---

---

---

---

---

---

---

---

(a)	Classification within the fair value hierarchy

---

---

---

---

(c)	Fixed maturity, short-term investments, other investments and cash equivalents

---

---

---

---

(d)	Securities lending

(a)	This amount relates to certain short-term investments with short original maturities which are generally not rated.

---

---

---

---

---

(a)	Classification within the fair value hierarchy

(b)	Derivative instruments designated as a fair value hedge

---

---

(a)	Credit risk

---

(a)	Authorized and issued

---

(b)	Warrants

(c)	Deferred share units

---

(d)	Dividends

(a)	Long Term Incentive Plan and Short Term Incentive Plan

(a)	The Company has not granted any stock options awards since September 4, 2009.

---

---

---

(b)	Employee seller shares

---

(a)	Financing structure and finance expenses

(a)	Indicates utilization of commitment amount, not drawn borrowings.

---

(b)

Talbot operates in Lloyd’s through a corporate member, Talbot 2002 Underwriting Capital Ltd (“T02”), which is the sole participant in Syndicate 1183. Lloyd’s sets T02’s required capital annually based on Syndicate 1183’s business plan, rating environment, reserving environment together with input arising from Lloyd’s discussions with, inter alia, regulatory and rating agencies.  Such capital, called Funds at Lloyd’s (“FAL”), comprises: cash, investments and undrawn letters of credit provided by various banks.

(a)	Includes preferred share dividends and finance expenses attributable to AlphaCat Re 2011.

(b)	$250,000 2010 Senior Notes due 2040

---

(c)	Junior subordinated deferrable debentures

(d)	Credit facilities

(i)	$400,000 syndicated unsecured letter of credit facility and $525,000 syndicated secured letter of credit facility

---

(ii)	Talbot FAL Facility

---

(iii)	IPC Syndicated Facility and IPC Bi-Lateral Facility

(a)	Concentrations of credit risk

---

(b)	Funds at Lloyd's

(c)	Lloyd's Central Fund

---

---

---

---

(a)	Ratios are based on net premiums earned. The general and administrative expense ratio includes share compensation expenses.

(b)	The transaction expenses relate to costs incurred in connection with the proposed acquisition of Flagstone Reinsurance Holdings, S.A.

---

(a)	Ratios are based on net premiums earned. The general and administrative expense ratio includes share compensation expenses.

(b)	The transaction expenses relate to costs incurred in connection with the Company's proposed acquisition of Transatlantic Holdings, Inc. Transaction expenses are primarily comprised of legal, financial advisory and audit related services.

---

(a)	Ratios are based on net premiums earned. The general and administrative expense ratio includes share compensation expenses.

(b)	The transaction expenses relate to costs incurred in connection with the proposed acquisition of Flagstone Reinsurance Holdings, S.A.

---

(a)	Ratios are based on net premiums earned. The general and administrative expense ratio includes share compensation expenses.

(b)	The transaction expenses relate to costs incurred in connection with the Company's proposed acquisition of Transatlantic Holdings, Inc. Transaction expenses are primarily comprised of legal, financial advisory and audit related services.

---

(a)	Represents risks in two or more geographic zones.

(b)	Represents risks in one geographic zone.

(c)	Not classified as geographic area as marine and aerospace risks can span multiple geographic areas and are not fixed locations in some instances.

---

(a)	Represents risks in two or more geographic zones.

(b)	Represents risks in one geographic zone.

(c)	Not classified as geographic area as marine and aerospace risks can span multiple geographic areas and are not fixed locations in some instances.

---

---

---

•	Premiums;

•	Reinsurance premiums ceded and reinsurance recoverable;

•	Investment valuation; and

---

•	Reserve for losses and loss expenses.

---

c)	The transaction expenses relate to costs incurred in connection with the proposed acquisition of Flagstone Reinsurance Holdings, S.A. The transaction expenses for 2011 relate to costs incurred in connection with the Company's proposed acquisition of Transatlantic Holdings, Inc. Transaction expenses are primarily comprised of legal, financial advisory and audit related services.

---

---

•	A favorable movement of $114.2 million in net unrealized gains (losses) on investments, of which $55.8 million is attributable to noncontrolling interest;

•	Increase in underwriting income of $31.3 million primarily due to:

•	An increase in net premiums earned of $16.5 million;

•	A decrease in underwriting deductions of $14.8 million due primarily to a decrease in losses and loss expenses of $70.6 million partially offset by an increase in general and administrative expenses of $34.6 million; and

•	A favorable movement in foreign exchange gains (losses) of $21.0 million,

(a)	The Corporate and Eliminations column includes legal entity adjustments.

(b)	Notable losses for the three months ended September 30, 2012 included: U.S. drought and Hurricane Isaac. Notable losses for the three months ended September 30, 2011 included: Danish floods and Hurricane Irene. Excludes the reserve for potential development on 2011 notable loss events.

---

---

---

---

---

---

---

(a)	Net of reinsurance but not net of reinstatement premiums. Total reinstatement premiums were $1.6 million for the three months ended September 30, 2012 and $4.0 million for the three months ended September 30, 2011.

