Edgar Filing: PLATINUM UNDERWRITERS HOLDINGS LTD

ptp10q_thirdquarter2012.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2012

	OR

	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from __________ to __________

Commission File Number: 001-31341

Platinum Underwriters Holdings, Ltd.

(Exact name of registrant as specified in its charter)

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

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

(441) 295-7195

(Registrant's telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes X No ___

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	X		Accelerated filer
Non-accelerated filer		(Do not check if a smaller reporting company)	Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ___ No X

The registrant had 32,781,828 common shares, par value $0.01 per share, outstanding as of October 18, 2012.

PLATINUM UNDERWRITERS HOLDINGS, LTD.

QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2012

TABLE OF CONTENTS

		Page

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements
	Consolidated Balance Sheets as of September 30, 2012 (Unaudited) and December 31, 2011	1
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2012 and 2011 (Unaudited)	2
	Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2012 and 2011 (Unaudited)	3
	Consolidated Statements of Shareholders’ Equity for the Nine Months Ended September 30, 2012 and 2011 (Unaudited)	4
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2012 and 2011 (Unaudited)	5
	Notes to Consolidated Financial Statements for the Three and Nine Months Ended September 30, 2012 and 2011 (Unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	43
Item 4.	Controls and Procedures	44

PART II – OTHER INFORMATION

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 6.	Exhibits	44
SIGNATURES		45

PART I - FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Consolidated Balance Sheets

September 30, 2012 and December 31, 2011

($ in thousands, except share data)

	(Unaudited)
	September 30,		December 31,
	2012		2011
ASSETS
Investments:
Fixed maturity available-for-sale securities at fair value	$	2,177,038	$	2,663,574
(amortized cost - $2,002,622 and $2,494,710, respectively)
Fixed maturity trading securities at fair value		116,056		125,126
(amortized cost - $106,578 and $115,156, respectively)
Short-term investments		165,741		588,834
Total investments		2,458,835		3,377,534
Cash and cash equivalents		1,662,679		792,510
Accrued investment income		23,856		29,440
Reinsurance premiums receivable		150,775		159,387
Reinsurance recoverable on unpaid and paid losses and loss adjustment expenses		4,273		6,302
Prepaid reinsurance premiums		62		8,360
Funds held by ceding companies		113,310		94,546
Deferred acquisition costs		29,189		28,779
Deferred tax assets		25,669		31,613
Other assets		24,274		23,140
Total assets	$	4,492,922	$	4,551,611

LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities
Unpaid losses and loss adjustment expenses	$	2,160,154	$	2,389,614
Unearned premiums		122,150		121,164
Debt obligations		250,000		250,000
Commissions payable		67,489		62,773
Other liabilities		103,183		37,201
Total liabilities	$	2,702,976	$	2,860,752

Shareholders’ Equity
Common shares, $0.01 par value, 200,000,000 shares authorized,	$	328	$	355
32,781,828 and 35,526,400 shares issued and outstanding, respectively
Additional paid-in capital		211,546		313,730
Accumulated other comprehensive income		150,387		146,635
Retained earnings		1,427,685		1,230,139
Total shareholders' equity	$	1,789,946	$	1,690,859

Total liabilities and shareholders' equity	$	4,492,922	$	4,551,611

See accompanying notes to consolidated financial statements.

- 1 -

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Consolidated Statements of Operations (Unaudited)

For the Three and Nine Months Ended September 30, 2012 and 2011

($ in thousands, except per share data)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Revenue:
Net premiums earned	$	138,588		$	166,813		$	421,875		$	522,130
Net investment income		23,209			29,762			77,916			96,105
Net realized gains on investments		22,982			7,498			70,299			3,216
Total other-than-temporary impairments		354			(8,315	)		263			(7,815	)
Portion of impairment losses recognized in other comprehensive income		(1,053	)		3,864			(3,145	)		191
Net impairment losses on investments		(699	)		(4,451	)		(2,882	)		(7,624	)
Other income (expense)		(96	)		(198	)		(766	)		838
Total revenue		183,984			199,424			566,442			614,665

Expenses:
Net losses and loss adjustment expenses		45,117			201,453			191,430			680,405
Net acquisition expenses		26,168			30,208			87,025			98,273
Net changes in fair value of derivatives		-			4,546			-			5,294
Operating expenses		19,966			14,755			56,645			49,011
Net foreign currency exchange losses (gains)		541			(982	)		763			(179	)
Interest expense		4,775			4,769			14,321			14,302
Total expenses		96,567			254,749			350,184			847,106

Income (loss) before income taxes		87,417			(55,325	)		216,258			(232,441	)
Income tax expense (benefit)		2,553			(1,790	)		10,575			(1,313	)
Net income (loss)	$	84,864		$	(53,535	)	$	205,683		$	(231,128	)

Earnings (loss) per common share:
Basic earnings (loss) per common share	$	2.56		$	(1.43	)	$	6.02		$	(6.18	)
Diluted earnings (loss) per common share	$	2.54		$	(1.43	)	$	5.98		$	(6.18	)

Shareholder dividends:
Common shareholder dividends declared	$	2,630		$	2,975		$	8,137		$	8,908
Dividends declared per common share	$	0.08		$	0.08		$	0.24		$	0.24

See accompanying notes to consolidated financial statements.

- 2 -

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

For the Three and Nine Months Ended September 30, 2012 and 2011

($ in thousands)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011

Net income (loss)	$	84,864		$	(53,535	)	$	205,683		$	(231,128	)

Other comprehensive income, before deferred tax:
Net change in unrealized gains and losses on available-for-sale securities arising during the period		24,565			90,998			73,567			161,751
Reclassification adjustments:
Net realized gains on available-for-sale investments		(22,710	)		(3,890	)		(70,607	)		(854	)
Net impairment losses on investments		699			4,451			2,882			7,624
Other comprehensive income, before deferred tax		2,554			91,559			5,842			168,521

Deferred tax on components of other comprehensive income:
Net change in unrealized gains and losses on available-for-sale securities arising during the period		(3,162	)		(5,662	)		(6,045	)		(16,105	)
Reclassification adjustments:
Net realized gains on available-for-sale investments		2,466			1,311			4,220			(607	)
Net impairment losses on investments		(33	)		(404	)		(265	)		(483	)
Deferred income tax expense		(729	)		(4,755	)		(2,090	)		(17,195	)

Other comprehensive income, net of deferred tax:
Net change in unrealized gains and losses on available-for-sale securities arising during the period		21,403			85,336			67,522			145,646
Reclassification adjustments:
Net realized gains on available-for-sale investments		(20,244	)		(2,579	)		(66,387	)		(1,461	)
Net impairment losses on investments		666			4,047			2,617			7,141
Other comprehensive income, net of deferred tax		1,825			86,804			3,752			151,326

Comprehensive income (loss)	$	86,689		$	33,269		$	209,435		$	(79,802	)

See accompanying notes to consolidated financial statements.

- 3 -

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Consolidated Statements of Shareholders’ Equity (Unaudited)

For the Nine Months Ended September 30, 2012 and 2011

($ in thousands)

	2012			2011
Common shares:
Balances at beginning of period	$	355		$	377
Exercise of common share options		1			-
Issuance (cancelation) of common shares		-			-
Settlement of equity awards		2			4
Repurchase of common shares		(30	)		(8	)
Balances at end of period		328			373

Additional paid-in capital:
Balances at beginning of period		313,730			453,619
Exercise of common share options		2,554			1,222
Issuance (cancelation) of common shares		(176	)		2
Settlement of equity awards		(1,128	)		(2,763	)
Repurchase of common shares		(109,603	)		(33,899	)
Purchase of common share options		-			(47,900	)
Share based compensation		5,802			3,127
Income tax benefit from share based compensation		367			382
Balances at end of period		211,546			373,790

Accumulated other comprehensive income (loss):
Balances at beginning of period		146,635			(24,488	)
Net change in unrealized gains and losses on available-for-sale securities, net of deferred taxes:
Change in unrealized gains and losses		794			151,012
Non-credit component of impairment losses		2,958			314
Balances at end of period		150,387			126,838

Retained earnings:
Balances at beginning of period		1,230,139			1,465,947
Net income (loss)		205,683			(231,128	)
Common share dividends		(8,137	)		(8,908	)
Balances at end of period		1,427,685			1,225,911
Total shareholders' equity	$	1,789,946		$	1,726,912

See accompanying notes to consolidated financial statements.

- 4 -

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)

For the Nine Months Ended September 30, 2012 and 2011

($ in thousands)

	2012			2011
Operating Activities:
Net income (loss)	$	205,683		$	(231,128	)
Adjustments to reconcile net income (loss) to cash provided by (used in) operations:
Depreciation and amortization		4,555			3,031
Net realized gains on investments		(70,299	)		(3,216	)
Net impairment losses on investments		2,882			7,624
Net foreign currency exchange losses (gains)		763			(179	)
Share-based compensation		6,805			3,127
Deferred income tax expense (benefit)		3,853			(1,088	)
Net fixed maturity trading securities activities		9,877			251
Changes in assets and liabilities:
Decrease (increase) in accrued investment income		5,761			(1,601	)
Decrease in reinsurance premiums receivable		8,577			11,092
Increase in funds held by ceding companies		(18,790	)		(8,529	)
Decrease (increase) in deferred acquisition costs		(403	)		5,157
Increase (decrease) in net unpaid and paid losses and loss adjustment expenses		(239,970	)		222,717
Increase (decrease) in net unearned premiums		9,224			(24,334	)
Increase (decrease) in commissions payable		4,713			(3,042	)
Changes in other assets and liabilities		47,800			58,264
Net cash provided by (used in) operating activities		(18,969	)		38,146

Investing Activities:
Proceeds from the sales of:
Fixed maturity available-for-sale securities		558,848			466,759
Fixed maturity trading securities		-			20,413
Short-term investments		36,581			27,995
Investment-related derivatives		-			3,094
Proceeds from the maturities or paydowns of:
Fixed maturity available-for-sale securities		213,503			100,264
Fixed maturity trading securities		-			5,000
Short-term investments		663,011			234,946
Acquisitions of:
Fixed maturity available-for-sale securities		(202,729	)		(35,783	)
Short-term investments		(266,723	)		(630,203	)
Investment-related derivatives		-			(9,548	)
Net cash provided by (used in) investing activities		1,002,491			182,937

Financing Activities:
Dividends paid to common shareholders		(8,137	)		(8,908	)
Repurchase of common shares		(109,633	)		(33,907	)
Purchase of common share options		-			(47,900	)
Proceeds from exercise of common share options		2,554			1,223
Net cash provided by (used in) financing activities		(115,216	)		(89,492	)

Effect of foreign currency exchange rate changes on cash		1,863			7,837
Net increase (decrease) in cash and cash equivalents		870,169			139,428
Cash and cash equivalents at beginning of period		792,510			987,877
Cash and cash equivalents at end of period	$	1,662,679		$	1,127,305

Supplemental disclosures of cash flow information:
Income taxes paid	$	14,508		$	749
Interest paid	$	9,375		$	9,375

See accompanying notes to consolidated financial statements.

- 5 -

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

For the Three and Nine Months Ended September 30, 2012 and 2011

1.	Basis of Presentation and Significant Accounting Policies

Basis of Presentation and Consolidation

Platinum Underwriters Holdings, Ltd. (“Platinum Holdings”) is a holding company domiciled in Bermuda. Through our reinsurance subsidiaries, we provide property and marine, casualty and finite risk reinsurance coverages to a diverse clientele of insurers and select reinsurers on a worldwide basis.

Platinum Holdings and its consolidated subsidiaries (collectively, the “Company”) include Platinum Holdings, Platinum Underwriters Bermuda, Ltd. (“Platinum Bermuda”), Platinum Underwriters Reinsurance, Inc. (“Platinum US”), Platinum Regency Holdings (“Platinum Regency”), Platinum Underwriters Finance, Inc. (“Platinum Finance”) and Platinum Administrative Services, Inc. The terms “we,” “us,” and “our” refer to the Company, unless the context otherwise indicates.

We operate through two licensed reinsurance subsidiaries, Platinum Bermuda, a Bermuda reinsurance company, and Platinum US, a U.S. reinsurance company. Platinum Regency is an intermediate holding company based in Ireland and a wholly owned subsidiary of Platinum Holdings. Platinum Finance is an intermediate holding company based in the U.S. and a wholly owned subsidiary of Platinum Regency. Platinum Bermuda is a wholly owned subsidiary of Platinum Holdings and Platinum US is a wholly owned subsidiary of Platinum Finance. Platinum Administrative Services, Inc. is a subsidiary of Platinum Finance that provides administrative support services to the Company.

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements. All material inter-company transactions and accounts have been eliminated in preparing these consolidated financial statements. The consolidated financial statements included in this report as of September 30, 2012 and for the three and nine months ended September 30, 2012 and 2011 are unaudited and include all adjustments consisting of normal recurring items that management considers necessary for a fair presentation under U.S. GAAP. These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2011.

The preparation of financial statements requires us 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 may differ materially from these estimates. The major estimates used in the preparation of the Company's consolidated financial statements, and therefore considered to be critical accounting estimates, include, but are not limited to, premiums written and earned, unpaid losses and loss adjustment expenses (“LAE”), reinsurance recoverable, valuation of investments and income taxes. In addition, estimates are used to evaluate risk transfer for assumed and ceded reinsurance transactions. Results of changes in estimates are reflected in results of operations in the period in which the change is made. The results of operations for any interim period are not necessarily indicative of results for the full year.

Recently Issued Accounting Standards

In December 2011, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update (“ASU”) No. 2011-12, “Comprehensive Income: Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05” (“ASU 2011-12”). ASU 2011-12 defers the presentation on the face of the financial statements of the effects of reclassifications of the components of net income and other comprehensive income out of accumulated other comprehensive income for all periods. None of the other requirements of ASU 2011-05, “Presentation of Comprehensive Income” (“ASU 2011-05”) issued in June 2011 are affected by ASU 2011-12. ASU 2011-05 requires entities to report components of comprehensive income in either a continuous statement of comprehensive income or two separate but consecutive statements. Under the continuous statement approach, the statement would include the components and total of net income, the components and total of other comprehensive income and the total of comprehensive income. Under the two statement approach, the first statement would include the components and total of net income and the second statement would include the components and total of other comprehensive income and the total of comprehensive income. ASU 2011-05 does not change the items that must be reported in other comprehensive income. ASU 2011-05 is effective retrospectively for interim and annual periods beginning after December 15, 2011. We adopted the guidance as of January 1, 2012 and included a separate statement of comprehensive income (loss) in our financial statements. The separate statement of comprehensive income (loss) incorporated the effects of reclassification adjustments recognized in our statement of operations.

In May 2011, the FASB issued ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirement in U.S. GAAP and IFRSs” (“ASU 2011-04”). ASU 2011-04 does not extend the use of fair value but, rather, provides guidance about how fair value should be applied where it already is required and permitted under U.S. GAAP or International Financial Reporting Standards (“IFRS”). For U.S. GAAP, most of the changes are clarifications of existing guidance or wording changes to align with IFRS. ASU 2011-04 is effective on a prospective basis for interim and annual periods beginning after December 15, 2011. In the period of adoption, a reporting entity is required to disclose a change, if any, in valuation technique and related inputs that result from applying ASU 2011-04 and to quantify the total effect, if practicable. We adopted the guidance as of January 1, 2012 and there were no changes in valuation technique or related inputs. Additional disclosures required under ASU 2011-04 have been reflected in Note 3.

In October 2010, the FASB issued ASU No. 2010-26, “Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts” (“ASU 2010-26”). ASU 2010-26 modifies the types of costs that may be deferred, allowing insurance companies to only defer costs directly related to successful acquisition of new or renewal contracts. These costs include incremental direct costs of successful contracts, the portion of employees’ salaries and benefits related to time spent on acquisition activities for successful contracts and other costs incurred in the acquisition of contracts. Additional disclosure of the type of acquisition costs capitalized is also required. ASU 2010-26 is effective on a prospective basis for interim and annual reporting periods beginning after December 15, 2011. We adopted the guidance as of January 1, 2012 and there was no impact on our financial statements.

- 6 -

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited), continued

For the Three and Nine Months Ended September 30, 2012 and 2011

2.	Investments

Fixed Maturity Available-for-sale Securities

The following table sets forth our fixed maturity available-for-sale securities as of September 30, 2012 and December 31, 2011 ($ in thousands):

			Included in Accumulated Other Comprehensive Income
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value		Non-credit portion of OTTI (1)
September 30, 2012:
U.S. Government	$	4,650	$	341	$	-	$	4,991	$	-
U.S. Government agencies		10,003		287		-		10,290		-
Municipal bonds		1,141,058		140,734		8		1,281,784		-
Non-U.S. governments		92,953		1,829		21		94,761		-
Corporate bonds		300,943		21,004		526		321,421		-
Commercial mortgage-backed securities		163,169		14,113		633		176,649		160
Residential mortgage-backed securities		267,873		3,149		5,471		265,551		4,171
Asset-backed securities		21,973		791		1,173		21,591		1,173
Total fixed maturity available-for-sale securities	$	2,002,622	$	182,248	$	7,832	$	2,177,038	$	5,504

December 31, 2011:
U.S. Government	$	4,702	$	381	$	-	$	5,083	$	-
U.S. Government agencies		100,000		259		-		100,259		-
Municipal bonds		1,510,658		150,280		178		1,660,760		-
Non-U.S. governments		69,992		1,929		655		71,266		-
Corporate bonds		329,218		21,093		763		349,548		-
Commercial mortgage-backed securities		195,309		11,884		2,584		204,609		196
Residential mortgage-backed securities		261,187		2,866		12,426		251,627		8,397
Asset-backed securities		23,644		489		3,711		20,422		2,821
Total fixed maturity available-for-sale securities	$	2,494,710	$	189,181	$	20,317	$	2,663,574	$	11,414

(1)

The non-credit portion of other than temporary impairments ("OTTI") represents the amount of unrealized losses on impaired securities that were not realized in earnings as of the reporting date. These unrealized losses are included in gross unrealized losses as of September 30, 2012 and December 31, 2011.

Our fixed maturity available-for-sale securities are U.S. dollar denominated securities. Non-U.S. governments consist primarily of securities issued by governments and financial institutions that are explicitly guaranteed by the respective government. At December 31, 2011, U.S. Government agencies consisted of securities issued by financial institutions under the Temporary Liquidity Guarantee Program guaranteed by the Federal Deposit Insurance Corporation.

