UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2005

or

o		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 (State or other jurisdiction of incorporation or organization)		98-0416483 (IRS Employer Identification No.)

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

(441) 295-7195

Not Applicable

     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 þ No o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes þ No o

     As of July 15, 2005, there were outstanding 43,482,288 common shares, par value $0.01 per share, of the registrant.

 

 

PLATINUM UNDERWRITERS HOLDINGS, LTD.
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2005

TABLE OF CONTENTS

		Page
PART I — FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Consolidated Balance Sheets as of June 30, 2005 (Unaudited) and December 31, 2004			1
Consolidated Statements of Income and Comprehensive Income for the Three and Six Months Ended June 30, 2005 and 2004 (Unaudited)			2
Consolidated Statements of Changes in Shareholders’ Equity for the Six months Ended June 30, 2005 and 2004 (Unaudited)			3
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2005 and 2004 (Unaudited)			4
Notes to Condensed Consolidated Financial Statements (Unaudited) for the Three and Six Months Ended June 30, 2005 and 2004			5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Three and Six Months Ended June 30, 2005 and 2004			15
Item 3. Quantitative and Qualitative Disclosures about Market Risk			39
Item 4. Controls and Procedures			40
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			42
Item 4. Submission of Matters to a Vote of Security Holders			42
Item 6. Exhibits			43
SIGNATURES			43
EX-10.1: FIRST AMENDMENT TO THE GUARANTY
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION
EX-32.2: CERTIFICATION

PART I — FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Consolidated Balance Sheets
($ in thousands, except share data)

		(Unaudited)
						December 31,
		June 30, 2005				2004
ASSETS
Investments:
Fixed maturities available-for-sale, at fair value (amortized cost — $2,639,061 and $2,144,290, respectively)		$	2,649,121			$	2,157,529
Fixed maturities — trading, at fair value (amortized cost — $73,301 and $82,931, respectively)			73,571				82,673
Other invested asset			6,000				6,769
Total investments			2,728,692				2,246,971
Cash and cash equivalents			409,539				209,897
Accrued investment income			28,316				23,663
Reinsurance premiums receivable			576,457				580,048
Reinsurance recoverable on ceded losses and loss adjustment expenses			10,447				2,005
Prepaid reinsurance premiums			6,241				2,887
Funds held by ceding companies			271,795				198,048
Deferred acquisition costs			144,844				136,038
Income tax recoverable			—				1,325
Deferred tax assets			12,849				8,931
Other assets			10,056				12,182
Total assets		$	4,199,236			$	3,421,995
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Unpaid losses and loss adjustment expenses		$	1,559,092			$	1,380,955
Unearned premiums			575,727				502,423
Reinsurance deposit liabilities			5,821				20,189
Debt obligations			387,500				137,500
Ceded premiums payable			18,119				2,384
Commissions payable			216,459				181,925
Funds withheld			13,224				11,999
Deferred taxes			10,545				10,404
Other liabilities			140,021				41,213
Total liabilities			2,926,508				2,288,992
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, 43,406,788 and 43,087,407 shares issued and outstanding, respectively			434				430
Additional paid-in capital			921,271				911,851
Unearned share grant compensation			(2,246	)			—
Accumulated other comprehensive income			10,637				12,252
Retained earnings			342,632				208,470
Total shareholders’ equity			1,272,728				1,133,003
Total liabilities and shareholders’ equity		$	4,199,236			$	3,421,995

See accompanying notes to condensed consolidated financial statements.

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Consolidated Statements of Income and Comprehensive Income (Unaudited)
For the Three and Six Months Ended June 30, 2005 and 2004

($ in thousands, except per share data)

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2005				2004				2005				2004
Revenue:
Net premiums earned		$	431,470				310,867				842,510			$	631,909
Net investment income			28,904				19,377				55,809				36,861
Net realized losses on investments			(555	)			(1,279	)			(183	)			(827	)
Other income			588				605				232				1,116
Total revenue			460,407				329,570				898,368				669,059
Expenses:
Losses and loss adjustment expenses			240,852				189,466				478,550				351,435
Acquisition expenses			103,928				62,694				197,177				151,615
Operating expenses			23,480				19,262				43,488				38,036
Net foreign currency exchange losses			160				1,168				1,958				302
Interest expense			4,174				2,324				6,347				4,630
Total expenses			372,594				274,914				727,520				546,018
Income before income tax expense			87,813				54,656				170,848				123,041
Income tax expense			19,828				4,857				29,775				18,428
Net income		$	67,985				49,799				141,073			$	104,613
Earnings per share:
Basic earnings per share		$	1.57				1.15				3.26			$	2.42
Diluted earnings per share		$	1.39				1.01				2.88			$	2.12
Comprehensive income (loss):
Net income		$	67,985				49,799				141,073			$	104,613
Other comprehensive income:
Net change in unrealized gains and losses on available-for-sale securities, net of deferred taxes			33,051				(52,356	)			(1,578	)			(33,183	)
Cumulative translation adjustments, net of deferred taxes			(46	)			(123	)			(37	)			(152	)
Comprehensive income (loss)		$	100,990				(2,680	)			139,458			$	71,278
Shareholder dividends:
Dividends declared		$	3,462				3,464				6,911			$	6,925
Dividends declared per share		$	0.08				0.08				0.16			$	0.16

See accompanying notes to condensed consolidated financial statements.

