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RENAISSANCERE HOLDINGS LTD - 10-K - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Edgar Online, Inc.
The following is a discussion and analysis of our results of operations for
2012, compared to 2011, and 2011, compared to 2010, respectively. The following
also includes a discussion of our liquidity and capital resources at
December 31, 2012. This discussion and analysis should be read in conjunction
with the audited consolidated financial statements and notes thereto included in
this filing. This filing contains forward-looking statements that involve risks
and uncertainties. Actual results may differ materially from the results
described or implied by these forward-looking statements. See "Note on
Forward-Looking Statements."
OVERVIEW
RenaissanceRe was established in Bermuda in 1993 to write principally property
catastrophe reinsurance and today is a leading global provider of reinsurance
and insurance coverages and related services. Our aspiration is to be the
world's best underwriter of high-severity, low frequency risks. Through our
operating subsidiaries, we seek to produce superior returns for our shareholders
by being a trusted, long-term partner to our customers, for assessing and
managing risk, delivering responsive solutions, and keeping our promises. We
accomplish this by leveraging our core capabilities of risk assessment and
information management, and by investing in our capabilities to serve our
customers across the cycles that have historically characterized our markets.
Overall, our strategy focuses on superior risk selection, superior customer
relationships and superior capital management. We provide value to our customers
and joint venture partners in the form of financial security, innovative
products, and responsive service. We are known as a leader in paying valid
reinsurance claims promptly. We principally measure our financial success
through long-term growth in tangible book value per common share plus the change
in accumulated dividends, which we believe is the most appropriate measure of
our Company's financial performance, and believe we have delivered superior
performance in respect of this measure over time.
Since a substantial portion of the reinsurance and insurance we write provides
protection from damages relating to natural and man-made catastrophes, our
results depend to a large extent on the frequency and severity of such
catastrophic events, and the coverages we offer to customers affected by these
events. We are exposed to significant losses from these catastrophic events and
other exposures that we cover. Accordingly, we expect a significant degree of
volatility in our financial results and our financial results may vary
significantly from quarter-to-quarter or from year-to-year, based on the level
of insured catastrophic losses occurring around the world.
Our revenues are principally derived from three sources: 1) net premiums earned
from the reinsurance and insurance policies we sell; 2) net investment income
and realized and unrealized gains from the investment of our capital funds and
the investment of the cash we receive on the policies which we sell; and 3)
other income received from our joint ventures, advisory services, weather and
energy risk management operations and various other items.
Our expenses primarily consist of: 1) net claims and claim expenses incurred on
the policies of reinsurance and insurance we sell; 2) acquisition costs which
typically represent a percentage of the premiums we write; 3) operating expenses
which primarily consist of personnel expenses, rent and other operating
expenses; 4) corporate expenses which include certain executive, legal and
consulting expenses, costs for research and development, and other miscellaneous
costs, including those associated with operating as a publicly traded company;
5) redeemable noncontrolling interest - DaVinciRe, which represents the interest
of third parties with respect to the net income (loss) of DaVinciRe; and 6)
interest and dividend costs related to our debt and preference shares. We are
also subject to taxes in certain jurisdictions in which we operate; however,
since the majority of our income is currently earned in Bermuda, a non-taxable
jurisdiction, the tax impact to our operations has historically been minimal.
The operating results, also known as the underwriting results, of an insurance
or reinsurance company are discussed frequently by reference to its net claims
and claim expense ratio, underwriting expense ratio, and combined ratio. The net
claims and claim expense ratio is calculated by dividing net claims and claim
expenses incurred by net premiums earned. The underwriting expense ratio is
calculated by dividing underwriting expenses (acquisition expenses and
operational expenses) by net premiums earned. The combined ratio is the sum of
the net claims and claim expense ratio and the underwriting expense ratio. A
combined ratio below 100% generally indicates profitable underwriting prior to
the consideration of

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investment income. A combined ratio over 100% generally indicates unprofitable
underwriting prior to the consideration of investment income. We also discuss
our net claims and claim expense ratio on an accident year basis. This ratio is
calculated by taking net claims and claim expenses, excluding development on net
claims and claim expenses from events that took place in prior fiscal years,
divided by net premiums earned.
As described in more detail below under "Segments", our reportable segments
include: (1) Reinsurance, which includes catastrophe reinsurance, specialty
reinsurance and certain property catastrophe and specialty joint ventures and
(2) Lloyd's, which includes reinsurance and insurance business written through
Syndicate 1458. In addition, our Other category primarily reflects our:
strategic investments; weather and energy risk management operations;
investments unit; corporate expenses, capital servicing costs and noncontrolling
interests; results of our discontinued operations and the remnants of our
Bermuda-based insurance operations not sold pursuant to the Stock Purchase
Agreement with QBE.
Segments
Our reportable segments include: (1) Reinsurance and (2) Lloyd's.
As of December 31, 2012, we undertook a review of our reportable segments and
concluded that our former Insurance segment no longer met the quantitative
thresholds defined in FASB ASC Topic Segment Reporting. These operations are not
actively involved in pursuing business opportunities and are in run-off;
therefore we determined they no longer require, nor warrant, separate disclosure
as a reportable segment. As such, the results of operations for the former
Insurance segment have been included in our Other category as noted above, and
all prior periods presented herein have been reclassified to conform with the
current year presentation.
Reinsurance
Our Reinsurance segment has two main units:
(1)  Property catastrophe reinsurance, principally written for our own account,

and for DaVinci, is our traditional core business. We believe we are one of

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the world's leading providers of this coverage, based on catastrophe gross

premiums written. This coverage protects against large natural catastrophes,

such as earthquakes, hurricanes and tsunamis, as well as claims arising from

other natural and man-made catastrophes such as winter storms, freezes,

floods, fires, wind storms, tornadoes, explosions and acts of terrorism. We

offer this coverage to insurance companies and other reinsurers primarily on

an excess of loss basis. This means that we begin paying when our customers'

claims from a catastrophe exceed a certain retained amount.

(2) Specialty reinsurance, also principally written for our own account, and for

DaVinci, covering certain targeted classes of business where we believe we

have a sound basis for underwriting and pricing the risk that we assume. Our

portfolio includes various classes of business, such as catastrophe exposed

workers' compensation, surety, terrorism, energy, aviation, crop, political

     risk, trade credit, financial, mortgage guarantee, catastrophe-exposed
     personal lines property, casualty clash, certain other casualty lines and
     other specialty lines of reinsurance that we collectively refer to as
     specialty reinsurance. We believe that we are seen as a market leader in

certain of these classes of business. We are seeking to expand our specialty

reinsurance operations over time, although we cannot assure you that we will

do so, particularly in light of current and forecasted market conditions.

Our specialty reinsurance business is typically significantly impacted by a

comparably small number of relatively large transactions.

Lloyd's

Our Lloyd's segment includes insurance and reinsurance business written for our
own account through Syndicate 1458. Syndicate 1458 commenced business by writing
certain lines of insurance and reinsurance business incepting on or after
June 1, 2009. The syndicate was established to enhance our underwriting platform
by providing access to Lloyd's extensive distribution network and worldwide
licenses. RenaissanceRe CCL, an indirect wholly owned subsidiary of the Company,
is the sole corporate member of Syndicate 1458. RSML, a wholly owned subsidiary
of RenaissanceRe, is the managing agent for Syndicate

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1458. We anticipate that Syndicate 1458's absolute and relative contributions to
our consolidated results of operations may have a meaningful impact over time.
Other
Our Other category primarily includes the results of: (1) our share of strategic
investments in certain markets we believe offer attractive risk-adjusted returns
or where we believe our investment adds value, and where, rather than assuming
exclusive management responsibilities ourselves, we partner with other market
participants; (2) our weather and energy risk management operations primarily
through Renaissance Trading and REAL; (3) our investment unit which manages and
invests the funds generated by our consolidated operations; (4) corporate
expenses, capital services costs and noncontrolling interests; (5) the results
of our discontinued operations; and (6) as described in more details above, the
remnants of our Bermuda-based insurance operations not sold pursuant to the
Stock Purchase Agreement with QBE.
New Business
From time to time we consider diversification into new ventures, either through
organic growth, the formation of new joint ventures, or the acquisition of or
the investment in other companies or books of business of other companies. This
potential diversification includes opportunities to write targeted, additional
classes of risk-exposed business, both directly for our own account and through
possible new joint venture opportunities. We also regularly evaluate potential
strategic opportunities that we believe might utilize our skills, capabilities,
proprietary technology and relationships to support possible expansion into
further risk-related coverages, services and products. Generally, we focus on
underwriting or trading risks where reasonably sufficient data may be available,
and where our analytical abilities may provide us a competitive advantage, in
order for us to seek to model estimated probabilities of losses and returns in
accordance with our approach in respect of our then current portfolio of risks.
We regularly review potential strategic transactions that might improve our
portfolio of business, enhance or focus our strategies, expand our distribution
or capabilities, or to seek other benefits. In evaluating potential new ventures
or investments, we generally seek an attractive estimated return on equity, the
ability to develop or capitalize on a competitive advantage, and opportunities
which we believe will not detract from our core operations. While we regularly
review potential strategic transactions and periodically engage in discussions
regarding possible transactions, there can be no assurance that we will complete
any such transactions or that any such transaction would be successful or
materially enhance our results of operations or financial condition. We believe
that our ability to potentially attract investment and operational opportunities
is supported by our strong reputation and financial resources, and by the
capabilities and track record of our ventures unit.
Risk Management
We seek to develop and effectively utilize sophisticated computer models and
other analytical tools to assess and manage the risks that we underwrite and
attempt to optimize our portfolio of reinsurance and insurance contracts and
other financial risks. Our policies, procedures, tools and resources to monitor
and assess our operational risks companywide, as well as our global
enterprise-wide risk management practices, are overseen by our Chief Risk
Officer, who reports directly to our Chief Financial Officer.
With respect to our Reinsurance operations, since 1993 we have developed and
continuously seek to improve our proprietary, computer-based pricing and
exposure management system, REMS©. We believe that REMS©, as updated from time
to time, is a more robust underwriting and risk management system than is
currently commercially available elsewhere in the reinsurance industry and
offers us a significant competitive advantage. REMS© was originally developed to
analyze catastrophe risks, though we continuously seek ways to enhance the
program in order to analyze other classes of risk. For information related to
Risk Management, refer to "Item 1. Business, Underwriting and Enterprise Risk
Management".
Discontinued Operations
During the fourth quarter of 2010, we made the strategic decision to divest
substantially all of our U.S.-based insurance operations in order to focus on
the business encompassed within our Reinsurance and Lloyd's segments and our
other businesses. Except as explicitly described as held for sale or as
discontinued operations, and unless otherwise noted, all discussions and amounts
presented herein relate

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to our continuing operations. Prior years presented have been reclassified to
conform to this new presentation.
On November 18, 2010, we entered into a Stock Purchase Agreement with QBE to
sell substantially all of our U.S.-based insurance operations, including our
U.S. property and casualty business underwritten through managing general
agents, our crop insurance business underwritten through Agro National Inc.
("Agro National"), our commercial property insurance operations and our claims
operations.  We have classified the assets and liabilities associated with this
transaction as held for sale. The financial results for these operations have
been presented as discontinued operations in our Consolidated Statements of
Operations.
Consideration for the transaction was book value at December 31, 2010, for the
aforementioned businesses, payable in cash at closing and subject to adjustment
for certain tax and other items. The transaction closed on March 4, 2011 and we
received net consideration of $269.5 million.
Pursuant to the Stock Purchase Agreement, RenaissanceRe was subject to a
post-closing review following December 31, 2011 of the net reserve for claims
and claim expenses for loss events occurring on or prior to December 31, 2010
(the "Reserve Collar"). Subsequent to the post-closing review, RenaissanceRe was
liable to pay, or otherwise reimburse QBE amounts up to $10.0 million for net
adverse development on prior accident years net claims and claim expenses.
Conversely, if prior accident years net claims and claim expenses experienced
net favorable development, QBE was liable to pay, or otherwise reimburse
RenaissanceRe amounts up to $10.0 million.
During 2011, RenaissanceRe recognized a $10.0 million liability and
corresponding expense in liabilities of discontinued operations held for sale
and income (loss) from discontinued operations, respectively, due to purported
net adverse development on prior accident years net claims and claim expenses
associated with the Reserve Collar.  Effective May 23, 2012, RenaissanceRe and
QBE reached an agreement in respect of the Reserve Collar, and RenaissanceRe
paid QBE the sum of $9.0 million on June 1, 2012, representing full and final
settlement of the Reserve Collar and recorded a gain of $1.0 million in income
from discontinued operations during the second quarter of 2012.
See "Note 3. Discontinued Operations in our Notes to Consolidated Financial
Statements" for additional information.
SUMMARY OF CRITICAL ACCOUNTING ESTIMATES
Claims and Claim Expense Reserves
General Description
We believe the most significant accounting judgment made by management is our
estimate of claims and claim expense reserves. Claims and claim expense reserves
represent estimates, including actuarial and statistical projections at a given
point in time, of the ultimate settlement and administration costs for unpaid
claims and claim expenses arising from the insurance and reinsurance contracts
we sell. We establish our claims and claim expense reserves by taking claims
reported to us by insureds and ceding companies, but which have not yet been
paid ("case reserves"), adding the costs for additional case reserves
("additional case reserves") which represent our estimates for claims previously
reported to us which we believe may not be adequately reserved as of that date,
and adding estimates for the anticipated cost of IBNR.

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The following table summarizes our claims and claim expense reserves by line of business and split between case reserves, additional case reserves and IBNR:

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                          Case         Additional
  At December 31, 2012  Reserves     Case Reserves        IBNR         Total
  (in thousands)
  Catastrophe          $ 706,264    $       222,208    $ 255,786    $ 1,184,258
  Specialty              111,234             80,971      286,108        478,313
  Total Reinsurance      817,498            303,179      541,894      1,662,571
  Lloyd's                 29,260             10,548      109,662        149,470
  Other                   17,016              8,522       41,798         67,336
  Total                $ 863,774    $       322,249    $ 693,354    $ 1,879,377

At December 31, 2011

  (in thousands)
  Catastrophe          $ 681,771    $       271,990    $ 388,147    $ 1,341,908
  Specialty              120,189             49,840      301,589        471,618
  Total Reinsurance      801,960            321,830      689,736      1,813,526
  Lloyd's                 17,909             14,459       55,127         87,495
  Other                   32,944              3,515       54,874         91,333
  Total                $ 852,813    $       339,804    $ 799,737    $ 1,992,354



Activity in the liability for unpaid claims and claim expenses is summarized as
follows:

  Year ended December 31,                       2012            2011            2010
  Net reserves as of January 1              $ 1,588,325     $ 1,156,132     $ 1,260,334
  Net incurred related to:
  Current year                                  483,180         993,168         431,476
  Prior years                                  (157,969 )      (131,989 )      (302,131 )
  Total net incurred                            325,211         861,179         129,345
  Net paid related to:
  Current year                                   84,056         299,299          50,793
  Prior years                                   142,615         129,687         182,754
  Total net paid                                226,671         428,986         233,547
  Net reserves as of December 31              1,686,865       1,588,325     

1,156,132

Reinsurance recoverable as of December 31 192,512 404,029

101,711

Gross reserves as of December 31$ 1,879,377$ 1,992,354$ 1,257,843




Our reserving methodology for each line of business uses a loss reserving
process that calculates a point estimate for the Company's ultimate settlement
and administration costs for claims and claim expenses. We do not calculate a
range of estimates. We use this point estimate, along with paid claims and case
reserves, to record our best estimate of additional case reserves and IBNR in
our consolidated financial statements. Under GAAP, we are not permitted to
establish estimates for catastrophe claims and claim expense reserves until an
event occurs that gives rise to a loss.
Reserving for our reinsurance claims involves other uncertainties, such as the
dependence on information from ceding companies, which among other matters,
includes the time lag inherent in reporting information from the primary insurer
to us or to our ceding companies and differing reserving practices among ceding
companies. The information received from ceding companies is typically in the
form of bordereaux, broker notifications of loss and/or discussions with ceding
companies or their brokers. This information can be received on a monthly,
quarterly or transactional basis and normally includes estimates of paid claims
and case reserves. We sometimes also receive an estimate or provision for IBNR.
This information is often updated and adjusted from time to time during the loss
settlement period as new data or facts in respect of

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initial claims, client accounts, industry or event trends may be reported or
emerge in addition to changes in applicable statutory and case laws.
Our estimates of losses from large events are based on factors including
currently available information derived from the Company's claims information
from certain customers and brokers, industry assessments of losses from the
events, proprietary models, and the terms and conditions of our contracts. The
uncertainty of our estimates for certain of these large events is additionally
impacted by the preliminary nature of the information available, the magnitude
and relative infrequency of the events, the expected duration of the respective
claims development period, inadequacies in the data provided thus far by
industry participants and the potential for further reporting lags or
insufficiencies (particularly in respect of the Chilean, 2010 New Zealand, 2011
New Zealand and Tohoku earthquakes); and in the case of storm Sandy and the
Thailand flooding, significant uncertainty as to the form of the claims and
legal issues, under the relevant terms of insurance contracts and reinsurance
treaties. In addition, a significant portion of the net claims and claim
expenses associated with storm Sandy and the New Zealand and Tohoku earthquakes
are concentrated with a few large clients and therefore the loss estimates for
these events may vary significantly based on the claims experience of those
clients. Loss reserve estimation in respect of our retrocessional contracts
poses further challenges compared to directly assumed reinsurance. A significant
portion of our reinsurance recoverable relates to the New Zealand and Tohoku
earthquakes. There is inherent uncertainty and complexity in evaluating loss
reserve levels and reinsurance recoverable amounts, due to the nature of the
losses relating to earthquake events, including that loss development time
frames tend to take longer with respect to earthquake events. The contingent
nature of business interruption and other exposures will also impact losses in a
meaningful way, especially with regard to storm Sandy, the Tohoku earthquake and
Thailand flooding, which we believe may give rise to significant complexity in
respect of claims handling, claims adjustment and other coverage issues, over
time. Given the magnitude and relatively recent occurrence of these large
events, meaningful uncertainty remains regarding total covered losses for the
insurance industry and, accordingly, several of the key assumptions underlying
our loss estimates. In addition, our actual net losses from these events may
increase if our reinsurers or other obligors fail to meet their obligations.
Because of the inherent uncertainties discussed above, we have developed a
reserving philosophy which attempts to incorporate prudent assumptions and
estimates, and we have generally experienced favorable net development on prior
year reserves in the last several years. However, there is no assurance that
this will occur in future periods.
Prior Year Development of Reserve for Net Claims and Claim Expenses
Our estimates of claims and claim expense reserves are not precise in that,
among other matters, they are based on predictions of future developments and
estimates of future trends and other variable factors. Some, but not all, of our
reserves are further subject to the uncertainty inherent in actuarial
methodologies and estimates. Because a reserve estimate is simply an insurer's
estimate at a point in time of its ultimate liability, and because there are
numerous factors which affect reserves and claims payments that cannot be
determined with certainty in advance, our ultimate payments will vary, perhaps
materially, from our estimates of reserves. If we determine in a subsequent
period that adjustments to our previously established reserves are appropriate,
such adjustments are recorded in the period in which they are identified.

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As detailed in the table and discussed in further detail below, changes to prior
year estimated claims reserves increased our net income by $158.0 million during
the year ended December 31, 2012, (2011 - decreased our net loss by $132.0
million, 2010 - increased our net income by $302.1 million), excluding the
consideration of changes in reinstatement premium, profit commissions,
redeemable noncontrolling interest - DaVinciRe, equity in net claims and claim
expenses of Top Layer Re and income tax.