Fixed Maturity Trading Securities

The following table sets forth the fair value of our fixed maturity trading securities as of September 30, 2012 and December 31, 2011 ($ in thousands):

	September 30, 2012		December 31, 2011
Non-U.S. dollar denominated securities:
Non-U.S. governments	$	116,056	$	125,126
Total fixed maturity trading securities	$	116,056	$	125,126

- 7 -

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited), continued

For the Three and Nine Months Ended September 30, 2012 and 2011

Our non-U.S. government fixed maturity trading securities are non-U.S. dollar denominated investments that, along with our non-U.S. government holdings of short-term trading securities and non-U.S. dollar cash and cash equivalents, are held for the purposes of hedging our non-U.S. dollar foreign currency reinsurance liabilities.

In prior periods, we have used insurance-linked securities to actively manage our exposure to catastrophe loss. We elected to record our investments in insurance-linked securities using the fair value option attributes of FASB Accounting Standards Codification ("ASC") 825, "Financial Instruments" ("ASC 825"), and recorded these in fixed maturity trading securities. There were mark-to-market adjustments recorded under ASC 825 of $0.1 million of net realized gains on investments for the three months ended September 30, 2011 and $1.2 million of net realized losses on investments for the nine months ended September 30, 2011.

At acquisition, we determine our trading intent in the near term of our fixed maturity trading securities accounted for in accordance with ASC 825. If we do not intend to sell these securities in the near term, the purchases and sales are included in investing activities in our consolidated statements of cash flows, otherwise they are included in operating activities. For the nine months ended September 30, 2011, there were proceeds from sales and maturities of $20.4 million and $5.0 million, respectively, and no purchases of trading securities accounted for in accordance with ASC 825 that were included in investing activities in the statements of cash flows.

Maturities

The following table sets forth the amortized cost and fair value of our fixed maturity available-for-sale and trading securities by stated maturity as of September 30, 2012 ($ in thousands):

	Amortized Cost		Fair Value
Due in one year or less	$	112,587	$	113,834
Due from one to five years		420,818		448,884
Due from five to ten years		557,221		614,933
Due in ten or more years		565,559		651,652
Mortgage-backed and asset-backed securities		453,015		463,791
Total	$	2,109,200	$	2,293,094

The actual maturities of our fixed maturity available-for-sale and trading securities could differ from stated maturities due to call or prepayment provisions.

Short-term Investments

The following table sets forth the fair value of our short-term investments as of September 30, 2012 and December 31, 2011 ($ in thousands):

	September 30, 2012		December 31, 2011
Available-for-sale:
U.S. Government	$	49,249	$	322,320
U.S. Government agencies		-		85,389
Trading:
Non-U.S. governments		116,492		181,125
Total short-term investments	$	165,741	$	588,834

Our U.S. dollar denominated short-term investments are accounted for as available-for-sale and our non-U.S. dollar denominated short-term investments are accounted for in accordance with the fair value option attributes of ASC 825. The mark-to-market adjustments on short-term investments recognized under ASC 825 contributed no net realized gains or losses on investments in the three months ended September 30, 2012 and less than $0.1 million of net realized losses on investments in the nine months ended September 30, 2012. The mark-to-market adjustments on short-term investments contributed $0.1 million of net realized gains on investments for both the three and nine months ended September 30, 2011.

For the nine months ended September 30, 2012, we had purchases of $204.3 million, proceeds from maturities of $242.0 million and proceeds from sales of $36.6 million from non-U.S. dollar denominated short-term investments accounted for in accordance with ASC 825 that were included in investing activities in the statements of cash flows. For the nine months ended September 30, 2011, we had purchases of $165.5 million, proceeds from maturities of $93.6 million and no proceeds from sales from non-U.S. dollar denominated short-term investments accounted for in accordance with ASC 825 that were included in investing activities in the statements of cash flows.

- 8 -

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited), continued

For the Three and Nine Months Ended September 30, 2012 and 2011

Other-Than-Temporary Impairments

We analyze the creditworthiness of our available-for-sale securities by reviewing various performance metrics of the issuer, including financial condition, credit ratings and other public information. We determined that none of our government bonds, municipal bonds or corporate bonds were other-than-temporarily impaired for the three and nine months ended September 30, 2012 and 2011.

The following table sets forth the net impairment losses on investments for the three and nine months ended September 30, 2012 and 2011 ($ in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2012		2011		2012		2011
Commercial mortgage-backed securities	$	-	$	-	$	30	$	-
Non-agency residential mortgage-backed securities		693		3,923		2,839		6,310
Sub-prime asset-backed securities		6		528		13		1,314
Net impairment losses on investments	$	699	$	4,451	$	2,882	$	7,624

We analyze our commercial mortgage-backed securities (“CMBS”) on a periodic basis using default loss models based on the performance of the underlying loans. Performance metrics include delinquencies, defaults, foreclosures, debt-service-coverage ratios and cumulative losses incurred. The expected losses for a mortgage pool are compared with the current level of credit support, which generally represents the point at which our security would experience losses. We evaluate projected cash flows as well as other factors in order to determine if a credit impairment has occurred. As of September 30, 2012, the single largest unrealized loss within our CMBS portfolio was $0.3 million related to a security with an amortized cost of $3.0 million.

Residential mortgage-backed securities (“RMBS”) include U.S. Government agency RMBS and non-agency RMBS. Securities with underlying sub-prime mortgages as collateral are included in asset-backed securities (“ABS”). We analyze our non-agency RMBS and sub-prime ABS on a periodic basis using default loss models based on the performance of the underlying loans. Performance metrics include delinquencies, defaults, foreclosures, prepayment speeds and cumulative losses incurred. The expected losses for a mortgage pool are compared with the current level of credit support, which generally represents the point at which our security would experience losses. We evaluate projected cash flows as well as other factors in order to determine if a credit impairment has occurred. As of September 30, 2012, the single largest unrealized loss within our RMBS portfolio was $1.5 million related to a non-agency RMBS security with an amortized cost of $2.0 million. As of September 30, 2012, the single largest unrealized loss within our sub-prime ABS portfolio was $0.6 million related to a security with an amortized cost of $1.0 million.

The following table sets forth a summary of the cumulative credit losses recognized on our fixed maturity available-for-sale securities for the three and nine months ended September 30, 2012 and 2011 ($ in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Balance, beginning of period	$	57,874		$	47,872		$	61,841		$	48,845
Credit losses on securities not previously impaired		42			1,509			42			1,529
Additional credit losses on securities previously impaired		657			2,942			2,840			6,095
Reduction for paydowns and securities sold		(3,447	)		(2,160	)		(9,168	)		(6,061	)
Reduction for increases in cash flows expected to be collected		(309	)		(175	)		(738	)		(420	)
Balance, end of period	$	54,817		$	49,988		$	54,817		$	49,988

As of September 30, 2012, total cumulative credit losses were related to CMBS, non-agency RMBS and sub-prime ABS. The cumulative credit losses we recorded on CMBS of $3.7 million were on four securities issued from 2006 to 2007. As of September 30, 2012, 7.7% of the mortgages backing these securities were 90 days or more past due and 0.9% of the mortgages had incurred cumulative losses. For these securities, the expected losses for the underlying mortgages were greater than the remaining average credit support of 20.4%. The cumulative credit losses we recorded on non-agency RMBS and sub-prime ABS of $51.1 million were on twenty-nine securities issued from 2004 to 2007. As of September 30, 2012, 14.8% of the mortgages backing these securities were 90 days or more past due and 5.6% of the mortgages had incurred cumulative losses. For these securities, the expected losses for the underlying mortgages were greater than the remaining average credit support of 6.0%.

- 9 -

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited), continued

For the Three and Nine Months Ended September 30, 2012 and 2011

Unrealized Losses

The following table sets forth our gross unrealized losses on securities classified as fixed maturity available-for-sale aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position. The amounts only relate to securities in an unrealized loss position as of September 30, 2012 and December 31, 2011 ($ in thousands):

	September 30, 2012				December 31, 2011
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Less than twelve months:
Municipal bonds	$	9,595	$	1	$	4,751	$	131
Non-U.S. governments		-		-		9,988		29
Corporate bonds		1,956		41		12,526		763
Commercial mortgage-backed securities		936		160		19,797		1,047
Residential mortgage-backed securities		73		4		131,574		2,112
Asset-backed securities		56		3		580		84
Total	$	12,616	$	207	$	179,216	$	4,166

Twelve months or more:
Municipal bonds	$	3,014	$	7	$	3,002	$	47
Non-U.S. governments		4,978		21		4,373		626
Corporate bonds		5,713		485		-		-
Commercial mortgage-backed securities		7,238		473		6,171		1,537
Residential mortgage-backed securities		31,567		5,467		43,704		10,314
Asset-backed securities		4,925		1,170		16,854		3,627
Total	$	57,435	$	7,624	$	74,104	$	16,151

Total unrealized losses:
Municipal bonds	$	12,609	$	8	$	7,753	$	178
Non-U.S. governments		4,978		21		14,361		655
Corporate bonds		7,669		526		12,526		763
Commercial mortgage-backed securities		8,174		633		25,968		2,584
Residential mortgage-backed securities		31,640		5,471		175,278		12,426
Asset-backed securities		4,981		1,173		17,434		3,711
Total	$	70,051	$	7,832	$	253,320	$	20,317

We believe that the gross unrealized losses in our fixed maturity available-for-sale securities portfolio represent temporary declines in fair value. We believe that the unrealized losses are not necessarily predictive of ultimate performance and that the provisions we have made for net impairment losses are adequate. However, economic conditions may deteriorate more than expected and may adversely affect the expected cash flows of our securities, which in turn may lead to impairment losses being recorded in future periods. Conversely, economic conditions may improve more than expected and favorably increase the expected cash flows of our impaired securities, which would be earned through net investment income over the remaining life of the security.

Net Investment Income

The following table sets forth our net investment income for the three and nine months ended September 30, 2012 and 2011 ($ in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Fixed maturity securities	$	22,022		$	28,399		$	73,892		$	92,811
Short-term investments and cash and cash equivalents		1,547			2,032			5,358			5,622
Funds held		684			406			1,938			1,019
Subtotal		24,253			30,837			81,188			99,452
Investment expenses		(1,044	)		(1,075	)		(3,272	)		(3,347	)
Net investment income	$	23,209		$	29,762		$	77,916		$	96,105

- 10 -

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited), continued

For the Three and Nine Months Ended September 30, 2012 and 2011

Net Realized Gains on Investments

The following table sets forth our net realized gains on investments for the three and nine months ended September 30, 2012 and 2011 ($ in thousands):

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2012		2011			2012			2011
Gross realized gains on the sale of investments	$	22,979	$	3,892		$	70,920		$	8,313
Gross realized losses on the sale of investments		-		(2	)		(1	)		(6,899	)
Net realized gains on the sale of investments		22,979		3,890			70,919			1,414
Mark-to-market adjustments on trading securities		3		3,608			(620	)		1,802
Net realized gains on investments	$	22,982	$	7,498		$	70,299		$	3,216

3.	Fair Value Measurements

The accounting guidance relating to fair value measurements addresses how a company should measure fair value when required to use a fair value measure for recognition or disclosure purposes. The fair values of our financial assets and liabilities addressed by this guidance are determined primarily through the use of observable inputs. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from external independent sources. Unobservable inputs reflect management’s assumptions about what market participants’ assumptions would be in pricing the asset or liability based on the best information available. We classify our financial assets and liabilities in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement. This classification requires judgment in assessing the market and pricing methodologies for a particular security. The fair value hierarchy is comprised of the following three levels:

Level 1:

Valuations are based on unadjusted quoted prices in active markets for identical financial assets or liabilities;

Level 2:

Valuations are based on prices obtained from independent index providers, pricing vendors or broker-dealers using observable inputs for financial assets and liabilities; and

Level 3:

Valuations are based on unobservable inputs for assets and liabilities where there is little or no market activity. Management’s assumptions and/or internal valuation pricing models may be used to determine the fair value of financial assets or liabilities.

The following table presents the fair value hierarchy for those financial assets and liabilities measured at fair value on a recurring basis by the Company as of September 30, 2012 and December 31, 2011 ($ in thousands):

			Fair Value Measurement Using:
	Total		Level 1		Level 2		Level 3
September 30, 2012:
Investments:
U.S. Government	$	4,991	$	4,991	$	-	$	-
U.S. Government agencies		10,290		-		10,290		-
Municipal bonds		1,281,782		-		1,281,782		-
Non-U.S. governments		210,818		56,820		153,998		-
Corporate bonds		321,421		-		321,421		-
Commercial mortgage-backed securities		176,649		-		176,649		-
Residential mortgage-backed securities		265,552		-		257,345		8,207
Asset-backed securities		21,591		-		15,522		6,069
Short-term investments		165,741		-		165,741		-
Total	$	2,458,835	$	61,811	$	2,382,748	$	14,276

December 31, 2011:
Investments:
U.S. Government	$	5,083	$	5,083	$	-	$	-
U.S. Government agencies		100,259		-		100,259		-
Municipal bonds		1,660,760		-		1,660,760		-
Non-U.S. governments		196,392		55,561		140,831		-
Corporate bonds		349,548		-		349,548		-
Commercial mortgage-backed securities		204,609		-		204,609		-
Residential mortgage-backed securities		251,627		-		243,481		8,146
Asset-backed securities		20,422		-		18,555		1,867
Short-term investments		588,834		34,894		553,940		-
Total	$	3,377,534	$	95,538	$	3,271,983	$	10,013

- 11 -

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited), continued

For the Three and Nine Months Ended September 30, 2012 and 2011

The fair values of our fixed maturity securities and short-term investments are generally based on prices obtained from independent index providers, pricing vendors or broker-dealers using observable inputs. Fixed maturity securities and short-term investments are generally valued using the market approach. The prices we obtain from third party pricing sources are validated by performing price comparisons against multiple pricing sources if available, periodic back-testing of sales to the previously reported fair value, an in-depth review of specific securities when evaluating stale prices, large price movements and other factors, as well as other validation procedures. We also continuously monitor market data that relates to our investment portfolio and review pricing documentation that describes the methodologies used by various pricing services. If we determine that a price appears unreasonable, we investigate and assess whether the price should be adjusted.

The following table describes the valuation techniques, assumptions, and significant inputs used to determine the fair value of our financial assets and liabilities as well as their classification pursuant to the fair value hierarchy:

U.S. Government	The fair values of U.S. Government securities were based on quoted prices in active markets for identical assets. The fair value measurements were classified as Level 1.

U.S Government agencies	Our U.S. Government agencies portfolio consisted of securities issued by financial institutions guaranteed by the Federal Deposit Insurance Corporation. The observable inputs used to price these securities may include the spread above the risk-free yield curve, reported trades and broker-dealer quotes. The fair value measurements were classified as Level 2.

Municipal bonds	The fair values of municipal bonds were determined based on observable inputs that may include the spread above the risk-free yield curve, reported trades, broker-dealer quotes, benchmark securities, bids, credit risks and economic indicators. The fair value measurements were classified as Level 2.

Non-U.S. governments	Our non-U.S. government bond portfolio consisted of securities issued primarily by governments, provinces, agencies and supranationals as well as debt issued by financial institutions that is guaranteed by non-U.S. governments. The fair values of non-U.S. government securities were determined based on observable inputs that may include the spread above the risk-free yield curve, reported trades and broker-dealer quotes. The fair value measurements were classified as Level 1 or Level 2.

Corporate bonds	The observable inputs used to price corporate issues may include the spread above the risk-free yield curve, reported trades, broker-dealer quotes, benchmark securities, bids, credit risks and industry and economic indicators. The fair value measurements were classified as Level 2.

Commercial mortgage-backed securities	The fair values of CMBS were determined based on observable inputs that may include the spread above the risk-free yield curve, reported trades, broker-dealer quotes, bids, security cash flows and structures, delinquencies, loss severities and default rates. The fair value measurements were classified as Level 2.

Residential mortgage-backed securities	Our RMBS portfolio was comprised of securities issued by U.S. Government agencies and by non-agency institutions. The observable inputs used to price U.S. Government agency RMBS may include the spread above the risk-free yield curve, reported trades, broker-dealer quotes, bids, loan level information and prepayment speeds. The observable inputs used to price non-agency RMBS may include the spread above the risk-free yield curve, reported trades, broker-dealer quotes, bids, security cash flows and structures, prepayment speeds, delinquencies, loss severities and default rates. The fair value measurements were classified as Level 2 or Level 3.

Asset-backed securities	The fair values of ABS were determined based on observable inputs that may include the spread above the risk-free yield curve, reported trades, broker-dealer quotes, bids, security cash flows and structures, type of collateral, prepayment speeds, delinquencies, loss severities and default rates. The fair value measurements were classified as Level 2 or Level 3.

Short-term investments	Short-term investments were carried at fair value based on observable inputs or carried at amortized cost, which approximates fair value. The fair value measurements were classified as Level 1 or Level 2.

Derivative instruments	During 2011, we held derivative instruments. Our derivative instruments included interest rate options, commodity options and other derivative instruments. See Note 4 for additional disclosure on our derivative instruments. Our interest rate and commodity options were exchange traded and the fair values were based on quoted prices in active markets for identical assets. The fair values were classified as Level 1. The fair value of our other derivative instrument was determined by management primarily using unobservable inputs through the application of our own assumptions and internal valuation pricing models. The fair value was classified as Level 3.

The fair value measurements of our non-agency RMBS and sub-prime ABS classified as Level 3 used significant unobservable inputs that include prepayment rates, probability of default, and loss severity in the event of default. The prices we obtained to determine these measurements were based upon unadjusted third party pricing sources.

The fair value measurement of our other derivative instrument classified as Level 3 used significant unobservable inputs through the application of our own assumptions and internal valuation pricing models. Unobservable inputs used in the internal valuation pricing model included the unpaid contract premiums, probability of losses triggered under the covered perils for first and second events, the remaining time to the end of the annual contract period and the seasonality of risks. Significant increases or decreases in any of these inputs in isolation may result in a significantly lower or higher fair value measurement.