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)
For the Six Months Ended June 30, 2005 and 2004

($ in thousands)

		2005				2004
Preferred shares:
Balances at beginning and end of period		$	—			$	—
Common shares:
Balances at beginning of period			430				430
Exercise of share options			3				3
Issuance of restricted shares			1				—
Balances at end of period			434				433
Additional paid-in-capital:
Balances at beginning of period			911,851				910,505
Exercise of share options			4,981				5,046
Issuance of restricted shares			2,750				—
Share based compensation			1,689				1,087
Balances at end of period			921,271				916,638
Unearned share grant compensation:
Balances at beginning of period			—				—
Shares issued			(2,750	)			—
Amortization			504				—
Balances at end of period			(2,246	)			—
Accumulated other comprehensive income (loss):
Balances at beginning of period			12,252				18,774
Net change in unrealized gains and losses on available-for-sale securities, net of deferred taxes			(1,578	)			(33,183	)
Net change in cumulative translation adjustments, net of deferred tax			(37	)			(152	)
Balances at end of period			10,637				(14,561	)
Retained earnings:
Balances at beginning of period			208,470				137,494
Net income			141,073				104,613
Dividends paid to shareholders			(6,911	)			(6,925	)
Balances at end of period			342,632				235,182
Total shareholders’ equity		$	1,272,728			$	1,137,692

See accompanying notes to condensed consolidated financial statements.

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Consolidated Statement of Cash Flows (Unaudited)
For the Six Months Ended June 30, 2005 and 2004

($ in thousands)

		2005				2004
Operating Activities:
Net income		$	141,073			$	104,613
Adjustments to reconcile net income to cash used in operations:
Depreciation and amortization			10,231				10,551
Net realized losses on investments			183				827
Net foreign currency exchange losses			1,958				302
Share-based compensation			2,193				1,087
Trading securities activities			4,329				41,978
Changes in assets and liabilities:
Increase in accrued investment income			(4,653	)			(3,215	)
(Increase) decrease in reinsurance premiums receivable			3,591				(62,291	)
Increase in funds held by ceding companies			(73,747	)			(16,202	)
Increase in deferred acquisition costs			(8,806	)			(42,839	)
Increase in net unpaid losses and loss adjustment expenses			173,745				161,108
Increase in net unearned premiums			69,950				177,244
Increase (decrease) in reinsurance deposit liabilities			(14,368	)			14,214
Increase (decrease) in ceded premiums payable			15,735				(840	)
Increase in commissions payable			34,534				30,996
Increase in funds withheld			1,225				—
Changes in other assets and liabilities			19,002				20,030
Other net			227				(621	)
Net cash provided by operating activities			376,402				436,942
Investing Activities:
Proceeds from sale of available-for-sale fixed maturities			207,840				190,589
Proceeds from maturity or paydown of available-for-sale fixed maturities			66,796				43,927
Acquisition of available-for-sale fixed maturities			(696,372	)			(602,816	)
Net cash used in investing activities			(421,736	)			(368,300	)
Financing Activities:
Dividends paid to shareholders			(6,911	)			(6,925	)
Proceeds from exercise of share options			4,984				5,049
Proceeds from issuance of debt			246,900				—
Net cash used in financing activities			244,973				(1,876	)
Net increase in cash and cash equivalents			199,639				66,766
Cash and cash equivalents at beginning of period			209,900				105,461
Cash and cash equivalents at end of period		$	409,539			$	172,227
Supplemental disclosures of cash flow information:
Income taxes paid		$	28,573			$	4,799
Interest paid		$	3,671			$	3,729

See accompanying notes to condensed consolidated financial statements.

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)
For the Three and Six Months Ended June 30, 2005 and 2004

(1) Basis of Presentation

     The condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of Platinum Underwriters Holdings, Ltd. (“Platinum Holdings”) and its subsidiaries (collectively, the “Company”), including Platinum Underwriters Bermuda, Ltd. (“Platinum Bermuda”), Platinum Underwriters Reinsurance, Inc. (“Platinum US”), Platinum Re (UK) Limited (“Platinum UK”), Platinum Underwriters Finance, Inc. (“Platinum Finance”), Platinum Regency Holdings, and Platinum Administrative Services, Inc. All material inter-company transactions have been eliminated in preparing these condensed consolidated financial statements. The condensed consolidated financial statements included in this report as of and for the three and six months ended June 30, 2005 and 2004 are unaudited and include adjustments consisting of normal recurring items that management considers necessary for a fair presentation under U.S. GAAP. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

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

     In November 2002, Platinum 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 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. Both St. Paul and RenaissanceRe have amended their options to provide that in lieu of paying $27.00 per share, any option exercise will be settled on a net share basis, which will result in Platinum Holdings issuing a number of common shares equal to the excess of the market price per share, determined in accordance with the amendments, 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. 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 of the Company in 2005 and an ownership interest in a senior note due 2007 issued by Platinum Finance, a U.S. based intermediate holding company subsidiary of Platinum Holdings. In May 2005, Platinum Finance issued $250,000,000 aggregate principal amount of the Series A 7.5% Notes due June 1, 2017 (the “Series A Notes”) unconditionally guaranteed by Platinum Holdings. The proceeds of the Series A Notes were used primarily to increase the capital of Platinum Bermuda and Platinum US.

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited), continued
For the Three and Six Months Ended June 30, 2005 and 2004

Share-Based Compensation

     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”) effective January 1, 2003. SFAS 123 requires that the fair value of share options granted under the Company’s share option plan subsequent to the adoption of SFAS 148 be amortized into 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 provides transition guidance for a voluntary adoption of SFAS 123 and amends the disclosure requirements of SFAS 123. Prior to the adoption of SFAS 123, the Company elected to use the intrinsic value method of accounting for its share-based awards granted to employees established by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and continues to use the intrinsic method for share options granted in 2002. 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.

