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 September 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 ___

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

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

     As of October 21, 2005, there were outstanding 49,604,759 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 SEPTEMBER 30, 2005

TABLE OF CONTENTS

		Page
PART I — FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Consolidated Balance Sheets as of September 30, 2005 (Unaudited) and December 31, 2004			1
Consolidated Statements of Income and Comprehensive Income for the Three and Nine months ended September 30, 2005 and 2004 (Unaudited)			2
Consolidated Statements of Changes in Shareholders’ Equity for the Nine Months Ended September 30, 2005 and 2004 (Unaudited)			3
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2005 and 2004 (Unaudited)			4
Notes to Condensed Consolidated Financial Statements (Unaudited) for the Three and Nine Months Ended September 30, 2005 and 2004			5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Three and Nine Months Ended September 30, 2005 and 2004			25
Item 3. Quantitative and Qualitative Disclosures about Market Risk			51
Item 4. Controls and Procedures			53
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			54
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			54
Item 6. Exhibits			55
SIGNATURES			55
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)
		September 30,				December 31,
		2005				2004
ASSETS
Investments:
Fixed maturities available-for-sale, at fair value (amortized cost — $2,917,948 and $2,144,290, respectively)		$	2,886,969			$	2,157,529
Fixed maturities — trading, at fair value (amortized cost — $96,392 and $82,931, respectively)			96,248				82,673
Other invested asset			6,000				6,769
Total investments			2,989,217				2,246,971
Cash and cash equivalents			391,637				209,897
Accrued investment income			31,013				23,663
Reinsurance premiums receivable			557,422				580,048
Reinsurance recoverable on ceded losses and loss adjustment expenses			68,276				2,005
Prepaid reinsurance premiums			10,745				2,887
Funds held by ceding companies			250,324				198,048
Deferred acquisition costs			139,158				136,038
Income tax recoverable			10,106				1,325
Deferred tax assets			27,290				8,931
Other assets			10,897				12,182
Total assets		$	4,486,085			$	3,421,995
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Unpaid losses and loss adjustment expenses		$	2,079,668			$	1,380,955
Unearned premiums			558,881				502,423
Reinsurance deposit liabilities			5,932				20,189
Debt obligations			387,500				137,500
Ceded premiums payable			26,278				2,384
Commissions payable			176,036				181,925
Funds withheld			—				11,999
Deferred taxes			—				10,404
Other liabilities			23,973				41,213
Total liabilities			3,258,268				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, 49,604,759 and 43,087,407 shares issued and outstanding, respectively			496				430
Additional paid-in capital			1,092,029				911,851
Unearned share grant compensation			(2,108	)			—
Accumulated other comprehensive income (loss)			(25,718	)			12,252
Retained earnings			163,118				208,470
Total shareholders’ equity			1,227,817				1,133,003
Total liabilities and shareholders’ equity		$	4,486,085			$	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 Nine Months Ended September 30, 2005 and 2004

($ in thousands, except per share data)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2005				2004				2005				2004
Revenue:
Net premiums earned		$	429,388				383,090				1,271,898			$	1,014,999
Net investment income			36,441				21,429				92,250				58,290
Net realized gains (losses) on investments			(879	)			2,262				(1,062	)			1,435
Other income (expense)			(433	)			1,021				(201	)			2,137
Total revenue			464,517				407,802				1,362,885				1,076,861
Expenses:
Losses and loss adjustment expenses			564,618				384,724				1,043,168				736,159
Acquisition expenses			98,858				81,271				296,035				232,886
Operating expenses			8,080				15,400				51,568				53,436
Net foreign currency exchange (gains) losses			(88	)			(628	)			1,870				(326	)
Interest expense			6,839				2,322				13,186				6,952
Total expenses			678,307				483,089				1,405,827				1,029,107
Income (loss) before income tax expense			(213,790	)			(75,287	)			(42,942	)			47,754
Income tax expense (benefit)			(37,766	)			(5,535	)			(7,991	)			12,893
Net income (loss)		$	(176,024	)			(69,752	)			(34,951	)		$	34,861
Earnings per share:
Basic earnings (loss) per share		$	(4.02	)			(1.62	)			(0.80	)		$	0.81
Diluted earnings (loss) per share		$	(4.02	)			(1.62	)			(0.80	)		$	0.78
Comprehensive income (loss):
Net income (loss)		$	(176,024	)			(69,752	)			(34,951	)		$	34,861
Other comprehensive income (loss):
Net change in unrealized gains and losses on available-for-sale securities, net of deferred taxes			(36,414	)			31,147				(37,992	)			(2,036	)
Cumulative translation adjustments, net of deferred taxes			59				(140	)			22				(292	)
Comprehensive income (loss)		$	(212,379	)			(38,745	)			(72,921	)		$	32,533
Shareholder dividends:
Dividends declared		$	3,490				3,435				10,401			$	10,360
Dividends declared per share		$	0.08				0.08				0.24			$	0.24