(b)

These notable loss event amounts exclude the reserve for potential development on 2011 notable loss events and are based on management's estimates following a review of the Company's potential exposure and discussions with certain clients and brokers. Given the magnitude of these events, and other uncertainties inherent in loss estimation, meaningful uncertainty remains regarding losses from these events and the Company's actual ultimate net losses from these events may vary materially from these estimates.

(c)	The 2011 loss ratios for the Validus Re segment have been represented to exclude the impact of the AlphaCat segment.

---

---

---

---

---

---

---

(a)	Corporate and Eliminations includes legal entity adjustments.

---

(a)	Corporate and Eliminations includes legal entity adjustments.

---

a)	Includes general and administrative expenses and share compensation expenses.

---

---

---

---

---

(a)

Non-GAAP Financial Measures: In presenting the Company’s results, management has included and discussed underwriting income and net operating income that are not calculated under standards or rules that comprise U.S. GAAP. Such measures are referred to as non-GAAP. Non-GAAP measures may be defined or calculated differently by other companies. These measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. A reconciliation of underwriting income to net income, the most comparable U.S. GAAP financial measure, is presented in the section below entitled “Underwriting Income (Loss).”

(b)	The general and administrative expense ratio includes share compensation expenses.

(c)	The transaction expenses relate to costs incurred in connection with the proposed acquisition of Flagstone Reinsurance Holdings, S.A. The transaction expenses for 2011 relate to costs incurred in connection with the Company's proposed acquisition of Transatlantic Holdings, Inc. Transaction expenses are primarily comprised of legal, financial advisory and audit related services.

---

(a)

Non-GAAP Financial Measures: In presenting the Company’s results, management has included and discussed underwriting income that is not calculated under standards or rules that comprise U.S. GAAP. Such measures are referred to as non-GAAP. Non-GAAP measures may be defined or calculated differently by other companies. These measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. A reconciliation of this measure to net income, the most comparable U.S. GAAP financial measure, is presented in the section below entitled “Underwriting Income (Loss).”

---

•	Increase in underwriting income of $362.8 million primarily due to:

•	A decrease in underwriting deductions of $302.6 million which includes the effect of a $403.2 million decrease in notable loss events; and

•	An increase in net premiums earned of $60.1 million.

•	A favorable movement of $75.6 million in net unrealized gains (losses) on investments, of which $10.9 million is attributable to noncontrolling interest.

(a)	The Corporate and Eliminations column includes legal entity adjustments.

(b)

Notable losses for the nine months ended September 30, 2012 included: Costa Concordia, Cat 67, U.S. drought and Hurricane Isaac. Notable losses for the nine months ended September 30, 2011 included: Tohoku earthquake, Gryphon Alpha, Christchurch earthquake, Brisbane floods, CNRL Horizon, Cat 46, Cat 48, Jupiter 1, Danish floods and Hurricane Irene. Excludes the reserve for potential development on 2011 notable loss events.

(c)

Non-GAAP Financial Measures: In presenting the Company's results, management has included and discussed underwriting income (loss) and net operating income that are not calculated under standards or rules that comprise U.S. GAAP. Such measures are referred to as non-GAAP. Non-GAAP measures may be defined or calculated differently by other companies. These measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. A reconciliation of this measure to net income, the most comparable U.S. GAAP financial measure, is presented in the section below entitled "Underwriting Income (Loss)."

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

(a)	Includes paid losses, case reserves and IBNR reserves.

(b)	Development other than allocation of RDE.

(c)	Excludes impact of movements in foreign exchange rates.

(d)	Closing Reserve for the period equals Closing Estimate for the period less cumulative Paid Losses.

(e)	Net movement in 2011 impacted by recognition of recoveries under retrocessional contracts.

(f)	As at September 30, 2012, the Company has allocated all of the 2010 RDE.

(g)	As at September 30, 2012, the Company has concluded that CNRL Horizon and Jupiter 1 no longer remains eligible for potential allocations from the 2011 RDE.

---

(a)	During the year ended December 31, 2010, $19,242 was allocated to the Chilean earthquake and $16,614 was allocated to the New Zealand earthquake from the 2010 reserve for development on notable loss events.

(b)	Notable losses for the year ended December 31, 2010 included Chilean earthquake, Melbourne hailstorm, Windstorm Xynthia, Deepwater Horizon, Aban Pearl, Bangkok riots, Perth hailstorm, New Zealand earthquake, Oklahoma windstorm, Political risk loss, Hurricane Karl, Queensland floods, Political violence loss, Satelite failure and Financial institution loss.

(c)

The 2011 notable loss events, principally the Tohoku earthquake, the Christchurch earthquake and the Thailand floods continued to experience adverse development as shown in the notable loss roll forward table. Contract complexity, the nature and number of perils arising from these events, limits and sub limits exposed, the quality, flow and timing of information received by the Company, information regarding retrocessional covers, assumptions, both explicit and implicit, regarding future paid and reported loss development patterns, frequency and severity trends, claims settlement practices and potential changes in the legal environment continue to lead to complexity and volatility in the ultimate loss estimates for these events. Given the potential that one or some of the 2011 notable loss events eligible for potential allocation from the 2011 RDE may experience adverse development, rather than all deteriorating proportionately, an addition to the 2011 RDE of $27.9 million was made.