     Restricted shares awarded are amortized into earnings over the vesting period based on the fair value of the shares at the time of the grant. There are limits on the transferability of the restricted shares and such restricted shares may be forfeited in the event of certain types of terminations of the recipient’s employment. The unearned or unvested portion of the restricted shares issued is presented as a separate component of shareholders’ equity.

     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 for transactions in which an entity obtains employee services in share-based payment transactions. SFAS 123R requires that, prospectively, compensation costs be recognized for the fair value of all share options over the remaining vesting period, 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 below approximates the expense under SFAS 123R.

     The following table illustrates the effect on the Company’s net income and earnings per share for the three and six months ended June 30, 2005 and 2004 of applying the “fair value” method to all share option grants ($ in thousands, except per share data):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2005				2004				2005				2004
Share-based compensation expense:
As reported		$	507				583				1,802			$	1,087
Pro forma			1,595				1,587				4,116				3,345

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited), continued
For the Three and Six Months Ended June 30, 2005 and 2004

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2005				2004				2005				2004
Net income:
As reported			67,985				49,799				141,073				104,613
Pro forma			66,897				48,795				138,759				102,355
Basic earnings per share:
As reported			1.57				1.15				3.26				2.42
Pro forma			1.55				1.11				3.21				2.40
Diluted earnings per share:
As reported			1.39				1.01				2.88				2.12
Pro forma		$	1.37				0.98				2.83			$	2.10

     On April 14, 2005, the Securities and Exchange Commission (“SEC”) adopted a new rule that allows SEC registrants to implement SFAS 123R as of January 1, 2006. The SEC’s new rule does not change the accounting required by SFAS 123R; it delays the date for compliance with the standard. Previously under SFAS 123R, the Company would have been required to implement the standard as of July 1, 2005. The Company plans to adopt the provisions of the SFAS 123R in the first quarter of 2006.

Reclassifications

     Certain reclassifications have been made to the 2004 financial statements in order to conform to the 2005 presentation.

(2) Investments

     Investments classified as available-for-sale are carried at fair value as of the balance sheet date. Net change in unrealized investment gains for the six months ended June 30, 2005 and 2004 were as follows ($ in thousands):

		2005				2004
Fixed maturities		$	(3,179	)		$	(41,134	)
Less — deferred taxes			1,601				7,951
Net change in unrealized gains (losses)		$	(1,578	)		$	(33,183	)

     Gross unrealized gains and losses on available-for-sale fixed maturities as of June 30, 2005 were $21,275,000 and $11,215,000, respectively.

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited), continued
For the Three and Six Months Ended June 30, 2005 and 2004

     The unrealized losses on fixed maturities classified as available-for-sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of June 30, 2005 were as follows ($ in thousands):

						Unrealized
		Fair Value				Loss
Less than twelve months:
U.S. Government and U.S. Government agencies		$	132,689			$	58
Corporate bonds			589,711				5,456
Mortgage and asset backed securities			205,043				614
Municipal bonds			96,504				489
Foreign governments and states			18,646				109
Redeemable preferred stocks			8,441				294
Total			1,051,034				7,020
Twelve months or more:
Corporate bonds			109,388				2,274
Mortgage and asset backed securities			69,749				938
Municipal bonds			40,678				713
Foreign governments and states			11,290				270
Total			231,105				4,195
Total of securities with unrealized losses:
U.S. Government and U.S. Government agencies			132,689				58
Corporate bonds			699,099				7,730
Mortgage and asset backed securities			274,792				1,552
Municipal bonds			137,182				1,202
Foreign governments and states			29,936				379
Redeemable preferred stocks			8,441				294
Total		$	1,282,139			$	11,215

     The Company routinely reviews its 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 ability to hold a security for a sufficient period of time for the value to recover the unrealized loss. The Company’s ability to hold a security is based on current and anticipated future positive cash flow from operations that generates sufficient liquidity in order to meet its 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 June 30, 2005 management believes that the Company’s investment portfolio does not contain any securities that have other-than-temporary impairments.

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited), continued
For the Three and Six Months Ended June 30, 2005 and 2004

     Other invested asset represents an investment in Inter-Ocean, Ltd., a non-public reinsurance company. As a result of the routine evaluation of investments, the Company wrote down the carrying value of the investment in Inter-Ocean, Ltd. and recorded a realized loss of $769,000. The Company has no ceded or assumed reinsurance business with Inter-Ocean, Ltd.

(3) Earnings Per Share

     Following is a calculation of the basic and diluted earnings per share for the three and six months ended June 30, 2005 and 2004 ($ in thousands, except per share data):

						Weighted
						Average
		Net				Shares				Earnings
		Income				Outstanding				Per Share
Three Months Ended June 30, 2005:
Basic earnings per share		$	67,985				43,293			$	1.57
Diluted earnings per share:
Share options and restricted share units			—				1,707
Interest expense related to ESU’s, net of related income tax benefit			1,506				—
Common share conversion of ESU’s							5,009
Diluted earnings per share:		$	69,491				50,009			$	1.39
Three Months Ended June 30, 2004:
Basic earnings per share		$	49,799				43,290			$	1.15
Diluted earnings per share:
Share options and restricted share units			—				2,489
Interest expense related to ESU’s, net of related income tax benefit			1,530				—
Common share conversion of ESU’s			—				5,009
Diluted earnings per share:		$	51,329				50,788			$	1.01
Six Months Ended June 30, 2005:
Basic earnings per share		$	141,073				43,224			$	3.26
Diluted earnings per share:
Share options and restricted share units			—				1,807
Interest expense related to ESU’s, net of related income tax benefit			2,929				—
Common share conversion of ESU’s			—				5,009
Diluted earnings per share:		$	144,002				50,040			$	2.88