  Year ended December 31,    2012          2011          2010
  Catastrophe             $ 110,568     $  59,137     $ 157,458
  Specialty                  34,146        77,761       128,561
  Reinsurance               144,714       136,898       286,019
  Lloyd's                    16,202          (478 )         197
  Other                      (2,947 )      (4,431 )      15,915
  Total                   $ 157,969     $ 131,989     $ 302,131



Our reserving techniques, assumptions and processes differ between our property
catastrophe reinsurance, specialty reinsurance and insurance businesses within
our Reinsurance and Lloyd's segments. Following is a discussion of the risks we
insure and reinsure, the reserving techniques, assumptions and processes we
follow to estimate our claims and claim expense reserves, and our current
estimates versus our initial estimates of our claims reserves, for each of these
units.
Reinsurance Segment
Property Catastrophe Reinsurance
Within our catastrophe unit, we principally write property catastrophe excess of
loss reinsurance contracts to insure insurance and reinsurance companies against
natural and man-made catastrophes. Under these contracts, we indemnify an
insurer or reinsurer when its aggregate paid claims and claim expenses from a
single occurrence of a covered peril exceed the attachment point specified in
the contract, up to an amount per loss specified in the contract. Our most
significant exposure is to losses from earthquakes and hurricanes and other
windstorms, although we are also exposed to claims arising from other
catastrophes, such as tsunamis, freezes, floods, fires, tornadoes, explosions
and acts of terrorism. Our predominant exposure under such coverage is to
property damage. However, other risks, including business interruption and other
non-property losses, may also be covered under our property catastrophe
reinsurance contracts when arising from a covered peril. Our coverages are
offered on either a worldwide basis or are limited to selected geographic areas.
Coverage can also vary from "all property" perils to limited coverage on
selected perils, such as "earthquake only" coverage. We also enter into
retrocessional contracts that provide property catastrophe coverage to other
reinsurers or retrocedants. This coverage is generally in the form of excess of
loss retrocessional contracts and may cover all perils and exposures on a
worldwide basis or be limited in scope to selected geographic areas, perils
and/or exposures. The exposures we assume from retrocessional business can
change within a contract term as the underwriters of a retrocedant may alter
their book of business after the retrocessional coverage has been bound. We also
offer dual trigger reinsurance contracts which require us to pay claims based on
claims incurred by insurers and reinsurers in addition to the estimate of
insured industry losses as reported by referenced statistical reporting
agencies.
Our property catastrophe reinsurance business is generally characterized by loss
events of low frequency and high severity. Initial reporting of paid and
incurred claims in general, tends to be relatively prompt. We consider this
business "short-tail" as compared to the reporting of claims for "long-tail"
products, which tends to be slower. However, the timing of claims payment and
reporting also varies depending on various factors, including: whether the
claims arise under reinsurance of primary insurance companies or reinsurance of
other reinsurance companies; the nature of the events (e.g., hurricanes,
earthquakes or terrorism); the geographic area involved; post-event inflation
which may cause the cost to repair damaged property to increase significantly
from current estimates, or for property claims to remain open for a longer
period of time, due to limitations on the supply of building materials, labor
and other resources; complex policy coverage and other legal issues; and the
quality of each client's claims management and reserving practices. Management's
judgments regarding these factors are reflected in our claims reserve estimates.

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Reserving for most of our property catastrophe reinsurance business does not
involve the use of traditional actuarial techniques. Rather, claims and claim
expense reserves are estimated by management after a catastrophe occurs by
completing an in-depth analysis of the individual contracts which may
potentially be impacted by the catastrophic event. The in-depth analysis
generally involves: 1) estimating the size of insured industry losses from the
catastrophic event; 2) reviewing our portfolio of reinsurance contracts to
identify those contracts which are exposed to the catastrophic event; 3)
reviewing information reported by customers and brokers; 4) discussing the event
with our customers and brokers; and 5) estimating the ultimate expected cost to
settle all claims and administrative costs arising from the catastrophic event
on a contract-by-contract basis and in aggregate for the event. Once an event
has occurred, during the then current reporting period we record our best
estimate of the ultimate expected cost to settle all claims arising from the
event. Our estimate of claims and claim expense reserves is then determined by
deducting cumulative paid losses from our estimate of the ultimate expected loss
for an event and our estimate of IBNR is determined by deducting cumulative paid
losses, case reserves and additional case reserves from our estimate of the
ultimate expected loss for an event. Once we receive a notice of loss or payment
request under a catastrophe reinsurance contract, we are generally able to
process and pay such claims promptly.
Because the events from which claims arise under policies written by our
property catastrophe reinsurance business are typically prominent, public
occurrences such as hurricanes and earthquakes, we are often able to use
independent reports as part of our loss reserve estimation process. We also
review catastrophe bulletins published by various statistical reporting agencies
to assist us in determining the size of the industry loss, although these
reports may not be available for some time after an event. In addition to the
loss information and estimates communicated by cedants and brokers, we also use
industry information which we gather and retain in our REMS© modeling system.
The information stored in our REMS© modeling system enables us to analyze each
of our policies in relation to a loss and compare our estimate of the loss with
those reported by our policyholders. The REMS© modeling system also allows us to
compare and analyze individual losses reported by policyholders affected by the
same loss event. Although the REMS© modeling system assists with the analysis of
the underlying loss and provides us with the information and ability to perform
increased analysis, the estimation of claims resulting from catastrophic events
is inherently difficult because of the variability and uncertainty associated
with property catastrophe claims and the unique characteristics of each loss.
For smaller events including localized severe weather events such as windstorms,
hail, ice, snow, flooding, freezing and tornadoes, which are not necessarily
prominent, public occurrences, we initially place greater reliance on
catastrophe bulletins published by statistical reporting agencies to assist us
in determining what events occurred during the reporting period than we do for
large events. This includes reviewing catastrophe bulletins published by
Property Claim Services for U.S. catastrophes. We set our initial estimates of
reserves for claims and claim expenses for these smaller events based on a
combination of our historical market share for these types of losses and the
estimate of the total insured industry property losses as reported by
statistical reporting agencies, although we generally make significant
adjustments based on our current exposure to the geographic region involved as
well as the size of the loss and the peril involved. This approach supplements
our approach for estimating losses for larger catastrophes, which as discussed
above, includes discussions with brokers and ceding companies, reviewing
individual contracts impacted by the event, and modeling the loss in our REMS©
system. Approximately one year from the date of loss for these small events, we
estimate IBNR for these events by using an actuarial technique. The actuarial
technique used to estimate IBNR is the paid Bornhuetter-Ferguson actuarial
method. The paid Bornhuetter-Ferguson actuarial method loss development factors
are selected based on a review of our historical experience and these factors
are reviewed at least annually. There were no changes to the paid loss
development factors over the last three years.
In general, our property catastrophe reinsurance reserves for our more recent
reinsured catastrophic events are subject to greater uncertainty and, therefore,
greater potential variability, and are likely to experience material changes
from one period to the next. This is due to the uncertainty as to the size of
the industry losses from the event, uncertainty as to which contracts have been
exposed to the catastrophic event, uncertainty due to complex legal and coverage
issues that can arise out of large or complex catastrophic events such as the
events of September 11, 2001, hurricane Katrina and storm Sandy, and uncertainty
as to the magnitude of claims incurred by our customers. As our property
catastrophe reinsurance claims age,

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more information becomes available and we believe our estimates become more
certain, although there is no assurance this trend will continue in the future.
Prior Year Development of Reserve for Net Claims and Claim Expenses
Within our property catastrophe reinsurance business, we seek to review
substantially all of our claims and claim expense reserves quarterly. Our
quarterly review procedures include identifying events that have occurred up to
the latest balance sheet date, determining our best estimate of the ultimate
expected cost to settle all claims and administrative costs associated with
those new events which have arisen during the reporting period, reviewing the
ultimate expected cost to settle claims and administrative costs associated with
those events which occurred during previous periods, and considering new
estimation techniques, such as additional actuarial methods or other statistical
techniques, that can assist us in developing a best estimate. This process is
judgmental in that it involves reviewing changes in paid and reported losses
each period and adjusting our estimates of the ultimate expected losses for each
event if there are developments that are different from our previous
expectations. If we determine that adjustments to an earlier estimate are
appropriate, such adjustments are recorded in the period in which they are
identified. As noted above, the level of our claims and claim expenses
associated with certain catastrophes can be very large. As a result, small
percentage changes in the estimated ultimate claims and large catastrophe events
can significantly impact our reserves for claims and claim expenses in
subsequent periods.
The following table details the development of our liability for unpaid claims
and claim expenses for the catastrophe reinsurance unit for the year ended
December 31, 2012:

                                                                           

Catastrophe

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  Year ended December 31, 2012

Reinsurance Unit

  Catastrophe claims and claim expenses
  Large catastrophe events
  Chile Earthquake (2010)                                              $       24,575
  Hurricanes Gustav & Ike (2008)                                               17,541
  U.K. Floods (2007)                                                           17,271
  Hurricanes Katrina, Rita and Wilma (2005)                                     6,420
  Hurricane Irene (2011)                                                        4,630
  Thailand Floods (2011)                                                        3,933
  Tohoku Earthquake and Tsunami (2011)                                          3,896
  Windstorm Kyrill (2007)                                                       3,417
  New Zealand Earthquake (2010)                                                (3,570 )
  New Zealand Earthquake (2011)                                               (17,912 )
  Other                                                                         2,542
  Total large catastrophe events                                               62,743
  Small catastrophe events
  Danish Floods (2011)                                                          5,000
  U.S. PCS 63 Winter Storm (2011)                                               5,000
  U.S. PCS 42 Winter Storm (2011)                                               2,560
  U.S. PCS 53 Winter Storm (2011)                                               2,558
  Other                                                                        32,707
  Total small catastrophe events                                               47,825
  Total favorable development of prior accident years claims and claim
  expenses                                                             $      110,568




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The favorable development of prior accident years claims and claim expenses
within the Company's catastrophe reinsurance unit in the year ended December 31,
2012 of $110.6 million was primarily due to reductions in estimated ultimate
losses on the 2010 Chilean earthquake of $24.6 million, the 2008 hurricanes of
$17.5 million, the U.K. floods of $17.3 million, the 2005 hurricanes of $6.4
million, hurricane Irene of $4.6 million, the Tohoku earthquake of $3.9 million
and a number of other catastrophes totaling $57.7 million, and partially offset
by adverse development related to the 2010 and 2011 New Zealand earthquakes of
$21.5 million primarily due to increase in estimated ultimate losses.
The following table details the development of our liability for unpaid claims
and claim expenses for the catastrophe reinsurance unit for the year ended
December 31, 2011:

                                                                           

Catastrophe

  Year ended December 31, 2011

Reinsurance Unit

  (in thousands)
  Catastrophe claims and claim expenses
  Large catastrophe events
  Tropical Cyclone Tasha (2010)                                        $       13,922
  Hurricanes Katrina, Rita and Wilma (2005)                                    10,008
  Chilean Earthquake (2010)                                                     8,455
  World Trade Center (2001)                                                     4,701
  Hurricanes Charley, Francis, Ivan and Jeanne (2004)                           4,076
  U.K. Floods (2007)                                                            3,635
  Windstorm Kyrill (2007)                                                       2,494
  New Zealand Earthquake (2010)                                               (15,179 )
  Total large catastrophe events                                               32,112
  Small catastrophe events
  U.S. PCS 21 Wildland Fire (2007)                                              4,554
  U.S. PCS 33 Great Midwest Storm (2010)                                        3,125
  U.S. PCS 31 Wind and Thunderstorm (2010)                                      3,039
  U.S. PCS 96 Wind and Thunderstorm (2010)                                      2,288
  Other                                                                        14,019
  Total small catastrophe events                                               27,025
  Total favorable development of prior accident years claims and claim
  expenses                                                             $       59,137



The favorable development on prior year reserves in 2011 within the Company's
catastrophe reinsurance unit of $59.1 million was due to $27.0 million related
to reductions in the estimated ultimate losses of smaller catastrophe events,
$32.1 million related to net reductions arising from the estimated ultimate
losses of large catastrophe events, including $13.9 million, $10.0 million, $8.5
million and $4.7 million related to tropical cyclone Tasha, the 2005 hurricanes,
the Chilean earthquake and the World Trade Center, and partially offset by $15.2
million of adverse development related to the 2010 New Zealand earthquake.

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The following table details the development of our liability for unpaid claims and claim expenses for the catastrophe reinsurance unit for the year ended December 31, 2010:

Catastrophe

  Year ended December 31, 2010

Reinsurance Unit

  (in thousands)
  Catastrophe claims and claim expenses
  Large catastrophe events
  Mature, large catastrophe events
  European Windstorm Erwin (2005)                                      $        10,593
  World Trade Center (2001)                                                      9,914
  Hurricanes Martin and Floyd (1999)                                             4,822
  European Floods (2002)                                                         4,361
  U.S. PCS 88 Wind and Thunderstorm (2003)                                       2,873
  Hurricane Isabel (2003)                                                        1,995
  U.S. PCS 97 Wildland Fire (2003)                                               1,231
  Windstorm Anatol (1999)                                                          971
  Northridge Earthquake (1993)                                                   1,094
  Total mature, large catastrophe events                                        37,854
  Buncefield Oil Depot (2005)                                                   27,418
  Hurricanes Katrina, Rita and Wilma (2005)                                     25,482
  Hurricanes Gustav and Ike (2008)                                              10,878
  Hurricanes Charley, Francis, Ivan and Jeanne (2004)                            8,149
  European Windstorm Klaus (2009)                                                8,000
  Total large catastrophe events                                               117,781
  Small catastrophe events
  U.S. PCS 78 Wind and Thunderstorm (2009)                                       3,215
  U.S. PCS 66 Wind and Thunderstorm (2009)                                       3,149
  U.S. Winter Storm (2009)                                                       3,000
  Hurricane Bill (2009)                                                          2,500
  U.S. PCS 82 Wind and Thunderstorm (2009)                                       2,429
  Austrian Floods (2009)                                                         2,356
  Other                                                                         23,028
  Total small catastrophe events                                                39,677
  Total favorable development of prior accident years claims and claim
  expenses                                                             $       157,458



The favorable development of prior accident years claims and claim expenses
within the Company's catastrophe reinsurance unit in 2010 of $157.5 million was
due in part to reductions of $37.9 million to the estimated ultimate claims of
mature, large catastrophe events, such as the 2001 World Trade Center, European
windstorm Erwin and the large European windstorms of 1999, for which the claims
are principally paid and the amount of additional reported claims had slowed
considerably and therefore the ultimate claims were reduced. In addition, the
2005 Buncefield Oil Depot claim was reduced by $27.4 million in 2010,
principally due to the underlying insured subrogating its liability and
subsequently reimbursing the Company for claims the Company had previously paid
to the insured. The ultimate claims associated with the 2005 hurricanes,
Katrina, Rita and Wilma, and the 2004 hurricanes, Charley, Frances, Ivan and
Jeanne, were reduced by $25.5 million and $8.1 million, respectively, as
reported claims came in better than expected in 2010. As discussed below, the
Company adopted a new actuarial technique in 2009 to reserve for these
hurricanes and the level of reported claims in 2010 was less than the actuarial
technique would have indicated, resulting in formulaic decreases to the ultimate
claims for these large hurricanes. The

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ultimate claims associated with the 2008 hurricanes, Gustav and Ike, were
reduced by $10.9 million and the 2009 European windstorm Klaus were reduced by
$8.0 million in 2010, due to better than expected reported claims activity. The
remainder of the favorable development of prior accident years claims and claim
expenses was due to a reduction in ultimate claims on a large number of
relatively small catastrophes, all principally the result of reported claims
coming in less than expected, resulting in formulaic decreases to the ultimate
claims for these events.
Actual Results vs. Initial Estimates
The table below summarizes our initial assumptions and changes in those
assumptions for claims and claim expense reserves within our catastrophe unit.
As discussed above, the key assumption in estimating reserves for our
catastrophe unit is our estimate of ultimate claims and claim expenses. The
table shows our initial estimates of ultimate claims and claim expenses for each
accident year and how these initial estimates have developed over time. The
initial estimate of accident year claims and claim expenses represents our
estimate of the ultimate settlement and administration costs for claims incurred
from catastrophic events occurring during a particular accident year, and as
reported as of December 31 of that year. The re-estimated ultimate claims and
claim expenses as of December 31, 2010, 2011 and 2012, represent our revised
estimates as reported as of those dates. The cumulative favorable (adverse)
development shows how our most recent estimates as reported at December 31, 2012
differ from our initial accident year estimates. Favorable development implies
that our current estimates are lower than our initial estimates while adverse
development implies that our current estimates are higher than our original
estimates. Total reserves as of December 31, 2012 reflect the unpaid portion of
our estimates of ultimate claims and claim expenses. The table is presented on a
gross basis and therefore does not include the benefit of reinsurance
recoveries. It also does not consider the impact of loss related premium or
redeemable noncontrolling interest - DaVinciRe.
Actual vs. Initial Estimated Property Catastrophe Reinsurance Claims and Claim
Expense Reserve Analysis
                                               Re-estimated Claims and
  (in thousands,                                   Claim Expenses
  except percentages)                            as of December 31,
                    Initial
                  Estimate of                                                                                                    Claims and             % of Claims
                    Accident                                                           Cumulative                                  Claim                 and Claim
                  Year Claims                                                          Favorable           % Decrease              Expense               Expenses
  Accident         and Claim                                                           (Adverse)        (Increase)  from       Reserves as of          

Unpaid as of

    Year            Expenses            2010            2011            

2012 Development Initial Ultimate December 31, 2012

December 31, 2012

1994 $ 100,816 $ 137,135$ 137,498$ 137,130 $ (36,314 ) (36.0 )% $

               310                0.2 %
    1995                 72,561          61,348          61,345          61,345             11,216             15.5  %                       48      

0.1 %

    1996                 67,671          45,214          45,209          45,219             22,452             33.2  %                       14                  - %
    1997                 43,050           9,046           9,040           9,041             34,009             79.0  %                        5      

0.1 %

    1998                129,171         151,755         151,951         152,038            (22,867 )          (17.7 )%                      564                0.4 %
    1999                267,981         199,097         198,257         197,849             70,132             26.2  %                      304                0.2 %
    2000                 54,600          17,794          17,803          17,787             36,813             67.4  %                       27      

0.2 %

    2001                257,285         212,678         205,078         201,140             56,145             21.8  %                    8,756                4.4 %
    2002                155,573          65,486          65,436          65,118             90,455             58.1  %                      277      

0.4 %

    2003                126,312          68,892          69,057          67,608             58,704             46.5  %                      218      

0.3 %

    2004                762,392         821,350         815,773         815,915            (53,523 )           (7.0 )%                    2,267                0.3 %
    2005              1,473,974       1,283,225       1,272,485       1,263,198            210,776             14.3  %                    7,936                0.6 %
    2006                121,754          60,413          60,313          58,392             63,362             52.0  %                    1,028     

1.8 %

    2007                245,892         150,809         138,329         116,568            129,324             52.6  %                   17,609     

15.1 %

    2008                599,481         480,907         481,878         455,909            143,572             23.9  %                   41,903                9.2 %
    2009                 90,800          53,991          47,189          42,288             48,512             53.4  %                    7,433      

17.6 %

    2010                385,207         385,207         355,564         321,522             63,685             16.5  %                  175,570     

54.6 %

    2011              1,243,138               -       1,243,138       1,246,752             (3,614 )           (0.3 )%                  641,316               51.4 %
    2012                345,776               -               -         345,776                  -                -  %                  278,673    

80.6 %

               $      6,543,434     $ 4,204,347     $ 5,375,343     $ 5,620,595     $      922,839             14.9  %      $         1,184,258               21.1 %




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As quantified in the table above, since the inception of the Company in 1993,
while we have experienced adverse development from time to time, on a cumulative
basis we have experienced $922.8 million of net favorable development on the
run-off of our gross reserves within our catastrophe unit. This represents 14.9%
of our initial estimated gross claims and claim expenses for accident years 2011
and prior of $6.2 billion and is calculated based on our estimates of claims and
claim expense reserves as of December 31, 2012, compared to our initial
estimates of ultimate claims and claim expenses, as of the end of each accident
year. As described above, given the complexity in reserving for claims and
claims expenses associated with catastrophe losses for property catastrophe
excess of loss reinsurance contracts, we have experienced development, both
favorable and unfavorable, in any given accident year. For example, our 2005
accident year developed favorably by $210.8 million, which is 14.3% better than
our initial estimates of claims and claim expenses for the 2005 accident year as
estimated as of December 31, 2005, while our 2004 accident year developed
unfavorably by $53.5 million, or negative 7.0%. On a net basis our cumulative
favorable or unfavorable development is generally reduced by offsetting changes
in our reinsurance recoverables, as well as changes to loss related premiums
such as reinstatement premiums, and redeemable noncontrolling interest for
changes in claims and claim expenses that impact DaVinciRe, all of which
generally move in the opposite direction to changes in our ultimate claims and
claim expenses.
The percentage of claims unpaid at December 31, 2012 for each accident year
reflects both the speed at which claims and claim expenses for each accident
year have been paid and our estimate of claims and claim expenses for that
accident year. As seen above, claims and claim expenses for the 2006 and prior
accident years have generally been paid, with 2001 having 4.4% remaining unpaid.
This is driven in part by the mix of our business, which primarily included
property catastrophe excess of loss reinsurance for personal lines property
coverage, rather than commercial property coverage or retrocessional coverage,
and the speed of the settlement and payment of claims by our underlying cedants.
In contrast, our 2001 accident year, which includes losses from the events of
September 11, 2001, includes a higher mix of commercial business and
retrocessional coverage where the underlying claims of our cedants tend to be
settled and paid more slowly. In addition, our 2007 accident year has also paid
out more slowly due to increased complexity surrounding claims of our underlying
cedants as a result of the notable losses during 2007, including European
windstorm Kyrill. As noted in the table above, the percentage of claims and
claims expenses unpaid as of December 31, 2012 related to more recent years,
such as 2009 through 2012, range from 17.6% to 80.6%, which higher percentages
are driven by the recency of these accident years, combined with the complexity
surrounding claims of our underlying cedants and the nature of the events, such
as the 2010 and 2011 New Zealand earthquakes, the Tohoku earthquake and storm
Sandy.
Sensitivity Analysis
The table below shows the impact on our ultimate claims and claim expenses, net
income and shareholders' equity as of and for the year ended December 31, 2012
of reasonably likely changes to our estimates of ultimate losses for claims and
claim expenses incurred from catastrophic events within our property catastrophe
reinsurance business unit. The reasonably likely changes are based on an
historical analysis of the period-to-period variability of our ultimate costs to
settle claims from catastrophic events, giving due consideration to changes in
our reserving practices over time. In general, our claim reserves for our more
recent catastrophic events are subject to greater uncertainty and, therefore,
greater variability and are likely to experience material changes from one
period to the next. This is due to the uncertainty as to the size of the
industry losses from the event, uncertainty as to which contracts have been
exposed to the catastrophic event, and uncertainty as to the magnitude of claims
incurred by our clients. As our claims age, more information becomes available
and we believe our estimates become more certain, although there is no assurance
this trend will continue in the future. As a result, the sensitivity analysis
below is based on the age of each accident year, our current estimated ultimate
claims and claim expenses for the catastrophic events occurring in each accident
year, and the reasonably likely variability of our current estimates of claims
and claim expenses by accident year. The impact on net income and shareholders'
equity assumes no increase or decrease in reinsurance recoveries, loss related
premium or redeemable noncontrolling interest - DaVinciRe.