See accompanying notes to condensed consolidated financial statements.

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)
For the Nine Months Ended September 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			7				2
Issuance of restricted shares and shares for share units			1				1
Issuance of common shares			58				—
Purchase of common shares			—				(3	)
Balances at end of period			496				430
Additional paid-in-capital:
Balances at beginning of period			911,851				910,505
Exercise of share options			13,063				5,834
Issuance of restricted shares and shares for share units			2,749				1,736
Share based compensation			2,559				1,565
Issuance of common shares			161,807				—
Purchase of common shares			—				(9,982	)
Balances at end of period			1,092,029				909,658
Unearned share grant compensation :
Balances at beginning of period			—				—
Shares issued			(2,750	)			—
Amortization			642				—
Balances at end of period			(2,108	)			—
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			(37,992	)			(2,036	)
Net change in cumulative translation adjustments, net of deferred tax			22				(292	)
Balances at end of period			(25,718	)			16,446
Retained earnings:
Balances at beginning of period			208,470				137,494
Net income (loss)			(34,951	)			34,861
Dividends paid to shareholders			(10,401	)			(10,360	)
Balances at end of period			163,118				161,995
Total shareholders’ equity		$	1,227,817			$	1,088,529

See accompanying notes to condensed consolidated financial statements.

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended September 30, 2005 and 2004
($ in thousands)

		2005				2004
Operating Activities:
Net income (loss)		$	(34,951	)		$	34,861
Adjustments to reconcile net income (loss) to cash used in operations:
Depreciation and amortization			13,361				15,676
Net realized losses on investments			1,062				(1,435	)
Net foreign currency exchange losses			1,870				(326	)
Share-based compensation			3,301				1,736
Trading securities activities			(14,195	)			13,026
Changes in assets and liabilities:
Increase in accrued investment income			(7,350	)			(9,121	)
(Increase) decrease in reinsurance premiums receivable			22,626				(151,022	)
Increase in funds held by ceding companies			(52,276	)			(20,720	)
Increase in deferred acquisition costs			(3,120	)			(62,693	)
Increase in net unpaid losses and loss adjustment expenses			638,669				488,814
Increase in net unearned premiums			48,600				234,382
Increase (decrease) in reinsurance deposit liabilities			(14,257	)			17,511
Increase (decrease) in ceded premiums payable			23,894				(2,354	)
Increase (decrease) in commissions payable			(5,889	)			44,592
Increase (decrease) in funds withheld			(11,999	)			22,487
Changes in other assets and liabilities			(47,927	)			(2,051	)
Other net			(2,399	)			(193	)
Net cash provided by operating activities			559,020				623,170
Investing Activities:
Proceeds from sale of available-for-sale fixed maturities			478,134				307,551
Proceeds from maturity or paydown of available-for-sale fixed maturities			97,070				117,117
Acquisition of available-for-sale fixed maturities			(1,363,918	)			(916,443	)
Net cash used in investing activities			(788,714	)			(491,775	)
Financing Activities:
Dividends paid to shareholders			(10,401	)			(10,360	)
Proceeds from exercise of share options			13,070				5,836
Proceeds from issuance of debt			246,900				—
Proceeds from issuance of common shares			161,865				—
Purchase of common shares			—				(9,985	)
Net cash provided by (used in) financing activities			411,434				(14,509	)
Net increase in cash and cash equivalents			181,740				116,886
Cash and cash equivalents at beginning of period			209,897				105,461
Cash and cash equivalents at end of period		$	391,637			$	222,347
Supplemental disclosures of cash flow information:
Income taxes paid		$	32,507			$	2,533
Interest paid		$	7,219			$	7,219