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited), continued
For the Three and Six Months Ended June 30, 2005 and 2004

						Weighted
						Average
		Net				Shares				Earnings
		Income				Outstanding				Per Share
Six Months Ended June 30, 2004:
Basic earnings per share		$	104,613				43,216			$	2.42
Diluted earnings per share:
Share options and restricted share units			—				2,616
Interest expense related to ESU’s, net of related income tax benefit			3,052				—
Common share conversion of ESU’s			—				5,009
Diluted earnings per share:		$	107,665				50,841			$	2.12

(4) Operating Segment Information

     The Company conducts its worldwide reinsurance business through three operating segments: Property and Marine, Casualty and Finite Risk. 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 property per-risk excess-of-loss treaties, property proportional treaties and catastrophe excess-of-loss reinsurance treaties. The Casualty operating segment includes principally reinsurance treaties that cover umbrella liability, general and product liability, professional liability, directors and officers liability, workers’ compensation, casualty clash, automobile liability, trade credit and surety. This segment also includes accident and health reinsurance treaties, which are predominantly reinsurance of health insurance products. The Finite Risk operating segment includes principally structured reinsurance contracts with ceding companies whose needs may not be met efficiently through traditional reinsurance products. The Company focuses on providing such clients with customized solutions.

     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 tax expense. 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 operating segments together with a reconciliation of underwriting income to income before income tax expense for the three and six months ended June 30, 2005 and 2004 ($ in thousands):

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited), continued
For the Three and Six Months Ended June 30, 2005 and 2004

		Property
		and Marine				Casualty				Finite Risk				Total
Three months ended June 30, 2005:
Net premiums written		$	134,953				188,890				99,116			$	422,959
Net premiums earned			140,669				198,723				92,078				431,470
Losses and LAE			58,499				127,531				54,822				240,852
Acquisition expenses			29,695				47,963				26,270				103,928
Other underwriting expenses			8,240				8,972				1,333				18,545
Segment underwriting income		$	44,235				14,257				9,653			$	68,145
Corporate expenses not allocated to segments															(4,935	)
Net foreign currency exchange losses															(160	)
Interest expense															(4,174	)
Other income															588
Net investment income and net realized losses on investments															28,349
Income before income tax expense														$	87,813
Ratios:
Losses and LAE			41.6	%			64.2	%			59.5	%			55.8	%
Acquisition expense			21.1	%			24.1	%			28.5	%			24.1	%
Other underwriting expense			5.9	%			4.5	%			1.4	%			4.3	%
Combined			68.6	%			92.8	%			89.4	%			84.2	%
Three months ended June 30, 2004:
Net premiums written		$	101,841				112,761				115,925			$	330,527
Net premiums earned			99,928				132,230				78,709				310,867
Losses and LAE			40,974				93,391				55,101				189,466
Acquisition expenses			14,905				31,994				15,795				62,694
Other underwriting expenses			7,174				5,305				2,567				15,046
Segment underwriting income		$	36,875				1,540				5,246			$	43,661
Corporate expenses not allocated to segments															(4,216	)
Net foreign currency exchange losses															(1,168	)
Interest expense															(2,324	)
Other income															605
Net investment income and net realized losses on investments															18,098
Income before income tax expense														$	54,656
Ratios:
Losses and LAE			41.0	%			70.6	%			70.0	%			60.9	%
Acquisition expense			14.9	%			24.2	%			20.1	%			20.2	%
Other underwriting expense			7.2	%			4.0	%			3.3	%			4.8	%
Combined			63.1	%			98.8	%			93.4	%			85.9	%

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited), continued
For the Three and Six Months Ended June 30, 2005 and 2004

		Property
		and Marine				Casualty				Finite Risk				Total
Six months ended June 30, 2005:
Net premiums written		$	320,002				404,559				192,197			$	916,758
Net premiums earned			268,866				383,491				190,153				842,510
Losses and LAE			118,539				245,969				114,042				478,550
Acquisition expenses			51,684				93,165				52,328				197,177
Other underwriting expenses			15,963				16,285				2,904				35,152
Segment underwriting income		$	82,680				28,072				20,879			$	131,631
Corporate expenses not allocated to segments															(8,336	)
Net foreign currency exchange losses															(1,958	)
Interest expense															(6,347	)
Other income															232
Net investment income and net realized losses on investments															55,626
Income before income tax expense														$	170,848
Ratios:
Losses and LAE			44.1	%			64.1	%			60.0	%			56.8	%
Acquisition expense			19.2	%			24.3	%			27.5	%			23.4	%
Other underwriting expense			5.9	%			4.2	%			1.5	%			4.2	%
Combined			69.2	%			92.6	%			89.0	%			84.4	%
Six months ended June 30, 2004:
Net premiums written		$	273,135				336,726				200,772			$	810,633
Net premiums earned			217,993				268,452				145,464				631,909
Losses and LAE			89,552				188,175				73,708				351,435
Acquisition expenses			36,657				66,830				48,128				151,615
Other underwriting expenses			15,324				10,362				5,164				30,850
Segment underwriting income		$	76,460				3,085				18,464			$	98,009
Corporate expenses not allocated to segments															(7,186	)
Net foreign currency exchange losses															(302	)
Interest expense															(4,630	)
Other income															1,116
Net investment income and net realized losses on investments															36,034
Income before income tax expense														$	123,041
Ratios:
Losses and LAE			41.1	%			70.1	%			50.7	%			55.6	%
Acquisition expense			16.8	%			24.9	%			33.1	%			24.0	%
Other underwriting expense			7.0	%			3.9	%			3.6	%			4.9	%
Combined			64.9	%			98.9	%			87.4	%			84.5	%