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Property Catastrophe Reinsurance Claims and Claim Expense Reserve Sensitivity
Analysis

                                                    $ Impact of           % Impact of
                                                      Change on              Change
                                                   Ultimate Claims       on Reserve for         % Impact of           % Impact of
                          Ultimate Claims and        and Claim               Claims             Change on Net           Change on
                           Claim Expenses at          Expenses         and Claim Expenses        Income for           Shareholders'

(in thousands, except December 31, at December 31, at December 31, the Year Ended

           Equity at
  percentages)                   2012                   2012                  2012            December 31, 2012     December 31, 2012
  Higher                $           6,205,941     $       585,346              31.1  %             (78.2 )%                (16.7 )%
  Recorded                          5,620,595                   -                 -  %                 -  %                    -  %
  Lower                 $           5,035,249     $      (585,346 )           (31.1 )%              78.2  %                 16.7  %



We believe the changes we made to our estimated ultimate claims and claim
expenses represent reasonably likely outcomes based on our experience to date
and our future expectations. While we believe these are reasonably likely
outcomes, we do not believe the reader should consider the above sensitivity
analysis an actuarial reserve range. In addition, the sensitivity analysis only
reflects reasonably likely changes in our underlying assumptions. It is possible
that our estimated ultimate claims and claim expenses could be significantly
higher or lower than the sensitivity analysis described above. For example, we
could be liable for events for which we have not estimated claims and claim
expenses or for exposures we do not currently believe are covered under our
policies. These changes could result in significantly larger changes to our
estimated ultimate claims and claim expenses, net income and shareholders'
equity than those noted above. We also caution the reader that the above
sensitivity analysis is not used by management in developing our reserve
estimates and is also not used by management in managing the business.
Specialty Reinsurance
Within our specialty reinsurance business unit we write a number of reinsurance
lines such as catastrophe exposed workers' compensation, surety, terrorism,
energy, aviation, crop, political risk, trade credit, financial, mortgage
guarantee, catastrophe-exposed personal lines property, casualty clash, certain
other casualty lines and other specialty lines of reinsurance that we
collectively refer to as specialty reinsurance. We offer our specialty
reinsurance products principally on an excess of loss basis, as described above
with respect to our property catastrophe reinsurance products, and we also
provide some proportional coverage. In a proportional reinsurance arrangement
(also referred to as quota share reinsurance or pro-rata reinsurance), the
reinsurer shares a proportional part of the original premiums and losses of the
reinsured. We offer our specialty reinsurance products to insurance companies
and other reinsurance companies and provide coverage for specific geographic
regions or on a worldwide basis. We expanded our specialty reinsurance business
in 2002 and have increased our presence in the specialty reinsurance market
since that time.
Our specialty reinsurance business can generally be characterized as providing
coverage for low frequency and high severity losses, similar to our property
catastrophe reinsurance business. As with our property catastrophe reinsurance
business, our specialty reinsurance contracts frequently provide coverage for
relatively large limits or exposures. As a result of the foregoing, our
specialty reinsurance business is subject to significant claims volatility. In
periods of low claims frequency or severity, our results will generally be
favorably impacted while in periods of high claims frequency or severity our
results will generally be negatively impacted.
Our processes and methodologies in respect of loss estimation for the coverages
we offer through our specialty reinsurance operation differ from those used for
our property catastrophe-oriented coverages. For example, our specialty
reinsurance coverages are more likely to be impacted by factors such as
long-term inflation and changes in the social and legal environment, which we
believe gives rise to greater uncertainty in our claims reserves. Moreover, in
reserving for our specialty reinsurance coverages we do not have the benefit of
a significant amount of our own historical experience in certain of these lines
and may have little or no related corporate reserving history in new lines. We
believe this makes our specialty reinsurance reserving subject to greater
uncertainty than our catastrophe unit.
When initially developing our reserving techniques for our specialty reinsurance
coverages, we considered estimating reserves utilizing several actuarial
techniques such as paid and reported loss development

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methods. We elected to use the Bornhuetter-Ferguson actuarial method because
this method is appropriate for lines of business, such as our specialty
reinsurance business, where there is a lack of historical claims experience.
This method allows for greater weight to be applied to expected results in
periods where little or no actual experience is available, and, hence, is less
susceptible to the potential pitfall of being excessively swayed by one year or
one quarter of actual paid and/or reported loss data. This method uses initial
expected loss ratio expectations to the extent that the expected paid or
reported losses are zero, and it assumes that past experience is not fully
representative of the future. As our reserves for claims and claim expenses age,
and actual claims experience becomes available, this method places less weight
on expected experience and places more weight on actual experience. This
experience, which represents the difference between expected reported claims and
actual reported claims is reflected in the respective reporting period as a
change in estimate. We reevaluate our actuarial reserving techniques on a
periodic basis.
The utilization of the Bornhuetter-Ferguson actuarial method requires us to
estimate an expected ultimate claims and claim expense ratio and select an
expected loss reporting pattern. We select our estimates of the expected
ultimate claims and claim expense ratios and expected loss reporting patterns by
reviewing industry results for similar business and adjusting for the terms of
the coverages we offer. The estimated expected claims and claim expense ratio
may be modified to the extent that reported losses at a given point in time
differ from what would be expected based on the selected loss reporting pattern.
Our estimate of IBNR is the product of the premium we have earned, the initial
expected ultimate claims and claim expense ratio and the percentage of estimated
unreported losses. In addition, certain of our specialty reinsurance coverages
may be impacted by natural and man-made catastrophes. We estimate claim reserves
for these losses after the event giving rise to these losses occur, following a
process that is similar to our catastrophe unit described above.
Prior Year Development of Reserve for Net Claims and Claim Expenses
Within our specialty reinsurance business, we seek to review substantially all
of our claims and claim expense reserves quarterly. Typically, our quarterly
review procedures include reviewing paid and reported claims in the most recent
reporting period, reviewing the development of paid and reported claims from
prior periods, and reviewing our overall experience by underwriting year and in
the aggregate. We monitor our expected ultimate claims and claim expense ratios
and expected loss reporting assumptions on a quarterly basis and compare them to
our actual experience. These actuarial assumptions are generally reviewed
annually, based on input from our actuaries, underwriters, claims personnel and
finance professionals, although adjustments may be made more frequently if
needed. Assumption changes are made to adjust for changes in the pricing and
terms of coverage we provide, changes in industry results for similar business,
as well as our actual experience, to the extent we have enough data to rely on
our own experience. If we determine that adjustments to an earlier estimate are
appropriate, such adjustments are recorded in the period in which they are
identified.

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The following table details the development of our liability for unpaid claims and claim expenses for the specialty reinsurance unit for the year ended December 31, 2012 split between catastrophe claims and claim expenses and attritional claims and claim expenses:

Specialty

  Year ended December 31, 2012

Reinsurance Unit

  Catastrophe claims and claim expenses
  Large catastrophe events
  Hurricanes Katrina, Rita and Wilma (2005)                            $         3,000
  Total catastrophe claims and claim expenses                          $         3,000
  Attritional claims and claim expenses
  Bornhuetter-Ferguson actuarial method - actual reported claims less
  than expected claims                                                 $        16,747
  Actuarial assumption changes                                                  14,399
  Total attritional claims and claim expenses                          $        31,146
  Total favorable development of prior accident years claims and claim
  expenses                                                             $        34,146



The favorable development of prior accident years claims and claim expenses
within our specialty reinsurance unit in the year ended December 31, 2012 of
$34.1 million includes $14.4 million associated with actuarial assumption
changes, principally in our casualty and medical malpractice lines of business,
and primarily as a result of revised initial expected claims ratios and claim
development factors due to actual experience coming in better than expected,
$16.7 million related to actual reported loss activity coming in better than
expected, as a result of the application of our formulaic actuarial reserving
methodology, and $3.0 million due to a reduction in ultimate losses on the 2005
hurricanes.
The following table details the development of our liability for unpaid claims
and claim expenses for the specialty reinsurance unit for the year ended
December 31, 2011 split between catastrophe claims and claim expenses and
attritional claims and claim expenses:

                                                                           

Specialty

  Year ended December 31, 2011

Reinsurance Unit

  (in thousands)
  Catastrophe claims and claim expenses
  Hurricanes Katrina, Rita and Wilma (2005)                            $         6,215
  Chilean Earthquake (2010)                                                      4,688
  Tropical Cyclone Tasha (2010)                                                  3,000
  Total catastrophe claims and claim expenses                          $        13,903
  Attritional claims and claim expenses
  Bornhuetter-Ferguson actuarial method - actual reported claims less
  than expected claims                                                 $        37,058
  Actuarial assumption changes                                                  26,800
  Total attritional claims and claim expenses                          $        63,858
  Total favorable development of prior accident years claims and claim
  expenses                                                             $        77,761



The favorable development on prior year reserves in 2011 within our specialty
unit of $77.8 million includes: $26.8 million associated with actuarial
assumption changes, principally in our workers' compensation quota share and
risk, property risk and energy risk lines of business, and primarily as a result
of revised initial expected claims ratios and claim development factors due to
actual experience coming in better than expected; $13.9 million due to
reductions in case reserves and additional case reserves for certain large
catastrophe events; and the remainder of $37.1 million due to reported claims
coming in better than expected in 2011 on prior accident years events, as a
result of the application of our formulaic actuarial reserving methodology.

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The following table details the development of our liability for unpaid claims and claim expenses for the specialty reinsurance unit for the year ended December 31, 2010 split between catastrophe claims and claim expenses and attritional claims and claim expenses:

Specialty

  Year ended December 31, 2010

Reinsurance Unit

  (in thousands)
  Catastrophe claims and claim expenses
  Large catastrophe events
  Hurricanes Katrina, Rita and Wilma (2005)                            $         5,350
  Buncefield Oil Depot (2005)                                                    2,073
  Total catastrophe claims and claim expenses                          $         7,423
  Attritional claims and claim expenses
  Bornhuetter-Ferguson actuarial method - actual reported claims less
  than expected claims                                                 $        71,261
  Actuarial assumption changes                                                  31,400
  Reductions in specific events                                                 18,477
  Total attritional claims and claim expenses                          $       121,138
  Total favorable development of prior accident years claims and claim
  expenses                                                             $       128,561



The favorable development of prior accident years claims and claim expenses
within the Company's specialty reinsurance unit in 2010 of $128.6 million
includes $31.4 million associated with actuarial assumption changes, principally
in the Company's casualty clash and surety lines of business, and partially
offset by an increase in reserves within the Company's workers compensation per
risk line of business, principally as a result of revised initial expected
claims ratios and claim development factors due to actual experience coming in
better than expected; $18.5 million due to reductions in case reserves and
additional case reserves, which are reserves established at the contract level
for specific events; $7.4 million due to reductions in case reserves and
additional case reserves for certain large catastrophe events; and the remainder
of $71.3 million due to reported claims coming in better than expected in 2010
on prior accident years events, principally the 2005 through 2009 underwriting
years, as a result of the application of the Company's formulaic actuarial
reserving methodology.
Actual Results vs. Initial Estimates
The Actual vs. Initial Estimated Ultimate Claims and Claim Expense Ratio table
below summarizes our key actuarial assumptions in reserving for our specialty
reinsurance business. As noted above, the key actuarial assumptions include the
estimated ultimate claims and claim expense ratios and the estimated loss
reporting patterns. The table shows our initial estimates of the ultimate claims
and claim expense ratio by underwriting year. The table shows how our initial
estimates of these ratios have developed over time, with the re-estimated ratios
reflecting a combination of the amount and timing of paid and reported losses
compared to our initial estimates. The initial estimate is based on the
actuarial assumptions that were in place at the end of that year. A decrease in
the ultimate claims and claim expense ratio implies that our current estimates
are lower than our initial estimates while an increase in the ultimate claims
and claim expense ratio implies that our current estimates are higher than our
initial estimates. The result would be a corresponding favorable impact on
shareholders' equity and net income or a corresponding unfavorable impact on
shareholders' equity and net income, respectively. The table also shows how our
initial estimated ultimate claims and claim expense ratios have changed from one
underwriting year to the next. The table below reflects a summary of the
weighted average assumptions for all classes of business written within our
specialty reinsurance unit. The table is presented on a gross loss basis and
therefore does not include the benefit of reinsurance recoveries or loss related
premium.

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Actual vs. Initial Estimated Specialty Reinsurance Claims and Claim Expense Reserve Analysis - Estimated Ultimate Claims and Claim Expense Ratio

                                   Estimated Ultimate Claims and Claim Expenses Ratio
                                                              Re-estimate at
  Underwriting Year   Initial Estimate   December 31, 2010   December 31, 2011   December 31, 2012
        2002               77.2%               21.5%               20.5%               19.6%
        2003               76.8%               28.1%               26.2%               25.3%
        2004               78.2%               40.1%               36.9%               37.0%
        2005               78.2%               31.6%               29.1%               28.1%
        2006               76.6%               36.9%               31.7%               29.8%
        2007               62.9%               55.5%               55.6%               56.1%
        2008               57.9%               77.1%               74.9%               63.9%
        2009               68.6%               50.9%               38.0%               35.8%
        2010               57.7%               84.1%               67.1%               60.8%
        2011               56.8%                -%                 73.0%               61.4%
        2012               55.3%                -%                  -%                 88.1%



The table above shows our initial estimated ultimate claims and claim expense
ratios for attritional losses for each new underwriting year within our
specialty reinsurance unit as of the end of each calendar year. Until 2007, our
initial estimated ultimate remained relatively constant between 76.6% in 2006
and 78.2% in 2004 and 2005. This reflects the fact that management had not made
significant changes to its initial estimates of expected ultimate claims and
claim expense ratios from one underwriting year to the next. The principal
reason for the modest changes from one underwriting year to the next is that the
mix of business has changed. For example, the mix of business for the 2007
through 2012 underwriting years have a lower initial expected ultimate claims
and claim expense ratio than in prior years as it is more heavily weighted to
business that is expected to produce a lower level of losses. The decrease in
the initial estimated ultimate claims and claim expense ratio from 2006 and
prior, to 2007 through 2012, also reflects assumption changes made for certain
classes of business where our experience, and the industry experience in
general, has been better than expected and, as a result, we decreased our
initial estimated ultimate claims and claim expense ratio for these classes of
business. The decrease in the initial estimated ultimate claims and claim
expense ratio for 2010 through 2012, compared to 2009, is principally due to
assumption changes for modeled expected loss ratios and expected reporting
patterns. The estimated ultimate net claims and claim expense ratio related to
the 2011 underwriting year at December 31, 2012 of 61.4%, increased from the
initial estimate of 56.8% primarily as a result of several relatively large
claims incurred in 2011. The estimated ultimate net claims and claim expense
ratio related to the 2012 underwriting year at December 31, 2012 of 88.1%,
increased from the initial estimate of 55.3% primarily as a result of storm
Sandy.
As each underwriting year has developed, our re-estimated expected ultimate
claims and claim expense ratios have changed. In particular, our re-estimated
ultimate claims and claim expense ratios decreased significantly from the
initial estimates for the 2002 through 2006 underwriting years. This was
principally due to our 2005 reserve review. During our 2005 reserve review, we
further segmented the specialty business with the aim of grouping risks into
more homogeneous categories which respond to the evolution of actual exposures.
This became possible as the volume of this business increased over the three
preceding years. This further segmentation required the selection of loss
reporting patterns to be applied to these new groups. We also updated our
assumptions for our original loss reporting patterns based on a combination of
new industry information and actual experience accumulated over the three
preceding years. The assumptions for the new loss reporting patterns were
applied to all prior underwriting years. In addition, we made explicit
allowances for commuted contracts whereas previously these were considered in
the overall reserving assumptions. We also reviewed substantially all of our
case reserves and additional case reserves. The result of the foregoing was a
decrease in our specialty reinsurance re-estimated ultimate claims and claim
expense reserves in 2005. Subsequent to this reserve review, the results of our
specialty book of business have been mixed. The 2006 underwriting year includes
favorable development as actual paid and reported losses during 2006 have
overall been less than expected, which has resulted in

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a reduction in our expected ultimate claims and claim expense ratio for this
year. However, the 2008, 2010, 2011 and 2012 underwriting years have performed
worse than expected and our current estimates are higher than our initial
estimates. This is due in part to the losses in our casualty clash line of
business in 2008, associated with exposure to the deterioration of the credit
and capital markets in 2008 as well as the Madoff matter discovered in the
fourth quarter of 2008. In comparison, our 2010 and 2011 underwriting years were
impacted by a number of relatively large catastrophe events, including the 2010
New Zealand and Chilean earthquakes in 2010, and in 2011, the 2011 New Zealand
and Tohoku earthquakes, the large U.S. tornadoes, the Australian floods, losses
arising from certain aggregate contracts, hurricane Irene and the Thailand
floods (collectively referred to as the "2011 Large Losses"). In addition, our
2012 underwriting year was impacted by storm Sandy. As noted above, our
specialty reinsurance business is in general characterized by events of low
frequency and high severity which results in actual experience that can be
significantly better or worse than long-term trends or industry results for
similar business may imply.
As noted above, some of our specialty reinsurance contracts are exposed to net
claims and claim expenses from large natural and man-made catastrophes. Net
claims and claim expenses from these large catastrophes are reserved for after
the events which gave rise to the claims in a manner which is consistent with
our property catastrophe reinsurance reserving practices as discussed above. The
large catastrophes occurring during the period from 2002 to 2012 impacting our
specialty unit principally include hurricanes Katrina, Rita and Wilma, which
occurred in 2005. Our estimate of ultimate net claims and claim expenses from
hurricanes Katrina, Rita and Wilma, within our specialty reinsurance unit, net
of reinsurance recoveries and assumed and ceded loss related premium, totaled
$48.6 million at December 31, 2012 (2011 - $51.6 million, 2010 - $57.8 million).
Sensitivity Analysis
The table below quantifies the impact on our reserves for claims and claim
expenses, net income and shareholders' equity as of and for the year ended
December 31, 2012 of reasonably likely changes to the actuarial assumptions used
to estimate our December 31, 2012 claims and claim expense reserves within our
specialty reinsurance business unit. The table quantifies reasonably likely
changes in our initial estimated ultimate claims and claim expense ratios and
estimated loss reporting patterns. The changes to the initial estimated ultimate
claims and claim expense ratios represent percentage increases or decreases to
our current estimated ultimate claims and claim expense ratios. The change to
the reporting patterns represent claims reporting that is both faster and slower
than our current estimated claims reporting patterns. The impact on net income
and shareholders' equity assumes no increase or decrease in reinsurance
recoveries, loss related premium or redeemable noncontrolling interest -
DaVinciRe.