- 12 -

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited), continued

For the Three and Nine Months Ended September 30, 2012 and 2011

Level 3 Financial Assets and Liabilities

The following tables reconcile the beginning and ending balance for our Level 3 financial assets and liabilities measured at fair value on a recurring basis for the three months ended September 30, 2012 and 2011 ($ in thousands):

	Three Months Ended September 30, 2012
	Residential mortgage-backed securities			Asset-backed securities			Derivatives		Total
Beginning balance, June 1	$	7,461		$	1,566		$	-	$	9,027
Purchases		-			-			-		-
Issuances		-			-			-		-
Settlements		-			-			-		-
Sales, maturities and paydowns		(935	)		-			-		(935	)
Total net realized gains included in earnings		-			-			-		-
Total net unrealized gains (losses) included in other comprehensive income (loss)		1,789			(30	)		-		1,759
Transfers into Level 3		3,807			4,932			-		8,739
Transfers out of Level 3		(3,915	)		(399	)		-		(4,314	)
Ending balance, September 30	$	8,207		$	6,069		$	-	$	14,276

Total increase (decrease) in fair value of the financial assets and liabilities included in earnings for the period	$	-		$	-		$	-	$	-

	Three Months Ended September 30, 2011
	Residential mortgage-backed securities			Asset-backed securities		Derivatives			Total
Beginning balance, June 1	$	2,809		$	-	$	(790	)	$	2,019
Purchases		-			-		-			-
Issuances		-			-		-			-
Settlements		-			-		2,560			2,560
Sales, maturities and paydowns		(64	)		-		-			(64	)
Total net realized gains included in earnings		-			-		-			-
Total increase (decrease) in fair value of the derivative instrument included in earnings		-			-		(1,770	)		(1,770	)
Total net unrealized gains (losses) included in other comprehensive income (loss)		185			-		-			185
Transfers into Level 3		-			496		-			496
Transfers out of Level 3		(2,930	)		-		-			(2,930	)
Ending balance, September 30	$	-		$	496	$	-		$	496

Total increase (decrease) in fair value of the financial assets and liabilities included in earnings for the period	$	-		$	-	$	(1,770	)	$	(1,770	)

The following tables reconcile the beginning and ending balance for our Level 3 financial assets and liabilities measured at fair value on a recurring basis for the nine months ended September 30, 2012 and 2011 ($ in thousands):

	Nine Months Ended September 30, 2012
	Residential mortgage-backed securities			Asset-backed securities			Derivatives		Total
Beginning balance, January 1	$	8,146		$	1,867		$	-	$	10,013
Purchases		-			-			-		-
Issuances		-			-			-		-
Settlements		-			-			-		-
Sales, maturities and paydowns		(1,669	)		-			-		(1,669	)
Total net realized gains included in earnings		-			-			-		-
Total net unrealized gains (losses) included in other comprehensive income (loss)		1,839			(331	)		-		1,508
Transfers into Level 3		6,060			4,932			-		10,992
Transfers out of Level 3		(6,169	)		(399	)		-		(6,568	)
Ending balance, September 30	$	8,207		$	6,069		$	-	$	14,276

Total increase (decrease) in fair value of the financial assets and liabilities included in earnings for the period	$	-		$	-		$	-	$	-

- 13 -

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited), continued

For the Three and Nine Months Ended September 30, 2012 and 2011

	Nine Months Ended September 30, 2011
	Residential mortgage-backed securities			Asset-backed securities			Derivatives			Total
Beginning balance, January 1	$	2,449		$	1,069		$	(4,871	)	$	(1,353	)
Purchases		-			-			-			-
Issuances		-			-			-			-
Settlements		-			-			7,389			7,389
Sales, maturities and paydowns		(229	)		-			-			(229	)
Total net realized gains included in earnings		-			-			-			-
Total increase (decrease) in fair value of the derivative instrument included in earnings		-			-			(2,518	)		(2,518	)
Total net unrealized gains (losses) included in other comprehensive income (loss)		710			365			-			1,075
Transfers into Level 3		-			496			-			496
Transfers out of Level 3		(2,930	)		(1,434	)		-			(4,364	)
Ending balance, September 30	$	-		$	496		$	-		$	496

Total increase (decrease) in fair value of the financial assets and liabilities included in earnings for the period	$	-		$	-		$	(2,518	)	$	(2,518	)

Transfers of assets and liabilities into or out of Level 3 are recorded at their fair values as of the end of each reporting period, consistent with the date of the determination of fair value. The transfers into and out of Level 3 were due to the sufficiency of evidence available to corroborate significant observable inputs with market observable information. There were no transfers between Levels 1 and 2 during the three and nine months ended September 30, 2012 and 2011.

Other Financial Assets and Liabilities Not Carried at Fair Value

Accounting guidance requires note disclosure of the fair value of other financial assets and liabilities, excluding insurance contracts.

The Series B 7.5% Notes due June 1, 2017 (the "debt obligations") on our consolidated balance sheets were recorded at cost with a carrying value of $250.0 million at September 30, 2012 and December 31, 2011, and had a fair value of $276.5 million and $269.0 million at September 30, 2012 and December 31, 2011, respectively. The fair value measurements were based on observable inputs and therefore would be considered to be Level 2.

Our remaining other financial assets and liabilities were carried at cost or amortized cost, which generally approximates fair value, at September 30, 2012 and December 31, 2011. The fair value measurements were based on observable inputs and therefore would be considered to be Level 1 or Level 2.

4.	Derivative Instruments

At December 31, 2011 and during the period January 1, 2012 through September 30, 2012, we held no derivative instruments. In prior periods, including the nine months ended September 30, 2011, we held derivative instruments. Our derivative instruments are recorded in the consolidated balance sheets at fair value as other assets or other liabilities, with changes in fair values and realized gains and losses recognized in net changes in fair value of derivatives in the consolidated statements of operations. None of our derivatives were designated as hedges under current accounting guidance. Our objectives for entering into derivative agreements are as follows:

Interest Rate Options

We use interest rate options within our portfolio of fixed maturity investments to manage our exposure to interest rate risk.

Commodity Options

We use commodity options to hedge certain underwriting risks.

Other Derivative Instrument

We use other derivative instruments to hedge certain underwriting risks.

In August 2008, we entered into a derivative agreement with Topiary Capital Limited (“Topiary”), a Cayman Islands special purpose vehicle, that provided us with the ability to recover up to $200.0 million if two catastrophic events involving U.S. wind, U.S. earthquake, European wind or Japanese earthquake occurred that met specified loss criteria during any of three annual periods commencing August 1, 2008. The derivative agreement with Topiary expired on July 31, 2011 and no recovery was made.

- 14 -

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited), continued

For the Three and Nine Months Ended September 30, 2012 and 2011

The following table sets forth the net changes in fair value of derivatives in the consolidated statements of operations for the three and nine months ended September 30, 2012 and 2011 ($ in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2012		2011			2012		2011
Interest rate options	$	-	$	2,929		$	-	$	2,929
Commodity options		-		(153	)		-		(153	)
Other derivative instrument		-		1,770			-		2,518
Net changes in fair value of derivatives	$	-	$	4,546		$	-	$	5,294

5.	Credit Facilities

Syndicated Credit Facility

On June 24, 2011, we entered into an amended and restated three-year $300.0 million credit facility (the "Syndicated Credit Facility") that consists of a $100.0 million unsecured senior credit facility available for revolving borrowings and letters of credit and a $200.0 million secured senior credit facility available for letters of credit. The Syndicated Credit Facility contains customary representations, warranties and covenants. We are in compliance with the covenants under the Syndicated Credit Facility. The Syndicated Credit Facility provides that we may increase the lender commitments by up to $150.0 million subject to the participation of lenders.

Other Letter of Credit Facilities

On June 30, 2011, our reinsurance subsidiaries entered into a letter of credit (“LOC”) facility in the maximum aggregate amount of $100.0 million that expires on December 31, 2013. Under the terms of the facility, up to $100.0 million is available for the issuance of letters of credit to support reinsurance obligations of our reinsurance subsidiaries. The facility contains customary representations, warranties and covenants. We are in compliance with the covenants. We also have the ability to request a supplemental LOC facility for up to $150.0 million subject to agreement with the lender.

On July 31, 2012, Platinum Bermuda entered into a one-year uncommitted LOC facility in the maximum aggregate amount of $75.0 million. Under the terms of the facility, up to $75.0 million is available for the issuance of letters of credit to support reinsurance obligations of Platinum Bermuda. The facility contains customary representations, warranties and covenants. We also have the ability to request a supplemental LOC facility for up to $75.0 million subject to agreement with the lender.

We had no cash borrowings under the Syndicated Credit Facility during the nine months ended September 30, 2012. The following table summarizes the outstanding letters of credit and the cash and cash equivalents and investments held in trust to collateralize the letters of credit issued as of September 30, 2012 ($ in thousands):

	Letters of Credit				Collateral
	Committed Capacity		Issued		Cash and Cash Equivalents		Investments		Total
Syndicated Credit Facility:
Secured	$	200,000	$	99,715	$	113,307	$	-	$	113,307
Unsecured		100,000		-		-		-		-
Total Syndicated Credit Facility		300,000		99,715		113,307		-		113,307
Other LOC Facilities		100,000		37,330		45,287		-		45,287
Total	$	400,000	$	137,045	$	158,594	$	-	$	158,594

6.	Income Taxes

We provide for income tax expense or benefit based upon income reported in the consolidated financial statements and the provisions of currently enacted tax laws. Platinum Holdings and Platinum Bermuda are incorporated under the laws of Bermuda and are subject to Bermuda law with respect to taxation. Under current Bermuda law, Platinum Holdings and Platinum Bermuda are not taxed on any Bermuda income or capital gains and they have received an assurance from the Bermuda Minister of Finance 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 31, 2035. Platinum Holdings has subsidiaries based in the United States and Ireland that are subject to the tax laws thereof.

The 2003 income tax return of our U.S.-based subsidiaries is currently under examination by the U.S. Internal Revenue Service. The income tax returns that remain open to examination are for calendar years 2009 and later.

- 15 -

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited), continued

For the Three and Nine Months Ended September 30, 2012 and 2011

7.	Share Repurchases

Our Board of Directors has authorized the repurchase of our common shares through a share repurchase program. Since the program was established, our Board of Directors has approved increases in the repurchase program from time to time, most recently on July 23, 2012, to result in authority as of such date to repurchase up to a total of $250.0 million of our common shares.

During the three months ended September 30, 2012, in accordance with the share repurchase program, we repurchased 491,791 of our common shares in the open market for an aggregate cost of $19.7 million at a weighted average cost including commissions of $40.05 per share. During the nine months ended September 30, 2012, in accordance with the share repurchase program, we repurchased 2,956,262 of our common shares in the open market for an aggregate cost of $109.6 million at a weighted average cost including commissions of $37.08 per share. The shares we repurchased were canceled.

8.	Statutory Regulations and Dividend Capacity

The laws and regulations of Bermuda and the United States include certain restrictions on the amount of statutory capital and surplus that are available for the payment of dividends by Platinum Bermuda and Platinum US to their respective parent companies, Platinum Holdings and Platinum Finance, without the prior approval of the relevant regulatory authorities. Based on regulatory restrictions, the maximum amount available for payment of dividends by our reinsurance subsidiaries during 2012 without prior regulatory approval is as follows ($ in thousands):

Platinum Bermuda	$	286,574
Platinum US		52,992
Total	$	339,566

During the nine months ended September 30, 2012, dividends of $120.0 million were paid by Platinum Bermuda to Platinum Holdings. Therefore, as of September 30, 2012, the remaining amount available for payment of dividends by our reinsurance subsidiaries during 2012 without prior regulatory approval was $219.6 million.

There are no regulatory restrictions on the amount of dividends that Platinum Finance can pay to Platinum Regency. Irish law prohibits Platinum Regency from declaring a dividend to Platinum Holdings unless it has “profits available for distribution.” The determination of whether a company has profits available for distribution is based on its accumulated realized profits less its accumulated realized losses.

9.	Operating Segment Information

We have organized our worldwide reinsurance business into the following three operating segments: Property and Marine, Casualty and Finite Risk. The Property and Marine segment includes principally property and marine reinsurance coverages that are written in the United States and international markets. This operating segment includes property reinsurance, crop reinsurance and marine and aviation reinsurance. The Property and Marine segment includes property catastrophe and marine excess-of-loss reinsurance contracts, property and marine per-risk excess-of-loss reinsurance contracts and property proportional reinsurance contracts. The Casualty segment includes reinsurance contracts that cover general and product liability, professional liability, accident and health, umbrella liability, workers' compensation, casualty clash, automobile liability, surety, trade credit, and political risk. We generally seek to write casualty reinsurance on an excess-of-loss basis. 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 exchange for contractual features that limit our risk, reinsurance contracts that we include in our Finite Risk segment typically provide the potential for significant profit commission to the ceding company. The classes of risks underwritten through our finite risk contracts are generally consistent with the classes covered by our traditional products. The finite risk reinsurance contracts that we underwrite generally provide prospective protection, meaning coverage is provided for losses that are incurred after inception of the contract, as contrasted with retrospective coverage, which covers losses that are incurred prior to inception of the contract. The three main categories of finite risk contracts are quota share, multi-year excess-of-loss and whole account aggregate stop loss.

- 16 -

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited), continued

For the Three and Nine Months Ended September 30, 2012 and 2011

In managing our operating segments, we use measures such as net underwriting income and underwriting ratios to evaluate segment performance. We do not allocate assets or certain income and expenses such as net investment income, net realized gains and losses on investments, net impairment losses on investments, net changes in fair value of derivatives, net foreign currency exchange gains and losses, interest expense and certain corporate expenses by segment. The measures we use in evaluating our operating segments should not be used as a substitute for measures determined under U.S. GAAP. Underwriting ratios are considered to be non-GAAP measures and are calculated for net losses and LAE, net acquisition expense and net underwriting expense. The ratios are calculated by dividing the related expense by net earned premiums. The following table summarizes underwriting activity and ratios for the three operating segments, together with a reconciliation of segment underwriting income (loss) to income (loss) before income taxes for the three and nine months ended September 30, 2012 and 2011 ($ in thousands):

	Three Months Ended September 30, 2012
	Property and Marine			Casualty			Finite Risk			Total
Net premiums written	$	64,876		$	72,358		$	8,745		$	145,979

Net premiums earned		61,900			70,326			6,362			138,588
Net losses and loss adjustment expenses		26,790			14,358			3,969			45,117
Net acquisition expenses		7,078			16,710			2,380			26,168
Other underwriting expenses		7,661			5,662			289			13,612
Segment underwriting income (loss)	$	20,371		$	33,596		$	(276	)		53,691

Net investment income											23,209
Net realized gains on investments											22,982
Net impairment losses on investments											(699	)
Other income (expense)											(96	)
Net changes in fair value of derivatives											-
Corporate expenses not allocated to segments											(6,354	)
Net foreign currency exchange (losses) gains											(541	)
Interest expense											(4,775	)
Income (loss) before income taxes										$	87,417

Underwriting ratios:
Net loss and loss adjustment expense		43.3	%		20.4	%		62.4	%		32.6	%
Net acquisition expense		11.4	%		23.8	%		37.4	%		18.9	%
Other underwriting expense		12.4	%		8.1	%		4.5	%		9.8	%
Combined		67.1	%		52.3	%		104.3	%		61.3	%

	Three Months Ended September 30, 2011
	Property and Marine			Casualty			Finite Risk			Total
Net premiums written	$	101,633		$	72,689		$	2,802		$	177,124

Net premiums earned		85,239			78,021			3,553			166,813
Net losses and loss adjustment expenses		156,995			42,704			1,754			201,453
Net acquisition expenses		12,068			16,780			1,360			30,208
Other underwriting expenses		6,686			4,300			218			11,204
Segment underwriting income (loss)	$	(90,510	)	$	14,237		$	221			(76,052	)

Net investment income											29,762
Net realized gains on investments											7,498
Net impairment losses on investments											(4,451	)
Other income (expense)											(198	)
Net changes in fair value of derivatives											(4,546	)
Corporate expenses not allocated to segments											(3,551	)
Net foreign currency exchange (losses) gains											982
Interest expense											(4,769	)
Income (loss) before income taxes										$	(55,325	)

Underwriting ratios:
Net loss and loss adjustment expense		184.2	%		54.7	%		49.4	%		120.8	%
Net acquisition expense		14.2	%		21.5	%		38.3	%		18.1	%
Other underwriting expense		7.8	%		5.5	%		6.1	%		6.7	%
Combined		206.2	%		81.7	%		93.8	%		145.6	%

- 17 -

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited), continued

For the Three and Nine Months Ended September 30, 2012 and 2011

	Nine Months Ended September 30, 2012
	Property and Marine			Casualty			Finite Risk			Total
Net premiums written	$	194,724		$	219,436		$	16,939		$	431,099

Net premiums earned		186,066			221,838			13,971			421,875
Net losses and loss adjustment expenses		85,380			101,245			4,805			191,430
Net acquisition expenses		25,034			52,572			9,419			87,025
Other underwriting expenses		21,950			16,323			747			39,020
Segment underwriting income (loss)	$	53,702		$	51,698		$	(1,000	)		104,400

Net investment income											77,916
Net realized gains on investments											70,299
Net impairment losses on investments											(2,882	)
Other income (expense)											(766	)
Net changes in fair value of derivatives											-
Corporate expenses not allocated to segments											(17,625	)
Net foreign currency exchange (losses) gains											(763	)
Interest expense											(14,321	)
Income (loss) before income taxes										$	216,258

Underwriting ratios:
Net loss and loss adjustment expense		45.9	%		45.6	%		34.4	%		45.4	%
Net acquisition expense		13.5	%		23.7	%		67.4	%		20.6	%
Other underwriting expense		11.8	%		7.4	%		5.3	%		9.2	%
Combined		71.2	%		76.7	%		107.1	%		75.2	%

	Nine Months Ended September 30, 2011
	Property and Marine			Casualty			Finite Risk			Total
Net premiums written	$	267,846		$	222,442		$	7,508		$	497,796

Net premiums earned		274,996			235,949			11,185			522,130
Net losses and loss adjustment expenses		551,868			126,191			2,346			680,405
Net acquisition expenses		37,703			53,487			7,083			98,273
Other underwriting expenses		21,281			14,461			717			36,459
Segment underwriting income (loss)	$	(335,856	)	$	41,810		$	1,039			(293,007	)

Net investment income											96,105
Net realized gains on investments											3,216
Net impairment losses on investments											(7,624	)
Other income (expense)											838
Net changes in fair value of derivatives											(5,294	)
Corporate expenses not allocated to segments											(12,552	)
Net foreign currency exchange (losses) gains											179
Interest expense											(14,302	)
Income (loss) before income taxes										$	(232,441	)

Underwriting ratios:
Net loss and loss adjustment expense		200.7	%		53.5	%		21.0	%		130.3	%
Net acquisition expense		13.7	%		22.7	%		63.3	%		18.8	%
Other underwriting expense		7.7	%		6.1	%		6.4	%		7.0	%
Combined		222.1	%		82.3	%		90.7	%		156.1	%

- 18 -

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited), continued

For the Three and Nine Months Ended September 30, 2012 and 2011

10.	Earnings (Loss) per Common Share

The following is a reconciliation of basic and diluted earnings or loss per common share for the three and nine months ended September 30, 2012 and 2011 ($ and amounts in thousands, except per share data):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Earnings (Loss)
Basic and Diluted
Net income (loss) attributable to common shareholders	$	84,864		$	(53,535	)	$	205,683		$	(231,128	)
Portion allocated to participating common shareholders (1)		(234	)		251			(740	)		1,285
Net income (loss) allocated to common shareholders	$	84,630		$	(53,284	)	$	204,943		$	(229,843	)

Common Shares
Basic
Weighted average common shares outstanding		32,996			37,183			34,063			37,165
Diluted
Weighted average common shares outstanding		32,996			37,183			34,063			37,165
Effect of dilutive securities:
Common share options		179			52			154			195
Restricted share units		97			125			69			218
Adjusted weighted average common shares outstanding		33,272			37,360			34,286			37,578

Earnings (Loss) Per Common Share
Basic earnings (loss) per common share	$	2.56		$	(1.43	)	$	6.02		$	(6.18	)
Diluted earnings (loss) per common share (2)	$	2.54		$	(1.43	)	$	5.98		$	(6.18	)

(1)	Represents earnings attributable to holders of unvested restricted shares issued under the Company's share incentive plans that are considered to be participating securities.