(d)	The reserve for potential development on notable loss events (or “RDE”) is included as part of the Company's overall reserve requirement as defined and disclosed in the Critical Accounting Policies and Estimates section of the Company's Annual Report on Form 10-K.

---

---

---

a)	Corporate and Eliminations includes legal entity adjustments.

---

(a)	Includes general and administrative expenses and share compensation expenses.

---

(a)	Corporate and Eliminations includes legal entity adjustments.

---

---

---

---

---

---

---

(a)	Indicates utilization of commitment amount, not drawn borrowings.

(b)

Talbot operates in Lloyd’s through a corporate member, Talbot 2002 Underwriting Capital Ltd (“T02”), which is the sole participant in Syndicate 1183. Lloyd’s sets T02’s required capital annually based on Syndicate 1183’s business plan, rating environment, reserving environment together with input arising from Lloyd’s discussions with, inter alia, regulatory and rating agencies.  Such capital, called Funds at Lloyd’s (“FAL”), comprises: cash, investments and undrawn letters of credit provided by various banks.

---

---

(a)	Indicates utilization of commitment amount, not drawn borrowings.

(b)

Talbot operates in Lloyd’s through a corporate member, Talbot 2002 Underwriting Capital Ltd (“T02”), which is the sole participant in Syndicate 1183. Lloyd’s sets T02’s required capital annually based on Syndicate 1183’s business plan, rating environment, reserving environment together with input arising from Lloyd’s discussions with, inter alia, regulatory and rating agencies.  Such capital, called Funds at Lloyd’s (“FAL”), comprises: cash, investments and undrawn letters of credit provided by various banks.

---

---

•	unpredictability and severity of catastrophic events;

•	our ability to obtain and maintain ratings, which may affect our ability to raise additional equity or debt financings, as well as other factors described herein;

•	adequacy of the Company’s and Flagstone's risk management and loss limitation methods;

•	cyclicality of demand and pricing in the insurance and reinsurance markets;

•	the Company’s ability to implement its business strategy during “soft” as well as “hard” markets;

•	adequacy of the Company’s and Flagstone's loss reserves;

•	continued availability of capital and financing;

•	the Company’s ability to identify, hire and retain, on a timely and unimpeded basis and on anticipated economic and other terms, experienced and capable senior management, as well as underwriters, claims professionals and support staff;

•	acceptance of our business strategy, security and financial condition by rating agencies and regulators, as well as by brokers and (re)insureds;

•	competition, including increased competition, on the basis of pricing, capacity, coverage terms or other factors;

•	potential loss of business from one or more major insurance or reinsurance brokers;

•	the Company’s ability to implement, successfully and on a timely basis, complex infrastructure, distribution capabilities, systems, procedures and internal controls, and to develop accurate actuarial data to support the business and regulatory and reporting requirements;

•	general economic and market conditions (including inflation, volatility in the credit and capital markets, interest rates and foreign currency exchange rates) and conditions specific to the insurance and reinsurance markets in which we operate;

•	the integration of Flagstone and other businesses we may acquire or new business ventures, including overseas offices, we may start;

•

accuracy of those estimates and judgments used in the preparation of the Company's and Flagstone's financial statements, including those related to revenue recognition, insurance and other reserves, reinsurance recoverables, investment valuations, intangible assets, bad debts, taxes, contingencies, litigation and any determination to use the deposit method of accounting, which, for a relatively new insurance and reinsurance company like the Company and Flagstone, are even more difficult to make than those made in a mature company because of limited historical information;

•	the effect on the Company’s and Flagstone's investment portfolio of changing financial market conditions including

---

•	acts of terrorism, political unrest, outbreak of war and other hostilities or other non-forecasted and unpredictable events;

•	availability and cost of reinsurance and retrocession coverage;

•	the failure of reinsurers, retrocessionaires, producers or others to meet their obligations to us;

•	the timing of loss payments being faster or the receipt of reinsurance recoverables being slower than anticipated by us;

•	changes in domestic or foreign laws or regulations, or their interpretations;

•	changes in accounting principles or the application of such principles by regulators;

•	statutory or regulatory or rating agency developments, including as to tax policy and reinsurance and other regulatory matters such as the adoption of proposed legislation that would affect Bermuda-headquartered companies and/or Bermuda-based insurers or reinsurers; and

•

the other factors set forth herein under Part I Item 1A "Risk Factors" and under Part II Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the other sections of the Company's Annual Report on Form 10-K for the year ended December 31, 2011, as well as the risk and other factors set forth in the Company's other filings with the SEC, as well as management's response to any of the aforementioned factors.

•	interest rate risk;

•	foreign currency risk;

•	credit risk;

•	liquidity risk; and

•	effects of inflation.

---

---

---

•	the Florida Office of Insurance Regulation; and

•	the Swiss Financial Market Supervisory Authority (FINMA).

---

---

---

---

---

---

---

---