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited), continued
For the Three and Six Months Ended June 30, 2005 and 2004

(5) Income Taxes

     The Company provides for income taxes based upon amounts reported in the consolidated financial statements and the provisions of currently enacted tax laws. Platinum Holdings and Platinum Bermuda are incorporated in Bermuda. Under current Bermuda law, they are not taxed on any Bermuda income or capital gains and they have received an assurance that if any legislation is enacted in Bermuda that would impose tax computed on profits or income, or computed on any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance tax, then the imposition of any such tax will not be applicable to Platinum Holdings or Platinum Bermuda or any of their respective operations, shares, debentures or other obligations until March 28, 2016. The Company also has subsidiaries in the United States, United Kingdom and Ireland that are subject to the tax laws thereof.

     A reconciliation of expected income tax expense, computed by applying a 35% income tax rate to income before income taxes, to actual income tax expense for the three and six months ended June 30, 2005 and 2004 is as follows ($ in thousands):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2005				2004				2005				2004
Expected income tax expense at 35%		$	30,735				19,130				59,797			$	43,064
Effect of foreign income subject to tax at rates other than 35%			(19,635	)			(14,233	)			(38,258	)			(24,341	)
Tax exempt investment income			(438	)			(567	)			(964	)			(961	)
U.S. withholding tax on deemed taxable transfer to foreign affiliate			9,150				—				9,150				—
Other, net			16				527				50				666
Income tax expense		$	19,828				4,857				29,775			$	18,428

     The Company incurred approximately $9,150,000 of income taxes associated with the transfer from Platinum Finance to Platinum Holdings of $183,350,000 of the proceeds from the sale of the Series A Notes in May 2005. This transaction is deemed to be a taxable distribution under U.S. tax law and subject to U.S. withholding tax.

(6) Series A Notes

     In May 2005, Platinum Finance issued $250,000,000 aggregate principal amount of Series A Notes due June 1, 2017, unconditionally guaranteed by Platinum Holdings. The Series A Notes were issued in a transaction exempt from the registration requirements under the Securities Act of 1933, as amended. The proceeds of the Series A Notes were used primarily to increase the capital of Platinum Bermuda and Platinum US. Interest at a per annum rate of 7.5% is payable on the Series A Notes on each June 1 and December 1 commencing on December 1, 2005. Platinum Finance may redeem the Series A Notes, at its option, at any time in whole, or from time to time in part, prior to maturity. The redemption price will be equal to the greater of: (i) 100 percent of the principal amount of the Notes and (ii) the sum of the present values of the remaining scheduled payments of principal and interest, discounted to the redemption date on a semiannual basis at a comparable treasury rate plus 50 basis points, plus in each case, interest accrued but not paid to the date of redemption.

     Pursuant to the registration rights agreement executed in connection with the offering of the Series A Notes, Platinum Holdings and Platinum Finance have filed with the SEC a registration statement on Form S-4 to enable holders to exchange the Series A Notes for publicly registered notes.

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited), continued
For the Three and Six Months Ended June 30, 2005 and 2004

Platinum Holdings and Platinum Finance have agreed to (i) use reasonable best efforts to cause the registration statement to become or be declared effective within 180 days after the issue date of the Series A Notes; (ii) use reasonable best efforts to commence and complete the exchange offer within 45 days after the effective date of the registration statement and keep the exchange offer open for a period of not less than 30 days after notice is mailed to holders; and (iii) file a shelf registration statement for the resale of the Series A Notes if, under the circumstances specified in the registration rights agreement, Platinum Holdings and Platinum Finance are unable to effect the exchange offer. If Platinum Holdings and Platinum Finance do not comply with certain obligations under the registration rights agreement, additional interest shall accrue at a per annum rate of 0.25% of the aggregate principal amount of the outstanding Series A Notes during the first 90-day period following the occurrence of such registration default and at a per annum rate of 0.50% thereafter for any remaining period during which a registration default continues.

(7) Regulatory Examination

     In connection with its examination of the statutory financial statements of Platinum US as of December 31, 2003, the Maryland Insurance Administration (the “Administration”) reached a different conclusion from that of the Company regarding the accounting for one health reinsurance contract written by Platinum US, which was effective from January 1 to December 31, 2003. Platinum US accounted for this contract as reinsurance under statutory accounting principles and U.S. GAAP. While the examination report has not been issued, the Administration has advised Platinum US that due to the immaterial effect, no changes or adjustments would be required with respect to its previously filed statutory financial statements nor would the financial statements in the examination report be adjusted for the accounting for this contract.