(2)	During a period of loss, the basic weighted average common shares outstanding is used in the denominator of the diluted loss per common share computation as the effect of including potential dilutive shares would be anti-dilutive.

11.	Condensed Consolidating Financial Information

Platinum Holdings fully and unconditionally guarantees the $250.0 million of debt obligations issued by its 100%-owned subsidiary Platinum Finance.

The following tables present the condensed consolidating financial information for Platinum Holdings, Platinum Finance and the non-guarantor subsidiaries of Platinum Holdings as of September 30, 2012 and December 31, 2011 and for the three and nine months ended September 30, 2012 and 2011 ($ in thousands):

- 19 -

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited), continued

For the Three and Nine Months Ended September 30, 2012 and 2011

Condensed Consolidating Balance Sheet

September 30, 2012

	Platinum Holdings		Platinum Finance		Non-guarantor Subsidiaries		Consolidating Adjustments			Consolidated
ASSETS
Total investments	$	-	$	207	$	2,458,628	$	-		$	2,458,835
Investment in subsidiaries		1,741,726		665,407		519,306		(2,926,439	)		-
Cash and cash equivalents		44,701		104,816		1,513,162		-			1,662,679
Reinsurance assets		-		-		297,609		-			297,609
Other assets		8,077		5,194		60,528		-			73,799
Total assets	$	1,794,504	$	775,624	$	4,849,233	$	(2,926,439	)	$	4,492,922
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Reinsurance liabilities	$	-	$	-	$	2,349,943	$	-		$	2,349,943
Debt obligations		-		250,000		-		-			250,000
Other liabilities		4,558		6,319		92,156		-			103,033
Total liabilities	$	4,558	$	256,319	$	2,442,099	$	-		$	2,702,976

Shareholders' Equity
Common shares	$	328	$	-	$	8,000	$	(8,000	)	$	328
Additional paid-in capital		211,546		213,710		2,020,990		(2,234,700	)		211,546
Accumulated other comprehensive income		150,387		45,159		195,538		(240,697	)		150,387
Retained earnings		1,427,685		260,436		182,606		(443,042	)		1,427,685
Total shareholders' equity	$	1,789,946	$	519,305	$	2,407,134	$	(2,926,439	)	$	1,789,946
Total liabilities and shareholders' equity	$	1,794,504	$	775,624	$	4,849,233	$	(2,926,439	)	$	4,492,922

Condensed Consolidating Balance Sheet

December 31, 2011

	Platinum Holdings		Platinum Finance		Non-guarantor Subsidiaries		Consolidating Adjustments			Consolidated
ASSETS
Total investments	$	-	$	274	$	3,377,260	$	-		$	3,377,534
Investment in subsidiaries		1,638,898		621,041		484,561		(2,744,500	)		-
Cash and cash equivalents		47,791		108,260		636,459		-			792,510
Reinsurance assets		-		-		297,374		-			297,374
Other assets		6,229		6,620		71,344		-			84,193
Total assets	$	1,692,918	$	736,195	$	4,866,998	$	(2,744,500	)	$	4,551,611
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Reinsurance liabilities	$	-	$	-	$	2,573,701	$	-		$	2,573,701
Debt obligations		-		250,000		-		-			250,000
Other liabilities		2,059		1,634		33,358		-			37,051
Total liabilities	$	2,059	$	251,634	$	2,607,059	$	-		$	2,860,752

Shareholders' Equity
Common shares	$	355	$	-	$	8,000	$	(8,000	)	$	355
Additional paid-in capital		313,730		213,342		2,000,335		(2,213,677	)		313,730
Accumulated other comprehensive income		146,635		41,277		187,903		(229,180	)		146,635
Retained earnings		1,230,139		229,942		63,701		(293,643	)		1,230,139
Total shareholders' equity	$	1,690,859	$	484,561	$	2,259,939	$	(2,744,500	)	$	1,690,859
Total liabilities and shareholders' equity	$	1,692,918	$	736,195	$	4,866,998	$	(2,744,500	)	$	4,551,611

- 20 -

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited), continued

For the Three and Nine Months Ended September 30, 2012 and 2011

Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)

For the Three Months Ended September 30, 2012

	Platinum Holdings			Platinum Finance			Non-guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Revenue:
Net premiums earned	$	-		$	-		$	138,588		$	-		$	138,588
Net investment income		2			(3	)		23,210			-			23,209
Net realized gains on investments		-			-			22,982			-			22,982
Net impairment losses on investments		-			-			(699	)		-			(699	)
Other income (expense)		1,400			1			(1,497	)		-			(96	)
Total revenue		1,402			(2	)		182,584			-			183,984

Expenses:
Net losses and loss adjustment expenses		-			-			45,117			-			45,117
Net acquisition expenses		-			-			26,168			-			26,168
Net changes in fair value of derivatives		-			-			-			-			-
Operating expenses		5,842			49			14,075			-			19,966
Net foreign currency exchange losses (gains)		-			-			541			-			541
Interest expense		-			4,775			-			-			4,775
Total expenses		5,842			4,824			85,901			-			96,567
Income (loss) before income taxes		(4,440	)		(4,826	)		96,683			-			87,417
Income tax expense (benefit)		-			(1,625	)		4,178			-			2,553
Income (loss) before equity in earnings of subsidiaries		(4,440	)		(3,201	)		92,505			-			84,864
Equity in earnings of subsidiaries		89,304			8,175			4,974			(102,453	)		-
Net income (loss)	$	84,864		$	4,974		$	97,479		$	(102,453	)	$	84,864

Other comprehensive income, net of deferred taxes		1,825			1,355			3,181			(4,536	)		1,825
Comprehensive income (loss)	$	86,689		$	6,329		$	100,660		$	(106,989	)	$	86,689

Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)

For the Three Months Ended September 30, 2011

	Platinum Holdings			Platinum Finance			Non-guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Revenue:
Net premiums earned	$	-		$	-		$	166,813		$	-		$	166,813
Net investment income		1			(15	)		29,776			-			29,762
Net realized gains on investments		-			-			7,498			-			7,498
Net impairment losses on investments		-			-			(4,451	)		-			(4,451	)
Other income (expense)		59			3			(260	)		-			(198	)
Total revenue		60			(12	)		199,376			-			199,424

Expenses:
Net losses and loss adjustment expenses		-			-			201,453			-			201,453
Net acquisition expenses		-			-			30,208			-			30,208
Net changes in fair value of derivatives		-			-			4,546			-			4,546
Operating expenses		3,922			64			10,769			-			14,755
Net foreign currency exchange losses (gains)		-			-			(982	)		-			(982	)
Interest expense		-			4,769			-			-			4,769
Total expenses		3,922			4,833			245,994			-			254,749
Income (loss) before income taxes		(3,862	)		(4,845	)		(46,618	)		-			(55,325	)
Income tax expense (benefit)		-			(1,652	)		(138	)		-			(1,790	)
Income (loss) before equity in earnings of subsidiaries		(3,862	)		(3,193	)		(46,480	)		-			(53,535	)
Equity in earnings of subsidiaries		(49,673	)		2,462			(731	)		47,942			-
Net income (loss)	$	(53,535	)	$	(731	)	$	(47,211	)	$	47,942		$	(53,535	)

Other comprehensive income, net of deferred taxes		86,804			8,831			95,636			(104,467	)		86,804
Comprehensive income (loss)	$	33,269		$	8,100		$	48,425		$	(56,525	)	$	33,269

- 21 -

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited), continued

For the Three and Nine Months Ended September 30, 2012 and 2011

Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)

For the Nine Months Ended September 30, 2012

	Platinum Holdings			Platinum Finance			Non-guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Revenue:
Net premiums earned	$	-		$	-		$	421,875		$	-		$	421,875
Net investment income		5			(10	)		77,921			-			77,916
Net realized gains on investments		-			-			70,299			-			70,299
Net impairment losses on investments		-			-			(2,882	)		-			(2,882	)
Other income (expense)		3,587			2			(4,355	)		-			(766	)
Total revenue		3,592			(8	)		562,858			-			566,442

Expenses:
Net losses and loss adjustment expenses		-			-			191,430			-			191,430
Net acquisition expenses		-			-			87,025			-			87,025
Net changes in fair value of derivatives		-			-			-			-			-
Operating expenses		16,617			182			39,846			-			56,645
Net foreign currency exchange losses (gains)		-			-			763			-			763
Interest expense		-			14,321			-			-			14,321
Total expenses		16,617			14,503			319,064			-			350,184
Income (loss) before income taxes		(13,025	)		(14,511	)		243,794			-			216,258
Income tax expense (benefit)		-			(4,890	)		15,465			-			10,575
Income (loss) before equity in earnings of subsidiaries		(13,025	)		(9,621	)		228,329			-			205,683
Equity in earnings of subsidiaries		218,708			40,116			30,495			(289,319	)		-
Net income (loss)	$	205,683		$	30,495		$	258,824		$	(289,319	)	$	205,683

Other comprehensive income, net of deferred taxes		3,752			3,882			7,635			(11,517	)		3,752
Comprehensive income (loss)	$	209,435		$	34,377		$	266,459		$	(300,836	)	$	209,435

Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)

For the Nine Months Ended September 30, 2011

	Platinum Holdings			Platinum Finance			Non-guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Revenue:
Net premiums earned	$	-		$	-		$	522,130		$	-		$	522,130
Net investment income		4			31			96,123			(53	)		96,105
Net realized gains on investments		-			-			3,216			-			3,216
Net impairment losses on investments		-			-			(7,624	)		-			(7,624	)
Other income (expense)		(1,633	)		121			2,350			-			838
Total revenue		(1,629	)		152			616,195			(53	)		614,665

Expenses:
Net losses and loss adjustment expenses		-			-			680,405			-			680,405
Net acquisition expenses		-			-			98,273			-			98,273
Net changes in fair value of derivatives		-			-			5,294			-			5,294
Operating expenses		13,971			266			34,774			-			49,011
Net foreign currency exchange losses (gains)		1			-			(180	)		-			(179	)
Interest expense		53			14,302			-			(53	)		14,302
Total expenses		14,025			14,568			818,566			(53	)		847,106
Income (loss) before income taxes		(15,654	)		(14,416	)		(202,371	)		-			(232,441	)
Income tax expense (benefit)		(600	)		(4,915	)		4,202			-			(1,313	)
Income (loss) before equity in earnings of subsidiaries		(15,054	)		(9,501	)		(206,573	)		-			(231,128	)
Equity in earnings of subsidiaries		(216,074	)		16,296			6,795			192,983			-
Net income (loss)	$	(231,128	)	$	6,795		$	(199,778	)	$	192,983		$	(231,128	)

Other comprehensive income, net of deferred taxes		151,326			31,934			183,261			(215,195	)		151,326
Comprehensive income (loss)	$	(79,802	)	$	38,729		$	(16,517	)	$	(22,212	)	$	(79,802	)

- 22 -

Platinum Underwriters Holdings, Ltd. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited), continued

For the Three and Nine Months Ended September 30, 2012 and 2011

Condensed Consolidating Statement of Cash Flows

For the Nine Months Ended September 30, 2012

	Platinum Holdings			Platinum Finance			Non-guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net cash provided by (used in) operating activities	$	(7,874	)	$	(3,507	)	$	(7,588	)	$	-			$	(18,969	)

Investing Activities:
Proceeds from the sales of:
Fixed maturity available-for-sale securities		-			-			558,848			-				558,848
Short-term investments		-			-			36,581			-				36,581
Proceeds from the maturities or paydowns of:
Fixed maturity available-for-sale securities		-			63			213,440			-				213,503
Short-term investments		-			-			663,011			-				663,011
Acquisitions of:
Fixed maturity available-for-sale securities		-			-			(202,729	)		-				(202,729	)
Short-term investments		-			-			(266,723	)		-				(266,723	)
Dividends from subsidiaries		120,000			-			-			(120,000	)			-
Net cash provided by (used in) investing activities		120,000			63			1,002,428			(120,000	)			1,002,491

Financing Activities:
Dividends paid to common shareholders		(8,137	)		-			(120,000	)		120,000				(8,137	)
Repurchase of common shares		(109,633	)		-			-			-				(109,633	)
Proceeds from exercise of common share options		2,554			-			-			-				2,554
Net cash provided by (used in) financing activities		(115,216	)		-			(120,000	)		120,000				(115,216	)

Effect of foreign currency exchange rate changes on cash		-			-			1,863			-				1,863
Net increase (decrease) in cash and cash equivalents		(3,090	)		(3,444	)		876,703			-				870,169
Cash and cash equivalents at beginning of period		47,791			108,260			636,459			-				792,510
Cash and cash equivalents at end of period	$	44,701		$	104,816		$	1,513,162		$	-			$	1,662,679

Condensed Consolidating Statement of Cash Flows

For the Nine Months Ended September 30, 2011

	Platinum Holdings			Platinum Finance			Non-guarantor Subsidiaries			Consolidating Adjustments			Consolidated
Net cash provided by (used in) operating activities	$	(4,375	)	$	(6,701	)	$	49,222		$	-		$	38,146

Investing Activities:
Proceeds from the sales of:
Fixed maturity available-for-sale securities		-			-			466,759			-			466,759
Fixed maturity trading securities		-			-			20,413			-			20,413
Short-term investments		-			-			27,995			-			27,995
Investment-related derivatives		-			-			3,094			-			3,094
Proceeds from the maturities or paydowns of:
Fixed maturity available-for-sale securities		-			88			100,176			-			100,264
Fixed maturity trading securities		-			-			5,000			-			5,000
Short-term investments		-			-			234,946			-			234,946
Acquisitions of:
Fixed maturity available-for-sale securities		-			-			(35,783	)		-			(35,783	)
Short-term investments		-			-			(630,203	)		-			(630,203	)
Investment-related derivatives		-			-			(9,548	)		-			(9,548	)
Dividends from subsidiaries		280,000			-			-			(280,000	)		-
Investment in subsidiary		(120,000	)		(3,000	)		-			123,000			-
Inter-company loans		-			75,000			100,000			(175,000	)		-
Net cash provided by (used in) investing activities		160,000			72,088			282,849			(332,000	)		182,937

Financing Activities:
Dividends paid to common shareholders		(8,908	)		-			(280,000	)		280,000			(8,908	)
Repurchase of common shares		(33,907	)		-			-			-			(33,907	)
Purchase of common share options		(47,900	)		-			-			-			(47,900	)
Proceeds from exercise of common share options		1,223			-			-			-			1,223
Capital contribution from parent		-			-			123,000			(123,000	)		-
Inter-company loans		(75,000	)		-			(100,000	)		175,000			-
Net cash provided by (used in) financing activities		(164,492	)		-			(257,000	)		332,000			(89,492	)

Effect of foreign currency exchange rate changes on cash		-			-			7,837			-			7,837
Net increase (decrease) in cash and cash equivalents		(8,867	)		65,387			82,908			-			139,428
Cash and cash equivalents at beginning of period		45,035			7,347			935,495			-			987,877
Cash and cash equivalents at end of period	$	36,168		$	72,734		$	1,018,403		$	-		$	1,127,305

- 23 -

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes thereto included in this Quarterly Report on Form 10-Q for the period ended September 30, 2012 (this “Form 10-Q”) and the consolidated financial statements and related notes thereto and Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” included in our Annual Report on Form 10-K for the year ended December 31, 2011 (the “2011 Form 10-K”). This Form 10-Q contains forward-looking statements that involve risks and uncertainties. Please see Item 1A, “Risk Factors,” in our 2011 Form 10-K and the “Note on Forward-Looking Statements” below. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Non-GAAP Financial Measures

Underwriting income or loss and underwriting ratios measure the performance of the Company’s underwriting function. Underwriting income or loss consists of net premiums earned less net losses and loss adjustment expenses (“LAE”) and net underwriting expenses. Net underwriting expenses include net acquisition expenses and, when referring to a segment result, also includes operating costs related to the underwriting operations of the segment. Underwriting income or loss excludes income and expenses related to net investment income, net realized gains or losses on investments, net impairment losses on investments, net changes in fair value of derivatives, net foreign exchange gains or losses, corporate expenses not allocated to underwriting operations, interest expense and other revenues and expenses. Underwriting ratios are considered to be non-GAAP measures and are calculated for net losses and LAE, net acquisition expense and net underwriting expense. The ratios are calculated by dividing the related expense by net earned premiums.

We conduct our worldwide reinsurance business through three operating segments: Property and Marine, Casualty and Finite Risk. Segment underwriting income is reconciled to the U.S. GAAP measure of income or loss before income taxes in Note 9 to the “Consolidated Financial Statements” in this Form 10-Q. The measures we use in evaluating our operating segments should not be used as a substitute for measures determined under U.S. GAAP.

Overview

Platinum Underwriters Holdings, Ltd. (“Platinum Holdings”) is a holding company domiciled in Bermuda. Through our reinsurance subsidiaries we provide property and marine, casualty and finite risk reinsurance coverages to a diverse clientele of insurers and select reinsurers on a worldwide basis. Platinum Holdings and its consolidated subsidiaries (collectively, the “Company”) include Platinum Holdings, Platinum Underwriters Bermuda, Ltd. (“Platinum Bermuda”), Platinum Underwriters Reinsurance, Inc. (“Platinum US”), Platinum Regency Holdings ("Platinum Regency"), Platinum Underwriters Finance, Inc. ("Platinum Finance") and Platinum Administrative Services, Inc. The terms "we," "us," and "our" refer to the Company, unless the context otherwise indicates.

At September 30, 2012, our capital resources of $2.0 billion consisted of $1.8 billion of common shareholders’ equity and $250.0 million of Series B 7.5% Notes due June 1, 2017 (the “debt obligations”). Our net income was $84.9 million and $205.7 million for the three and nine months ended September 30, 2012, respectively, which compares with a net loss of $53.5 million and $231.1 million for the three and nine months ended September 30, 2011, respectively. Our results for the three and nine months ended September 30, 2012 improved over the three and nine months ended September 30, 2011 as a result of a lower level of major catastrophe losses, an increase in net favorable development on prior years’ reserve balances and an increase in net realized gains on investments, partially offset by a decrease in our net investment income.

