107,098 5,211 $ 60,356
------- --------- ------- --------- ----------

Amortization
of deferred
policy Other Net
acquisition operating written
Period costs expenses premiums
------ ------------ --------- --------

Year ended
December 31, 2004:
Property and Marine .............. $ 58,792 $ 504,439
Casualty ......................... 118,734 677,399
Finite Risk ...................... 46,781 464,175
-------- ----------
Total ...................... 224,307 13,196 1,646,013
-------- ----------
Year ended December 31, 2003:
Property and Marine .............. 48,756 352,908
Casualty ......................... 87,620 474,000
Finite Risk ...................... 90,864 345,234
-------- ----------
Total ...................... 227,240 92,595 1,172,142
-------- ----------
Period from November 1, 2002
through December 31, 2002:
Property and Marine .............. 6,206 89,341
Casualty ......................... 5,699 164,929
Finite Risk ...................... 2,544 43,844
-------- ----------
Total ...................... $ 14,449 16,334 $ 298,114
-------- ----------

S-7

SCHEDULE IV

PLATINUM UNDERWRITERS HOLDINGS, LTD.

Reinsurance
($ in thousands)

Assumed from Percentage of
Direct Ceded to other other amount
Description amount companies companies Net amount assumed to net
- ----------- ------ -------------- ------------ ---------- --------------

Property and liability premiums
written:
Year ended December 31, 2004:
Property and Marine ................... -- $13,029 517,468 $ 504,439 102.6%
Casualty .............................. -- 748 678,147 677,399 100.1%
Finite Risk ........................... -- -- 464,175 464,175 100.0%
------- --------- ----------
Total ............................. -- 13,777 1,659,790 1,646,013 100.8%
------- --------- ----------
Year ended December 31, 2003:
Property and Marine ................... -- $25,156 378,064 $ 352,908 107.1%
Casualty .............................. -- 1,175 475,175 474,000 100.2%
Finite Risk ........................... -- -- 345,234 345,234 100.0%
------- --------- ----------
Total ............................. -- 26,331 1,198,473 1,172,142 102.2%
------- --------- ----------
Period ended December 31, 2002: ......... --
Property and Marine ................... -- -- 89,341 89,341 100.0%
Casualty .............................. -- -- 164,929 164,929 100.0%
Finite Risk ........................... -- -- 43,844 43,844 100.0%
------- --------- ----------
Total ............................. -- $ -- 298,114 $ 298,114 100.0%
------- --------- ----------

S-8

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

Following is selected historical combined financial data for the period
from January 1, 2002 through November 1, 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.

On April 1, 2004, Travelers Property Casualty Corp. (TPC) merged with a
subsidiary of St. Paul, as a result of which TPC became a wholly-owned
subsidiary of the St. Paul Travelers Companies, Inc. (STA.) For accounting
purposes, the transaction was accounted for as a reverse acquisition with TPC
treated as the accounting acquirer. Accordingly, the transaction was accounted
for as a purchase business combination, using TPC historical financial
information and applying fair value estimates to the acquired assets,
liabilities, and commitments of St. Paul as of April 1, 2004. Beginning on April
1, 2004, the results of operations and financial condition of St. Paul were
consolidated with TPC's.

P-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders:
The St. Paul Companies, Inc.:

We have audited the accompanying combined statements of underwriting
results and identifiable underwriting cash flows of The St. Paul Companies, Inc.
Reinsurance Underwriting Segment (Predecessor) for the period from January 1,
2002 through November 1, 2002. The combined statements are the responsibility of
the Predecessor's management. Our responsibility is to express an opinion on
these combined statements based on our audit.

We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
combined statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the combined statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall combined statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

The accompanying combined statements were prepared to present the
historical underwriting results and identifiable cash flows of the Predecessor
specifically attributable to reinsurance underwriting operations of The St. Paul
Companies, Inc. (St. Paul) as described in Note 1. The combined statements do
not contain an allocation of St. Paul's equity structure, investment portfolio
assets, investment income or cash flows from investing and financing activities.
Accordingly, the combined statements are not intended to be a complete
presentation of the Predecessor's or St. Paul's results of operations or cash
flows.

In our opinion, the combined statements referred to above present fairly,
in all material respects, the underwriting results and identifiable underwriting
cash flows of the Predecessor for the period from January 1, 2002 through
November 1, 2002 in conformity with accounting principles generally accepted in
the United States of America.

/s/ KPMG LLP

Minneapolis, Minnesota
March 21, 2003

P-2

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

Combined Statement of Underwriting Results
For the Period From January 1, 2002 through November 1, 2002
($ in millions)