ITEM 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004

Business Overview

     Platinum Underwriters Holdings, Ltd. (“Platinum Holdings”) is a Bermuda holding company organized in 2002. Platinum Holdings and its subsidiaries (collectively, the “Company”) operate through three licensed reinsurance subsidiaries: Platinum Underwriters Bermuda, Ltd. (“Platinum Bermuda”), Platinum Underwriters Reinsurance, Inc. (“Platinum US”), Platinum Re (UK) Limited (“Platinum UK”). 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 following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes thereto and management’s discussion and analysis of financial condition and results of operations included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004. The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

     In November 2002, Platinum Holdings completed an initial public offering of 33,044,000 common shares (“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 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. Both St. Paul and RenaissanceRe have amended their options to provide that in lieu of paying $27.00 per share, any option exercise will be settled on a net share basis, which will result in Platinum Holdings issuing a number of common shares equal to the excess of the market price per share, determined in accordance with the amendments, 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. 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 of the Company in 2005 and an ownership interest in a senior note due 2007 issued by Platinum Underwriters Finance, Inc. (“Platinum Finance”), a U.S. based intermediate holding company subsidiary of Platinum Holdings. In May 2005, Platinum Finance issued $250,000,000 aggregate principal amount of Series A 7.5% Notes due June 1, 2017 (the “Series A Notes”) unconditionally guaranteed by Platinum Holdings. The proceeds of the Series A Notes were used primarily to increase the capital of Platinum Bermuda and Platinum US.

     The Company writes 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 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. Casualty reinsurance also includes accident and health reinsurance treaties, which are predominantly reinsurance of health insurance products.

     The property and casualty reinsurance industry is highly competitive. The Company competes with reinsurers worldwide, many of which have greater financial, marketing and management resources. The Company’s competitors can vary by type of business. Large multi-national and multi-line reinsurers represent some of the Company’s competitors in all lines and classes, while other specialty reinsurance companies in the United States compete in selective lines. Financial institutions have also created alternative capital market products that compete with reinsurance products, such as reinsurance securitization. Bermuda-based reinsurers tend to be the significant competitors on property catastrophe business. Lloyd’s of London syndicates are significant competitors on marine business. For casualty and other international classes of business, the large U.S. and European reinsurers are significant competitors.

     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. As liabilities are established to cover expected claims, 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 by fluctuations in interest rates, inflation and other changes in the economic environment that affect market prices of investments.

Results of Operations

Three Months Ended June 30, 2005 as Compared with the Three Months Ended June 30, 2004

     Net income for the three months ended June 30, 2005 and 2004 was as follows ($ in thousands):

		2005				2004				Increase
Net income		$	67,985				49,799			$	18,186

     The increase in net income in 2005 as compared with 2004 is attributable to an increase in underwriting income of $24,484,000 and an increase in investment income of $9,527,000, partially offset by an increase in operating expenses of $4,218,000 and an increase in income tax expense of $14,971,000. Underwriting income includes net favorable development of $15,157,000 and $9,210,000 in 2005 and 2004, respectively. Net favorable development includes the development of prior years unpaid losses and LAE and the related impact on premiums and profit commissions.

     Net premiums written and net premiums earned for the three months ended June 30, 2005 and 2004 were as follows ($ in thousands):

		2005				2004				Increase
Net premiums written		$	422,959				330,527			$	92,432
Net premiums earned		$	431,470				310,867			$	120,603

     The increase in net premiums written in 2005 is attributable to growth in both the Property and Marine and Casualty segments, partially offset by a decline in the Finite segment. The increase in net premium earned is related to the growth in current and prior periods’ net premiums written in the Property and Marine and Casualty segments and is also affected by changes in the mix of business and the structure of the underlying reinsurance contracts.

     Net investment income for the three months ended June 30, 2005 and 2004 was $28,904,000 and $19,377,000, respectively. Net investment income increased in 2005 primarily due to increased invested assets. The increase in invested assets is attributable to positive cash flow from operations in 2005 and 2004 and the proceeds from the Series A Notes. Net investment income includes interest earned on funds held of $3,183,000 and $178,000 in 2005 and 2004, respectively. Net realized losses on investments were $555,000 and $1,279,000 for the three months ended June 30, 2005 and 2004, respectively. Net realized losses on investments in 2005 include a provision of $769,000 for the permanent impairment of an investment in Inter-Ocean, Ltd., a non-public reinsurance company, included in other invested asset. Exclusive of this provision, net realized gains and losses on investments were the result of the Company’s efforts to manage the credit quality and duration of the investment portfolio.

     Other income for the three months ended June 30, 2005 and 2004 was $588,000 and $605,000, respectively. Other income is comprised primarily of changes in fair value of fixed maturities classified as trading, net earnings or expense on several reinsurance contracts in the Finite Risk segment that are accounted for as deposits and interest expense or other charges related to funds withheld. Other income for the three months ended June 30, 2005 includes $865,000 of net unrealized gains relating to fixed maturities classified as trading, $225,000 of net income on reinsurance contracts accounted for as deposits and $502,000 of interest expense related to funds withheld. Other income for the three months ended June 30, 2004 includes $727,000 of net unrealized losses relating to fixed maturities classified as trading, $162,000 of net income on reinsurance contracts accounted for as deposits and a gain of $1,000,000 on the sale of assets.

     Net foreign currency exchange losses for the three months ended June 30, 2005 and 2004 were $160,000 and $1,168,000, respectively. The Company routinely does business in various foreign currencies. Foreign currency exchange gains and losses result from the re-valuation into U.S. dollars of assets and liabilities denominated in foreign currencies. The Company periodically monitors its largest foreign currency exposures and purchases or sells foreign currency denominated invested assets to match these exposures. Net foreign currency exchange gains and losses arise as a result of fluctuations in the amounts of assets and liabilities denominated in foreign currencies as well as fluctuations in the currency exchange rates.

