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(a)	Included in the hedge funds balance are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

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(a)	Included in the hedge funds balance are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

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(c)	Net realized gains (losses) and change in net unrealized gains (losses)

(a)	Includes change in net unrealized (gains) losses on investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

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(a)	Classification within the fair value hierarchy

•	Level 1 - Fair values are measured based on unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access.

•	Level 2 - Fair values are measured based on quoted prices in active markets for similar assets or liabilities, quoted prices for identical assets or liabilities in inactive markets, or for which significant inputs are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data.

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•	Level 3 - Fair values are measured based on inputs that are unobservable and significant to the overall fair value measurement. The unobservable inputs reflect our own judgments about assumptions where there is little, if any, market activity for that asset or liability that market participants might use.

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(a)	Included in the hedge funds balance are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

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(a)	Included in the hedge funds balance are investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

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(a)	Includes Level 3 investments held by PaCRe in which the Company has an equity interest of 10%. The remaining 90% interest is held by third party investors.

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(a)	Until March 31, 2012, this investment was included in " Other investments" as a level 3 investment in the fair value hierarchy, hence the change in fair value was included in net unrealized (losses) gains on investments.

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(a)	Asset and liability derivatives are classified within other assets and accounts payable and accrued expenses respectively on the Consolidated Balance Sheets.

(a)	Asset and liability derivatives are classified within other assets and accounts payable and accrued expenses respectively on the Consolidated Balance Sheets.

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(a)	Authorized and issued

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(b)	Warrants

(c)	Deferred share units

(d)	Dividends

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(a)	Financing structure and finance expenses

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

(b)

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

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(a)	Includes variable funding note expense and other AlphaCat related fees. Refer to Note 13: "Variable funding notes" for further details.

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

(c)	Junior subordinated deferrable debentures

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(d)	Credit facilities

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

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(ii)	Talbot FAL Facility

(iii)	IPC Syndicated Facility and IPC bi-lateral facility

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(a)	Concentrations of credit risk

(b)	Funds at Lloyd's

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(a)	Ratios are based on net premiums earned.

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

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(a)	Ratios are based on net premiums earned.

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

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

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(a)	Ratios are based on net premiums earned.

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

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(a)	Ratios are based on net premiums earned.

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

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

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

(b)	Represents risks in one geographic zone.

(c)	The Other location non-specific category refers to business for which an analysis of exposure by geographic zone is not applicable such as marine and aerospace risks and can span multiple geographic areas and are not fixed locations in some instances.

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

(b)	Represents risks in one geographic zone.

(c)	The Other location non-specific category refers to business for which an analysis of exposure by geographic zone is not applicable such as marine and aerospace risks and can span multiple geographic areas and are not fixed locations in some instances.

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(a)	Quarterly Dividend

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•	An increase of $17.8 million in finance expenses;

•	An unfavorable movement of $16.4 million in net unrealized gains on investments;

•	An unfavorable movement of $15.4 million in net realized (losses) gains on investments; offset by

•	An increase in underwriting income of $23.7 million.

(a)	There were no notable losses for the three months ended September 30, 2013. Notable losses for the three months ended September 30, 2012 were: U.S. drought and Hurricane Isaac. Excludes the reserve for potential development on 2011 notable loss events.

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•	An unfavorable movement of $132.1 million in net unrealized (losses) gains on investments;

•	An increase in finance expenses of $50.1 million;

•	An unfavorable movement of $23.9 million in net realized (losses) gains; offset by

•	An increase in underwriting income of $132.8 million.

(a)	Notable losses for the nine months ended September 30, 2013 were the European Floods. Notable losses for the nine months ended September 30, 2012 were: Costa Concordia, Cat 67, U.S drought and Hurricane Isaac. Excludes the reserve for potential development on 2011 notable loss events.

(b)

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

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•	Reserve for losses and loss expenses;

•	Premiums;

•	Reinsurance premiums ceded and reinsurance recoverable; and

•	Investment valuation.

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a)	The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

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

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a)	The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

b)

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

c)	Underwriting income for the AlphaCat segment includes noncontrolling interest.

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a)	The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

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a)	The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

a)	The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

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a)	The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

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a)	The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

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a)	The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

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a)	The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

(a)

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

(b)	Net of reinsurance but not net of reinstatement premiums. Total reinstatement premiums for the three months ended September 30, 2013 and 2012 were $0.0 million and $1.6 million, respectively.

(c)	NPE = net premiums earned.

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(a)	The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

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(a)	The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

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(a)	The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

(a)	The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

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(a)	The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

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(a)	The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

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(a)	The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

(a)	The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

(b)	Underwriting income for the AlphaCat segment includes noncontrolling interest.

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(a)	The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

(b)	Net income includes noncontrolling interest from the AlphaCat segment.

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(a)	The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

(a)	The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

(b)	Includes variable funding note expense and other AlphaCat related fees. Please refer to Note 13 "Variable funding notes" in the unaudited Consolidated Financial Statements contained herein for further details.

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(f)	During Q2 2013, the Company concluded that Cat 46, Cat 48 and Gryphon Alpha no longer remain eligible for potential allocations from the 2011 RDE.

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

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

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(c)

Contract complexity, the nature and number of perils arising from these events, limits and sub limits exposed, the quality, flow and timing of information received by the Company, information regarding retrocessional covers, assumptions, both explicit and implicit, regarding future paid and reported loss development patterns, frequency and severity trends, claims settlement practices and potential changes in the legal environment continue to lead to complexity and volatility in the ultimate loss estimates for these events. Given the potential that one or some of the 2011 notable loss events eligible for potential allocation from the 2011 RDE may experience adverse development, rather than all deteriorating proportionately, an addition to the 2011 RDE of $27,926 was made during the year ended December 31, 2012.

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

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(a)	The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

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(a)	The results of operations for Flagstone are consolidated only from the November 30, 2012 date of acquisition.

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(a)	The A.M. Best ratings were most recently affirmed on February 7, 2013. The Flagstone Reassurance Suisse, SA rating was raised from A- to A on September 26, 2013.

(b)	The S&P ratings were most recently affirmed on August 30, 2012

(c)	All Moody’s ratings were most recently affirmed on September 16, 2013

(d)	All Fitch ratings were most recently affirmed on October 18, 2013

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

(b)

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

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•	unpredictability and severity of catastrophic events;

•	our ability to obtain and maintain ratings, which may affect our ability to raise additional equity or debt financings;

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

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

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

•	adequacy of the Company’s loss reserves;

•	continued availability of capital and financing;

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

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

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

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

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

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

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

•

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

•	the effect on the Company’s investment portfolio of changing financial market conditions including inflation, interest rates, liquidity and the possible downgrade of U.S. securities by credit rating agencies and the resulting effect on the value of securities in the Company’s investment portfolio, as well as other factors;

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

•	availability and cost of reinsurance and retrocession coverage;

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

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

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

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

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

•

the other factors set forth under Part I Item 1A "Risk Factors" and under Part II Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the other sections of the Company's Annual Report on Form 10-K/A for the year ended December 31, 2012, as well as the risk and other factors set forth in the Company's other filings with the SEC, as well as management's response to any of the aforementioned factors.

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•	interest rate risk;

•	foreign currency risk;

•	credit risk;

•	liquidity risk; and

•	effects of inflation.

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