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 Nine Months Ended September 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 nine months ended September 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 amended Annual Report on Form 10-K/A 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”). Concurrently 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 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, concurrently 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. 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 bearing interest at 5.25%, due 2007 issued by Platinum Finance, a U.S. based intermediate holding company subsidiary of Platinum Holdings, and guaranteed by Platinum Holdings (the “Senior Guaranteed Notes”).

Platinum Underwriters Holdings, Ltd. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited), continued
For the Three and Nine Months Ended September 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 termination 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 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 (loss) and earnings (loss) per share for the three and nine months ended September 30, 2005 and 2004 of applying the “fair value” method to all share option grants ($ in thousands, except per share data):

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2005				2004				2005				2004
Share-based compensation expense:
As reported		$	908				649				2,710			$	1,736
Pro forma			2,140				1,855				6,256				5,200

Platinum Underwriters Holdings, Ltd. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited), continued
For the Three and Nine Months Ended September 30, 2005 and 2004

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2005				2004				2005				2004
Net income (loss):
As reported		$	(176,024	)			(69,752	)			(34,951	)		$	34,861
Pro forma			(177,256	)			(70,958	)			(38,497	)			31,397
Basic earnings (loss) per share:
As reported			(4.02	)			(1.62	)			(0.80	)			0.81
Pro forma			(4.05	)			(1.66	)			(0.89	)			0.72
Diluted earnings (loss) per share:
As reported			(4.02	)			(1.62	)			(0.80	)			0.78
Pro forma		$	(4.05	)			(1.66	)			(0.89	)		$	0.71

     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 and losses on available-for-sale securities, net of deferred taxes for the nine months ended September 30, 2005 and 2004 were as follows ($ in thousands):

		2005				2004
Fixed maturities		$	(44,218	)		$	(3,261	)
Less — deferred taxes			6,226				1,225
Net change in unrealized investment gains and losses		$	(37,992	)		$	(2,036	)

     Gross unrealized gains and losses on available-for-sale fixed maturities as of September 30, 2005 were $5,548,000 and $36,527,000, respectively.

Platinum Underwriters Holdings, Ltd. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited), continued
For the Three and Nine Months Ended September 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 September 30, 2005 were as follows ($ in thousands):

						Unrealized
		Fair Value				Loss
Less than twelve months:
U.S. Government and U.S. Government agencies		$	129,041			$	(1,156	)
Corporate bonds			1,071,601				(15,578	)
Mortgage and asset backed securities			802,091				(9,609	)
Municipal bonds			139,090				(1,177	)
Foreign governments and states			28,044				(401	)
Redeemable preferred stocks			8,375				(360	)
Total			2,178,242				(28,281	)
Twelve months or more:
U.S. Government and U.S. Government agencies			3,429				(7	)
Corporate bonds			154,002				(4,600	)
Mortgage and asset backed securities			67,914				(2,354	)
Municipal bonds			38,218				(878	)
Foreign governments and states			11,151				(407	)
Total			274,714				(8,246	)
Total of securities with unrealized losses:
U.S. Government and U.S. Government agencies			132,470				(1,163	)
Corporate bonds			1,225,603				(20,178	)
Mortgage and asset backed securities			870,005				(11,963	)
Municipal bonds			177,308				(2,055	)
Foreign governments and states			39,195				(808	)
Redeemable preferred stocks			8,375				(360	)
Total		$	2,452,956			$	(36,527	)

     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 September 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 Nine Months Ended September 30, 2005 and 2004

     Other invested asset represents an investment in Inter-Ocean Holdings, Ltd., a non-public reinsurance company. In June 2005 as a result of the routine evaluation of investments, the Company wrote down the carrying value of the investment in Inter-Ocean Holdings Ltd. to its estimated net realizable value and recorded a realized loss of $769,000. The Company has no ceded or assumed reinsurance business with Inter-Ocean Holdings, Ltd.