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Specialty Reinsurance Claims and Claim Expense Reserve Sensitivity Analysis


                                           $ Impact of          % Impact of         % Impact of
                                              Change               Change            Change on        % Impact of
                                         on Reserves for       on Reserve for       Net Income         Change on
                           Estimated     Claims and Claim     Claims and Claim     for the Year      Shareholders'
                              Loss         Expenses at          Expenses at            Ended           Equity at
  (in thousands,except     Reporting       December 31,         December 31,       December 31,       December 31,
  percentages)              Pattern            2012                 2012               2012               2012
  Increase expected claims
  and claim expense ratio    Slower
  by 25%                   reporting    $        153,397             8.2  %            (20.5 )%           (4.4 )%
  Increase expected claims
  and claim expense ratio  Expected
  by 25%                   reporting              71,455             3.8  %             (9.5 )%           (2.0 )%
  Increase expected claims
  and claim expense ratio    Faster
  by 25%                   reporting               2,404             0.1  %             (0.3 )%           (0.1 )%
  Expected claims and        Slower
  claim expense ratio      reporting              65,554             3.5  %             (8.8 )%           (1.9 )%
  Expected claims and       Expected
  claim expense ratio      reporting                   -               -  %                -  %              -  %
  Expected claims and        Faster
  claim expense ratio      reporting             (55,240 )          (2.9 )%              7.4  %            1.6  %
  Decrease expected claims
  and claim expense ratio    Slower
  by 25%                   reporting             (22,289 )          (1.2 )%              3.0  %            0.6  %
  Decrease expected claims
  and claim expense ratio   Expected
  by 25%                   reporting             (71,455 )          (3.8 )%              9.5  %            2.0  %
  Decrease expected claims
  and claim expense ratio    Faster
  by 25%                   reporting            (112,885 )          (6.0 )%             15.1  %            3.2  %



We believe that ultimate claims and claim expense ratios 25.0 percentage points
above or below our estimated assumptions constitute reasonably likely outcomes
based on our experience to date and our future expectations. In addition, we
believe that the adjustments that we made to speed up or slow down our estimated
loss reporting patterns are reasonably likely changes. While we believe these
are reasonably likely changes, we do not believe the reader should consider the
above sensitivity analysis an actuarial reserve range. In addition, we caution
the reader that the above sensitivity analysis only reflects reasonably likely
changes. It is possible that our initial estimated claims and claim expense
ratios and loss reporting patterns could be significantly different from the
sensitivity analysis described above. For example, we could be liable for events
which we have not estimated reserves for or for exposures we do not currently
think are covered under our contracts. These changes could result in
significantly larger changes to reserves for claims and claim expenses, net
income and shareholders' equity than those noted above. We also caution the
reader that the above sensitivity analysis is not used by management in
developing our reserve estimates and is also not used by management in managing
the business.
Lloyd's Segment
Within our Lloyd's segment, we write property catastrophe excess of loss
reinsurance contracts to insure insurance and reinsurance companies against
natural and man-made catastrophes, a number of specialty reinsurance lines and
insurance policies and quota share reinsurance that involves understanding the
characteristics of the underlying insurance policy.
We use the Bornhuetter-Ferguson actuarial method to estimate claims and claim
expenses within our Lloyd's segment for our specialty reinsurance and insurance
lines of business. The comments discussed above relating to our reserving
techniques and processes for our specialty reinsurance unit apply to the
specialty reinsurance and insurance lines of business within our Lloyd's
segment. In addition, certain of our coverages may be impacted by natural and
man-made catastrophes. We estimate claim reserves for these losses after the
event giving rise to these losses occurs, following a process that is similar to
our catastrophe unit as noted above.

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Prior Year Development of Reserve for Net Claims and Claim Expenses The following table details the development of our liability for unpaid claims and claim expenses for our Lloyd's segment:


  Year ended December 31,                                  2012        2011 

2010

  Attritional claims and claim expenses                 $  8,011     $ (478 

) $ 197

Catastrophe events - property catastrophe reinsurance 5,726 -

-

  Catastrophe events - other                               3,750          - 

-

  Actuarial assumption changes                            (1,285 )        -         -
  Total                                                 $ 16,202     $ (478 )   $ 197



The favorable development of prior accident years claims and claim expenses
within our Lloyd's segment of $16.2 million during the year ended December 31,
2012 was principally due to decreases in estimated ultimate losses on certain
specific events, including $9.5 million of catastrophe losses, principally
related to the Thailand floods and $2.5 million related to hurricane Irene, with
the remainder due to reported claims coming in lower than expected on a number
of prior accident years events, as a result of the application of our formulaic
actuarial reserving methodology, partially offset by adverse development of $1.3
million due to assumption changes used in our formulaic actuarial reserving
methodology.
Actual Results vs. Initial Estimates
The table below summarizes our initial assumptions and changes in those
assumptions for catastrophe claims and claim expense reserves associated with
our property catastrophe reinsurance business within our Lloyd's segment.
Similar to our catastrophe unit included in our Reinsurance segment above, the
key assumption in estimating reserves for property catastrophe reinsurance
losses in our Lloyd's segment is our estimate of the ultimate claims and claim
expenses. The table shows our initial estimates of ultimate claims and claim
expenses for each accident year and how these initial estimates have developed
over time. The initial estimate of accident year claims and claim expenses
represents our estimate of the ultimate settlement and administration costs for
claims incurred from catastrophic events occurring during a particular accident
year, and as reported as of December 31 of that year. The re-estimated ultimate
claims and claim expenses as of December 31, 2010, 2011 and 2012, represent our
revised estimates as reported as of those dates. The cumulative favorable
(adverse) development shows how our most recent estimates as reported at
December 31, 2012 differ from our initial accident year estimates. Favorable
development implies that our current estimates are lower than our initial
estimates while adverse development implies that our current estimates are
higher than our original estimates. Total reserves as of December 31, 2012
reflect the unpaid portion of our estimates of ultimate claims and claim
expenses. The table is presented on a gross basis and therefore does not include
the benefit of reinsurance recoveries or loss related premium such as
reinstatement premium.
Actual vs. Initial Estimated Lloyd's Segment Catastrophe Claims and Claim
Expense Reserve Analysis for Property Catastrophe Reinsurance Business

  (in thousands, except percentages)
                           Initial                                                                                           Claims              % of
                           Estimate                                                                                        and Claim        Claims and Claim
                         of Accident              Re-estimated Claims and             Cumulative        % Decrease          Expense             Expenses
                             Year                     Claim Expenses                  Favorable         (Increase)        Reserves at          Unpaid at
                          Claims and                as of December 31,                (Adverse)        from Initial       December 31,        December 31,
   Accident Year        Claim Expenses        2010          2011         2012        Development         Ultimate             2012                2011
        2010          $          5,277     $   5,277     $  5,986     $  6,310     $       (1,033 )        (19.6 )%     $        6,310              100.0 %
        2011                    30,121             -       30,121       24,037              6,084           20.2  %              8,256               34.3 %
        2012                    10,957             -            -       10,957                  -              -  %              9,355               85.4 %
                      $         46,355     $   5,277     $ 36,107     $ 41,304     $        5,051           14.3  %     $       23,921               57.9 %




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As quantified in the table above, since our Lloyd's segment commenced writing
business in mid-2009, we have experienced $5.1 million of net favorable
development on the run-off of our gross reserves related to catastrophe events
for our property catastrophe reinsurance business within our Lloyd's segment. As
described above and similar to our catastrophe unit, given the complexity in
reserving for claims and claims expenses associated with catastrophe losses for
property catastrophe reinsurance business, we have experienced development, both
favorable and unfavorable, in any given accident year. For example, our 2011
accident year has developed favorably by $6.1 million, which is 20.2% better
than our initial estimates of claims and claim expenses for the 2011 accident
year as estimated as of December 31, 2011, while our 2010 accident year
developed unfavorably by $1.0 million, or negative 19.6%. On a net basis our
cumulative favorable or unfavorable development is generally reduced by
offsetting changes in our reinsurance recoverables, as well as changes to loss
related premiums such as reinstatement premiums, all of which generally move in
the opposite direction to changes in our ultimate claims and claim expenses.
The percentage of claims unpaid at December 31, 2012 for each accident year
reflects both the speed at which claims and claim expenses for each accident
year have been paid and our estimate of claims and claim expenses for that
accident year. This is driven in part by the mix of our business and the speed
of the settlement and payment of claims by our underlying cedants.
Actual vs. Initial Estimated Lloyd's Segment Attritional Claims and Claim
Expense Reserve Analysis - Estimated Ultimate Claims and Claim Expense Ratio
The Actual vs. Initial Estimated Ultimate Claims and Claim Expense Ratio table
below summarizes our key actuarial assumptions in reserving for attritional
losses for our specialty reinsurance and insurance lines of business in our
Lloyd's segment. As noted above, the key actuarial assumptions include the
estimated ultimate claims and claim expense ratios and the estimated loss
reporting patterns. The table shows our initial estimates of the ultimate claims
and claim expense ratio by underwriting year. The initial estimate is based on
the actuarial assumptions that were in place at the end of that year. A decrease
in the ultimate claims and claim expense ratio implies that our current
estimates are lower than our initial estimates while an increase in the ultimate
claims and claim expense ratio implies that our current estimates are higher
than our initial estimates. The result would be a corresponding favorable impact
on shareholders' equity and net income or a corresponding unfavorable impact on
shareholders' equity and net income, respectively. The table below reflects a
summary of the weighted average assumptions for all classes of specialty
reinsurance and insurance business in our Lloyd's segment for which we reserve
for attritional losses using the Bornhuetter-Ferguson actuarial method. The
table is presented on a gross loss basis and therefore does not include the
benefit of reinsurance recoveries or loss related premium such as reinstatement
premium.

                                    Estimated Ultimate Claims and Claim Expenses Ratio
                                                               Re-estimate at
  Underwriting Year   Initial Estimate   December 31, 2010   December 31, 2011    December 31, 2012
        2010               63.3%               62.7%               56.5%                   53.5 %
        2011               66.0%                -%                 83.0%                   60.6 %
        2012               58.4%                -%                  -%                     87.4 %



The table above shows our initial estimated ultimate claims and claim expense
ratios for attritional losses for each new underwriting year within specialty
insurance and reinsurance in our Lloyd's segment as of the end of each calendar
year. The principal reason for changes from one underwriting year to the next is
changes in the mix and relative volume of business.
As each underwriting year has developed, our re-estimated expected ultimate
claims and claim expense ratios have changed. In particular, our re-estimated
ultimate claims and claim expense ratios decreased from the initial estimates
for the 2010 and 2011 underwriting years. This was principally due to the
application of our formulaic actuarial reserving methodology with the reductions
being due to actual paid and reported claim activity being more favorable to
date than what was originally anticipated when setting the initial reserves
combined with reductions to estimated ultimate claims and claim expenses on
certain large events. However, the 2012 underwriting year has performed worse
than expected and our current estimates are higher than our initial estimates.
This is due in part to experiencing claims and claim

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expenses related to large property losses in 2012 which added 15.4 percentage
points to the 2012 underwriting year ultimate claims and claim expenses ratio.
As noted above, our specialty reinsurance and insurance lines of business are in
general characterized by events of low frequency and high severity which results
in actual experience that can be significantly better or worse than long-term
trends or industry results for similar business may imply.
Sensitivity Analysis
The table below shows the impact on our ultimate claims and claim expenses, net
income and shareholders' equity as of and for the year ended December 31, 2012
of reasonably likely changes to our estimates of ultimate losses for claims and
claim expenses incurred from catastrophic events associated with property
catastrophe reinsurance business within our Lloyd's segment. The reasonably
likely changes are based on a historical analysis of the period-to-period
variability of our ultimate costs to settle claims from catastrophic events,
giving due consideration to changes in our reserving practices over time. In
general, our claim reserves for our more recent catastrophic events are subject
to greater uncertainty and, therefore, greater variability and are likely to
experience material changes from one period to the next. This is due to the
uncertainty as to the size of the industry losses from the event, uncertainty as
to which contracts have been exposed to the catastrophic event, and uncertainty
as to the magnitude of claims incurred by our clients. As our claims age, more
information becomes available and we believe our estimates become more certain,
although there is no assurance this trend will continue in the future. As a
result, the sensitivity analysis below is based on the age of each accident
year, our current estimated ultimate claims and claim expenses for the
catastrophic events occurring in each accident year, and the reasonably likely
variability of our current estimates of claims and claim expenses by accident
year.
Lloyd's Segment Property Catastrophe Reinsurance Claims and Claim Expense
Reserve Sensitivity Analysis

                                                $ Impact of
                                                   Change
                                                 on Ultimate           % Impact of            % Impact of           % Impact of
                            Ultimate               Claims                 Change                 Change                Change
                           Claims and            and Claim        on

Reserve for Claims on Net Income for on Shareholders'

                        Claim Expenses at         Expenses          and 

Claim Expenses the Year Ended Equity at

(in thousands, December 31, at December 31, at December 31, December 31, December 31,

  except percentages)         2012                  2012                   2012                   2012                  2012
  Higher              $            51,608     $        10,304                0.5  %                (1.4 )%              (0.3 )%
  Recorded                         41,304                   -                  -  %                   -  %                 -  %
  Lower               $            31,000     $       (10,304 )             (0.5 )%                 1.4  %               0.3  %



We believe the changes we made to our estimated ultimate claims and claim
expenses represent reasonably likely outcomes based on our experience to date
and our future expectations. While we believe these are reasonably likely
outcomes, we do not believe the reader should consider the above sensitivity
analysis an actuarial reserve range. In addition, the sensitivity analysis only
reflects reasonably likely changes in our underlying assumptions. It is possible
that our estimated ultimate claims and claim expenses could be significantly
higher or lower than the sensitivity analysis described above. For example, we
could be liable for events for which we have not estimated claims and claim
expenses or for exposures we do not currently believe are covered under our
policies. These changes could result in significantly larger changes to our
estimated ultimate claims and claim expenses, net income and shareholders'
equity than those noted above. We also caution the reader that the above
sensitivity analysis is not used by management in developing our reserve
estimates and is also not used by management in managing the business.

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Lloyd's Segment Attritional Claims and Claim Expense Reserve Sensitivity
Analysis

                                          $ Impact of          % Impact of        % Impact of
                                             Change               Change           Change on        % Impact of
                                        on Reserves for      on Reserves for       Net Income        Change on
                          Estimated     Claims and Claim     Claims and Claim     for the Year     Shareholders'
                             Loss         Expenses at          Expenses at           Ended           Equity at
  (in thousands,except    Reporting       December 31,         December 31,       December 31,     December 31,
  percentages)             Pattern            2012                 2012               2012             2012
  Increase expected
  claims and claim          Slower
  expense ratio by 25%    reporting    $        45,302              2.4  %            (6.0 )%          (1.3 )%
  Increase expected
  claims and claim        Expected
  expense ratio by 25%    reporting             22,761              1.2  %            (3.0 )%          (0.6 )%
  Increase expected
  claims and claim          Faster
  expense ratio by 25%    reporting             (7,138 )           (0.4 )%             1.0  %           0.2  %
  Expected claims and       Slower
  claim expense ratio     reporting             18,033              1.0  %            (2.4 )%          (0.5 )%
  Expected claims and      Expected
  claim expense ratio     reporting                  -                -  %               -  %             -  %
  Expected claims and       Faster
  claim expense ratio     reporting            (23,919 )           (1.3 )%             3.2  %           0.7  %
  Decrease expected
  claims and claim          Slower
  expense ratio by 25%    reporting             (9,236 )           (0.5 )%             1.2  %           0.3  %
  Decrease expected
  claims and claim         Expected
  expense ratio by 25%    reporting            (22,761 )           (1.2 )%             3.0  %           0.6  %
  Decrease expected
  claims and claim          Faster
  expense ratio by 25%    reporting            (40,700 )           (2.2 )%             5.4  %           1.2  %



We believe that ultimate claims and claim expense ratios 25.0 percentage points
above or below our estimated assumptions constitute reasonably likely outcomes
based on our experience to date and our future expectations. In addition, we
believe that the adjustments that we made to speed up or slow down our estimated
loss reporting patterns are reasonably likely changes. While we believe these
are reasonably likely changes, we do not believe the reader should consider the
above sensitivity analysis an actuarial reserve range. In addition, we caution
the reader that the above sensitivity analysis only reflects reasonably likely
changes. It is possible that our initial estimated claims and claim expense
ratios and loss reporting patterns could be significantly different from the
sensitivity analysis described above. For example, we could be liable for events
which we have not estimated reserves for or for exposures we do not currently
think are covered under our contracts. These changes could result in
significantly larger changes to reserves for claims and claim expenses, net
income and shareholders' equity than those noted above. We also caution the
reader that the above sensitivity analysis is not used by management in
developing our reserve estimates and is also not used by management in managing
the business.
Other
Included in the Other category are the remnants of our Bermuda-based insurance
operations not sold pursuant to the Stock Purchase Agreement with QBE. These
operations are in run-off and no new business is being underwritten. Our
outstanding claims and claim expense reserves for these operations include
insurance policies and quota share reinsurance with respect to risks including:
1) commercial property, which principally included catastrophe-exposed
commercial property products; 2) commercial multi-line, which included
commercial property and liability coverage, such as general liability,
automobile liability and physical damage, building and contents, professional
liability and various specialty products; and 3) personal lines property, which
principally included homeowners personal lines property coverage and catastrophe
exposed personal lines property coverage.

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We use the Bornhuetter-Ferguson actuarial method to estimate claims and claim
expenses within the Other category for our property and casualty insurance and
quota share reinsurance business. The comments discussed above relating to our
reserving techniques and processes for our specialty reinsurance unit within our
Reinsurance segment also apply to our Other category. In addition, certain of
our coverages may be impacted by natural and man-made catastrophes. We estimate
claim reserves for these losses after the event giving rise to these losses
occurs, following a process that is similar to our catastrophe unit.
Development of Prior Year Liability for Unpaid Claims and Claim Expenses
The following table details the development of our liability for unpaid claims
and claim expenses for our Other category split between large catastrophe events
and attritional claims and claim expenses:

                                           2012         2011        2010
  Catastrophe events                    $  1,171     $  4,243     $    300
  Attritional claims and claim expenses    3,265        1,389       15,615
  Loss portfolio transfer                 (7,383 )          -            -
  Actuarial assumption changes                 -      (10,063 )          -
  Total                                 $ (2,947 )   $ (4,431 )   $ 15,915



The adverse development on prior accident years of $2.9 million for the year
ended December 31, 2012 within our Other category was principally the result of
a loss portfolio transfer entered into by the Company on October 1, 2012, in
respect of its contractor's liability book of business within Glencoe, whereby
the Company paid consideration of $36.5 million to transfer net liabilities of
$29.1 million, resulting in a loss of $7.4 million which is recorded above as
prior accident years attritional claims and claims expenses in the Company's
Other category, partially offset by reductions in reported losses on certain
attritional loss contracts and favorable development related to catastrophe
events, primarily the 2008 hurricanes.
The adverse development on prior accident years of $4.4 million in 2011 within
the Company's Other category was principally due to the construction defect book
of business, which experienced higher than expected reported losses, and was
subsequently subject to a comprehensive actuarial review during the fourth
quarter of 2011, which review resulted in an increase of $10.1 million to the
estimated ultimate claims and claim expenses related to this book of business
due to changes in the actuarial assumptions. The total gross reserve for claims
and claim expenses for the construction defect book of business at December 31,
2011 is $58.8 million. Partially offsetting the adverse development on prior
accident years within the construction defect book of business, noted above, was
favorable development of $4.2 million related to large catastrophe events, of
which $4.6 million related to the 2005 hurricanes, and $1.4 million related to
the application of our formulaic actuarial reserving methodology with the
reductions being due to actual paid and reported claim activity being more
favorable to date than what was originally anticipated when setting the initial
reserves.
The favorable development of $15.9 million in 2010 on prior accident year claims
and claim expenses within the Company's Other category was principally driven by
the application of the Company's formulaic actuarial reserving methodology for
this business with the reductions being due to actual paid and reported claim
activity being more favorable to date than what was originally anticipated when
setting the initial reserves. There were no significant changes made to the
actuarial assumptions in 2010 or to the ultimate claims associated with the
large catastrophe events.
Actual Results vs. Initial Estimates
The Actual vs. Initial Estimated Ultimate Claims and Claim Expense Ratio table
below summarizes our key actuarial assumptions in reserving for our Other
category. As noted above, the key actuarial assumptions include the estimated
ultimate claims and claim expense ratios and the estimated loss reporting
patterns. The table shows our initial estimates of the ultimate claims and claim
expense ratios by accident year. The table shows how our initial estimates of
these ratios have developed over time with the re-estimated ratios reflecting a
combination of the amount and timing of paid and reported losses compared to our
initial estimates. The initial estimate is based on the actuarial assumptions
that were in place at the end of that year. A decrease in the ultimate claims
and claim expense ratio implies that our current estimates are lower than our
initial estimates while an increase in the ultimate claims and claim expense
ratio implies that our

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current estimates are higher than our initial estimates. The result would be a
corresponding favorable impact on shareholders' equity and net income or a
corresponding unfavorable impact on shareholders' equity and net income,
respectively. The table also shows how our initial estimated ultimate claims and
claim expense ratios have changed from one accident year to the next. The table
below reflects a summary of the weighted average assumptions for all classes of
business written within our Other category. The table is presented on a gross
loss basis and therefore does not include the benefit of reinsurance recoveries
or loss related premium.
Actual vs. Initial Estimated Other Category Claims and Claim Expense Reserve
Analysis - Estimated Ultimate Claims and Claim Expense Ratio

                                   Estimated Ultimate Claims and Claim 

Expenses Ratio

                                                              Re-estimate 

at

  Underwriting Year   Initial Estimate   December 31, 2010   December 31, 2011   December 31, 2012
        2003               55.3%               30.6%               32.6%               32.8%
        2004               50.2%               45.1%               45.6%               46.3%
        2005               45.0%               46.5%               46.5%               45.8%
        2006               47.4%               36.6%               40.6%               40.6%
        2007               45.7%               24.3%               24.7%               24.8%
        2008               46.0%               68.0%               64.4%               63.2%
        2009               53.0%               66.7%               61.5%               63.1%
        2010               57.9%              129.5%               68.9%               64.8%
        2011                 -%                 -%                  -%                  -%
        2012                 -%                 -%                  -%                  -%



The table above shows our initial estimated ultimate claims and claim expense
ratios for attritional losses for each new underwriting year within our Other
category as of the end of each calendar year. Our initial estimated ultimate
remained relatively constant between 2005 and 2008. This reflects the fact that
management has not made significant changes to its estimated initial expected
ultimate claims and claim expense ratio from one period to the next during that
period. The principal reason for the changes from one year to the next, for
example, the 2009 through 2010 underwriting years, is that the mix of business
has changed. As each underwriting year has developed, our re-estimated ultimate
claims and claim expense ratios have generally been reduced until recently. This
reflects the impact of actual experience where actual paid and reported losses
to date for attritional losses are less than originally expected. For the years
2008 through 2010, our re-estimated ultimate claims and claim expense ratios
increased from the initial estimate due to reported losses exceeding our initial
estimate within our Other category's commercial property line of business,
combined with a relatively low level of net premiums earned during those periods
for our commercial property line of business. As described above, under the
Bornhuetter-Ferguson actuarial method less weight is placed on initial estimates
and more weight is placed on actual experience as our claims and claim expense
reserves age.