Our net premiums written were $146.0 million and $431.1 million for the three and nine months ended September 30, 2012, respectively, and $177.1 million and $497.8 million for the three and nine months ended September 30, 2011, respectively. The decrease in net premiums written for the three and nine months ended September 30, 2012 as compared with the same periods in 2011 was primarily due to the non-renewal of business that did not meet our minimum pricing standards and our desire to reduce our exposure to catastrophe events.

Current Outlook

In the Property and Marine segment, we currently believe that reinsurers generally remain well-capitalized and that competitive pressure will keep property catastrophe reinsurance rates from rising significantly during the January 1, 2013 renewal period. Accordingly, we currently expect that the portfolio of business we write in our Property and Marine segment during 2013 will be similar to our current in-force book of business. We expect that our Property and Marine segment will continue to represent a large proportion of our overall book of business, which could result in significant volatility in our results of operations.

In the Casualty segment, we currently expect that insurance and reinsurance capacity will remain abundant and that competition will continue to limit the potential for significant increases in risk-adjusted rates. Although certain casualty rate increases appear to exceed trends in loss costs, we believe that the expected profitability of many casualty reinsurance contracts will not improve due to lower investment yields. We expect that select casualty reinsurance contracts will continue to offer adequate returns and that the portfolio of business we write in our Casualty segment during 2013 will be similar to our current in-force book of business.

Reflecting a continued lack of demand for finite risk covers, we expect to write a relatively small portfolio of business in our Finite Risk segment during 2013.

Based on our current reserve position, portfolio of in-force business, asset portfolio, and underwriting prospects for the near term, we believe that we are well capitalized with an adequate margin above the rating agency targets for a company with our ratings. If our business performs as expected, we anticipate that we may generate excess capital over time. Under those conditions, we would have the financial flexibility to expand our underwriting, hold riskier assets, or repurchase our common shares or debt securities. While we will consider the risk-adjusted pricing prevailing in the reinsurance and financial markets at the time, we currently view share repurchase as a relatively attractive use of excess capital.

Critical Accounting Estimates

The preparation of consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that are inherently subjective in nature that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent liabilities. Actual results may differ materially from these estimates. Our critical accounting estimates used in the preparation of our consolidated financial statements include premiums written and earned, unpaid losses and LAE, reinsurance recoverable, valuation of investments and income taxes. In addition, estimates are used to evaluate risk transfer for assumed and ceded reinsurance transactions. For a detailed discussion of our critical accounting estimates, please refer to Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in our 2011 Form 10-K.

- 24 -

Results of Operations

Three Months Ended September 30, 2012 as Compared with the Three Months Ended September 30, 2011

Net income (loss) and diluted earnings (loss) per common share for the three months ended September 30, 2012 and 2011 were as follows ($ and amounts in thousands, except diluted earnings (loss) per common share):

	Three Months Ended September 30,
	2012			2011			Net change
Underwriting income (loss)	$	53,691		$	(76,052	)	$	129,743
Net investment income		23,209			29,762			(6,553	)
Net realized gains on investments		22,982			7,498			15,484
Net impairment losses on investments		(699	)		(4,451	)		3,752
Other revenues (expenses)		(11,766	)		(12,082	)		316
Income (loss) before income taxes		87,417			(55,325	)		142,742
Income tax (expense) benefit		(2,553	)		1,790			(4,343	)
Net income (loss)	$	84,864		$	(53,535	)	$	138,399
Weighted average shares outstanding for diluted earnings (loss) per common share		33,272			37,183			(3,911	)
Diluted earnings (loss) per common share	$	2.54		$	(1.43	)	$	3.97

The net income and diluted income per common share for the three months ended September 30, 2012 as compared with the net loss and diluted loss per common share for the three months ended September 30, 2011 was primarily due to an increase in the net underwriting result attributable to a decrease in net losses from major catastrophe activity and an increase in net favorable development. In addition, there was an increase in net realized gains on investments, partially offset by a decrease in net investment income and higher income taxes. As the three months ended September 30, 2011 resulted in a net loss, the basic weighted average common shares outstanding is used in the denominator of the diluted loss per common share computation.

Underwriting Results

Net underwriting income was $53.7 million for the three months ended September 30, 2012, which compares with a net underwriting loss of $76.1 million for the three months ended September 30, 2011. The change in the net underwriting result was due primarily to a decrease in net losses from major catastrophes in 2012 and an increase in net favorable development.

Net losses from major catastrophes consist of gross losses and LAE, net of any retrocessional recoveries and reinstatement premiums earned.

Net favorable or unfavorable development is the development of prior years’ unpaid losses and LAE and the related impact of premiums and commissions. Net favorable or unfavorable loss development excludes the related impact of the premiums and commissions.

Net losses from major catastrophes were $6.4 million and $122.7 million for the three months ended September 30, 2012 and 2011, respectively. Underwriting losses on our 2012 underwriting year North American crop business as a result of the severe drought conditions in the United States were $17.6 million for the three months ended September 30, 2012. Net favorable development was $61.3 million and $27.8 million for the three months ended September 30, 2012 and 2011, respectively.

The following discussion and analysis reviews our underwriting results by operating segment.

Property and Marine

The following table summarizes underwriting results and ratios for the Property and Marine segment for the three months ended September 30, 2012 and 2011 ($ in thousands):

	Three Months Ended September 30,
	2012			2011			Increase (decrease)
Gross premiums written	$	65,135		$	102,141		$	(37,006	)
Ceded premiums written		259			508			(249	)
Net premiums written		64,876			101,633			(36,757	)
Net premiums earned		61,900			85,239			(23,339	)
Net losses and LAE		26,790			156,995			(130,205	)
Net acquisition expenses		7,078			12,068			(4,990	)
Other underwriting expenses		7,661			6,686			975
Property and Marine segment underwriting income (loss)	$	20,371		$	(90,510	)	$	110,881

Underwriting ratios:
Net loss and LAE		43.3	%		184.2	%	(140.9) points
Net acquisition expense		11.4	%		14.2	%	(2.8) points
Other underwriting expense		12.4	%		7.8	%	4.6 points
Combined		67.1	%		206.2	%	(139.1) points

- 25 -

The Property and Marine segment underwriting result improved by $110.9 million for the three months ended September 30, 2012 as compared with the three months ended September 30, 2011, primarily due to a decrease in net losses from major catastrophes. Net losses from major catastrophes were $6.4 million and $122.7 million for the three months ended September 30, 2012 and 2011, respectively. Net losses from major catastrophes for the three months ended September 30, 2012 were primarily attributable to Hurricane Isaac and Property Claims Services (“PCS”) Catastrophe 83, a U.S. multi-day straight line wind and thunderstorm event. Net losses from major catastrophes were partially offset by a reduction in first and second quarter 2012 major catastrophe loss estimates. Underwriting losses on our 2012 underwriting year North American crop business resulting from the severe drought conditions in the United States were $17.6 million for the three months ended September 30, 2012. Net losses from major catastrophes for the three months ended September 30, 2011 were attributable to Hurricane Irene and increases in first and second quarter 2011 major catastrophe loss estimates.

Net favorable development was $20.9 million and $12.9 million for the three months ended September 30, 2012 and 2011, respectively.

Excluding net losses from major catastrophes and net favorable development, Property and Marine segment underwriting income was impacted by changes in the mix of business resulting in an increase in the combined ratio. The combined ratio was also impacted by a decrease in non-major catastrophe losses as compared with the same period in 2011.

Net Premiums Written and Earned

The Property and Marine segment generated 44.4% and 57.4% of our net premiums written for the three months ended September 30, 2012 and 2011, respectively. Gross premiums written decreased by $37.0 million for the three months ended September 30, 2012 as compared with the three months ended September 30, 2011, and decreased by $32.4 million when excluding reinstatement premiums written related to major catastrophes of $2.3 million and $6.9 million for the three months ended September 30, 2012 and 2011, respectively. The decrease in gross premiums written, excluding reinstatement premiums, was primarily due to decreases in the catastrophe excess-of-loss classes and resulted from fewer opportunities that met our underwriting standards and our desire to reduce our exposure to catastrophe events. Net premiums earned decreased by $23.3 million for the three months ended September 30, 2012 as compared with the same period in 2011, primarily as a result of decreases in net premiums written in current and prior periods. Net premiums written and earned were also impacted by changes in the mix of business and the structure of the underlying reinsurance contracts.

Net Losses and LAE

Net losses and LAE decreased by $130.2 million for the three months ended September 30, 2012 as compared with the three months ended September 30, 2011. The decrease in net losses and LAE was primarily due to a decrease in net losses from major catastrophes of $120.7 million, a decrease in non-major catastrophe losses and an increase in net favorable loss development, partially offset by underwriting losses on our 2012 underwriting year North American crop business resulting from the severe drought conditions in the United States. The following table sets forth the components of pre-tax net losses by major catastrophe for the three months ended September 30, 2012 ($ in thousands):

Major Catastrophe	Net Losses and LAE			Reinstatement Premiums Earned		Net Losses from Major Catastrophes
PCS Catastrophe 83	$	(6,736	)	$	1,107	$	(5,629	)
Hurricane Isaac		(3,101	)		324		(2,777	)
Decrease in First and Second Quarter 2012 Catastrophe Estimates:
PCS Catastrophes 66 and 67		1,096			398		1,494
PCS Catastrophe 74		81			427		508
Total	$	(8,660	)	$	2,256	$	(6,404	)

The following table sets forth the components of pre-tax net losses by major catastrophe for the three months ended September 30, 2011 ($ in thousands):

Major Catastrophe	Net Losses and LAE			Reinstatement Premiums Earned			Net Losses from Major Catastrophes
Hurricane Irene	$	(15,154	)	$	561		$	(14,593	)
Increase in First and Second Quarter 2011 Catastrophe Estimates:
Japan earthquake		(34,045	)		(101	)		(34,146	)
June New Zealand earthquake		(27,183	)		-			(27,183	)
February New Zealand earthquake		(30,659	)		3,792			(26,867	)
U.S. tornadoes		(15,326	)		2,640			(12,686	)
Denmark floods		(6,700	)		-			(6,700	)
Cyclone Yasi		126			(609	)		(483	)
Australian floods		(378	)		373			(5	)
Total	$	(129,319	)	$	6,656		$	(122,663	)

- 26 -

Net losses from major catastrophes, with related premium adjustments, increased the net loss and LAE ratio by 12.9 points and 148.9 points for the three months ended September 30, 2012 and 2011, respectively.

Underwriting losses on our 2012 underwriting year North American crop business resulting from the severe drought conditions in the United States were $17.6 million for the three months ended September 30, 2012 compared with no underwriting income or loss on our 2011 underwriting year North American crop business for the three months ended September 30, 2011.

Net favorable loss development was $20.8 million and $13.9 million for the three months ended September 30, 2012 and 2011, respectively. Net favorable loss development and related premium adjustments decreased the net loss and LAE ratio by 33.1 points and 15.2 points for the three months ended September 30, 2012 and 2011, respectively. Net favorable loss development for the three months ended September 30, 2012 and 2011 was primarily attributable to a level of cumulative losses reported by our ceding companies that was lower than expected and that, in our judgment, resulted in sufficient credibility in the loss experience to change our previously selected loss ratios.

The following table sets forth the net favorable (unfavorable) development for the three months ended September 30, 2012 by class of business ($ in thousands):

Class of Business	Net Losses and LAE		Net Acquisition Expense			Net Premiums			Net Development
Major catastrophes	$	11,281	$	(13	)	$	(648	)	$	10,620
Catastrophe excess-of-loss (non-major events)		5,122		287			105			5,514
Property per risk excess-of-loss		1,878		18			391			2,287
Marine, aviation and satellite		2,334		107			(224	)		2,217
Other		198		49			-			247
Total	$	20,813	$	448		$	(376	)	$	20,885

Net favorable development in the major catastrophes class arose primarily from the 2011 earthquake in Japan. Net favorable development in the catastrophe excess-of-loss (non-major events) class arose primarily from international business in the 2011 underwriting year. Net favorable development in the property per risk excess-of-loss class arose primarily from the North American business on the 2007 underwriting year. Net favorable development in the marine, aviation and satellite class arose from most prior underwriting years with a change in loss development patterns contributing $0.8 million to the net favorable development.

The following table sets forth the net favorable (unfavorable) development for the three months ended September 30, 2011 by class of business ($ in thousands):

Class of Business	Net Losses and LAE		Net Acquisition Expense			Net Premiums			Net Development
Property per risk excess-of-loss	$	5,466	$	36		$	(130	)	$	5,372
Catastrophe excess-of-loss (non-major events)		3,221		(55	)		124			3,290
Major catastrophes		1,905		(2	)		(28	)		1,875
Marine, aviation and satellite		2,034		(316	)		(470	)		1,248
Property proportional		1,208		(129	)		-			1,079
Other		106		(44	)		-			62
Total	$	13,940	$	(510	)	$	(504	)	$	12,926

Net favorable development in the property per risk excess-of-loss class arose primarily from the 2009 and 2010 underwriting years. Net favorable development in the catastrophe excess-of-loss (non-major events) class arose primarily from international business in the 2010 underwriting year. Net favorable development in the major catastrophes class arose primarily from events that occurred in 2009 and 2010, partially offset by unfavorable development from 2005 events. Net favorable development in the marine, aviation and satellite class arose primarily from the marine classes from most prior underwriting years. Net favorable development in the property proportional class arose primarily from international business in the 2008 through 2010 underwriting years, and included a change in the pattern of expected reported losses of $0.5 million.

Net Acquisition Expenses

Net acquisition expenses and related net acquisition expense ratios were $7.1 million and 11.4%, respectively, for the three months ended September 30, 2012 and $12.1 million and 14.2%, respectively, for the three months ended September 30, 2011. The decrease in net acquisition expenses was primarily due to the decrease in net premiums earned as compared with the same period in 2011. Net acquisition expenses and related net acquisition expense ratios were also impacted by changes in the mix of business.

Other Underwriting Expenses

Other underwriting expenses were $7.7 million and $6.7 million for the three months ended September 30, 2012 and 2011, respectively. The increase was primarily the result of an increase in compensation accruals due to the Company's stronger return on equity in 2012 versus 2011.

- 27 -

Casualty

The following table summarizes underwriting results and ratios for the Casualty segment for the three months ended September 30, 2012 and 2011 ($ in thousands):

	Three Months Ended September 30,
	2012			2011			Increase (decrease)
Net premiums written	$	72,358		$	72,689		$	(331	)
Net premiums earned		70,326			78,021			(7,695	)
Net losses and LAE		14,358			42,704			(28,346	)
Net acquisition expenses		16,710			16,780			(70	)
Other underwriting expenses		5,662			4,300			1,362
Casualty segment underwriting income	$	33,596		$	14,237		$	19,359

Underwriting ratios:
Net loss and LAE		20.4	%		54.7	%	(34.3) points
Net acquisition expense		23.8	%		21.5	%	2.3 points
Other underwriting expense		8.1	%		5.5	%	2.6 points
Combined		52.3	%		81.7	%	(29.4) points

The Casualty segment underwriting income increased by $19.4 million for the three months ended September 30, 2012 as compared with the three months ended September 30, 2011, as a result of an increase in net favorable development. Net favorable development was $40.3 million and $15.0 million for the three months ended September 30, 2012 and 2011, respectively.

Excluding net favorable development, Casualty segment underwriting income was impacted by changes in the mix of business. The combined ratio was also impacted by an increase in the financial lines combined ratio as compared with the same period in 2011.

Net Premiums Written and Earned

The Casualty segment generated 49.6% and 41.0% of our net premiums written for the three months ended September 30, 2012 and 2011, respectively. Net premiums written decreased by $0.3 million for the three months ended September 30, 2012 as compared with the three months ended September 30, 2011. Net premiums earned decreased as a result of the decreases in net premiums written in current and prior periods. Net premiums written and earned were also impacted by changes in the mix of business and the structure of the underlying reinsurance contracts.

Net Losses and LAE

Net losses and LAE decreased by $28.3 million for the three months ended September 30, 2012 as compared with the three months ended September 30, 2011. Net favorable loss development was $40.0 million and $14.5 million for the three months ended September 30, 2012 and 2011, respectively. Net favorable loss development and related premium adjustments decreased the net loss and LAE ratios by 57.3 points and 18.7 points for the three months ended September 30, 2012 and 2011, respectively. Net favorable loss development for the three months ended September 30, 2012 and 2011 was primarily attributable to a level of cumulative losses reported by our ceding companies that was lower than expected and that, in our judgment, resulted in sufficient credibility in the loss experience to change our previously selected loss ratios. The net loss and LAE ratios were also impacted by changes in the mix of business and an increase in the financial lines loss ratio.

The following table sets forth the net favorable (unfavorable) development for the three months ended September 30, 2012 by class of business ($ in thousands):

Class of Business	Net Losses and LAE			Net Acquisition Expense			Net Premiums			Net Development
North American claims made	$	22,278		$	(94	)	$	-		$	22,184
North American umbrella		13,233			4			-			13,237
Financial lines		6,393			(86	)		(150	)		6,157
North American occurrence		(1,579	)		(48	)		22			(1,605	)
Other		(370	)		169			545			344
Total	$	39,955		$	(55	)	$	417		$	40,317

- 28 -

The following table sets forth the net favorable (unfavorable) development for the three months ended September 30, 2011 by class of business ($ in thousands):

Class of Business	Net Losses and LAE			Net Acquisition Expense			Net Premiums			Net Development
North American claims made	$	6,575		$	109		$	43		$	6,727
North American occurrence excess-of-loss		3,057			(23	)		16			3,050
Financial lines		3,224			50			(352	)		2,922
North American umbrella		1,573			(21	)		-			1,552
International motor excess		823			-			-			823
Other		(767	)		294			414			(59	)
Total	$	14,485		$	409		$	121		$	15,015

Net favorable development in the North American claims made class arose primarily from the 2003, 2006 and 2007 underwriting years. Net favorable development in the North American occurrence excess-of-loss class arose primarily from the 2002 underwriting year. Net favorable development in the financial lines class arose primarily from the 2009 underwriting year in the North American surety class. Net favorable development in the North American umbrella class arose primarily from the 2003 and 2005 underwriting years. Net favorable development in the international motor excess class arose primarily from a change in the pattern of expected reported losses from the 2008 and prior underwriting years.

Net Acquisition Expenses

Net acquisition expenses and related net acquisition expense ratios were $16.7 million and 23.8%, respectively, for the three months ended September 30, 2012 and $16.8 million and 21.5%, respectively, for the three months ended September 30, 2011. Net acquisition expenses and related net acquisition expense ratios were impacted by changes in the mix of business.