(3) Hurricane Losses

     In 2005, two significant named hurricanes, Katrina and Rita (the “2005 Hurricanes”), caused severe damage in Louisiana, Mississippi, Texas and several other states in the Gulf Coast region of the United States. Hurricane Katrina, based on current industry estimates, is the costliest natural disaster in U.S. history. In 2004, four significant named hurricanes, Charley, Frances, Ivan and Jeanne (the “2004 Hurricanes”), caused severe damage in the Caribbean and the southeastern United States, principally Florida. As a result of losses arising from these catastrophic events, certain reinsurance contracts generated additional premiums and accrued profit commissions for certain reinsurance contracts were reduced.

     The net adverse impact on underwriting results of the Company for the three months ended September 30, 2005 and 2004 from the above mentioned hurricanes is summarized as follows ($ in thousands):

		2005				2004
Gross losses and LAE		$	396,923			$	186,457
Retrocessional reinsurance			(56,083	)			—
Net losses and LAE			340,840				186,457
Additional premiums earned			(19,554	)			(19,895	)
Profit commissions			—				(10,350	)
Net adverse impact on underwriting results		$	321,286			$	156,212

     Development of the 2004 Hurricanes subsequent to September 30, 2004 increased the adverse impact on underwriting results by approximately $34,754,000 in the fourth quarter of 2004 and $6,081,000 in the first six months of 2005.

(4) Earnings Per Share

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

Weighted

Net

Average

Earnings

Income

Shares

(Loss)

(loss)

Outstanding

Per Share

Three Months Ended September 30, 2005:

Basic loss per share:

Loss available to common shareholders

$

(176,024

)

43,785

$

(4.02

)

Platinum Underwriters Holdings, Ltd. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited), continued
For the Three and Nine Months Ended September 30, 2005 and 2004

						Weighted
		Net				Average				Earnings
		Income				Shares				(Loss)
		(loss)				Outstanding				Per Share
Three Months Ended September 30, 2004:
Basic loss per share:
Loss available to common shareholders		$	(69,752	)			43,127			$	(1.62	)
Nine Months Ended September 30, 2005:
Basic loss per share:
Loss available to common shareholders			(34,951	)			43,459				(0.80	)
Nine Months Ended September 30, 2004:
Basic earnings per share
Income available to common shareholders			34,861				43,186				0.81
Diluted earnings per share:
Share options and restricted share units			—				2,227
Interest expense related to ESU’s			4,577				—
Common share conversion of ESU’s			—				5,009
Diluted earnings per share:		$	39,438				50,422			$	0.78

(5) 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.

     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 nine months ended September 30, 2005 and 2004 ($ in thousands):

Platinum Underwriters Holdings, Ltd. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited), continued
For the Three and Nine Months Ended September 30, 2005 and 2004

		Property
		and Marine				Casualty				Finite Risk				Total
Three months ended September 30, 2005:
Net premiums written		$	133,350				216,659				60,177			$	410,186
Net premiums earned			145,853				205,050				78,485				429,388
Losses and LAE			373,761				129,218				61,639				564,618
Acquisition expenses			17,753				50,097				31,008				98,858
Other underwriting expenses			3,632				1,894				524				6,050
Segment underwriting income (loss)		$	(249,293	)			23,841				(14,686	)			(240,138	)
Net investment income and net realized losses on investments															35,562
Net foreign currency exchange gains															88
Other expense															(433	)
Corporate expenses not allocated to segments															(2,030	)
Interest expense															(6,839	)
Loss before income tax benefit														$	(213,790	)
Ratios:
Losses and LAE			256.3	%			63.0	%			78.5	%			131.5	%
Acquisition expense			12.2	%			24.4	%			39.5	%			23.0	%
Other underwriting expense			2.5	%			0.9	%			0.7	%			1.4	%
Combined			271.0	%			88.3	%			118.7	%			155.9	%
Three months ended September 30, 2004:
Net premiums written		$	120,629				171,967				147,899			$	440,495
Net premiums earned			135,430				156,512				91,148				383,090
Losses and LAE			195,495				105,559				83,670				384,724
Acquisition expenses			20,834				38,935				21,502				81,271
Other underwriting expenses			5,956				5,617				661				12,234
Segment underwriting income (loss)		$	(86,855	)			6,401				(14,685	)			(95,139	)
Net investment income and net realized gains on investments															23,691
Net foreign currency exchange gains															628
Other income															1,021
Corporate expenses not allocated to segments															(3,166	)
Interest expense															(2,322	)
Loss before income tax benefit														$	(75,287	)
Ratios:
Losses and LAE			144.4	%			67.4	%			91.8	%			100.4	%
Acquisition expense			15.4	%			24.9	%			23.6	%			21.2	%
Other underwriting expense			4.4	%			3.6	%			0.7	%			3.2	%
Combined			164.2	%			95.9	%			116.1	%			124.8	%