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As noted above, some of the contracts were exposed to claims and claim expenses
from large natural and man-made catastrophes. Claims and claim expenses from
these large catastrophes are reserved for after the event which gave rise to the
claims in a manner which is consistent with our property catastrophe reinsurance
reserving practices as discussed above. The large catastrophes occurring during
the period from 2004 to 2008 principally include hurricanes Charley, Frances,
Ivan and Jeanne in 2004, hurricanes Katrina, Rita and Wilma in 2005, and
hurricanes Gustav and Ike in 2008. Our ultimate claims and claim expenses from
these events within our Other category are shown in the table below.

(in thousands, except

  percentages)                          Re-estimated Claims and Claim Expenses at
                       Initial                                                                               %             Claims and       % of Claims
                       Estimate                                                                           Decrease           Claim           and Claim
                      of Accident                                                       Cumulative       (Increase)         Expense           Expenses
                      Year Claims                                                        Favorable          from          Reserves at        Unpaid at
      Events           and Claim          December         December     

December (Adverse) Initial December 31, December 31,

  (Accident Year)      Expenses           31, 2010         31, 2011      31, 2012       Development       Estimate            2012              2012
  Charley,
  Frances, Ivan
  and Jeanne
  (2004)            $     210,323     $       249,949     $ 249,456     $ 249,500     $     (39,177 )      (18.6 )%     $          585            0.2 %
  Katrina, Rita
  and Wilma
  (2005)                  311,312             297,596       293,477       296,801            14,511          4.7  %              5,278            1.8 %
  Gustav and Ike
  (2008)                   19,258              19,849        18,500        18,500               758          3.9  %              5,949           32.2 %
                    $     540,893     $       567,394     $ 561,433     $ 564,801     $     (23,908 )       (4.4 )%     $       11,812            2.1 %



Sensitivity Analysis
The table below quantifies the impact on our reserves for claims and claim
expenses, net income and shareholders' equity as of and for the year ended
December 31, 2012 of reasonably likely changes to the actuarial assumptions used
to estimate our December 31, 2012 claims and claim expense reserves within our
Other category. The table quantifies reasonably likely changes in our initial
estimated ultimate claims and claim expense ratios and estimated loss reporting
patterns. The changes to the initial estimated ultimate claims and claim expense
ratios represent percentage increases or decreases to our current estimated
ultimate claims and claim expense ratios. The change to the reporting patterns
represent claims reporting that is both faster and slower than our current
estimated reporting patterns. The impact on net income and shareholders' equity
assumes no increase or decrease in reinsurance recoveries or loss related
premium and is before tax.

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Other Category Claims and Claim Expense Reserve Sensitivity Analysis

                                          $ Impact of          % Impact of        % Impact of
                                             Change               Change           Change on        % Impact of
                                        on Reserves for      on Reserves for       Net Income        Change on
                          Estimated     Claims and Claim     Claims and Claim     for the Year     Shareholders'
                             Loss         Expenses at          Expenses at           Ended           Equity at
  (in thousands,except    Reporting       December 31,         December 31,       December 31,     December 31,
  percentages)             Pattern            2012                 2012               2012             2012
  Increase expected
  claims and claim          Slower
  expense ratio by 25%    reporting    $        27,914              1.5  %            (3.7 )%          (0.8 )%
  Increase expected
  claims and claim        Expected
  expense ratio by 25%    reporting             10,450              0.6  %            (1.4 )%          (0.3 )%
  Increase expected
  claims and claim          Faster
  expense ratio by 25%    reporting             (1,541 )           (0.1 )%             0.2  %             -  %
  Expected claims and       Slower
  claim expense ratio     reporting             13,971              0.7  %            (1.9 )%          (0.4 )%
  Expected claims and      Expected
  claim expense ratio     reporting                  -                -  %               -  %             -  %
  Expected claims and       Faster
  claim expense ratio     reporting             (9,592 )           (0.5 )%             1.3  %           0.3  %
  Decrease expected
  claims and claim          Slower
  expense ratio by 25%    reporting                 29                -  %               -  %             -  %
  Decrease expected
  claims and claim         Expected
  expense ratio by 25%    reporting            (10,450 )           (0.6 )%             1.4  %           0.3  %
  Decrease expected
  claims and claim          Faster
  expense ratio by 25%    reporting            (17,644 )           (0.9 )%             2.4  %           0.5  %



We believe that ultimate claims and claim expense ratios 25.0 percentage points
above or below our estimated assumptions constitute reasonably likely outcomes
based on our experience to date and our future expectations. In addition, we
believe that the adjustments that we made to speed up or slow down our estimated
loss reporting patterns are reasonably likely changes. While we believe these
are reasonably likely changes, we do not believe the reader should consider the
above sensitivity analysis an actuarial reserve range. In addition, we caution
the reader that the above sensitivity analysis only reflects reasonably likely
changes. It is possible that our initial estimated claims and claim expense
ratios and loss reporting patterns could be significantly different from the
sensitivity analysis described above. For example, we could be liable for events
which we have not estimated reserves for or for exposures we do not currently
think are covered under our contracts. These changes could result in
significantly larger changes to our reserves for claims and claim expenses, net
income and shareholders' equity than those noted above. We also caution the
reader that the above sensitivity analysis is not used by management in
developing our reserve estimates and is also not used by management in managing
the business.
Reinsurance Recoverable
We enter into reinsurance agreements in order to help reduce our exposure to
large losses and to help manage our risk portfolio. Amounts recoverable from
reinsurers are estimated in a manner consistent with the claims and claim
expense reserves associated with the related assumed reinsurance. For multi-year
retrospectively rated contracts, we accrue amounts (either assets or
liabilities) that are due to or from assuming companies based on estimated
contract experience. If we determine that adjustments to earlier estimates are
appropriate, such adjustments are recorded in the period in which they are
determined.
The estimate of reinsurance recoverable can be more subjective than estimating
the underlying claims and claim expense reserves as discussed under the heading
"Claims and Claim Expense Reserves" above. In particular, reinsurance
recoverable may be affected by deemed inuring reinsurance, industry losses
reported by various statistical reporting services, and other factors.
Reinsurance recoverable on dual trigger reinsurance contracts require us to
estimate our ultimate losses applicable to these contracts as well as estimate
the ultimate amount of insured losses for the industry as a whole that will be
reported by the applicable statistical reporting agency, as per the contract
terms. In addition, the level of our additional case

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reserves and IBNR reserves has a significant impact on reinsurance recoverable.
These factors can impact the amount and timing of the reinsurance recoverable to
be recorded.
The majority of the balance we have accrued as recoverable will not be due for
collection until some point in the future. The amounts recoverable ultimately
collected are open to uncertainty due to the ultimate ability and willingness of
reinsurers to pay our claims, for reasons including insolvency and elective
run-off, contractual dispute and various other reasons. In addition, because the
majority of the balances recoverable will not be collected for some time,
economic conditions as well as the financial and operational performance of a
particular reinsurer may change, and these changes may affect the reinsurer's
willingness and ability to meet their contractual obligations to us. To reflect
these uncertainties, we estimate and record a valuation allowance for potential
uncollectible reinsurance recoverable which reduces reinsurance recoverable and
net earnings.
We estimate our valuation allowance by applying specific percentages against
each recovery based on our counterparty's credit rating.  The percentages
applied are based on historical industry default statistics developed by major
rating agencies and are then adjusted by us based on industry knowledge and our
judgment and estimates.  We also apply case-specific valuation allowances
against certain recoveries that we deem unlikely to be collected in full. We
then evaluate the overall adequacy of the valuation allowance based on other
qualitative and judgmental factors.  The valuation allowance recorded against
reinsurance recoverable was $4.5 million at December 31, 2012 (2011 - $7.3
million). The reinsurers with the three largest balances accounted for 14.3%,
14.3% and 12.6%, respectively, of our reinsurance recoverable balance at
December 31, 2012 (2011 - 27.3%, 14.9% and 12.4%, respectively). The three
largest company-specific components of the valuation allowance represented
44.1%, 26.7% and 6.1%, respectively, of our total valuation allowance at
December 31, 2012 (2011 - 34.2%, 27.3% and 12.0%, respectively).
Fair Value Measurements and Impairments
Fair Value
The use of fair value to measure certain assets and liabilities with resulting
unrealized gains or losses is pervasive within our financial statements. Fair
value is defined under accounting guidance currently applicable to us to be the
price that would be received upon the sale of an asset or paid to transfer a
liability in an orderly transaction between open market participants at the
measurement date. We recognize the change in unrealized gains and losses arising
from changes in fair value in our consolidated statements of operations, with
the exception of changes in unrealized gains and losses on our fixed maturity
investments available for sale, which are recognized as a component of
accumulated other comprehensive income in shareholders' equity.
FASB ASC Topic Fair Value Measurements and Disclosures prescribes a fair value
hierarchy that prioritizes the inputs to the respective valuation techniques
used to measure fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or liabilities
(Level 1) and the lowest priority to valuation techniques that use at least one
significant input that is unobservable (Level 3). The three levels of the fair
value hierarchy are described below:
•    Fair values determined by Level 1 inputs utilize unadjusted quoted prices

obtained from active markets for identical assets or liabilities for which

we have access. The fair value is determined by multiplying the quoted price

by the quantity held by us;

• Fair values determined by Level 2 inputs utilize inputs other than quoted

prices included in Level 1 that are observable for the asset or liability,

either directly or indirectly. Level 2 inputs include quoted prices for

similar assets and liabilities in active markets, and inputs other than

     quoted prices that are observable for the asset or liability, such as
     interest rates and yield curves that are observable at commonly quoted
     intervals, broker quotes and certain pricing indices; and

• Level 3 inputs are based all or in part on significant unobservable inputs

for the asset or liability, and include situations where there is little, if

any, market activity for the asset or liability. In these cases, significant

management assumptions can be used to establish management's best estimate

of the assumptions used by other market participants in determining the fair

     value of the asset or liability.



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In certain cases, the inputs used to measure fair value may fall into different
levels of the fair value hierarchy. In such cases, the level in the fair value
hierarchy within which the fair value measurement in its entirety falls has been
determined based on the lowest level input that is significant to the fair value
measurement of the asset or liability. Our assessment of the significance of a
particular input to the fair value measurement in its entirety requires
judgment, and we consider factors specific to the asset or liability.
In order to determine if a market is active or inactive for a security, we
consider a number of factors, including, but not limited to, the spread between
what a seller is asking for a security and what a buyer is bidding for the same
security, the volume of trading activity for the security in question, the price
of the security compared to its par value (for fixed maturity investments), and
other factors that may be indicative of market activity.
There have been no material changes in our valuation techniques, nor have there
been any transfers between Level 1 and Level 2, during the period represented by
these consolidated financial statements.
Below is a summary of the assets and liabilities that are measured at fair value
on a recurring basis and also represents the carrying amount of such assets and
liabilities on our consolidated balance sheet:

                                                           Quoted
                                                      Prices in Active      Significant
                                                         Markets for           Other         Significant
                                                         Identical          Observable       Unobservable
                                                           Assets             Inputs            Inputs
  At December 31, 2012                   Total            (Level 1)         

(Level 2) (Level 3)

Fixed maturity investments

  U.S. treasuries                    $ 1,259,800     $       1,259,800     $         -     $            -
  Agencies                               315,154                     -         315,154                  -

Non-U.S. government (Sovereign

  debt)                                  133,198                     -         133,198                  -
  Non-U.S. government-backed
  corporate                              349,514                     -         349,514                  -
  Corporate                            1,615,207                     -       1,587,415             27,792
  Agency mortgage-backed                 408,531                     -         408,531                  -
  Non-agency mortgage-backed             248,339                     -         248,339                  -
  Commercial mortgage-backed             406,166                     -         406,166                  -
  Asset-backed                            12,954                     -          12,954                  -
  Total fixed maturity investments     4,748,863             1,259,800       3,461,271             27,792
  Short term investments                 821,163                     -         821,163                  -
  Equity investments trading              58,186                58,186               -                  -
  Other investments
  Private equity partnerships            344,669                     -               -            344,669
  Senior secured bank loan funds         202,929                     -         172,334             30,595
  Catastrophe bonds                       91,310                     -          91,310                  -
  Hedge funds                              5,803                     -               -              5,803
  Total other investments                644,711                     -         263,644            381,067

Other assets and (liabilities)

Assumed and ceded (re)insurance

  contracts                                2,647                     -               -              2,647
  Derivatives (1)                         19,123                  (125 )        14,821              4,427
  Other                                    7,315                     -         (11,551 )           18,866

Total other assets and

  (liabilities)                           29,085                  (125 )         3,270             25,940
                                     $ 6,302,008     $       1,317,861     $ 4,549,348     $      434,799


(1) See "Note 19. Derivative Instruments in our Notes to Consolidated Financial

Statements" for additional information related to the fair value by type of

    contract, of derivatives entered into by us.



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As at December 31, 2012, we classified $449.3 million and $14.5 million of
assets and liabilities, respectively, at fair value on a recurring basis using
Level 3 inputs. This represented 5.7% and 0.4% of our total assets and
liabilities, respectively. Level 3 fair value measurements are based on
valuation techniques that use at least one significant input that is
unobservable. These measurements are made under circumstances in which there is
little, if any, market activity for the asset or liability. We use valuation
models or other pricing techniques that require a variety of inputs including
contractual terms, market prices and rates, yield curves, credit curves,
measures of volatility, prepayment rates and correlations of such inputs, some
of which may be unobservable, to value these Level 3 assets and liabilities. Our
assessment of the significance of a particular input to the fair value
measurement in its entirety requires judgment.  In making the assessment, we
considered factors specific to the asset or liability. In certain cases, the
inputs used to measure fair value of an asset or a liability may fall into
different levels of the fair value hierarchy. In such cases, the level in the
fair value hierarchy within which the fair value measurement in its entirety is
classified is determined based on the lowest level input that is significant to
the fair value measurement of the asset or liability.
See to "Note 6. Fair Value Measurements in our Notes to Consolidated Financial
Statements" for additional information about fair value measurements.
Impairments
The amount and timing of asset impairment is subject to significant estimation
techniques and asset impairment is a critical accounting estimate for us. The
more significant impairment reviews we complete are for our fixed maturity
investments available for sale, equity method investments and goodwill and other
intangible assets as described in more detail below.
Fixed Maturity Investments Available For Sale
Our quarterly process for assessing whether declines in the fair value of our
fixed maturity investments available for sale represent impairments that are
other-than-temporary includes reviewing each fixed maturity investment available
for sale that is impaired and determining: (i) if we have the intent to sell the
debt security or (ii) if it is more likely than not that we will be required to
sell the debt security before its anticipated recovery; and (iii) whether a
credit loss exists, that is, where we expect that the present value of the cash
flows expected to be collected from the security are less than the amortized
cost basis of the security.
In assessing our intent to sell securities, our procedures may include actions
such as discussing planned sales with our third party investment managers,
reviewing sales that have occurred shortly after the balance sheet date, and
consideration of other qualitative factors that may be indicative of our intent
to sell or hold the relevant securities. We recognized a total of $Nil of
other-than-temporary impairments due to our intent to sell these securities
during the year ended December 31, 2012 (2011 - $Nil, 2010 - $Nil).
In assessing whether it is more likely than not that we will be required to sell
a security before its anticipated recovery, we consider various factors
including our future cash flow forecasts and requirements, legal and regulatory
requirements, the level of our cash, cash equivalents, short term investments,
fixed maturity investments trading and fixed maturity investments available for
sale in an unrealized gain position, and other relevant factors. For the year
ended December 31, 2012, we recognized $Nil of other-than-temporary impairments
due to required sales (2011 - $Nil, 2010 - $Nil).
In evaluating credit losses, we consider a variety of factors in the assessment
of a security including: (i) the time period during which there has been a
significant decline below cost; (ii) the extent of the decline below cost and
par; (iii) the potential for the security to recover in value; (iv) an analysis
of the financial condition of the issuer; (v) the rating of the issuer; (vi) the
implied rating of the issuer based on an analysis of option adjusted spreads;
(vii) the absolute level of the option adjusted spread for the issuer; and
(viii) an analysis of the collateral structure and credit support of the
security, if applicable.
Once we determine that it is possible that a credit loss may exist for a
security, we perform a detailed review of the cash flows expected to be
collected from the issuer. We estimate expected cash flows by applying estimated
default probabilities and recovery rates to the contractual cash flows of the
issuer, with such default and recovery rates reflecting long-term historical
averages adjusted to reflect current credit, economic and market conditions,
giving due consideration to collateral and credit support, if applicable, and