Other Underwriting Expenses

Other underwriting expenses were $5.7 million and $4.3 million for the three months ended September 30, 2012 and 2011, respectively. The increase was primarily the result of an increase in compensation accruals due to the Company's stronger return on equity in 2012 versus 2011.

Finite Risk

The following table summarizes underwriting results and ratios for the Finite Risk segment for the three months ended September 30, 2012 and 2011 ($ in thousands):

	Three Months Ended September 30,
	2012			2011			Increase (decrease)
Net premiums written	$	8,745		$	2,802		$	5,943
Net premiums earned		6,362			3,553			2,809
Net losses and LAE		3,969			1,754
Net acquisition expenses		2,380			1,360
Net losses, LAE and acquisition expenses		6,349			3,114			3,235
Other underwriting expenses		289			218			71
Finite Risk segment underwriting income (loss)	$	(276	)	$	221		$	(497	)

Underwriting ratios:
Net loss and LAE		62.4	%		49.4	%
Net acquisition expense		37.4	%		38.3	%
Net loss, LAE and acquisition expense		99.8	%		87.7	%	12.1 points
Other underwriting expense		4.5	%		6.1	%	(1.6) points
Combined		104.3	%		93.8	%	10.5 points

During the three months ended September 30, 2012 and 2011, the in-force Finite Risk portfolio consisted of one contract and we expect minor activity in this segment in the foreseeable future due to the relatively low level of demand for finite risk products. Due to the inverse relationship between losses and commissions for this segment, we believe it is important to evaluate the overall combined ratio, rather than its component parts of net loss and LAE ratio and net acquisition expense ratio. Due to the decline in premium volume in recent years, current year ratios may be significantly impacted by relatively small adjustments of prior years’ reserves.

- 29 -

Net Premiums Written and Earned

The Finite Risk segment generated 6.0% and 1.6% of our net premiums written for the three months ended September 30, 2012 and 2011, respectively. The increases in net premiums written and net premiums earned for the three months ended September 30, 2012 as compared with the three months ended September 30, 2011 were attributable to an increase in the reported premium and an increase in our estimates of premium written and earned relating to the one in-force contract.

Net Losses and LAE and Acquisition Expenses

Net losses, LAE and acquisition expenses increased by $3.2 million for the three months ended September 30, 2012 as compared with the three months ended September 30, 2011, primarily due to an increase in net premiums earned. A change in underwriting conditions resulted in an increase in the loss and loss adjustment expense ratio for the current period.

Non-Underwriting Results

Net Investment Income

Net investment income was $23.2 million and $29.8 million for the three months ended September 30, 2012 and 2011, respectively. The decrease during the three months ended September 30, 2012, as compared with the same period in 2011 resulted primarily from a decrease in the average book yield for the portfolio from 2.9% in the third quarter of 2011 to 2.4% in the third quarter of 2012. We also had a reduction of approximately $275.0 million in the average book value of our investments and cash and cash equivalents for the three months ended September 30, 2012 as compared with the same period in 2011.

Net Realized Gains on Investments

Net realized gains on investments were $23.0 million and $7.5 million for the three months ended September 30, 2012 and 2011, respectively. Sales of investments resulted in net realized gains of $23.0 million for the three months ended September 30, 2012 and included $16.7 million from the sale of municipal bonds, $3.7 million from the sale of corporate bonds and $2.3 million from the sale of commercial mortgage-backed securities (“CMBS”). There was no net impact from mark-to-market adjustments on trading securities for the three months ended September 30, 2012. Sales of investments resulted in net realized gains of $3.9 million for the three months ended September 30, 2011, primarily from U.S. Treasury Inflation-Protected Securities (“TIPS”). The net positive impact from mark-to-market adjustments on trading securities of $3.6 million for the three months ended September 30, 2011 were related primarily to non-U.S. government securities.

Net Impairment Losses on Investments

Net impairment losses on investments were $0.7 million and $4.5 million for the three months ended September 30, 2012 and 2011, respectively. The net impairment losses reflect other-than-temporary impairments attributable to credit losses on impaired securities that relate exclusively to investments in securitized mortgages not guaranteed by U.S. government agencies. The net impairment losses recorded for the three months ended September 30, 2012 related substantially all to non-agency residential mortgage-backed securities (“RMBS”). The net impairment losses recorded for the three months ended September 30, 2011 included $3.9 million related to non-agency RMBS and $0.6 million related to sub-prime asset-backed securities (“ABS”).

Net Changes in Fair Value of Derivatives

There were no net changes in the fair value of derivatives for the three months ended September 30, 2012 as we did not hold any derivatives during this period. Net changes in the fair value of derivatives resulted in an expense of $4.5 million for the three months ended September 30, 2011. The net changes in the fair value of derivatives for the three months ended September 30, 2011 were primarily attributable to expenses of $2.9 million related to put options on treasury futures that were purchased to temporarily protect our investment portfolio against a sudden increase in interest rates. In addition, expenses of $1.8 million related to a decrease in the fair value of a derivative agreement with Topiary Capital Limited that was used to manage our exposure to certain underwriting risks until it expired on July 31, 2011.

Operating Expenses

Non-underwriting operating expenses were $6.4 million and $3.6 million for the three months ended September 30, 2012 and 2011, respectively, and related to costs such as compensation and other corporate expenses associated with operating as a publicly-traded company. The increase was primarily the result of an increase in compensation accruals due to the Company's stronger return on equity in 2012 versus 2011.

Interest Expense

Interest expense was $4.8 million for both the three months ended September 30, 2012 and 2011 and related to our $250.0 million of debt obligations.

Income Taxes

Income tax expense was $2.6 million for the three months ended September 30, 2012 and income tax benefit was $1.8 million for the three months ended September 30, 2011. Our effective tax rate was 2.9% and (3.2%) for the three months ended September 30, 2012 and 2011, respectively. Income tax expense or benefit is primarily driven by the taxable income or loss generated by our U.S.-based subsidiaries. The income tax expense or benefit rate is driven by the portion of taxable income or loss generated by our U.S.-based subsidiaries relative to the income or loss generated by our Bermuda-based operations, which are not subject to corporate income tax. Premiums earned by our U.S. and Bermuda-based subsidiaries generally do not bear a proportionate relationship to their respective pre-tax income for a variety of reasons, including the significant impact on pre-tax income of the different mixes of business underwritten by the particular subsidiary, the presence or absence of underwriting income or loss attributable to such business, and the investment results experienced by the particular subsidiary.

- 30 -

Pre-tax income was $79.9 million and $7.5 million in our Bermuda and U.S. companies, respectively, for the three months ended September 30, 2012. Pre-tax loss was $52.7 million and $2.5 million in our Bermuda and U.S. companies, respectively, for the three months ended September 30, 2011.

Nine Months Ended September 30, 2012 as Compared with the Nine Months Ended September 30, 2011

Net income (loss) and diluted earnings (loss) per common share for the nine months ended September 30, 2012 and 2011 were as follows ($ and amounts in thousands, except diluted earnings (loss) per common share):

	Nine Months Ended September 30,
	2012			2011			Net change
Underwriting income (loss)	$	104,400		$	(293,007	)	$	397,407
Net investment income		77,916			96,105			(18,189	)
Net realized gains on investments		70,299			3,216			67,083
Net impairment losses on investments		(2,882	)		(7,624	)		4,742
Other revenues (expenses)		(33,475	)		(31,131	)		(2,344	)
Income (loss) before income taxes		216,258			(232,441	)		448,699
Income tax expense (benefit)		(10,575	)		1,313			(11,888	)
Net income (loss)	$	205,683		$	(231,128	)	$	436,811
Weighted average shares outstanding for diluted earnings (loss) per common share		34,286			37,165			(2,879	)
Diluted earnings (loss) per common share	$	5.98		$	(6.18	)	$	12.16

The net income and diluted income per common share for the nine months ended September 30, 2012 as compared with the net loss and diluted loss per common share for the nine months ended September 30, 2011 was primarily due to an increase in the net underwriting result attributable to a significant decrease in net losses from major catastrophe activity and an increase in net favorable development. In addition, there was an increase in net realized gains on investments, partially offset by a decrease in net investment income and higher income taxes. As the nine months ended September 30, 2011 resulted in a net loss, the basic weighted average common shares outstanding is used in the denominator of the diluted loss per common share computation.

Underwriting Results

Net underwriting income was $104.4 million for the nine months ended September 30, 2012, which compares with a net underwriting loss of $293.0 million for the nine months ended September 30, 2011. The change in the net underwriting result was due primarily to a significant decrease in net losses from major catastrophes in 2012 and an increase in net favorable development.

Net losses from major catastrophes were $35.8 million and $454.7 million for the nine months ended September 30, 2012 and 2011, respectively. Underwriting losses on our 2012 underwriting year North American crop business as a result of the severe drought conditions in the United States were $17.6 million for the nine months ended September 30, 2012. Net favorable development was $112.3 million and $77.3 million for the nine months ended September 30, 2012 and 2011, respectively.

The following discussion and analysis reviews our underwriting results by operating segment.

Property and Marine

The following table summarizes underwriting results and ratios for the Property and Marine segment for the nine months ended September 30, 2012 and 2011 ($ in thousands):

	Nine Months Ended September 30,
	2012			2011			Increase (decrease)
Gross premiums written	$	195,110		$	302,597		$	(107,487	)
Ceded premiums written		386			34,751			(34,365	)
Net premiums written		194,724			267,846			(73,122	)
Net premiums earned		186,066			274,996			(88,930	)
Net losses and LAE		85,380			551,868			(466,488	)
Net acquisition expenses		25,034			37,703			(12,669	)
Other underwriting expenses		21,950			21,281			669
Property and Marine segment underwriting income (loss)	$	53,702		$	(335,856	)	$	389,558

Underwriting ratios:
Net loss and LAE		45.9	%		200.7	%	(154.8) points
Net acquisition expense		13.5	%		13.7	%	(0.2) points
Other underwriting expense		11.8	%		7.7	%	4.1 points
Combined		71.2	%		222.1	%	(150.9) points

- 31 -

The Property and Marine segment underwriting result improved by $389.6 million for the nine months ended September 30, 2012 as compared with the nine months ended September 30, 2011, primarily due to a decrease in net losses from major catastrophes. Net losses from major catastrophes were $35.8 million and $454.7 million for the nine months ended September 30, 2012 and 2011, respectively. Net losses from major catastrophes for the nine months ended September 30, 2012 were attributable to PCS Catastrophes 66 and 67, tornado and hailstorm events affecting primarily Kentucky and Tennessee that occurred in February and March 2012, PCS Catastrophe 74, a tornado and hailstorm event in Missouri, Illinois, Kentucky, Texas and Indiana that occurred in April 2012, PCS Catastrophe 83 and Hurricane Isaac. Underwriting losses on our 2012 underwriting year North American crop business as a result of the severe drought conditions in the United States were $17.6 million for the nine months ended September 30, 2012. Net losses from major catastrophes for the nine months ended September 30, 2011 related primarily to the February and June earthquakes in New Zealand, the earthquake in Japan, U.S. tornadoes, Australian floods and Cyclone Yasi.

Net favorable development was $43.6 million and $29.9 million for the nine months ended September 30, 2012 and 2011, respectively.

Excluding net losses from major catastrophes and net favorable development, Property and Marine segment underwriting income was also impacted by changes in the mix of business resulting in an increase in the combined ratio. The combined ratio was also impacted by a decrease in non-major catastrophe losses as compared with the same period in 2011.

Net Premiums Written and Earned

The Property and Marine segment generated 45.2% and 53.8% of our net premiums written for the nine months ended September 30, 2012 and 2011, respectively. Gross premiums written decreased by $107.5 million for the nine months ended September 30, 2012 as compared with the nine months ended September 30, 2011, and by $85.9 million when considering reinstatement premiums written related to major catastrophes of $4.8 million and $26.3 million for the nine months ended September 30, 2012 and 2011, respectively. The decrease in gross premiums written, excluding reinstatement premiums, was due to decreases across most classes of business, most significantly in the catastrophe excess-of-loss classes as compared with the same period in 2011 and resulted from fewer opportunities that met our underwriting standards and our desire to reduce our exposure to catastrophe events. The decrease in ceded premiums written was due to a decrease in retrocessional reinsurance purchased for the nine months ended September 30, 2012 as compared with the same period in 2011. Net premiums earned decreased by $88.9 million for the nine months ended September 30, 2012 as compared with the same period in 2011, primarily as a result of decreases in net premiums written in current and prior periods. Net premiums written and earned were also impacted by changes in the mix of business and the structure of the underlying reinsurance contracts.

Net Losses and LAE

Net losses and LAE decreased by $466.5 million for the nine months ended September 30, 2012 as compared with the nine months ended September 30, 2011. The decrease in net losses and LAE was primarily due to a decrease in net losses from major catastrophes of $440.3 million, a decrease in non-major catastrophe losses and an increase in net favorable loss development, partially offset by underwriting losses on our 2012 underwriting year North American crop business as a result of the severe drought conditions in the United States. The following table sets forth the components of pre-tax net losses by major catastrophe for the nine months ended September 30, 2012 ($ in thousands):

Major Catastrophe	Net Losses and LAE			Reinstatement Premiums Earned		Net Losses from Major Catastrophes
PCS Catastrophes 66 and 67	$	(20,706	)	$	2,569	$	(18,137	)
PCS Catastrophe 74		(9,764	)		526		(9,238	)
PCS Catastrophe 83		(6,736	)		1,107		(5,629	)
Hurricane Isaac		(3,101	)		324		(2,777	)
Total	$	(40,307	)	$	4,526	$	(35,781	)

The following table sets forth the components of pre-tax net losses by major catastrophe for the nine months ended September 30, 2011 ($ in thousands):

Major Catastrophe	Net Losses and LAE			Reinstatement Premiums Earned		Net Losses from Major Catastrophes
February New Zealand earthquake	$	(207,832	)	$	11,133	$	(196,699	)
Japan earthquake*		(132,989	)		5,651		(127,338	)
U.S. tornadoes		(50,389	)		5,476		(44,913	)
June New Zealand earthquake		(32,713	)		-		(32,713	)
Australian floods		(20,579	)		2,149		(18,430	)
Hurricane Irene		(15,154	)		561		(14,593	)
Cyclone Yasi		(14,209	)		906		(13,303	)
Denmark floods		(6,700	)		-		(6,700	)
Total	$	(480,565	)	$	25,876	$	(454,689	)

* Includes $35.0 million of retrocessional recoveries.

During the fourth quarter of 2011, the Company revised its estimates of pre-tax net losses from major catastrophes for the nine months ended September 30, 2011. At December 31, 2011, the Company’s estimates of pre-tax net losses were $208.5 million for the February New Zealand earthquake, $143.6 million for the Japan earthquake, $43.0 million for the U.S. tornadoes, $33.7 million for the June New Zealand earthquake, $16.5 million for the Australian floods, $12.0 million for Hurricane Irene, $13.5 million for Cyclone Yasi and $10.4 million for the Denmark floods.

- 32 -

Net losses from major catastrophes, with related premium adjustments, increased the net loss and LAE ratio by 21.0 points and 172.0 points for nine months ended September 30, 2012 and 2011, respectively.

Underwriting losses on our 2012 underwriting year North American crop business as a result of the severe drought conditions in the United States were $17.6 million for the nine months ended September 30, 2012 compared with no underwriting income or loss on our 2011 underwriting year North American crop business for the nine months ended September 30, 2011.

Net favorable loss development was $39.3 million and $31.3 million for nine months ended September 30, 2012 and 2011, respectively. Net favorable loss development and related premium adjustments decreased the net loss and LAE ratio by 22.6 points and 10.7 points for the nine months ended September 30, 2012 and 2011, respectively. Net favorable loss development for the nine months ended September 30, 2012 and 2011 was primarily attributable to a level of cumulative losses reported by our ceding companies that was lower than expected and that, in our judgment, resulted in sufficient credibility in the loss experience to change our previously selected loss ratios.

The following table sets forth the net favorable (unfavorable) development for the nine months ended September 30, 2012 by class of business ($ in thousands):

Class of Business	Net Losses and LAE		Net Acquisition Expense			Net Premiums		Net Development
Major catastrophes	$	13,572	$	(37	)	$	29	$	13,564
Catastrophe excess-of-loss (non-major events)		10,902		279			382		11,563
Property per risk excess-of-loss		8,227		(6	)		1,726		9,947
Marine, aviation and satellite		3,068		4			1,972		5,044
Property proportional		2,997		(108	)		-		2,889
Other		536		9			-		545
Total	$	39,302	$	141		$	4,109	$	43,552

Net favorable development in the major catastrophes class arose primarily from the 2011 earthquake in Japan. Net favorable development in the catastrophe excess-of-loss (non-major events) class arose primarily from the 2010 and 2011 underwriting years. Net favorable development in the property per risk excess-of-loss class arose from the 2006 through 2010 underwriting years. Net favorable development in the marine, aviation and satellite class arose primarily from the 2006 through 2008 underwriting years with a change in loss development patterns contributing $0.8 million to the net favorable development. Net favorable development in the property proportional class arose primarily from the 2008 through 2010 underwriting years.

The following table sets forth the net favorable (unfavorable) development for the nine months ended September 30, 2011 by class of business ($ in thousands):

Class of Business	Net Losses and LAE			Net Acquisition Expense			Net Premiums			Net Development
Major catastrophes	$	16,326		$	(10	)	$	(355	)	$	15,961
Property per risk excess-of-loss		12,180			292			45			12,517
Property proportional		5,259			(182	)		-			5,077
Crop		1,923			(164	)		-			1,759
Marine, aviation and satellite		2,250			(324	)		(308	)		1,618
Catastrophe excess-of-loss (non-major events)		(6,590	)		(126	)		(283	)		(6,999	)
Total	$	31,348		$	(514	)	$	(901	)	$	29,933

Net favorable development in the major catastrophes class arose primarily from the September 2010 earthquake in New Zealand and the December 2010 floods in Australia. Net favorable development in the property per risk excess-of-loss class arose from most prior underwriting years. Net favorable development in the property proportional class arose primarily from the 2008 and 2009 underwriting years, with a change in the expected loss ratios contributing $0.7 million of the net favorable development. Net favorable development in the crop class arose primarily from North American business in the 2010 underwriting year. Net favorable development in the marine, aviation and satellite class arose primarily from the 2005 through 2007 underwriting years. Net unfavorable development in the catastrophe excess-of-loss (non-major events) class arose primarily from an increase in loss advices from ceding companies related to fourth quarter 2010 events in Europe and Australia, partially offset by North American business and international business prior to 2010.

Net Acquisition Expenses

Net acquisition expenses and related net acquisition expense ratios were $25.0 million and 13.5%, respectively, for the nine months ended September 30, 2012 and $37.7 million and 13.7%, respectively, for the nine months ended September 30, 2011. The decrease in net acquisition expenses was primarily due to the decrease in net premiums earned as compared with the same period in 2011. Net acquisition expenses and related net acquisition expense ratios were also impacted by changes in the mix of business.