Platinum Underwriters Holdings, Ltd. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited), continued
For the Three and Nine Months Ended September 30, 2005 and 2004

		Property
		and Marine				Casualty				Finite Risk				Total
Nine months ended September 30, 2005:
Net premiums written		$	453,352				621,218				252,374			$	1,326,944
Net premiums earned			414,719				588,541				268,638				1,271,898
Losses and LAE			492,300				375,187				175,681				1,043,168
Acquisition expenses			69,437				143,262				83,336				296,035
Other underwriting expenses			19,595				18,179				3,428				41,202
Segment underwriting income (loss)		$	(166,613	)			51,913				6,193				(108,507	)
Net investment income and net realized losses on investments															91,188
Net foreign currency exchange losses															(1,870	)
Other expense															(201	)
Corporate expenses not allocated to segments															(10,366	)
Interest expense															(13,186	)
Loss before income tax benefit														$	(42,942	)
Ratios:
Losses and LAE			118.7	%			63.7	%			65.4	%			82.0	%
Acquisition expense			16.7	%			24.3	%			31.0	%			23.3	%
Other underwriting expense			4.7	%			3.1	%			1.3	%			3.2	%
Combined			140.1	%			91.1	%			97.7	%			108.5	%
Nine months ended September 30, 2004:
Net premiums written		$	393,764				508,693				348,671			$	1,251,128
Net premiums earned			353,423				424,964				236,612				1,014,999
Losses and LAE			285,047				293,734				157,378				736,159
Acquisition expenses			57,491				105,765				69,630				232,886
Other underwriting expenses			21,280				15,979				5,825				43,084
Segment underwriting income (loss)		$	(10,395	)			9,486				3,779				2,870
Net investment income and net realized gains on investments															59,725
Net foreign currency exchange gains															326
Other income															2,137
Corporate expenses not allocated to segments															(10,352	)
Interest expense															(6,952	)
Income before income tax expense														$	47,754
Ratios:
Losses and LAE			80.7	%			69.1	%			66.5	%			72.5	%
Acquisition expense			16.3	%			24.9	%			29.4	%			22.9	%
Other underwriting expense			6.0	%			3.8	%			2.5	%			4.2	%
Combined			103.0	%			97.8	%			98.4	%			99.6	%

Platinum Underwriters Holdings, Ltd. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited), continued
For the Three and Nine Months Ended September 30, 2005 and 2004

(6) 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 (benefit), computed by applying a 35% income tax rate to income (loss) before income taxes, to actual income tax expense (benefit) for the three and nine months ended September 30, 2005 and 2004 is as follows ($ in thousands):

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2005				2004				2005				2004
Expected income tax expense (benefit) at 35%		$	(74,827	)			(26,350	)			(15,030	)		$	16,714
Effect of foreign income subject to tax at rates other than 35%			38,528				21,299				270				(3,042	)
Tax exempt investment (income) loss			(1,047	)			360				(2,011	)			(601	)
U.S. withholding tax on deemed taxable transfer to foreign affiliate			(1,000	)			—				8,150				—
Other, net			580				(844	)			630				(178	)
Income tax expense (benefit)		$	(37,766	)			(5,535	)			(7,991	)		$	12,893

     The Company incurred approximately $8,150,000 of income taxes associated with the transfer from Platinum Finance to Platinum Holdings of $183,350,000 of the proceeds from the issuance 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. During the three months ended September 30, 2005, the estimated amount deemed to be a taxable distribution under U.S. tax law and subject to withholding tax was revised as a result of the net loss for the nine months ended September 30, 2005. Consequently, the estimate of withholding tax was reduced by $1,000,000.