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discounting the expected cash flows at the purchase yield on the security. In
instances in which a determination is made that an impairment exists but we do
not intend to sell the security and it is not more likely than not that we will
be required to sell the security before the anticipated recovery of its
remaining amortized cost basis, the impairment is separated into: (i) the amount
of the total other-than-temporary impairment related to the credit loss; and
(ii) the amount of the total other-than-temporary impairment related to all
other factors. The amount of the other-than-temporary impairment related to the
credit loss is recognized in earnings. The amount of the other-than-temporary
impairment related to all other factors is recognized in other comprehensive
income. For the year ended December 31, 2012, we recognized $0.3 million and
$0.1 million of credit related other-than-temporary impairments which were
recognized in earnings and other than-temporary impairments related to other
factors which were recognized in other comprehensive income, respectively (2011
- $0.6 million and $0.1 million, respectively, 2010 - $0.8 million and $2
thousand, respectively). At December 31, 2012, our gross unrealized losses on
fixed maturity investments available for sale totaled $0.1 million.
Investments in Other Ventures, Under Equity Method
Investments in which we have significant influence over the operating and
financial policies of the investee are classified as investments in other
ventures, under equity method, and are accounted for under the equity method of
accounting. Under this method, we record our proportionate share of income or
loss from such investments in our results for the period. Any decline in the
value of investments in other ventures, under equity method, including goodwill
and other intangible assets arising upon acquisition of the investee, considered
by management to be other-than-temporary, is impaired and is reflected in our
consolidated statements of operations in the period in which it is determined.
As of December 31, 2012, we had $87.7 million (2011 - $70.7 million) in
investments in other ventures, under equity method on our consolidated balance
sheets, including $10.8 million of goodwill and $19.6 million of other
intangible assets (2011 - $9.0 million and $24.5 million).
In determining whether an equity method investment is impaired, we look at a
variety of factors including the operating and financial performance of the
investee, the investee's future business plans and projections, recent
transactions and market valuations of publicly traded companies where available,
discussions with the investee's management, and our intent and ability to hold
the investment until it recovers in value. In doing this, we make assumptions
and estimates in assessing whether an impairment has occurred and if, in the
future, our assumptions and estimates made in assessing the fair value of these
investments change, this could result in a material decrease in the carrying
value of these investments. This would cause us to write-down the carrying value
of these investments and could have a material adverse effect on our results of
operations in the period the impairment charge is taken. During the year ended
December 31, 2012, we recorded $Nil (2011 - $Nil, 2010 - $0.8 million)
other-than-temporary impairment charges related to investments in other
ventures, under the equity method.
Goodwill and Other Intangible Assets
Goodwill and other intangible assets acquired are initially recorded at fair
value. Subsequent to initial recognition, finite lived other intangible assets
are amortized over their estimated useful life, subject to impairment, and
goodwill and indefinite lived other intangible assets are carried at the lower
of cost or fair value. If goodwill or other intangible assets are impaired, they
are written down to their estimated fair values with a corresponding expense
reflected in our consolidated statements of operations.
We test goodwill and other intangible assets for impairment in the fourth
quarter of each year, or more frequently if events or changes in circumstances
indicate that the carrying amount may not be recoverable. For purposes of the
annual impairment evaluation, goodwill is assigned to the applicable reporting
unit of the acquired entities giving rise to the goodwill and other intangible
assets and is tested based on the cash flows they produce. There are generally
many assumptions and estimates underlying the fair value calculation.
Principally, we identify the reporting unit or business entity that the goodwill
or other intangible asset is attributed to, and review historical and forecasted
operating and financial performance and other underlying factors affecting such
analysis, including market conditions. Other assumptions used could produce
significantly different results which may result in a change in the value of
goodwill or our other intangible assets and related charge in our consolidated
statements of operations. An impairment charge could be recognized in the event
of a significant decline in the implied fair value of those operations where the
goodwill or other intangible assets are applicable. As at December 31, 2012,
excluding the amounts

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recorded in investments in other ventures, under equity method, as noted above,
our consolidated balance sheets include $5.9 million of goodwill (2011 - $5.9
million) and $2.6 million of other intangible assets (2011 - $3.0 million).
Impairment charges were $Nil during the year ended December 31, 2012 (2011 -
$5.2 million, 2010 - $Nil).
Income Taxes
Income taxes have been provided in accordance with the provisions of FASB ASC
Topic Income Taxes. Deferred tax assets and liabilities result from temporary
differences between the amounts recorded in our consolidated financial
statements and the tax basis of the Company's assets and liabilities. Such
temporary differences are primarily due to net operating loss carryforwards and
GAAP versus tax basis accounting differences related to interest expense,
underwriting results, accrued expenses and investments. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date. A valuation allowance against
deferred tax assets is recorded if it is more likely than not that all, or some
portion, of the benefits related to deferred tax assets will not be realized.
At December 31, 2012, our net deferred tax asset (prior to our valuation
allowance) and valuation allowance were $48.0 million (2011 - $34.6 million) and
$48.2 million (2011 - $35.0 million), respectively (see "Note 15. Taxation in
our Notes to Consolidated Financial Statements" for additional information).  At
each balance sheet date, we assess the need to establish a valuation allowance
that reduces the net deferred tax asset when it is more likely than not that
all, or some portion, of the deferred tax assets will not be realized.  The
valuation allowance is based on all available information including projections
of future GAAP taxable income from each tax-paying component in each tax
jurisdiction.  Losses incurred within our U.S. tax-paying subsidiaries in the
fourth quarter of 2011 were significant enough to result in a cumulative GAAP
taxable loss at the U.S. tax-paying subsidiaries for the three year period ended
December 31, 2011. We reassess our valuation allowance on a quarterly basis and
commencing with our reassessment effective December 31, 2011, we determined that
it is more likely than not that we would not be able to recover our U.S. net
deferred tax asset and as a result, recognized a full valuation allowance in the
fourth quarter of 2011. At December 31, 2012, our U.S. tax-paying subsidiaries
had a net deferred tax asset of $37.7 million (2011 - $26.4 million), for which
a full valuation allowance has been provided as we continued to remain in a
cumulative three year GAAP taxable loss position at our U.S. tax-paying
subsidiaries throughout 2012, among other facts. Our Ireland and U.K. operations
have produced GAAP taxable losses and we currently do not believe it is more
likely than not that we will be able to recover our net deferred tax assets from
these operations.
The Company has unrecognized tax benefits of $Nil as of December 31, 2012 (2011
- $3.3 million). Interest and penalties related to unrecognized tax benefits,
would be recognized in income tax expense.  At December 31, 2012, interest and
penalties accrued on unrecognized tax benefits was $Nil (2011 - $Nil). Income
tax returns filed for tax years 2009 through 2011, 2008 through 2011 and 2011,
are open for examination by the Internal Revenue Service, Irish tax authorities
and U.K. tax authorities, respectively. The Company does not expect the
resolution of these open years to have a significant impact on its consolidated
statements of operations and financial condition.

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SUMMARY OF RESULTS OF OPERATIONS


  Year ended December 31,                            2012             2011             2010
  (in thousands, except per share amounts and
  percentages)
  Statements of operations highlights
  Gross premiums written                        $ 1,551,591      $ 1,434,976      $ 1,165,295
  Net premiums written                            1,102,657        1,012,773          848,965
  Net premiums earned                             1,069,355          951,049          864,921
  Net claims and claim expenses incurred            325,211          

861,179 129,345

  Underwriting income (loss)                        451,301         

(177,172 ) 474,573

  Net investment income                             167,375          

118,000 203,955

Net realized and unrealized gains on

  investments                                       163,991           

70,668 144,444

Income (loss) from continuing operations 746,662 (74,502 ) 798,482

Income (loss) from discontinued operations 2,287 (15,890 ) 62,670

  Net income (loss)                                 748,949          

(90,392 ) 861,152

Net income (loss) available (attributable) to

RenaissanceRe common shareholders                 566,014          

(92,235 ) 702,613

Income (loss) from continuing operations

available (attributable) to RenaissanceRe

common shareholders per common share -

  diluted                                       $     11.18      $     

(1.53 ) $ 11.18

Income (loss) from discontinued operations

  per common share - diluted                           0.05            (0.31 )           1.13

Net income (loss) available (attributable) to

RenaissanceRe common shareholders per common

  share - diluted                               $     11.23      $     (1.84 )    $     12.31
  Dividends per common share                    $      1.08      $      1.04      $      1.00

  Key ratios

Net claims and claim expense ratio - current

  accident year                                        45.2  %         

104.4 % 49.9 %

Net claims and claim expense ratio - prior

  accident years                                      (14.8 )%         

(13.8 )% (34.9 )%

Net claims and claim expense ratio - calendar

  year                                                 30.4  %          90.6  %          15.0  %
  Underwriting expense ratio                           27.4  %          28.0  %          30.1  %
  Combined ratio                                       57.8  %         118.6  %          45.1  %

  Return on average common equity                      17.7  %          (3.0 )%          21.7  %

                                                 December 31,     December 31,     December 31,
  Book value                                         2012             2011             2010
  Book value per common share                   $     68.14      $     59.27      $     62.58
  Accumulated dividends per common share              12.00            10.92             9.88

Book value per common share plus accumulated

  dividends                                     $     80.14      $     

70.19 $ 72.46

Change in book value per common share plus

  change in accumulated dividends                      16.8  %          (3.6 )%          23.0  %

                                                 December 31,     December 31,     December 31,
  Balance sheet highlights                           2012             2011             2010
  Total assets                                  $ 7,928,628      $ 7,744,912      $ 8,138,278

Total shareholders' equity attributable to

  RenaissanceRe                                 $ 3,503,065      $ 3,605,193      $ 3,936,325




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Below is a discussion of the results of operations for the year ended December
31, 2012 compared to the year ended December 31, 2011.
Net income available to RenaissanceRe common shareholders was $566.0 million in
2012, compared to a net loss attributable to RenaissanceRe common shareholders
of $92.2 million in 2011, an improvement of $658.2 million. As a result of our
net income available to RenaissanceRe common shareholders in 2012, we generated
an annualized return on average common equity of 17.7% and our book value per
common share increased from $59.27 at December 31, 2011 to $68.14 at
December 31, 2012, a 16.8% increase, after considering the change in accumulated
dividends paid to our common shareholders.
The most significant events affecting our financial performance during 2012, on
a comparative basis to 2011, include:
•   Increased Gross Premiums Written - gross premiums written increased $116.6

million, or 8.1%, to $1,551.6 million. Excluding the impact of $20.1 million

and $160.3 million of net reinstatement premiums written from large losses in

2012 and 2011, respectively, gross premiums written increased $256.8 million,

or 20.1% for the year, due to a combination of improved pricing during the

2012 renewals within our core markets, and continued growth across most lines

of business within our specialty unit and Lloyd's segment;

• Significantly Improved Underwriting Results - underwriting income of $451.3

million and a combined ratio of 57.8% in 2012, compared to an underwriting

loss of $177.2 million and a combined ratio of 118.6% in 2011, was positively

impacted by the increase in gross premiums written, noted above, and a

decrease in net claims and claim expenses of $536.0 million due to

significantly lower insured losses with respect of large events. Included in

underwriting income for 2012 was $149.1 million and $26.3 million of

underwriting losses related to storm Sandy and hurricane Isaac, respectively,

which added a total of 19.0 percentage points to our 2012 combined ratio. In

2011, a number of large losses, namely the 2011 New Zealand and Tohoku

earthquakes, the large U.S. tornadoes, the Australian floods, losses arising

from aggregate contracts, hurricane Irene and the Thailand floods

(collectively referred to as the "2011 Large Losses") resulted in $725.2

million of underwriting losses and added 85.4 percentage points to the

Company's combined ratio, as detailed in the table below;

• Higher Investment Results - our net investment income and net realized and

unrealized gains on investments increased $49.4 million and $93.3 million,

    respectively, in 2012, compared to 2011, primarily due to higher total
    returns in our fixed maturity investments portfolio as a result of the
    significant tightening of credit spreads combined with higher average
    invested assets and improved valuations in our portfolio of other
    investments, specifically our senior secured bank loan funds;

• Equity in Earnings of Other Ventures - our equity in earnings of other

ventures improved to earnings of $23.2 million in 2012, compared to a loss of

$36.5 million in 2011. The $59.8 million improvement is primarily due to our

equity investment in Top Layer Re which generated income of $20.8 million in

2012, compared to a loss of $37.5 million in 2011, an improvement of $58.3

million, principally due to the absence of large losses during 2012, compared

to claims and claim expenses incurred in 2011 in Top Layer Re related to the

2011 New Zealand and Tohoku earthquakes; and partially offset by

• Other Loss - our other loss deteriorated $22.2 million to a loss of $22.9

million in 2012, compared to a loss of $0.7 million in 2011, primarily the

result of ceded reinsurance contracts accounted for at fair value which

incurred a loss of $4.6 million in 2012, compared to income of $37.4 million

in 2011, due to net recoverables on the Tohoku earthquake in the first

quarter of 2011 which did not reoccur in 2012 and partially offset by $20.8

million of trading losses within the Company's weather and energy risk

management operations, compared to trading losses of $45.0 million in 2011;

and

• Net (Income) Loss Attributable to Redeemable Noncontrolling Interest -

DaVinciRe - our net income attributable to redeemable noncontrolling interest

- DaVinciRe was $147.5 million in 2012, compared to net loss attributable to

redeemable noncontrolling interest - DaVinciRe of $33.7 million in 2011, a

change of $181.2 million, principally due to a significant improvement in

underwriting income as a result of the decrease in current accident year net

claims and claim expenses and higher investment results, as noted above,

which also impacted DaVinciRe, and together resulted in net income of $212.5

million for DaVinciRe in 2012, compared to net loss of $61.3 million for

DaVinciRe in 2011. In addition, our ownership in DaVinciRe decreased from

    42.8% at December 31, 2011 to 30.8% at December 31, 2012, consequently
    increasing redeemable noncontrolling interest - DaVinciRe.



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Below is a discussion of the results of operations for the year ended December
31, 2011 compared to the year ended December 31, 2010.
Net loss attributable to RenaissanceRe common shareholders was $92.2 million in
2011, compared to $702.6 million of net income available to RenaissanceRe common
shareholders in 2010, a decrease of $794.8 million. As a result of our net loss
attributable to RenaissanceRe common shareholders in 2011, we generated a
negative return on average common equity of 3.0% and our book value per common
share decreased from $62.58 at December 31, 2010 to $59.27 at December 31, 2011,
a 3.6% decrease, after considering the change in accumulated dividends paid to
our common shareholders. In 2010, we generated returns on average common equity
of 21.7%, and increased our book value per common share plus the change in
accumulated dividends by 23.0%, respectively.
The most significant events affecting our financial performance during 2011, on
a comparative basis to 2010 include:
•   Significant Catastrophe Events and Corresponding Underwriting Losses - our

underwriting loss of $177.2 million in 2011 deteriorated $651.7 million from

underwriting income of $474.6 million in 2010, primarily due to $725.2

million of underwriting losses as a result of a number of large losses,

namely the 2011 Large Losses, and resulted in $559.5 million of net negative

impact, compared to $211.7 million of net negative impact from the large

losses of 2010, an increase of $347.9 million, as detailed below;

Lower Favorable Development on Prior Years Claims and Claim Expenses -

favorable development on prior years claims and claim expenses decreased

$170.1 million to $132.0 million in 2011, compared to $302.1 million in 2010,

and was comprised primarily of $136.9 million related to our Reinsurance

segment, as detailed below;

• Lower Investment Results - net investment income and net realized and

unrealized gains on investments deteriorated $86.0 million and $73.8 million,

respectively, compared to 2010. The decrease in our investment results was

primarily due to lower total returns on the fixed maturity investments

portfolio, a decrease in the returns from our hedge fund and private equity

investments due to relatively weaker performance, and lower returns on

certain non-investment grade allocations included in other investments;

• Other (Loss) Income - our other (loss) income deteriorated $41.8 million to a

loss of $0.7 million in 2011, compared to income of $41.1 million in 2010,

primarily the result of $45.0 million of trading losses within the Company's

weather and energy risk management operations due to the unusually warm

weather experienced in the United Kingdom and certain parts of the the United

States during the fourth quarter of 2011, compared to trading income of $8.1

million in 2010, more than offsetting our ceded reinsurance contracts

accounted for at fair value which generated $37.4 million in income in 2011,

compared to $5.2 million in 2010, principally as a result of net recoverables

from the Tohoku earthquake;

• Equity in Losses of Other Ventures - our equity in losses of other ventures

deteriorated to a loss of $36.5 million in 2011, compared to a loss of $11.8

million in 2010. The decrease is primarily due to our equity investment in

Top Layer Re which incurred a loss of $37.5 million in 2011, compared to a

loss of $12.1 million in 2010, a deterioration of $25.4 million, principally

due to current accident year claims and claim expenses in Top Layer Re

related to the 2011 New Zealand earthquake and the Tohoku earthquake;

• Loss from Discontinued Operations - our loss from discontinued operations is

$15.9 million in 2011, compared to income from discontinued operations of
    $62.7 million in 2010, and is primarily due to certain tax related
    adjustments and the recognition of a $10.0 million expense related to a
    contractually agreed obligation to pay, or otherwise reimburse, QBE for

amounts up to $10.0 million in respect of net adverse development on prior

accident years net claims and claims expenses for reserves that were sold to

QBE. Income from discontinued operations in 2010 is primarily due to

underwriting income of $57.0 million which was principally attributable to

strong underwriting results for the 2010 crop year; and partially offset by




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• Net Loss Attributable to Redeemable Noncontrolling Interest - DaVinciRe - our

net loss attributable to redeemable noncontrolling interest - DaVinciRe was

$33.7 million in 2011, compared to net income attributable to redeemable

noncontrolling interest - DaVinciRe of $116.5 million in 2010, a change of

$150.2 million, and principally due to a significant reduction in

underwriting income, due to the increase in current accident year net claims

and claim expenses, combined with lower investment results, as noted above,

which also impacted DaVinciRe and together resulted in a net loss for 2011,

compared to net income in 2010, and consequently decreased redeemable

noncontrolling interest - DaVinciRe.



Net Negative Impact of Hurricane Isaac and storm Sandy and the 2011 Large Losses
Net negative impact of hurricane Isaac and storm Sandy and the 2011 Large Losses
includes the sum of estimates of net claims and claim expenses incurred, earned
reinstatement premiums assumed and ceded, lost profit commissions and redeemable
noncontrolling interest - DaVinci Re. Net negative impact of the 2011 Large
Losses also includes equity in the net claims and claim expenses of Top Layer
Re, and other income in respect of ceded reinsurance contracts accounted for at
fair value. Our estimates are based on a review of our potential exposures,
preliminary discussions with certain counterparties and catastrophe modeling
techniques. Given the magnitude and recent occurrence of these events, delays in
receiving claims data, the contingent nature of business interruption and other
exposures, potential uncertainties relating to reinsurance recoveries and other
uncertainties inherent in loss estimation, meaningful uncertainty remains
regarding losses from these events. In addition, a significant portion of the
net claims and claim expenses associated with the 2011 New Zealand and Tohoku
earthquakes and storm Sandy are concentrated with a few large clients and
therefore the loss estimates for these events may vary significantly based on
the claims experience of those clients. Accordingly, our actual net negative
impact from the these events will vary from these preliminary estimates, perhaps
materially so. Changes in these estimates will be recorded in the period in
which they occur.
See the financial data below for additional information detailing the net
negative impact of hurricane Isaac and storm Sandy on our consolidated financial
statements in 2012.

  Year ended December 31, 2012                   Hurricane Isaac     Storm 

Sandy Total

(in thousands, except percentages)

Net claims and claim expenses incurred $ (33,185 ) $ (187,944 ) $ (221,129 )

  Reinstatement premiums earned                           8,863          

37,437 46,300

  Ceded reinstatement premiums earned                         -            

(385 ) (385 )

  Lost profit commissions                                (2,016 )         1,771           (245 )
  Net negative impact on underwriting result            (26,338 )      

(149,121 ) (175,459 )

Redeemable noncontrolling interest -

  DaVinciRe                                               8,925          

22,160 31,085

  Net negative impact                           $       (17,413 )   $  

(126,961 ) $ (144,374 )

Percentage point impact on consolidated

  combined ratio                                            2.8            16.0           19.0

Net negative impact on Reinsurance segment

  underwriting result                           $       (25,857 )   $  

(132,061 ) $ (157,918 )

Net negative impact on Lloyd's segment

  underwriting result                                      (481 )       

(17,060 ) (17,541 )

Net negative impact on underwriting result $ (26,338 ) $ (149,121 ) $ (175,459 )





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See the financial data below for additional information detailing the net negative impact of the 2011 Large Losses on our consolidated financial statements in 2011.