Other Underwriting Expenses

Other underwriting expenses were $22.0 million and $21.3 million for the nine months ended September 30, 2012 and 2011, respectively. The increase was primarily the result of an increase in compensation accruals due to the Company's stronger return on equity in 2012 versus 2011.

- 33 -

Casualty

The following table summarizes underwriting results and ratios for the Casualty segment for the nine months ended September 30, 2012 and 2011 ($ in thousands):

	Nine Months Ended September 30,
	2012			2011			Increase (decrease)
Net premiums written	$	219,436		$	222,442		$	(3,006	)
Net premiums earned		221,838			235,949			(14,111	)
Net losses and LAE		101,245			126,191			(24,946	)
Net acquisition expenses		52,572			53,487			(915	)
Other underwriting expenses		16,323			14,461			1,862
Casualty segment underwriting income	$	51,698		$	41,810		$	9,888

Underwriting ratios:
Net loss and LAE		45.6	%		53.5	%	(7.9) points
Net acquisition expense		23.7	%		22.7	%	1.0 points
Other underwriting expense		7.4	%		6.1	%	1.3 points
Combined		76.7	%		82.3	%	(5.6) points

The Casualty segment underwriting income increased by $9.9 million for the nine months ended September 30, 2012 as compared with the nine months ended September 30, 2011, as a result of an increase in net favorable development. Net favorable development was $68.6 million and $46.4 million for the nine months ended September 30, 2012 and 2011, respectively.

Net Premiums Written and Earned

The Casualty segment generated 50.9% and 44.7% of our net premiums written for the nine months ended September 30, 2012 and 2011, respectively. Net premiums written decreased by $3.0 million for the nine months ended September 30, 2012 as compared with the nine months ended September 30, 2011. The net premiums written in the nine months ended September 30, 2012 and 2011 were impacted by increases to prior years’ premium estimates of $30.0 million and $11.3 million, respectively. Excluding the impact of increases to prior years’ premium estimates, net premiums written decreased by $21.7 million primarily due to fewer opportunities that met our underwriting standards. The net premiums earned in the nine months ended September 30, 2012 and 2011 were also impacted by increases to prior years’ premium estimates of $20.6 million and $5.2 million, respectively. Excluding the impact of increases to prior years’ premium estimates, net premiums earned decreased by $29.5 million. Net premiums earned decreased as a result of the decreases in net premiums written in current and prior periods. Net premiums written and earned were also impacted by changes in the mix of business and the structure of the underlying reinsurance contracts.

Net Losses and LAE

Net losses and LAE decreased by $24.9 million for the nine months ended September 30, 2012 as compared with the nine months ended September 30, 2011, primarily due to an increase in net favorable loss development. Net favorable loss development was $67.7 million and $45.3 million for the nine months ended September 30, 2012 and 2011, respectively. Net favorable loss development and related premium adjustments decreased the net loss and LAE ratios by 31.2 points and 19.4 points for the nine months ended September 30, 2012 and 2011, respectively. Net favorable loss development for the nine months ended September 30, 2012 and 2011 was primarily attributable to a level of cumulative losses reported by our ceding companies that was lower than expected and that, in our judgment, resulted in sufficient credibility in the loss experience to change our previously selected loss ratios. The net loss and LAE ratios were also impacted by changes in the mix of business and an increase in the financial lines loss ratio.

The following table sets forth the net favorable (unfavorable) development for the nine months ended September 30, 2012 by class of business ($ in thousands):

Class of Business	Net Losses and LAE			Net Acquisition Expense			Net Premiums		Net Development
North American claims made	$	42,864		$	(1,478	)	$	739	$	42,125
North American umbrella		23,845			430			-		24,275
Financial lines		5,676			(369	)		460		5,767
North American occurrence		2,842			(192	)		41		2,691
Accident and health		933			552			-		1,485
International casualty		(8,219	)		74			295		(7,850	)
Other		(258	)		(32	)		441		151
Total	$	67,683		$	(1,015	)	$	1,976	$	68,644

- 34 -

Net favorable development in the North American claims made class arose primarily from the 2004 through 2009 underwriting years with a change in loss development patterns contributing $4.6 million to the net favorable development. Net favorable development in the North American umbrella class arose primarily from the 2003 through 2007 underwriting years with a change in loss development patterns contributing $9.6 million to the net favorable development. Net favorable development in the financial lines class arose primarily from the 2006 and 2010 underwriting years. Net favorable development in the North American occurrence class arose primarily from the 2002, 2003 and 2007 underwriting years, partially offset by unfavorable development in the 2004 through 2006 underwriting years. The unfavorable development included a change in loss development patterns of $0.8 million. Net favorable development in the accident and health class arose primarily from the 2009 and 2010 underwriting years. Net unfavorable development in the international casualty class arose primarily from the 2006, 2008 and 2010 underwriting years. The 2006 underwriting year was impacted by an increase in medical malpractice claims. The 2008 underwriting year was impacted by an increase in claims related to the credit crisis arising from the financial institutions business and liability arising from Australian wildfires. The 2010 underwriting year was impacted by a claim to a power plant in Thailand.

The following table sets forth the net favorable (unfavorable) development for the nine months ended September 30, 2011 by class of business ($ in thousands):

Class of Business	Net Losses and LAE			Net Acquisition Expense			Net Premiums			Net Development
North American claims made	$	26,296		$	(854	)	$	59		$	25,501
North American umbrella		9,383			(181	)		-			9,202
North American occurrence excess-of-loss		7,606			165			196			7,967
Financial lines		6,397			(60	)		(401	)		5,936
Accident and health		(3,094	)		1,370			-			(1,724	)
Other		(1,294	)		67			749			(478	)
Total	$	45,294		$	507		$	603		$	46,404

Net favorable development in the North American claims made class arose primarily from the 2003 through 2007 underwriting years. Net favorable development in the North American umbrella class arose primarily from the 2003, 2005, 2006 and 2008 underwriting years. The net favorable development in 2008 underwriting year resulted from improved loss experience in the current year after adverse experience led us to increase the selected loss ratio from the initial expected loss ratio in prior years. Net favorable development in the North American occurrence excess-of-loss class arose primarily from the 2002 through 2005 underwriting years. Net favorable development in the financial lines class arose primarily from North American surety business across most prior underwriting years, with a change in the loss development patterns resulting in approximately $1.6 million of net favorable development. Net unfavorable development in the accident and health class arose primarily from the 2004 through 2006 underwriting years. Net unfavorable development in other classes was partially offset by a change in the pattern of expected reported losses resulting in approximately $1.3 million of net favorable development.

Net Acquisition Expenses

Net acquisition expenses and related net acquisition expense ratios were $52.6 million and 23.7%, respectively, for the nine months ended September 30, 2012 and $53.5 million and 22.7%, respectively, for the nine months ended September 30, 2011. Net acquisition expenses and related net acquisition expense ratios were impacted by changes in the mix of business.

Other Underwriting Expenses

Other underwriting expenses were $16.3 million and $14.5 million for the nine months ended September 30, 2012 and 2011, respectively. The increase was primarily the result of an increase in compensation accruals due to the Company's stronger return on equity in 2012 versus 2011.

Finite Risk

The following table summarizes underwriting results and ratios for the Finite Risk segment for the nine months ended September 30, 2012 and 2011 ($ in thousands):

	Nine Months Ended September 30,
	2012			2011			Increase (decrease)
Net premiums written	$	16,939		$	7,508		$	9,431
Net premiums earned		13,971			11,185			2,786
Net losses and LAE		4,805			2,346
Net acquisition expenses		9,419			7,083
Net losses, LAE and acquisition expenses		14,224			9,429			4,795
Other underwriting expenses		747			717			30
Finite Risk segment underwriting income (loss)	$	(1,000	)	$	1,039		$	(2,039	)

Underwriting ratios:
Net loss and LAE		34.4	%		21.0	%
Net acquisition expense		67.4	%		63.3	%
Net loss, LAE and acquisition expense		101.8	%		84.3	%	17.5 points
Other underwriting expense		5.3	%		6.4	%	(1.1) points
Combined		107.1	%		90.7	%	16.4 points

- 35 -

During the nine months ended September 30, 2012 and 2011, the in-force Finite Risk portfolio consisted of one contract and we expect minor activity in this segment in the foreseeable future due to the relatively low level of demand for finite risk products. Due to the inverse relationship between losses and commissions for this segment, we believe it is important to evaluate the overall combined ratio, rather than its component parts of net loss and LAE ratio and net acquisition expense ratio. Due to the decline in premium volume in recent years, current year ratios may be significantly impacted by relatively small adjustments of prior years' reserves.

Net Premiums Written and Earned

The Finite Risk segment generated 3.9% and 1.5% of our net premiums written for the nine months ended September 30, 2012 and 2011, respectively. Net premiums written increased by $9.4 million for the nine months ended September 30, 2012 as compared with the nine months ended September 30, 2011. The net premiums written in the nine months ended September 30, 2012 were impacted by increases to prior years’ premium estimates of $5.0 million compared to decreases to prior years’ premiums estimates of $0.4 million for the nine months ended September 30, 2011. Excluding the impact of increases to prior years’ premium estimates, net premiums written increased by $4.0 million due to an increase in the reported premium and an increase in our estimates of premium written relating to the one in-force contract. The net premiums earned in the nine months ended September 30, 2012 were also impacted by increases to prior years’ premium of $1.7 million compared to decreases of $0.5 million for the nine months ended September 30, 2011. Excluding the impact of increases to prior years’ premium, net premiums earned increased by $0.6 million.

Net Losses and LAE and Acquisition Expenses

Net losses, LAE and acquisition expenses increased by $4.8 million for the nine months ended September 30, 2012 as compared with the nine months ended September 30, 2011, due to an increase in premiums earned and a decrease in net favorable development. There was net favorable development of $0.1 million and $1.0 million for the nine months ended September 30, 2012 and 2011, respectively. The net favorable development decreased the net loss, LAE and acquisition expense ratio by 1.0 points and 8.7 points for the nine months ended September 30, 2012 and 2011, respectively. In addition, a change in underwriting conditions resulted in an increase in the loss and loss adjustment expense ratio for the current period.

Non-Underwriting Results

Net Investment Income

Net investment income was $77.9 million and $96.1 million for the nine months ended September 30, 2012 and 2011, respectively. Net investment income decreased during the nine months ended September 30, 2012, as compared with the same period in 2011 resulted primarily from a decrease in the average book yield for the portfolio from 3.1% in 2011 to 2.7% in 2012. We also had a reduction of approximately $250.0 million in the average book value of our investments and cash and cash equivalents for the nine months ended September 30, 2012 as compared with the same period in 2011.

Net Realized Gains on Investments

Net realized gains on investments were $70.3 million and $3.2 million for the nine months ended September 30, 2012 and 2011. Sales of investments resulted in net realized gains of $70.9 million for the nine months ended September 30, 2012 and included $58.0 million from the sale of municipal bonds, $8.3 million from the sale of corporate bonds and $3.3 million from the sale of CMBS. The net negative impact from mark-to-market adjustments on trading securities of $0.6 million for the nine months ended September 30, 2012 were related to non-U.S government securities. Sales of investments resulted in net realized gains of $1.4 million for the nine months ended September 30, 2011, primarily from TIPS and corporate bonds partially offset by realized losses from U.S. Government securities. The net positive impact from mark-to-market adjustments on trading securities of $1.8 million for the nine months ended September 30, 2011 were related primarily to the sale of our insurance-linked securities.

Net Impairment Losses on Investments

Net impairment losses on investments were $2.9 million and $7.6 million for the nine months ended September 30, 2012 and 2011, respectively. The net impairment losses reflect other-than-temporary impairments attributable to credit losses on impaired securities that relate exclusively to investments in securitized mortgages not guaranteed by U.S. government agencies. The net impairment losses recorded for the nine months ended September 30, 2012 related substantially all to non-agency RMBS. The net impairment losses recorded for the nine months ended September 30, 2011 included $6.3 million related to non-agency RMBS and $1.3 million related to sub-prime ABS.

Net Changes in Fair Value of Derivatives

There were no net changes in the fair value of derivatives for the nine months ended September 30, 2012 as we did not hold any derivatives during this period. Net changes in the fair value of derivatives resulted in expense of $5.3 million for the nine months ended September 30, 2011. The net changes in the fair value of derivatives for the nine months ended September 30, 2011 were primarily attributable to expenses of $2.9 million related to put options on treasury futures that were purchased to temporarily protect our investment portfolio against a sudden increase in interest rates and expenses of $2.5 million related to a decrease in the fair value of a derivative agreement with Topiary Capital Limited that was used to manage our exposure to certain underwriting risks until it expired on July 31, 2011.

Operating Expenses

Non-underwriting operating expenses were $17.6 million and $12.6 million for the nine months ended September 30, 2012 and 2011, respectively, and related to costs such as compensation and other corporate expenses associated with operating as a publicly-traded company. The increase was primarily the result of an increase in compensation accruals due to the Company's stronger return on equity in 2012 versus 2011.

- 36 -

Interest Expense

Interest expense was $14.3 million for both the nine months ended September 30, 2012 and 2011 and related to our $250.0 million of debt obligations.

Income Taxes

Income tax expense was $10.6 million and income tax benefit was $1.3 million for the nine months ended September 30, 2012 and 2011, respectively. Our effective tax rate was 4.9% and (0.6%) for the nine months ended September 30, 2012 and 2011, respectively. Income tax expense or benefit is primarily driven by the taxable income or loss generated by our U.S.-based subsidiaries. The income tax expense or benefit rate is driven by the portion of taxable income or loss generated by our U.S.-based subsidiaries relative to the income or loss generated by our Bermuda-based operations, which are not subject to corporate income tax. Premiums earned by our U.S. and Bermuda-based subsidiaries generally do not bear a proportionate relationship to their respective pre-tax income for a variety of reasons, including the significant impact on pre-tax income of the different mixes of business underwritten by the particular subsidiary, the presence or absence of underwriting income or loss attributable to such business, and the investment results experienced by the particular subsidiary.

Pre-tax income was $175.4 million and $41.1 million in our Bermuda and U.S. companies, respectively, for the nine months ended September 30, 2012. Pre-tax loss was $239.3 million in our Bermuda companies and pre-tax income was $5.8 million in our U.S. companies for the nine months ended September 30, 2011.

Financial Condition

The following discussion of financial condition, liquidity and capital resources as of September 30, 2012 focuses only on material changes from December 31, 2011. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition,” in our 2011 Form 10-K.

Liquidity

Liquidity Requirements

Platinum Holdings is a holding company, the assets of which consist primarily of shares of its subsidiaries. Platinum Holdings depends primarily on its available cash resources and liquid investments and dividends and other distributions from its subsidiaries to meet its obligations. Such obligations, and those of Platinum Finance, may include operating expenses, debt service obligations and income taxes. We believe that Platinum Holdings has sufficient cash resources and its subsidiaries have available dividend capacity to service our current outstanding obligations. Our reinsurance subsidiaries’ principal cash requirements are the payment of losses and LAE, commissions, brokerage, operating expenses, income taxes and dividends to Platinum Holdings. We consider the impact of dividends and other distributions from our reinsurance subsidiaries on their respective capital levels, which may impact the financial strength rating assigned to our subsidiaries by A.M. Best Company, Inc. ("A.M. Best") and Standard & Poor's Ratings Services ("S&P").

Collateral Requirements of our Reinsurance Subsidiaries

Platinum Bermuda is not licensed, approved or accredited as a reinsurer in the United States and, therefore, under the terms of most of its contracts with U.S. ceding companies, it is required to provide collateral to its ceding companies for unpaid losses and LAE and unearned premiums in a form acceptable to state insurance commissioners. Platinum Bermuda and Platinum US also provide reinsurance coverage in many other international jurisdictions, several of which require us to provide collateral. Typically, this type of collateral takes the form of letters of credit issued by a bank, the establishment of a trust, or funds withheld. See “Sources of Liquidity – Credit Facilities” below for additional information on our bank credit facilities and the collateral required by us.

Platinum Bermuda and Platinum US have reinsurance and other contracts that also require them to provide collateral to ceding companies should certain events occur, such as a decline in our financial strength rating by A.M. Best or S&P below specified levels or a decline in statutory equity below specified amounts, or when certain levels of assumed liabilities are attained. Some reinsurance contracts also have special termination provisions that permit early termination should certain events occur. As of September 30, 2012 and December 31, 2011, we held investments with a carrying value of $57.1 million and $61.1 million, respectively, and cash and cash equivalents of $9.6 million and $9.3 million, respectively, in trust to collateralize obligations under various reinsurance contracts.

Dividend Capacity of our Subsidiaries

The laws and regulations of Bermuda and the United States include certain restrictions on the amount of statutory capital and surplus that is available for the payment of dividends by Platinum Bermuda and Platinum US to their respective parent companies, Platinum Holdings and Platinum Finance, without the prior approval of the relevant regulatory authorities. Based on regulatory restrictions, the maximum amount available for payment of dividends by our reinsurance subsidiaries during 2012 without prior regulatory approval is as follows ($ in thousands):

Platinum Bermuda	$	286,574
Platinum US		52,992
Total	$	339,566

- 37 -

Other Liquidity Requirements

Platinum Holdings fully and unconditionally guarantees the outstanding $250.0 million debt obligations of Platinum Finance. Platinum Finance pays interest at a rate of 7.5% per annum on each June 1 and December 1.

Platinum Holdings also may require cash to pay for share repurchases. See “Capital Resources - Share and Debt Repurchases” below for additional discussion of share repurchases.

Sources of Liquidity

Our sources of funds consist primarily of cash and cash equivalents held by us, cash from operations, proceeds from sales, redemption and maturity of investments, borrowings from our credit facilities and the issuance of securities. As at September 30, 2012, we had cash and cash equivalents of $1.7 billion and Platinum Holdings had cash and cash equivalents of $44.7 million. We expect that our liquidity needs for the next twelve months will be met by our cash and cash equivalents, cash flows from operations, investment income and proceeds from the sale, redemption or maturity of our investments.

Cash Flows

Net cash flows used in operating activities were $19.0 million for the nine months ended September 30, 2012 and net cash flows provided by operating activities were $38.1 million for the nine months ended September 30, 2011. Cash flows used in operating activities resulted primarily from an increase in the payment of losses and LAE and a reduction in premium volume in the nine months ended September 30, 2012 as compared with the same period in 2011. Our reinsurance subsidiaries have liquidity from premiums, which are generally received in advance of the time losses are paid. The period of time from the occurrence of a claim through the settlement of the liability may extend many years into the future. However, due to the nature of our reinsurance operations, cash flows are affected by claim payments that can fluctuate from year to year. The amount and timing of actual claim payments can vary based on many factors, including the severity of individual losses, changes in the legal environment, and general market conditions. As a result of expected loss payments resulting from major catastrophe activity that has occurred since the beginning of 2010, we anticipate that our operating cash flows will be negative for at least the next 12 months.