(7) Debt and Equity Transactions

Debt Offering

     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 Series A Notes were issued in a transaction exempt from the registration requirements under the Securities Act of 1933, as amended (the “Securities Act”). 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,

Platinum Underwriters Holdings, Ltd. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited), continued
For the Three and Nine Months Ended September 30, 2005 and 2004

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 Series A 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 U.S. Treasury rate plus 50 basis points, plus in each case, interest accrued but not paid to the date of redemption.

     On September 27, 2005, Platinum Holdings and Platinum Finance launched an exchange offer through which they offered to exchange up to $250,000,000 aggregate principal amount of the outstanding Series A Notes for up to $250,000,000 aggregate principal amount of Series B Notes which have substantially the same terms as the Series A Notes and which have been registered under the Securities Act (the “Series B Notes”), pursuant to a separate prospectus. The exchange offer period ended on October 28, 2005, 100% of the Series A Notes were tendered for Series B Notes. The exchange is scheduled to close on November 2, 2005.

ESU remarketing

     In November 2002, the Company issued ESU’s, consisting of a contract to purchase common shares of the Company in 2005 and an ownership interest in Senior Guaranteed Notes. On August 16, 2005, Platinum Finance successfully completed the remarketing of $137,500,000 aggregate principal amount of the Senior Guaranteed Notes due November 16, 2007 at a price of 100.7738% with a reset interest rate of 6.371% (the “Remarketed Senior Guaranteed Notes”). Interest is payable on the Remarketed Senior Guaranteed Notes on May 16 and November 16 of each year, commencing November 16, 2005. The Remarketed Senior Guaranteed Notes are unconditionally guaranteed by Platinum Holdings. The remarketing was conducted on behalf of holders of the ESU’s and neither Platinum Holdings nor Platinum Finance received any cash proceeds from the remarketing. Proceeds from the remarketing were used to purchase a portfolio of U.S. Treasury securities to secure the obligations of the holders of the ESU’s under the related common share purchase contract and to pay the remarketing fee. There were no excess proceeds to be distributed to holders of the ESU’s in connection with the remarketing.

Common Share Offering

     On September 22, 2005, Platinum Holdings completed an offering of 5,839,286 common shares at a price to the public of $28.00 per share, less related expenses. All shares were offered by Platinum Holdings and were sold pursuant to its effective shelf registration statement. The proceeds were $161,865,000, net of expenses, and are expected to be used to make contributions to the capital and surplus of the reinsurance subsidiaries and for general corporate purposes.

(8) 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

Platinum Underwriters Holdings, Ltd. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited), continued
For the Three and Nine Months Ended September 30, 2005 and 2004

statements nor would the financial statements in the examination report be adjusted for the accounting for this contract.

(9) Condensed Consolidating Financial Information

     In November 2002, the Company issued ESU’s consisting of a contract to purchase common shares of the Company in 2005 and an ownership interest in Senior Guaranteed Notes due 2007 issued by Platinum Finance, a U.S. based intermediate holding company and indirect wholly owned subsidiary of Platinum Holdings. The Senior Guaranteed Notes are fully and unconditionally guaranteed by Platinum Holdings on a senior unsecured basis and are pledged to collateralize the holders’ obligations to acquire common shares in 2005. In May 2005, Platinum Finance issued $250,000,000 aggregate principal amount of Series A Notes. The Series A Notes are also fully and unconditionally guaranteed by Platinum Holdings.

     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 Platinum US to Platinum Finance in 2005 without prior regulatory approval is $40,312,000. As of September 30, 2005, the maximum amount available for payment of dividends or other distributions by the reinsurance subsidiaries of Platinum Holdings, including Platinum US, without prior regulatory approval is estimated to be $114,637,000.