2011 Large Losses

Year ended December 2011 New Zealand Tohoku Australian Large U.S. Aggregate

  31, 2011               Earthquake       Earthquake        Floods        Tornadoes        Contracts      Hurricane Irene     Thailand Floods       Total
  (in thousands,
  except percentages)
  Net claims and
  claim expenses
  incurred            $   (273,596 )     $  (284,348 )   $  (12,273 )   $ 

(135,090 ) $ (33,080 ) $ (32,530 ) $ (76,437 ) $ (847,354 )

Assumed

reinstatement

  premiums earned           49,878            60,914          1,694          23,273            1,524               5,874              17,144        160,301
  Ceded reinstatement
  premiums earned           (3,542 )         (26,004 )            -               -                -                   -                   -        (29,546 )
  Lost profit
  commissions               (7,522 )            (331 )         (348 )          (151 )              -                   -                (245 )       (8,597 )
  Net negative impact
  on underwriting
  result                  (234,782 )        (249,769 )      (10,927 )      (111,968 )        (31,556 )           (26,656 )           (59,538 )     (725,196 )
  Equity in net
  claims and claim
  expenses of Top
  Layer Re                 (23,757 )         (26,243 )            -               -                -                   -                   -        (50,000 )
  Recoveries from
  ceded reinsurance
  contracts accounted
  for at fair value              -            45,000              -               -                -                   -                   -         45,000
  Redeemable
  noncontrolling
  interest -
  DaVinciRe                 55,748            53,669          1,182          32,941            4,944               7,698              14,474        

170,656

  Net negative impact $   (202,791 )     $  (177,343 )   $   (9,745 )   $   (79,027 )    $   (26,612 )   $       (18,958 )   $       (45,064 )   $ (559,540 )
  Percentage point
  impact on
  consolidated
  combined ratio              25.0              26.5            1.1            11.6              3.3                 2.7                 6.0           85.4

  Net negative impact
  on Reinsurance
  segment

underwriting result $ (228,756 ) $ (237,480 ) $ (10,927 ) $ (109,043 ) $ (31,556 )

           (24,156 )           (53,538 )     

(695,456 )

Net negative impact

on Lloyd's segment

  underwriting result       (6,026 )         (12,289 )            -          (2,925 )              -              (2,500 )            (6,000 )      

(29,740 )

Net negative impact

on underwriting

  result              $   (234,782 )     $  (249,769 )   $  (10,927 )   $  (111,968 )    $   (31,556 )   $       (26,656 )   $       (59,538 )   $ (725,196 )




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Underwriting Results by Segment
Reinsurance Segment
Below is a summary of the underwriting results and ratios for our Reinsurance
segment followed by an analysis of our catastrophe unit and specialty
reinsurance unit underwriting results and ratios:

Reinsurance segment overview

  Year ended December 31,                          2012             2011    

2010

(in thousands, except percentages)

  Gross premiums written (1)                  $ 1,392,094      $ 1,323,187      $ 1,123,619
  Net premiums written                        $   967,587      $   913,499      $   809,719
  Net premiums earned                         $   946,423      $   873,088      $   838,790

Net claims and claim expenses incurred 242,022 783,704

        113,804
  Acquisition expenses                             90,491           82,978           77,954
  Operational expenses                            132,935          131,251          129,990
  Underwriting income (loss)                  $   480,975      $  (124,845 )    $   517,042

Net claims and claim expenses incurred -

  current accident year                       $   386,736      $   920,602  

$ 399,823

Net claims and claim expenses incurred -

  prior accident years                           (144,714 )       (136,898 

) (286,019 )

Net claims and claim expenses incurred -

  total                                       $   242,022      $   783,704  

$ 113,804

Net claims and claim expense ratio -

  current accident year                              40.9  %         105.4  

% 47.7 %

Net claims and claim expense ratio - prior

  accident years                                    (15.3 )%         (15.6 

)% (34.1 )%

Net claims and claim expense ratio -

  calendar year                                      25.6  %          89.8  %          13.6  %
  Underwriting expense ratio                         23.6  %          24.5  %          24.8  %
  Combined ratio                                     49.2  %         114.3  %          38.4  %


(1) Includes gross premiums written of $Nil assumed from the Other category for

the year ended December 31, 2012 (2011 - $Nil, 2010 - $9.5 million).



Reinsurance Segment Gross Premiums Written - Gross premiums written in our
Reinsurance segment were $1,392.1 million in 2012, an increase of $68.9 million,
or 5.2%, compared to $1,323.2 million in 2011. Excluding the impact of $18.7
million and $159.8 million of net reinstatement premiums written from large
losses in 2012 and 2011, respectively, gross premiums written increased $210.0
million or 18.1%, primarily due to the catastrophe unit experiencing improved
market conditions on a risk-adjusted basis within its core lines of business
during the 2012 renewals and due to the inception of several new contracts
during 2012 which met our risk-adjusted return thresholds within our specialty
unit. Included in net reinstatement premiums written of $18.7 million in 2012 is
$36.0 million related to storm Sandy, partially offset by $16.3 million and $9.9
million of negative reinstatement premiums written related to the 2011 New
Zealand earthquake and Tohoku, respectively.
Gross premiums written in our Reinsurance segment increased by $199.6 million,
or 17.8%, to $1,323.2 million in 2011, compared to $1,123.6 million in 2010,
primarily due to an increase in gross premiums written in the catastrophe unit
which was positively impacted by reinstatement premiums written on the 2011
Large Losses. Excluding the impact of $159.8 million and $28.0 million of
reinstatement premiums written in 2011 and 2010, respectively, gross premiums
written increased $67.8 million, or 6.2%, primarily due to improving market
conditions in our core catastrophe markets during the June and July 2011
renewals, and partially offset by the softer market conditions in our core
markets during the January 2011 renewals. In addition, our specialty reinsurance
gross premiums written increased $16.5 million, or 12.8%, to $145.9 million,
compared to $129.4 million in 2010, primarily due to the inception of new
contracts during 2011 which met our risk-adjusted return thresholds.

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Our Reinsurance segment premiums are prone to significant volatility due to the
timing of contract inception and also due to the business being characterized by
a relatively small number of relatively large transactions. In addition, our
property catastrophe reinsurance gross premiums written continue to be
characterized by a large percentage of U.S. and Caribbean premium as we have
found business derived from exposures in Europe and the rest of the world to be,
in general, less attractive on a risk-adjusted basis during recent periods. A
significant amount of our U.S. and Caribbean premium provides coverage against
windstorms, mainly U.S. Atlantic hurricanes, as well as earthquakes and other
natural and man-made catastrophes.
Ceded Premiums Written

  Year ended December 31,                         2012         2011         2010
  (in thousands)

Ceded premiums written - Reinsurance segment $ 424,507$ 409,688$ 313,900




Due to the potential volatility of the property catastrophe reinsurance
contracts which we sell, we purchase reinsurance to reduce our exposure to large
losses and to help manage our risk portfolio. We use our REMS© modeling system
to evaluate how each purchase interacts with our portfolio of reinsurance
contracts we write, and with the other ceded reinsurance contracts we purchase,
to determine the appropriateness of the pricing of each contract and whether or
not it helps us to balance our portfolio of risks.
Ceded premiums written increased by $14.8 million in 2012, compared to 2011.
Excluding the impact of $1.0 million and $28.0 million of reinstatement premiums
related to recoveries on certain large losses in 2012 and 2011, respectively,
ceded premiums written increased by $41.8 million or 10.9%, primarily due to
ceded premiums written of $48.5 million related to our managed joint ventures,
Upsilon and Tim Re III.
Ceded premiums written increased by $95.8 million in 2011, compared to 2010,
principally due to our decision to purchase additional reinsurance protection,
combined with $28.0 million of reinstatement premiums related to recoveries on
certain programs impacted by the 2011 New Zealand and Tohoku earthquakes.
To the extent that appropriately priced coverage is available, we anticipate
continued use of reinsurance to reduce the impact of large losses on our
financial results and to manage our portfolio of risk; however, the buying of
ceded reinsurance in our Reinsurance segment is based on market opportunities
and is not based on placing a specific reinsurance program each year. In
addition, in future periods we may utilize the growing market for
insurance-linked securities to expand our ceded reinsurance buying if we find
the pricing and terms of such coverages attractive.
Reinsurance Segment Underwriting Results - Our Reinsurance segment generated
underwriting income of $481.0 million in 2012, compared to incurring an
underwriting loss of $124.8 million in 2011, an improvement of $605.8 million.
In 2012, our Reinsurance segment generated a net claims and claim expense ratio
of 25.6%, an underwriting expense ratio of 23.6% and a combined ratio of 49.2%,
compared to 89.8%, 24.5% and 114.3%, respectively, in 2011.
The $605.8 million improvement in the Reinsurance segment's underwriting result
and 65.1 percentage point decrease in the combined ratio was principally due to
a decrease in current accident year claims and claim expenses in 2012, compared
to 2011. During 2012, hurricane Isaac and storm Sandy had a net negative impact
of $157.9 million, or 20.0 percentage points, on our Reinsurance segment's
underwriting result and combined ratio, respectively, as detailed in the table
below. In addition, current accident year net claims and claim expenses in 2012
included $16.0 million of estimated ultimate losses related to potential
exposure to LIBOR related claims attributable to the current accident year.

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See the financial data below for additional information detailing the net negative impact of hurricane Isaac and storm Sandy on our Reinsurance segment in 2012.


  Year ended December 31, 2012                 Hurricane Isaac     Storm 

Sandy Total

(in thousands, except percentages)

Net claims and claim expenses incurred $ (32,685 ) $ (169,477 ) $ (202,162 )

  Reinstatement premiums earned                         8,844           

36,030 44,874

  Ceded reinstatement premiums earned                       -             

(385 ) (385 )

  Lost profit commissions                              (2,016 )          1,771            (245 )

Net negative impact on Reinsurance segment

  underwriting result                                 (25,857 )       

(132,061 ) (157,918 )

Percentage point impact on Reinsurance

  segment combined ratio                                  3.3             16.5            20.0

Net negative impact on catastrophe unit

  underwriting result                         $       (25,857 )   $   

(121,061 ) $ (146,918 )

Net negative impact on specialty unit

  underwriting result                                       -          

(11,000 ) (11,000 )

Net negative impact on Reinsurance segment

  underwriting result                         $       (25,857 )   $   (132,061 )   $  (157,918 )



Our Reinsurance segment incurred an underwriting loss of $124.8 million in 2011,
compared to $517.0 million of underwriting income in 2010, a decrease of $641.9
million. In 2011, our Reinsurance segment generated a net claims and claim
expense ratio of 89.8%, an underwriting expense ratio of 24.5% and a combined
ratio of 114.3%, compared to 13.6%, 24.8% and 38.4%, respectively, in 2010.
The $641.9 million decrease in the Reinsurance segment's underwriting result and
75.9 percentage point increase in the combined ratio was principally due to a
$520.8 million increase in current accident year losses and a $149.1 million
decrease in favorable development on prior years reserves in 2011, compared to
2010. The increase in current accident year losses was primarily due to the 2011
Large Losses, which negatively impacted the Reinsurance segment's underwriting
result and combined ratio by $695.5 million and 91.3 percentage points,
respectively, after considering the impact of net reinstatement premiums earned
and net lost profit commission related to these events, as detailed in the table
below.

                                                                                2011 Large Losses

Year ended 2011 New Zealand Tohoku Australian Large U.S. Aggregate

  December 31, 2011     Earthquake       Earthquake        Floods        Tornadoes        Contracts      Hurricane Irene     Thailand Floods       Total
  (in thousands,
  except
  percentages)
  Net claims and
  claim expenses
  incurred           $   (267,570 )     $  (273,334 )   $  (12,273 )   $  (131,965 )    $   (33,080 )   $       (30,030 )   $       (70,437 )   $ (818,689 )
  Assumed
  reinstatement
  premiums earned          49,878            60,603          1,694          23,073            1,524               5,874              17,144        159,790
  Ceded
  reinstatement
  premiums earned          (3,542 )         (24,418 )            -               -                -                   -                   -        (27,960 )
  Lost profit
  commissions              (7,522 )            (331 )         (348 )          (151 )              -                   -                (245 )       (8,597 )
  Net negative
  impact on
  Reinsurance
  segment
  underwriting
  result             $   (228,756 )     $  (237,480 )   $  (10,927 )   $  (109,043 )    $   (31,556 )   $       (24,156 )   $       (53,538 )   $ (695,456 )
  Percentage point
  impact on
  Reinsurance
  segment combined
  ratio                      26.9              27.8            1.2            12.4              3.6                 2.7                 6.0           91.3

  Net negative
  impact on
  catastrophe unit
  underwriting
  result             $   (222,256 )     $  (229,980 )   $   (4,927 )   $  (109,043 )    $   (31,556 )   $       (24,156 )   $       (47,538 )   $ (669,456 )
  Net negative
  impact on
  specialty unit
  underwriting
  result                   (6,500 )          (7,500 )       (6,000 )             -                -                   -              (6,000 )      (26,000 )
  Net negative
  impact on
  Reinsurance
  segment
  underwriting
  result             $   (228,756 )     $  (237,480 )   $  (10,927 )   $  (109,043 )    $   (31,556 )   $       (24,156 )   $       (53,538 )   $ (695,456 )




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Losses from our property catastrophe reinsurance and specialty reinsurance
policies can be infrequent, but severe, as demonstrated by our 2011 results.
Although 2012 is generally considered to be the third most costly year for
insured property catastrophe losses, behind only 2011 and 2005, we incurred a
relatively low level of net claims and claim expenses. During periods with
relatively low levels of property catastrophe loss activity, we have the
potential to produce a low level of losses and a related increase in
underwriting income. As described above, we believe there is likely to be an
increase in the severity, and possibly the frequency, of weather related natural
disasters and catastrophes relative to the historical experience over the past
100 years, including the frequency and severity of hurricanes that have the
potential to make landfall in the U.S., potentially as a result of decadal ocean
water temperature cyclical trends, changes in expected sea levels and a
longer-term trend towards global warming.
Our Reinsurance segment prior year reserves experienced $144.7 million of net
favorable development in 2012. The favorable development on prior year reserves
in 2012 included $110.6 million related to our catastrophe reinsurance unit and
$34.1 million related to our specialty reinsurance unit. Favorable development
within the catastrophe unit is primarily due to reductions in estimated ultimate
losses on the 2010 Chilean earthquake of $24.6 million, the 2008 hurricanes of
$17.5 million, the June 2007U.K. floods of $17.3 million, the 2005 hurricanes
of $6.4 million, hurricane Irene of $4.6 million, the Tohoku earthquake of $3.9
million and a number of other catastrophes totaling $57.7 million, and partially
offset by adverse development related to the 2010 and 2011 New Zealand
earthquakes of $21.5 million primarily due to an increase in estimated ultimate
losses. Favorable development within the specialty unit included $14.4 million
associated with actuarial assumption changes, principally in our casualty and
medical malpractice lines of business, and primarily as a result of revised
initial expected claims ratios and claim development factors due to actual
experience coming in better than expected and $19.7 million related to actual
reported loss activity coming in better than expected.
Our Reinsurance segment prior year reserves experienced $136.9 million of net
favorable development in 2011. The favorable development on prior year reserves
in 2011 included $59.1 million related to our catastrophe reinsurance unit and
$77.8 million related to our specialty reinsurance unit. The favorable
development on prior year reserves in 2011 within the catastrophe reinsurance
unit of $59.1 million was due to $27.0 million related to reductions in the
estimated ultimate losses of smaller catastrophe events, $32.1 million arising
from net reductions to the estimated ultimate losses of large catastrophe
events, including $13.9 million, $10.0 million, $8.5 million and $4.7 million
related to tropical cyclone Tasha, the 2005 hurricanes, the Chilean earthquake
and the World Trade Center, respectively, and partially offset by $15.2 million
of adverse development related to the 2010 New Zealand earthquake. The favorable
development within the specialty reinsurance unit included $37.1 million due to
reported losses developing more favorably than expected during 2011 on prior
accident years events, $26.8 million associated with actuarial assumption
changes, principally in our workers' compensation quota share and risk, property
risk and energy risk lines of business, and primarily as a result of revised
initial expected claims ratios and claim development factors due to actual
experience coming in better than expected, and $13.9 million related to a
decrease in case reserves and additional case reserves, which are established at
the contract level for specific loss or large events.
Our underwriting expenses consist of acquisition expenses and operational
expenses. Acquisition expenses consist of the costs to acquire premiums and are
principally comprised of broker commissions and excise taxes. Acquisition
expenses are driven by contract terms and are normally a set percentage of
premiums and, accordingly, these costs will normally move in line with the
fluctuation in gross premiums earned. Our acquisition expense ratio has remained
relatively constant at 9.6%, 9.5% and 9.3% in 2012, 2011 and 2010, respectively.
Operating expenses consist primarily of salaries and other general and
administrative expenses and have remained relatively constant at $132.9 million,
$131.3 million and $130.0 million in 2012, 2011 and 2010, respectively. Our
operating expense ratio may increase over time, as a result of factors including
the absolute and comparative growth of our operating expenses, further
refinements to internal expense allocations, market trends and market dynamics.
We have entered into joint ventures and specialized quota share cessions of our
book of business. In accordance with the joint venture and quota share
agreements, we are entitled to certain profit commissions and fee income. We
record these profit commissions and fees as a reduction in acquisition and
operating expenses and, accordingly, these fees have reduced our underwriting
expense ratios. These fees totaled

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$65.4 million, $58.3 million and $56.5 million in 2012, 2011 and 2010,
respectively, and resulted in a corresponding decrease to the Reinsurance
segment underwriting expense ratio of 6.9%, 6.7% and 6.7%, respectively. In
addition, we are entitled to certain fee income and profit commissions from
DaVinci. Because the results of DaVinci, and its parent DaVinciRe, are
consolidated in our results of operations, these fees and profit commissions are
eliminated in our consolidated financial statements and are principally
reflected in redeemable noncontrolling interest - DaVinciRe. The net impact of
all fees and profit commissions related to these joint ventures and specialized
quota share cessions within our Reinsurance segment was $120.0 million, $64.6
million and $91.6 million in 2012, 2011 and 2010, respectively.
Catastrophe
Below is a summary of the underwriting results and ratios for our catastrophe
unit:

  Catastrophe unit overview
  Year ended December 31,                          2012             2011             2010

(in thousands, except percentages)

Property catastrophe gross premiums written

  Renaissance                                 $   733,963      $   742,236  

$ 630,080

  DaVinci                                         448,244          435,060  

364,153

Total property catastrophe gross premiums

  written (1)                                 $ 1,182,207      $ 1,177,296      $   994,233
  Net premiums written                        $   766,035      $   773,560      $   685,393
  Net premiums earned                         $   781,738      $   737,545      $   721,419

Net claims and claim expenses incurred 165,209 770,350

        153,290
  Acquisition expenses                             66,665           62,882           63,889
  Operational expenses                            103,811          100,932          104,535
  Underwriting income (loss)                  $   446,053      $  (196,619 )    $   399,705

Net claims and claim expenses incurred -

  current accident year                       $   275,777      $   829,487  

$ 310,748

Net claims and claim expenses incurred -

  prior accident years                           (110,568 )        (59,137 

) (157,458 )

Net claims and claim expenses incurred -

  total                                       $   165,209      $   770,350  

$ 153,290

Net claims and claim expense ratio -

  current accident year                              35.3  %         112.5  

% 43.1 %

Net claims and claim expense ratio - prior

  accident years                                    (14.2 )%          (8.1 

)% (21.9 )%

Net claims and claim expense ratio -

  calendar year                                      21.1  %         104.4  %          21.2  %
  Underwriting expense ratio                         21.8  %          22.3  %          23.4  %
  Combined ratio                                     42.9  %         126.7  %          44.6  %


(1) Includes gross premiums written of $Nil assumed from the Other category for

the year ended December 31, 2012 (2011 - $Nil, 2010 - $9.5 million).



Catastrophe Reinsurance Gross Premiums Written - In 2012, our catastrophe
reinsurance gross premiums written increased by $4.9 million, or 0.4%, to
$1,182.2 million, compared to $1,177.3 million in 2011. Excluding the impact of
$17.1 million and $159.8 million of net reinstatement premiums written in 2012
and 2011, our catastrophe unit gross premiums written increased $147.6 million,
or 14.5%, in 2012, primarily due to improved market conditions on a
risk-adjusted basis within our core lines of business during the key January and
June 2012 renewals, and inclusive of $37.4 million and $37.7 million of gross
premiums written on behalf of our recent fully-collateralized joint ventures,
Upsilon Re and Tim Re III.
In 2011, our catastrophe reinsurance gross premiums written increased by $183.1
million, or 18.4%, to $1,177.3 million, compared to $994.2 million in 2010. The
increase is due in part to reinstatement premiums written on 2011 Large Losses,
and the improving market conditions in our core markets during the June and July
2011 renewals, partially offset by the then softer market conditions in our core
markets during the January 2011 renewals. Excluding the impact of $159.8 million
and $28.0 million of

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reinstatement premiums written in 2011 and 2010, respectively, our catastrophe
unit gross premiums written increased $51.3 million, or 5.3%, in 2011.
Our property catastrophe reinsurance gross premiums written continue to be
characterized by a large percentage of U.S. and Caribbean premium, as we have
found business derived from exposures in Europe or the rest of the world to be,
in general, less attractive on a risk-adjusted basis during recent periods. A
significant amount of our U.S. and Caribbean premium provides coverage against
windstorms, mainly U.S. Atlantic hurricanes, as well as earthquakes and other
natural and man-made catastrophes.
Catastrophe Reinsurance Underwriting Results - Our catastrophe unit generated
underwriting income of $446.1 million in 2012, compared to incurring an
underwriting loss of $196.6 million in 2011, an improvement of $642.7 million.
The improvement in underwriting income was driven by an increase in net premiums
earned of $44.2 million principally due to the increase in gross premiums
written noted above and a $553.7 million decrease in current accident year
claims and claim expenses as a result of the relatively low level of insured
catastrophe losses during 2012 which included $191.2 million of net claims and
claim expenses related to hurricane Isaac and storm Sandy, compared to 2011
which was negatively impacted by net claims and claim expenses related to the
2011 Large Losses of $792.7 million. In addition, favorable development on prior
accident years claims and claim expenses within our catastrophe unit was $110.6
million in 2012, compared to $59.1 million in 2011, an increase of $51.4
million, as discussed below.
In 2012, our catastrophe unit generated a net claims and claim expense ratio of
21.1%, an underwriting expense ratio of 21.8% and a combined ratio of 42.9%,
compared to 104.4%, 22.3% and 126.7%, respectively, in 2011. Current accident
year net claims and claim expenses of $275.8 million includes $158.5 million
related to storm Sandy, $35.0 million related to the tornado outbreaks across
the Midwestern region of the U.S. during late February and early March (PCS 66
and 67, respectively), $32.7 million related to hurricane Isaac and $8.2 million
related to the June 29, 2012 derecho (PCS 83) which impacted the Midwest to
Mid-Atlantic coast of the U.S., with the remainder due primarily to a number of
other relatively small events throughout the U.S. During 2012, hurricane Isaac
and storm Sandy had a net negative impact of $146.9 million, or 23.3 percentage
points, on our catastrophe unit's underwriting result and combined ratio,
respectively, as detailed in the table below. Operating expenses of $103.8
million in 2012 remained relatively flat compared to $100.9 million in 2011.
See the financial data below for additional information detailing the net
negative impact of hurricane Isaac and storm Sandy on our catastrophe unit in
2012.