     Losses and LAE and the resulting loss ratios for the three months ended June 30, 2005 and 2004 were as follows ($ in thousands):

										Increase
		2005				2004				(decrease)
Losses and LAE		$	240,852				189,466			$	51,386
Losses and LAE ratios			55.8	%			60.9	%		(5.1) points

     The increase in losses and LAE in 2005 as compared with 2004 is due primarily to the increased net premiums earned. The loss and LAE ratio decreased in 2005 as compared with 2004 due primarily to

more favorable loss development in 2005 than in 2004 in all segments. Losses and LAE included net favorable loss development of approximately $17,256,000 representing 4.0% of net premiums earned in 2005 and approximately $3,029,000 representing 1.0% of net premiums earned in 2004.

     Acquisition expenses and resulting acquisition expense ratios for the three months ended June 30, 2005 and 2004 were as follows ($ in thousands):

		2005				2004				Increase
Acquisition expenses		$	103,928				62,694			$	41,234
Acquisition expense ratios			24.1	%			20.2	%		3.9 points

     The increase in acquisition expenses is due primarily to the increase in net premiums earned in 2005 as compared with 2004 as well as shifts in the mix of business. As a result of loss experience from prior years, profit commissions were increased in 2005, primarily in the Property and Marine segment, and decreased in 2004, primarily in the Finite Risk segment. Profit commission increases in 2005 related to prior years were approximately $3,293,000, representing 0.8% of net premiums earned and profit commission reductions in 2004 related to prior years were approximately $6,181,000, representing 2.0% of net premiums earned. Exclusive of profit commissions, the increase in the acquisition expense ratio in 2005 as compared with 2004 is primarily due to shifts in the mixes of business in the Property and Marine segment toward proportional business and in the Finite Risk segment toward proportional casualty business that generally has higher acquisition costs.

     Operating expenses for the three months ended June 30, 2005 and 2004 were $23,480,000 and $19,262,000, respectively. Operating expenses include costs such as salaries, rent and like items related to reinsurance operations as well as costs associated with Platinum Holdings. Operating expenses in 2005 increased as compared with 2004 primarily due to increased salaries and benefits, increased regulatory compliance costs and an increase in incentive-based compensation in 2005 as compared with 2004 due to increased net income. Regulatory compliance costs were higher in 2005 than in 2004 as the majority of such costs in 2004 were incurred in the third and fourth quarters of 2004.

     Interest expense for the three months ended June 30, 2005 and 2004 was $4,174,000 and $2,324,000, respectively and includes interest on the ESU’s as well as the Series A Notes. The increase in 2005 as compared with 2004 is due to interest on the Series A Notes issued in May 2005.

     Income tax expense and the effective income tax rate for the three months ended June 30, 2005 and 2004 were as follows ($ in thousands):

		2005				2004				Increase
Income tax expense		$	19,828				4,857			$	14,971
Effective income tax rates			22.6	%			8.9	%		13.7 points

     The increase in income tax expense in 2005 as compared with 2004 is due, in part, to the increase in income before income tax expense. An increasing percentage of the Company’s income before income taxes is generated by Platinum Bermuda, which is not subject to corporate income tax. However, the Company incurred approximately $9,150,000 of income taxes associated with the transfer from Platinum Finance to Platinum Holdings of $183,350,000 of the proceeds from the sale of the Series A Notes. This transaction is deemed to be a taxable distribution under U.S. tax law and subject to U.S. withholding tax. The effective tax rate in 2004 was favorably affected by a reduction in the estimated annual effective tax rate.

Six Months Ended June 30, 2005 as Compared with the Six Months Ended June 30, 2004

     Net income for the six months ended June 30, 2005 and 2004 was as follows ($ in thousands):

		2005				2004				Increase
Net income		$	141,073				104,613			$	36,460

     The 34.9% increase in net income in 2005 as compared with 2004 is principally attributable to the increase in underwriting income of $33,622,000 and an increase in investment income of $18,948,000, offset by an increase in operating expenses of $5,452,000 and income tax expense of $11,347,000. Underwriting income in 2005 as compared with 2004 was impacted by more favorable net development in 2005. Net favorable development was $35,633,000 and $23,547,000 in 2005 and 2004, respectively. Net favorable development includes the development of prior years unpaid losses and LAE and the related impact on premiums and profit commissions.

     Net premiums written and net premiums earned for the six months ended June 30, 2005 and 2004 were as follows ($ in thousands):

		2005				2004				Increase
Net premiums written		$	916,758				810,633			$	106,125
Net premiums earned		$	842,510				631,909			$	210,601

     The increase in net premiums written in 2005 as compared with 2004 is primarily attributable to growth in the Property and Marine and Casualty segments. 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 six months ended June 30, 2005 and 2004 was $55,809,000 and $36,861,000, respectively. Net investment income increased during 2005 primarily due to increased invested assets. The increase in invested assets is attributable to positive cash flow from operations in 2005 and 2004 and the proceeds from the Series A Notes. Net cash flow from operations, excluding trading securities activities, was $372,073,000 for the six months ended June 30, 2005 and $698,223,000 for the year ended December 31, 2004, respectively. Net investment income includes interest earned on funds held of $5,494,000 and $220,000 in 2005 and 2004, respectively. Net realized losses on investments were $183,000 and $827,000 for the six months ended June 30, 2005 and 2004, respectively. Net realized losses on investments in 2005 also include a provision of $769,000 for the permanent impairment of an investment in Inter-Ocean, Ltd. included in other invested asset. Exclusive of this provision, net realized gains and losses on investments were the result of the Company’s efforts to manage the quality, diversity, currency exposure, duration and tax profile of the investment portfolio.