     The tables below present condensed consolidating financial information of Platinum Holdings, Platinum Finance and the non-guarantor subsidiaries of Platinum Holdings as of September 30, 2005 and December 31, 2004 and for the three and nine months ended September 30, 2005 and 2004 ($ in thousands):

Platinum Underwriters Holdings, Ltd. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited), continued
For the Three and Nine Months Ended September 30, 2005 and 2004

										Non-
Condensed Consolidating Balance Sheet		Platinum				Platinum				guarantor				Consolidating
September 30, 2005		Holdings				Finance				Subsidiaries				Adjustments				Consolidated
ASSETS
Investments:
Fixed maturities available-for-sale, at fair value		$	—				12,652				2,874,317				—			$	2,886,969
Fixed maturity trading securities at fair value			—				—				96,248				—				96,248
Other invested asset			—				—				6,000				—				6,000
Total investments			—				12,652				2,976,565				—				2,989,217
Investment in subsidiaries			1,051,375				428,112				330,235				(1,809,722	)			—
Cash and cash equivalents			176,593				23,184				191,860				—				391,637
Reinsurance assets			—				—				2,706,714				(1,680,789	)			1,025,925
Other assets			2,015				7,581				169,710				(100,000	)			79,306
Total assets		$	1,229,983				471,529				6,375,084				(3,590,511	)		$	4,486,085
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Reinsurance liabilities		$	—				—				4,527,024				(1,680,229	)		$	2,846,795
Debt obligations			—				387,500				—				—				387,500
Other liabilities			2,330				7,521				14,842				(720	)			23,973
Total liabilities			2,330				395,021				4,541,866				(1,680,949	)			3,258,268
Shareholders’ Equity:
Preferred shares			—				—				—				—				—
Common shares			496				—				1,250				(1,250	)			496
Additional paid-in capital			1,092,027				51,533				1,442,134				(1,493,665	)			1,092,029
Unearned share based comp			(2,108	)			—				—				—				(2,108	)
Accumulated other comprehensive income			(25,718	)			(6,728	)			(32,759	)			39,487				(25,718	)
Retained earnings			162,956				31,703				422,593				(454,134	)			163,118
Total shareholders’ equity			1,227,653				76,508				1,833,218				(1,909,562	)			1,227,817
Total liabilities and shareholders’ equity		$	1,229,983				471,529				6,375,084				(3,590,511	)		$	4,486,085

Platinum Underwriters Holdings, Ltd. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited), continued
For the Three and Nine Months Ended September 30, 2005 and 2004

Condensed Consolidating Balance Sheet		Platinum				Platinum				Non-guarantor				Consolidating
December 31, 2004		Holdings				Finance				Subsidiaries				Adjustments				Consolidated
ASSETS
Investments:
Fixed maturities available-for-sale, at fair value		$	—				3,740				2,153,789				—			$	2,157,529
Fixed maturity trading securities at fair value			—				—				82,673				—				82,673
Other invested asset			—				—				6,769				—				6,769
Total investments			—				3,740				2,243,231				—				2,246,971
Investment in subsidiaries			1,135,434				414,105				470,776				(2,020,315	)			—
Cash and cash equivalents			1,945				8,204				199,748				—				209,897
Reinsurance assets			—				—				2,009,245				(1,090,219	)			919,026
Other assets			1,648				1,502				142,951				(100,000	)			46,101
Total assets		$	1,139,027				427,551				5,065,951				(3,210,534	)		$	3,421,995
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Reinsurance liabilities		$	—				—				3,233,233				(1,133,358	)		$	2,099,875
Debt obligations			—				137,500				—				—				137,500
Other liabilities			6,024				928				1,525				43,140				51,617
Total liabilities			6,024				138,428				3,234,758				(1,090,218	)			2,288,992
Shareholders’ Equity:
Preferred shares			—				—				—				—				—
Common shares			430				—				1,250				(1,250	)			430
Additional paid-in capital			911,851				147,238				1,417,032				(1,564,270	)			911,851
Accumulated other comprehensive income			12,252				3,309				17,068				(20,377	)			12,252
Retained earnings			208,470				138,576				395,843				(534,419	)			208,470
Total shareholders’ equity			1,133,003				289,123				1,831,193				(2,120,316	)			1,133,003
Total liabilities and shareholders’ equity		$	1,139,027				427,551				5,065,951				(3,210,534	)		$	3,421,995