Net cash flows provided by investing activities were $1.0 billion and $182.9 million for the nine months ended September 30, 2012 and 2011, respectively. In 2012 and 2011, net cash flows provided by investing activities were primarily due to sales and maturities of short-term investments and fixed maturity available-for-sale securities, partially offset by the acquisition of fixed maturity available-for-sale securities and short-term investments. In 2012, we increased our cash balance from investing activities as a result of numerous factors, including managing the overall duration of our investment portfolio and the expected loss payments resulting from major catastrophe activity that has occurred since the beginning of 2010.

Net cash flows used in financing activities were $115.2 million and $89.5 million for the nine months ended September 30, 2012 and 2011, respectively. Net cash flows used in financing activities in 2012 primarily related to repurchases of common shares of $109.6 million and the payment of dividends to common shareholders of $8.1 million. Net cash flows used in financing activities in 2011 primarily related to repurchases of common shares and the purchase of common share options totaling $81.8 million and the payment of dividends to common shareholders of $8.9 million.

Investments

Our investable assets totaled $4.1 billion and $4.2 billion at September 30, 2012 and December 31, 2011, respectively. Investable assets include investments, cash and cash equivalents, accrued investment income and net balances due to and from brokers and had a duration of 2.8 and 3.6 years as of September 30, 2012 and December 31, 2011, respectively.

As part of our investment strategy, we seek to establish a level of cash and liquid short-term and intermediate-term securities which, combined with expected cash flows from our operating activities, we believe to be adequate to meet our foreseeable payment obligations. The ultimate amount and timing of claim payments could differ materially from our estimates and create significant variations in cash flows from operations between periods, which may require us to make payments from other sources of liquidity, such as sales of investments, borrowings from credit facilities or proceeds from capital market transactions. If we need to sell investments to meet liquidity requirements, the sale of such investments may be at a material loss.

- 38 -

Our investment portfolio consists primarily of diversified, high quality, predominantly investment grade fixed maturity securities. See Note 3 to the “Consolidated Financial Statements” in this Form 10-Q for additional discussion of fair values. The following table sets forth the fair values, net unrealized gains and losses and credit quality of our investments as of September 30, 2012 ($ in thousands):

	Fair Value		Net Unrealized Gain (Loss)			Credit Quality
Fixed maturity available-for-sale securities:
U.S. Government	$	4,991	$	341		Aaa
U.S. Government agencies		10,290		287		Aaa
Municipal bonds:
State general obligation bonds		742,228		85,106		Aa2
Essential service bonds		305,228		31,033		Aa3
State income tax and sales tax bonds		116,165		16,092		Aa1
Other municipal bonds		78,058		6,081		Aa2
Pre-refunded bonds		40,105		2,414		Aa3
Subtotal		1,281,784		140,726		Aa2
Non-U.S. governments		94,761		1,808		Aa1
Corporate bonds:
Industrial		188,114		9,950		Baa1
Utilities		76,281		5,555			A3
Insurance		49,573		4,233		Baa1
Finance		7,453		740		Baa1
Subtotal		321,421		20,478		Baa1
Commercial mortgage-backed securities		176,649		13,480		Aa2
Residential mortgage-backed securities:
U.S. Government agency residential mortgage-backed securities		216,728		2,563		Aaa
Non-agency residential mortgage-backed securities		43,893		(4,930	)	Caa2
Alt-A residential mortgage-backed securities		4,930		45		Caa2
Subtotal		265,551		(2,322	)	Aa3
Asset-backed securities:
Asset-backed securities		13,684		84		Aaa
Sub-prime asset-backed securities		7,907		(466	)	Ca
Subtotal		21,591		(382	)	Baa1
Total fixed maturity available-for-sale securities		2,177,038		174,416		Aa3
Fixed maturity trading securities:
Non-U.S. governments		116,056		n/a		Aaa
Total fixed maturity trading securities		116,056		n/a		Aaa
Short-term investments:
Available-for-sale		49,249		289		Aaa
Trading		116,492		n/a		Aaa
Total short-term investments		165,741		289		Aaa
Total investments	$	2,458,835	$	174,705		Aa3

As of September 30, 2012, our investments had a dollar weighted average rating of Aa3, primarily measured by Moody’s Investor Services ("Moody's"). If a particular security did not have a Moody’s rating then a rating from S&P was generally converted to a Moody’s equivalent rating.

- 39 -

Our non-U.S. government bond portfolio consists of securities issued by governments, provinces, agencies and supranationals as well as debt issued by financial institutions that is guaranteed by non-U.S. governments. The following table provides additional detail on the fair value and amortized cost of our portfolio of non-U.S. government fixed maturity available-for-sale securities, fixed maturity trading securities and short-term investments converted to U.S. dollars as of September 30, 2012 ($ in thousands):

	Fair Value
Non-U.S. government portfolio	Basic Monetary Unit		Other Non-U.S. Dollar		U.S. Dollar		Total		Amortized Cost
Germany	$	43,811	$	-	$	-	$	43,811	$	40,597
Ireland		-		-		4,978		4,978		5,000
Netherlands		-		1,558		-		1,558		1,420
Eurozone governments		43,811		1,558		4,978		50,347		47,017
New Zealand		88,918		-		-		88,918		88,910
Australia		38,183		-		30,715		68,898		67,724
United Kingdom		56,820		-		-		56,820		51,452
Norway		-		-		33,485		33,485		32,996
Sweden		-		1,314		20,282		21,596		21,189
Japan		-		-		5,301		5,301		5,000
Supranational		-		1,944		-		1,944		1,733
Other non-U.S. governments		183,921		3,258		89,783		276,962		269,004
Total non-U.S. governments	$	227,732	$	4,816	$	94,761	$	327,309	$	316,021

We invest in non-U.S. dollar denominated securities for purposes of hedging our non-U.S. dollar denominated reinsurance liabilities. Our investments in debt issued by Eurozone financial institutions are guaranteed by their respective governments and are included in the table above.

In addition to the investments noted above, we hold non-U.S. dollar denominated cash and cash equivalents of $212.5 million that are also held for the purpose of hedging our net foreign currency reinsurance liabilities.

The net unrealized gain position of our municipal bond and corporate bond portfolios was $140.7 million and $20.5 million, respectively, as of September 30, 2012 as compared with an unrealized gain position of $150.1 million and $20.3 million, respectively, as of December 31, 2011. The decrease in the net unrealized gain position in our municipal bond portfolio was the result of sales activities partially offset by the positive impact of the narrowing of interest rate spreads and lower U.S. Government treasury yields. We analyze the creditworthiness of our municipal bond and corporate bond portfolios by reviewing various performance metrics of the issuer, including financial condition, credit ratings and other public information.

The net unrealized gain position of our portfolio of CMBS was $13.5 million as of September 30, 2012 as compared with $9.3 million as of December 31, 2011. The net unrealized gain position was positively impacted by a narrowing of interest rate spreads and lower U.S. Government treasury yields, partially offset by sales activities. We analyze our CMBS on a periodic basis using default loss models based on the performance of the underlying loans. Performance metrics include delinquencies, defaults, foreclosures, debt-service-coverage ratios and cumulative losses incurred. The expected losses for a mortgage pool are compared with the current level of credit support, which generally represents the point at which our security would experience losses. We evaluate projected cash flows as well as other factors in order to determine if a credit impairment has occurred. Our portfolio consists primarily of senior tranches of CMBS with high credit ratings and strong credit support.

The net unrealized loss position of our RMBS portfolio was $2.3 million, with non-agency RMBS representing $4.9 million, as of September 30, 2012 as compared with $9.6 million, with non-agency RMBS representing $11.3 million, as of December 31, 2011. Approximately 82% of the RMBS in our investment portfolio were issued or are guaranteed by the Government National Mortgage Association, the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, or the Federal Deposit Insurance Corporation and are referred to as U.S. Government agency RMBS. The remaining 18% of our RMBS were issued by non-agency institutions and included securities with underlying Alt-A mortgages. The net unrealized loss position of our non-agency RMBS was positively impacted by a narrowing of interest rate spreads and the recognition of net impairment losses. Securities with underlying sub-prime mortgages as collateral are included in ABS. The net unrealized loss position of our portfolio of sub-prime ABS was $0.5 million as of September 30, 2012 as compared with $2.3 million as of December 31, 2011. We analyze our non-agency RMBS and sub-prime ABS on a periodic basis using default loss models based on the performance of the underlying loans. Performance metrics include, but are not limited to, delinquencies, defaults, foreclosures, prepayment speeds and cumulative losses incurred. The expected losses for a mortgage pool are compared with the current level of credit support, which generally represents the point at which our security would experience losses. We evaluate projected cash flows as well as other factors in order to determine if a credit impairment has occurred.

We believe that the gross unrealized losses in our available-for-sale portfolio represent temporary declines in fair value. We believe that the unrealized losses are not necessarily predictive of ultimate performance and that the provisions we have made for net impairment losses are adequate. However, economic conditions may deteriorate more than expected and may adversely affect the expected cash flows of our securities, which in turn may lead to impairment losses recorded in future periods. Conversely, economic conditions may improve more than expected and favorably increase the cash flows expected from these impaired securities, which would be earned through net investment income over the remaining life of the security.

- 40 -

Credit Facilities

Syndicated Credit Facility

Other Letter of Credit Facilities

	Letters of Credit				Collateral
	Committed Capacity		Issued		Cash and Cash Equivalents		Investments		Total
Syndicated Credit Facility:
Secured	$	200,000	$	99,715	$	113,307	$	-	$	113,307
Unsecured		100,000		-		-		-		-
Total Syndicated Credit Facility		300,000		99,715		113,307		-		113,307
Other LOC Facilities		100,000		37,330		45,287		-		45,287
Total	$	400,000	$	137,045	$	158,594	$	-	$	158,594

Capital Resources

At September 30, 2012, our capital resources of $2.0 billion consisted of $1.8 billion of common shareholders’ equity and $250.0 million of debt obligations. At December 31, 2011, our capital resources of $1.9 billion consisted of $1.7 billion of common shareholders’ equity and $250.0 million of debt obligations. The increase in capital during the nine months ended September 30, 2012 was primarily attributable to our net income of $205.7 million, partially offset by repurchases of common shares of $109.6 million and dividends of $8.1 million.

Share and Debt Repurchases

Our Board of Directors has also authorized the repurchase of up to $250.0 million of our outstanding debt obligations issued by Platinum Finance in open market purchases, privately negotiated transactions or otherwise. We have not repurchased any of our debt obligations.

The timing and amount of the repurchase transactions under our repurchase programs depends on a variety of factors, including market conditions, our liquidity requirements, contractual restrictions, corporate and regulatory considerations and other factors.

- 41 -

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, as defined for purposes of the U.S. Securities and Exchange Commission (“SEC”) rules, which are not accounted for or disclosed in the “Consolidated Financial Statements” contained elsewhere in this Form 10-Q as of September 30, 2012.

Contractual Obligations

There have been no material changes outside of the ordinary course of business to our contractual obligations as disclosed under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition - Contractual Obligations,” in our 2011 Form 10-K.

Recently Issued Accounting Standards

See Note 1 to the “Consolidated Financial Statements” contained elsewhere in this Form 10-Q for a discussion of recently issued accounting standards.

Note On Forward-Looking Statements

This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). Forward-looking statements are based on our current plans or expectations that are inherently subject to significant business, economic and competitive uncertainties and contingencies. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf of, us. In particular, statements using words such as “may,” “should,” “estimate,” “expect,” “anticipate,” “intend,” “believe,” “predict,” “potential,” or words of similar import generally involve forward-looking statements.

The inclusion of forward-looking statements in this Form 10-Q should not be considered as a representation by us or any other person that our current plans or expectations will be achieved. Numerous factors could cause our actual results to differ materially from those in forward-looking statements, including the following:

·	the occurrence of severe natural or man-made catastrophic events;

·	the effectiveness of our loss limitation methods and pricing models;

·	the adequacy of our ceding companies’ ability to assess the risks they underwrite;

·	the adequacy of our liability for unpaid losses and loss adjustment expenses;

·	the effects of emerging claim and coverage issues on our business;

·	our ability to maintain our A.M. Best and S&P ratings;

·	our ability to raise capital on acceptable terms if necessary;

·	our exposure to credit loss from counterparties in the normal course of business;

·	our ability to provide reinsurance from Bermuda to insurers domiciled in the United States;

·	the effect on our business of the cyclicality of the property and casualty reinsurance business;

·	the effect on our business of the highly competitive nature of the property and casualty reinsurance industry;

·	losses that we could face from terrorism, political unrest and war;

·	our dependence on the business provided to us by reinsurance brokers and our exposure to credit risk associated with our brokers during the premium and loss settlement process;

·	the availability of catastrophic loss protection on acceptable terms;

·	foreign currency exchange rate fluctuation;

·	our ability to maintain and enhance effective operating procedures and internal controls over financial reporting;

- 42 -

·	our need to make many estimates and judgments in the preparation of our financial statements;

·	the limitations placed on our financial and operational flexibility by the representations, warranties and covenants in our debt and credit facilities;

·	our ability to retain key executives and attract and retain additional qualified personnel in the future;

·	the performance of our investment portfolio;

·	fluctuations in the mortgage-backed and asset-backed securities markets;

·	the effects of changes in market interest rates on our investment portfolio;

·	the concentration of our investment portfolio in any particular industry, asset class or geographic region;

·	the effects that the imposition of U.S. corporate income tax would have on Platinum Holdings and its non-U.S. subsidiaries;

·	the risk that U.S. persons who hold our shares will be subject to adverse U.S. federal income tax consequences under certain circumstances;

·	the risk that U.S. persons who dispose of our shares may be subject to U.S. federal income taxation at the rates applicable to dividends on all or a portion of their gains, if any;

·	the risk that holders of 10% or more of our shares may be subject to U.S. income taxation under the “controlled foreign corporation” rules;

·	the effect of changes in U.S. federal income tax law on an investment in our shares;

·	the possibility that we may become subject to taxes in Bermuda;

·	the effect on our business of potential changes in the regulatory system under which we operate;

·	the impact of regulatory regimes and changes to accounting rules on our financial results, irrespective of business operations;

·	the uncertain impact on our business of the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010;

·	the dependence of the cash flows of Platinum Holdings, a holding company, on dividends, interest and other permissible payments from its subsidiaries to meet its obligations;

·	the risk that our shareholders may have greater difficulty in protecting their interests than would shareholders of a U.S. corporation; and

·	limitations on the ownership, transfer and voting rights of our common shares.

As a consequence, our future financial condition and results may differ from those expressed in any forward-looking statements made by or on behalf of us. The foregoing factors should not be construed as exhaustive. Additionally, forward-looking statements speak only as of the date they are made, and we undertake no obligation to revise or update forward-looking statements to reflect new information or circumstances after the date hereof or to reflect the occurrence of future events. For a detailed discussion of our risk factors, refer to Item 1A, "Risk Factors," in our 2011 Form 10-K.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We believe that we are principally exposed to the following types of market risk: interest rate risk, credit risk, liquidity risk and foreign currency exchange rate risk. The following discussion focuses only on material changes to these types of market risks since December 31, 2011. See Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” in our 2011 Form 10-K for a complete discussion of these risks.

Interest Rate Risk

The following table shows the aggregate hypothetical impact on the market value of our fixed maturity securities portfolio as of September 30, 2012, resulting from an immediate parallel shift in interest rates ($ in thousands):

	Interest Rate Shift in Basis Points
		- 100bp		- 50bp	Current			+ 50bp			+ 100bp
Total market value	$	2,410,750	$	2,350,994	$	2,293,094	$	2,238,070		$	2,185,994
Percent change in market value		5.1%		2.5%		0.0%		(2.4%	)		(4.7%	)
Resulting net appreciation (depreciation)	$	117,656	$	57,900	$	-	$	(55,024	)	$	(107,100	)

- 43 -

Actual shifts in interest rates may not change by the same magnitude across the maturity spectrum and, as a result, the impact on the fair value of our fixed maturity securities portfolio may be materially different from the resulting net appreciation or depreciation indicated in the table above.

ITEM 4.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, including the Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Form 10-Q. Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and timely reported as specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

No changes occurred during the three months ended September 30, 2012 in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table summarizes our purchases of our common shares during the three months ended September 30, 2012:

Period	Total Number of Shares Purchased (3)		Average Price Paid per Share (1) (3)		Total Number of Shares Purchased as Part of a Publicly Announced Program (2)		Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program
July 1, 2012 – July 31, 2012		5,313	$	38.85		800	$	249,969,584
August 1, 2012 – August 31, 2012		370,743		39.58		370,743		235,296,634
September 1, 2012 – September 30, 2012		120,248		41.53		120,248		230,302,486
Total		496,304	$	40.04		491,791	$	230,302,486

(1)	Including commissions.

(2)

Our Board of Directors established a program authorizing the repurchase of our common shares. Since the program was established, our Board of Directors has approved increases in the repurchase program from time to time, most recently on July 23, 2012, to result in authority as of such date to repurchase up to a total of $250.0 million of our common shares.

(3)	The July 1, 2012 to July 31, 2012 amounts include 4,513 shares withheld for taxes upon the vesting of an executive officer’s restricted shares at a price of $39.00 per share. The shares were subsequently canceled.

ITEM 6.

EXHIBITS

Exhibit Number		Description

31.1		Certification of Michael D. Price, Chief Executive Officer of Platinum Holdings, pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
31.2		Certification of Allan C. Decleir, Chief Financial Officer of Platinum Holdings, pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
32.1		Certification of Michael D. Price, Chief Executive Officer of Platinum Holdings, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Allan C. Decleir, Chief Financial Officer of Platinum Holdings, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
101		Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of September 30, 2012 (unaudited) and December 31, 2011, (ii) the Consolidated Statements of Operations for the three and nine months ended September 30, 2012 and 2011 (unaudited), (iii) the Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2012 and 2011 (unaudited), (iv) the Consolidated Statements of Shareholders’ Equity for the nine months ended September 30, 2012 and 2011 (unaudited), (v) the Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011 (unaudited), and (vi) the Notes to the Consolidated Financial Statements for the three and nine months ended September 30, 2012 and 2011 (unaudited).

- 44 -

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Platinum Underwriters Holdings, Ltd.

Date: October 25, 2012	By:	/s/ Michael D. Price
		Michael D. Price
		President and Chief Executive Officer (Principal Executive Officer)

Date: October 25, 2012	By:	/s/ Allan C. Decleir
		Allan C. Decleir
		Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

- 45 -