     Other income for the six months ended June 30, 2005 and 2004 was $232,000 and $1,116,000, respectively. Other income is comprised primarily of changes in fair value of fixed maturities classified as trading, net earnings on several reinsurance contracts in the Finite Risk segment that are accounted for as deposits and interest expense or other charges related to funds withheld. Other income for the six months ended June 30, 2005 includes $531,000 of net unrealized gains relating to changes in fair value of fixed maturities classified as trading, $203,000 of earnings on reinsurance contracts accounted for as deposits and $502,000 of interest expense related to funds withheld. Other income for the six months ended June 30, 2004 includes $409,000 of net unrealized losses relating to fixed maturities classified as trading, $259,000 of earnings on reinsurance contracts accounted for as deposits and a gain of $1,000,000 on the sale of assets.

     Net foreign currency exchange losses for the six months ended June 30, 2005 and 2004 were $1,958,000 and $302,000, respectively. Net foreign currency exchange gains and losses arise as a result of fluctuations in the amounts of assets and liabilities denominated in foreign currencies as well as fluctuations in the currency exchange rates.

     Losses and LAE and the resulting loss ratios for the six months ended June 30, 2005 and 2004 were as follows ($ in thousands):

		2005				2004				Increase
Losses and LAE		$	478,550				351,435			$	127,115
Loss and LAE ratios			56.8	%			55.6	%		1.2 points

     The increase in losses and LAE in 2005 as compared with 2004 is due to the increased net premiums earned. Losses and LAE included net favorable loss development of approximately $33,119,000 representing 3.9% of net premiums earned in 2005 and approximately $28,239,000 representing 4.5% of net premiums earned in 2004. The loss and LAE ratio increased in 2005 as compared with 2004 due to less favorable loss development in 2005 as well as a shift in the mix of business in the Finite Risk segment from finite property to finite casualty contracts that generally have higher loss ratios.

     Acquisition expenses and resulting acquisition expense ratios for the six months ended June 30, 2005 and 2004 were as follows ($ in thousands):

										Increase
		2005				2004				(decrease)
Acquisition expenses		$	197,177				151,615			$	45,562
Acquisition expense ratios			23.4	%			24.0	%		(0.6) points

     The increase in acquisition expenses is due primarily to the increase in net premiums earned in 2005 as compared with 2004. While the ratios in 2005 and 2004 are comparable, the ratios are affected by profit commissions, including approximately $215,000 in 2005 and $4,692,000 in 2004 relating to favorable loss development from prior years primarily in the Finite Risk segment.

     Operating expenses for the six months ended June 30, 2005 and 2004 were $43,488,000 and $38,036,000, respectively. Operating expenses include costs such as salaries, rent and like items related to reinsurance operations as well as costs associated with Platinum Holdings. Operating expenses in 2005 increased as compared with 2004 primarily due to increased salaries and benefits, increased regulatory compliance costs and an increase in incentive-based compensation in 2005 as compared with 2004 due to increased net income. Regulatory compliance costs were higher in 2005 than in 2004 as the majority of such costs in 2004 were incurred in the third and fourth quarters of 2004.

     Interest expense for the six months ended June 30, 2005 and 2004 was $6,347,000 and $4,630,000, respectively and includes interest on the ESU’s as well as the Series A Notes. The increase in 2005 as compared with 2004 is due to interest on the Series A Notes issued in May 2005.

     Income tax expense and the effective income tax rate for the six months ended June 30, 2005 and 2004 were as follows ($ in thousands):

		2005				2004				Increase
Income tax expense		$	29,775				18,428			$	11,347
Effective income tax rates			17.4	%			15.0	%		2.4 points

     The increase in income tax expense in 2005 as compared with 2004 is due, in part, to the increase in income before income tax expense. An increasing percentage of the Company’s income before income taxes is generated by Platinum Bermuda, which is not subject to corporate income tax. However, the Company incurred approximately $9,150,000 of income taxes associated with the transfer from Platinum Finance to Platinum Holdings of $183,350,000 of the proceeds from the Series A Notes. This transaction is deemed to be a taxable distribution under U.S. tax law and subject to U.S. withholding tax.

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 tax expense. 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 three and six months ended June 30, 2005 and 2004 ($ in thousands):

		Property and Marine				Casualty				Finite Risk				Total
Three months ended June 30, 2005:
Net premiums written		$	134,953				188,890				99,116			$	422,959
Net premiums earned			140,669				198,723				92,078				431,470
Losses and LAE			58,499				127,531				54,822				240,852
Acquisition expenses			29,695				47,963				26,270				103,928
Other underwriting expenses			8,240				8,972				1,333				18,545
Segment underwriting income		$	44,235				14,257				9,653			$	68,145
Corporate expenses not allocated to segments															(4,935	)
Net foreign currency exchange losses															(160	)
Interest expense															(4,174	)
Other income															588
Net investment income and net realized losses on investments															28,349
Income before income tax expense														$	87,813
Ratios:
Losses and LAE			41.6	%			64.2	%			59.5	%			55.8	%
Acquisition expense			21.1	%			24.1	%			28.5	%			24.1	%
Other underwriting expense			5.9	%			4.5	%			1.4	%			4.3	%
Combined			68.6	%			92.8	%			89.4	%			84.2	%