  Year ended December 31, 2012                 Hurricane Isaac     Storm 

Sandy Total

(in thousands, except percentages)

Net claims and claim expenses incurred $ (32,685 ) $ (158,477 ) $ (191,162 )

  Reinstatement premiums earned                         8,844           

36,030 44,874

  Ceded reinstatement premiums earned                       -             

(385 ) (385 )

  Lost profit commissions                              (2,016 )          1,771            (245 )

Net negative impact on catastrophe unit

  underwriting result                         $       (25,857 )   $   

(121,061 ) $ (146,918 )

Percentage point impact on catastrophe unit

  combined ratio                                          4.8             21.0            23.3



In comparison, our catastrophe unit incurred an underwriting loss of $196.6
million in 2011, compared to underwriting income of $399.7 million in 2010, a
decrease of $596.3 million. The decrease in underwriting income was primarily
due to a $518.7 million increase in current accident year claims and claim
expenses as a result of the 2011 Large Losses and a decrease of $98.3 million in
favorable development on prior accident years claims and claim expenses, and
partially offset by a $16.1 million increase in net premiums earned due to the
reinstatement premiums written and earned, noted above.
In 2011, our catastrophe unit generated a net claims and claim expense ratio of
104.4%, an underwriting expense ratio of 22.3% and a combined ratio of 126.7%,
compared to 21.2%, 23.4% and 44.6%, respectively, in 2010. The decrease in the
underwriting expense ratio to 22.3% in 2011, from 23.4% in 2010, was driven in
part by an increase in net premiums earned as a result of the reinstatement
premiums

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written and earned, which do not incur additional acquisition expenses, as well
as a $3.6 million reduction in operating expenses. The increase in current
accident year losses was primarily due to the 2011 Large Losses, which
negatively impacted the catastrophe unit's underwriting results and combined
ratio by $669.5 million and 104.8 percentage points, respectively, after
considering the impact of net reinstatement premiums earned and lost profit
commissions related to these events, as detailed in the table below.

                                                                                    2011 Large Losses
  Year ended December 2011 New Zealand      Tohoku         Large U.S.                             Aggregate
  31, 2011               Earthquake       Earthquake       Tornadoes       Australian Floods      Contracts      Hurricane Irene     Thailand Floods       Total
  (in thousands,
  except percentages)
  Net claims and
  claim expenses
  incurred            $   (261,070 )     $  (265,834 )   $  (131,965 )    $          (6,273 )   $   (33,080 )   $       (30,030 )   $       (64,437 )   $ (792,689 )
  Assumed
  reinstatement
  premiums earned           49,878            60,603          23,073                  1,694           1,524               5,874              17,144        159,790
  Ceded reinstatement
  premiums earned           (3,542 )         (24,418 )             -                      -               -                   -                   -        (27,960 )
  Lost profit
  commissions               (7,522 )            (331 )          (151 )                 (348 )             -                   -                (245 )       (8,597 )
  Net negative impact
  on catastrophe unit
  underwriting result $   (222,256 )     $  (229,980 )   $  (109,043 )    $
         (4,927 )   $   (31,556 )   $       (24,156 )   $       (47,538 )   $ (669,456 )
  Percentage point
  impact on
  catastrophe unit
  combined ratio              30.4              31.5            14.4                    0.6             4.3                 3.1                 6.0          104.8



During 2012, we experienced $110.6 million of favorable development on prior
year reserves, compared to $59.1 million of favorable development on prior years
reserves in 2011. The favorable development on prior year reserves in 2012 was
primarily due to reductions in estimated ultimate losses on the 2010 Chilean
earthquake of $24.6 million, the 2008 hurricanes of $17.5 million, the June 2007U.K. floods of $17.3 million, the 2005 hurricanes of $6.4 million, hurricane
Irene of $4.6 million, the Tohoku earthquake of $3.9 million and a number of
other catastrophes totaling $57.7 million, and partially offset by adverse
development related to the 2010 and 2011 New Zealand earthquakes of $21.5
million primarily due to increase in estimated ultimate losses.
During 2011, we experienced $59.1 million of favorable development on prior year
reserves, compared to $157.5 million of favorable development on prior years
reserves in 2010. The favorable development on prior year reserves in 2011
within the catastrophe reinsurance unit of $59.1 million was due to $27.0
million related to reductions in the estimated ultimate losses of smaller
catastrophe events, $32.1 million arising from net reductions to the estimated
ultimate losses of large catastrophe events, including $13.9 million, $10.0
million, $8.5 million and $4.7 million related to tropical cyclone Tasha, the
2005 hurricanes, the Chilean earthquake and the World Trade Center,
respectively, and partially offset by $15.2 million of adverse development
related to the 2010 New Zealand earthquake.
See "Item 7. Summary of Critical Accounting Estimates, Claims and Claim Expense
Reserves" for additional discussion of our reserving techniques and prior year
development of net claims and claim expenses.



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Specialty

Below is a summary of the underwriting results and ratios for our specialty
reinsurance unit:

  Specialty unit overview
  Year ended December 31,                          2012             2011             2010

(in thousands, except percentages)

Specialty gross premiums written

  Renaissance                                 $   207,387      $   144,192  

$ 126,848

  DaVinci                                           2,500            1,699  

2,538

Total specialty gross premiums written $ 209,887$ 145,891

    $   129,386
  Net premiums written                        $   201,552      $   139,939      $   124,326
  Net premiums earned                         $   164,685      $   135,543      $   117,371
  Net claims and claim expenses incurred           76,813           13,354          (39,486 )
  Acquisition expenses                             23,826           20,096           14,065
  Operational expenses                             29,124           30,319           25,455
  Underwriting income                         $    34,922      $    71,774      $   117,337

Net claims and claim expenses incurred -

  current accident year                       $   110,959      $    91,115  

$ 89,075

Net claims and claim expenses incurred -

  prior accident years                            (34,146 )        (77,761 

) (128,561 )

Net claims and claim expenses incurred -

  total                                       $    76,813      $    13,354  

$ (39,486 )

Net claims and claim expense ratio -

  current accident year                              67.4  %          67.2  

% 75.9 %

Net claims and claim expense ratio - prior

  accident years                                    (20.8 )%         (57.3 

)% (109.5 )%

Net claims and claim expense ratio -

  calendar year                                      46.6  %           9.9  %         (33.6 )%
  Underwriting expense ratio                         32.2  %          37.1  %          33.6  %
  Combined ratio                                     78.8  %          47.0  %             -  %



Specialty Reinsurance Gross Premiums Written - In 2012, our specialty
reinsurance gross premiums written increased $64.0 million, or 43.9%, to $209.9
million, compared to $145.9 million in 2011, primarily due to the inception of a
number of new contracts during 2012 which met our risk-adjusted return
thresholds. During 2012, we experienced growth in a number of our specialty
lines of business within Glencoe and will continue to seek to expand our
specialty reinsurance operations through this platform, although we cannot
assure you that we will do so. Our specialty reinsurance premiums are prone to
significant volatility as this business is characterized by a relatively small
number of comparably large transactions.
In 2011, our specialty reinsurance gross premiums written increased $16.5
million, or 12.8%, to $145.9 million, compared to $129.4 million in 2010,
primarily due to the inception of new contracts during 2011 which met our
risk-adjusted return thresholds.
Specialty Reinsurance Underwriting Results - Our specialty unit generated $34.9
million of underwriting income in 2012, compared to $71.8 million in 2011, a
decrease of $36.9 million, principally due to a $63.5 million increase in net
claims and claim expenses, partially offset by a $29.1 million increase in net
premiums earned due to the increase in gross premiums written noted above. The
$63.5 million increase in net claims and claim expenses is driven by a $43.6
million decrease in favorable development on prior accident year net claims and
claim expenses and a $19.8 million increase in current accident year net claims
and claim expenses, both as discussed below.

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In 2012, our specialty unit generated a net claims and claim expense ratio of
46.6%, an underwriting expense ratio of 32.2% and a combined ratio of 78.8%,
compared to 9.9%, 37.1% and 47.0%, respectively, in 2011. The 4.9 percentage
point decrease in the underwriting expense ratio was principally driven by a
$29.1 million increase in net premiums earned and partially offset by a $3.7
million increase in acquisition expenses, both as a result of the increase in
gross premiums written noted above. Operating expenses of $29.1 million in 2012
remained relatively flat compared to $30.3 million in 2011.
Current accident year net claims and claim expenses of $111.0 million in 2012
includes $16.0 million related to estimated ultimate losses related to potential
exposure to LIBOR related claims attributable to the current accident year,
$11.0 million related to storm Sandy and $5.0 million related to the grounding
of the Costa Concordia cruise ship, with the remainder principally due to
reported attritional losses and the application of our formulaic reserving
methodologies for establishing incurred but not reported reserves for net claims
and claim expenses. In comparison, 2011 experienced $91.1 million of current
accident year net claims and claim expenses including estimated losses
associated with the Tohoku earthquake, 2011 New Zealand earthquake, the
Australian flooding and the Thailand flooding of $7.5 million, $6.5 million,
$6.0 million and $6.0 million, respectively.
Our specialty unit generated $71.8 million of underwriting income in 2011,
compared to $117.3 million in 2010, a decrease of $45.6 million, principally due
to a $52.8 million increase in net claims and claim expenses. The $52.8 million
increase in net claims and claim expenses is primarily driven by a $50.8 million
decrease in favorable development on prior accident year net claims and claim
expenses, as discussed below. Included in current accident year net claims and
claim expenses of $91.1 million are estimated losses associated with several
large events including the Tohoku earthquake of $7.5 million, the 2011 New
Zealand earthquake of $6.5 million, the Australian floods of $6.0 million and
the Thailand floods of $6.0 million. In 2011, our specialty unit generated a net
claims and claim expense ratio of 9.9%, an underwriting expense ratio of 37.1%
and a combined ratio of 47.0%, compared to negative 33.6%, 33.6% and 0.0%,
respectively, in 2010. The 3.5 percentage point increase in the underwriting
expense ratio was principally driven by an increase in operational expenses due
to higher allocated operating expenses and a relative increase in contracts with
higher acquisition expense ratios during 2011.
The favorable development of $34.1 million within our specialty reinsurance unit
in 2012 included $14.4 million associated with actuarial assumption changes,
principally in our casualty and medical malpractice lines of business, and
primarily as a result of revised initial expected claims ratios and claim
development factors due to actual experience coming in better than expected,
$3.0 million of favorable development on the 2005 hurricanes and $16.7 million
of reported losses developing more favorably than expected during 2012 on prior
accident years events.
The favorable development of $77.8 million within our specialty reinsurance unit
in 2011 included $37.1 million due to reported losses developing more favorably
than expected during 2011 on prior accident years events, $26.8 million
associated with actuarial assumption changes, principally in our workers'
compensation quota share and risk, property risk and energy risk lines of
business, and primarily as a result of revised initial expected claims ratios
and claim development factors due to actual experience coming in better than
expected, and $13.9 million related to a decrease in case reserves and
additional case reserves, which are established at the contract level for
specific loss or large events.
See "Item 7. Summary of Critical Accounting Estimates, Claims and Claim Expense
Reserves" for additional discussion of our reserving techniques and prior year
development of net claims and claim expenses.



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Lloyd's Segment
Below is a summary of the underwriting results and ratios for our Lloyd's
segment:

  Lloyd's segment overview
  Year ended December 31,                          2012            2011             2010

(in thousands, except percentages)

Lloyd's gross premiums written

  Specialty                                   $   123,099      $    83,641     $    34,065
  Catastrophe                                      36,888           27,943          14,724
  Insurance                                             -                -          17,420

Total Lloyd's gross premiums written (1) $ 159,987$ 111,584

   $    66,209
  Net premiums written                        $   135,131      $    98,617     $    61,189
  Net premiums earned                         $   122,968      $    76,386     $    50,204
  Net claims and claim expenses incurred           80,242           73,259          25,676
  Acquisition expenses                             22,864           14,031          10,784
  Operational expenses                             45,680           36,732          24,837
  Underwriting loss                           $   (25,818 )    $   (47,636 )   $   (11,093 )

Net claims and claim expenses incurred -

  current accident year                       $    96,444      $    72,781  

$ 25,873

Net claims and claim expenses incurred -

  prior accident years                            (16,202 )            478  

(197 )

Net claims and claim expenses incurred -

  total                                       $    80,242      $    73,259  

$ 25,676

Net claims and claim expense ratio -

  current accident year                              78.4  %          95.3 

% 51.5 %

Net claims and claim expense ratio - prior

  accident years                                    (13.1 )%           0.6 

% (0.4 )%

Net claims and claim expense ratio -

  calendar year                                      65.3  %          95.9 %          51.1  %
  Underwriting expense ratio                         55.7  %          66.5 %          71.0  %
  Combined ratio                                    121.0  %         162.4 %         122.1  %


(1) Includes gross premiums written of $Nil and $0.5 million assumed from the

Other category and Reinsurance segment, respectively, for the year ended

December 31, 2012 (2011 - $Nil and $0.1 million, 2010 - $17.4 million and

$0.2 million, respectively).



Lloyd's Gross Premiums Written - Gross premiums written in our Lloyd's segment
increased by $48.4 million, or 43.4% to $160.0 million in 2012, compared to
$111.6 million in 2011, primarily due to Syndicate 1458 growing its book of
business across the majority of its lines of business and the impact of rate
increases, most notably in its casualty lines of business.
Gross premiums written in our Lloyd's segment increased by $45.4 million, or
68.5% to $111.6 million in 2011, compared to $66.2 million in 2010. Excluding
the impact of an intercompany quota share agreement in the second quarter of
2010, gross premiums written in the Lloyd's segment increased $63.0 million, or
129.7%, primarily due to Syndicate 1458 growing its book of business across the
majority of its lines of business, most notably its casualty lines of business.
Lloyd's Underwriting Results - Our Lloyd's segment incurred an underwriting loss
of $25.8 million and a combined ratio of 121.0% in 2012, compared to $47.6
million and a combined ratio of 162.4% in 2011. Current accident year net claims
and claim expenses increased $23.7 million, while favorable development of prior
accident years net claims and claim expenses increased $16.7 million, during
2012, compared to 2011, resulting in net claims and claims expenses increasing
to $80.2 million in 2012, compared to $73.3 million in 2011. Included in current
accident year net claims and claim expenses during 2012 is $18.5 million related
to storm Sandy, $4.5 million due to the U.S. drought impacting the 2012 crop
season and

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estimated ultimate losses of $2.5 million associated with potential exposure to
LIBOR related claims attributable to the current accident year, with the
remainder due to reported attritional losses and the application of our
formulaic reserving methodologies for establishing incurred but not reported
reserves for net claims and claim expenses. Operational expenses increased $8.9
million, to $45.7 million in 2012, compared to 2011, principally driven by an
increase in compensation and related operating expenses as a result of growth in
headcount as Syndicate 1458 continues to expand its operations. The decrease in
the underwriting expense ratio to 55.7% in 2012, from 66.5% in 2011, was
primarily driven by the increase in net premiums earned.
Our Lloyd's segment incurred an underwriting loss of $47.6 million and a
combined ratio of 162.4% in 2011, compared to an underwriting loss of $11.1
million and a combined ratio of 122.1% in 2010. Our Lloyd's segment was
negatively impacted by the 2011 Large Losses which resulted in $29.7 million of
underwriting losses and increased the combined ratio by 39.3 percentage points,
as detailed in the table below. Operational expenses increased $11.9 million, to
$36.7 million in 2011, compared to 2010, and principally include compensation
and related operating expenses. The decrease in the underwriting expense ratio
to 66.5% in 2011, from 71.0% in 2010, was primarily driven by the increase in
net premiums earned.

                                                                       2011 Large Losses
                                   2011 New Zealand       Tohoku        Large U.S.      Hurricane     Thailand

Year ended December 31, 2011 Earthquake Earthquake Tornadoes Irene Floods Total

(in thousands, except

percentages)

Net claims and claim expenses

  incurred                        $      (6,026 )      $  (11,014 )   $   

(3,125 ) $ (2,500 ) $ (6,000 ) $ (28,665 )

Assumed reinstatement premiums

  earned                                      -               311            200               -             -           511

Ceded reinstatement premiums

  earned                                      -            (1,586 )            -               -             -        (1,586 )

Net negative impact on Lloyd's

segment underwriting result $ (6,026 ) $ (12,289 ) $ (2,925 ) $ (2,500 ) $ (6,000 ) $ (29,740 )

Percentage point impact on

  Lloyd's segment combined ratio            7.9              16.9            3.7             3.3           7.9          39.3



The favorable development of $16.2 million within our Lloyd's segment in 2012
included $5.5 million related to the 2011 Thailand floods, $2.5 million related
to hurricane Irene and $1.3 million related to actuarial assumption changes,
with the remainder primarily due to reported claims coming in lower than
expected on a number of prior accident years events, as a result of the
application of our formulaic actuarial reserving methodology.
See "Item 7. Summary of Critical Accounting Estimates, Claims and Claim Expense
Reserves" for additional discussion of our reserving techniques and prior year
development of net claims and claim expenses.
Other Underwriting Loss

  Year ended December 31,    2012         2011         2010
  (in thousands)
  Underwriting loss       $ (3,856 )   $ (4,691 )   $ (31,376 )



Included in our Other category are the underwriting results related to the
remnants of our Bermuda-based insurance operations not sold pursuant to the
Stock Purchase Agreement with QBE. Included in our Other category was an
underwriting loss of $3.9 million in 2012, primarily due to us entering into a
loss portfolio transfer in respect of our contractor's liability book of
business within Glencoe, whereby we transfered net liabilities of $29.1 million,
resulting in a loss of $7.4 million which was recorded as prior accident years
net claims and claims expenses, partially offset by favorable development
related to the application of our formulaic actuarial reserving methodology with
the reductions being due to actual paid and reported claim activity being more
favorable to date than what was originally anticipated when setting the initial
reserves.
In 2011 our Other category experienced an underwriting loss of $4.7 million in
2011, compared to $31.4 million in 2010, due primarily to adverse development on
prior accident years of $4.4 million. The adverse development in 2011 was
principally due to the contractor's liability book of business, which
experienced higher than expected reported losses of $11.5 million, and was
subsequently subject to a comprehensive

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actuarial review during the fourth quarter of 2011, which review resulted in an
increase of $10.1 million to the estimated ultimate claims and claim expenses
related to this book of business due to changes in the actuarial assumptions.
The total gross reserve for claims and claim expenses for the construction
defect book of business at December 31, 2011 was $58.8 million and $40.8 million
of net claims and claim expenses after reinsurance recoverables. Partially
offsetting the adverse development on prior accident years within the
construction defect book of business, noted above, was favorable development of
$4.2 million related to large catastrophe events primarily related to the 2005
hurricanes, and $12.9 million related to the application of our formulaic
actuarial reserving methodology with the reductions being due to actual paid and
reported claim activity being more favorable to date than what was originally
anticipated when setting the initial reserves.
Net Investment Income

  Year ended December 31,                       2012          2011          2010
  (in thousands)
  Fixed maturity investments                 $ 102,476     $  89,858     $ 108,195
  Short term investments                         1,007         1,666         2,318
  Equity investments trading                     1,086           471             -
  Other investments
  Hedge funds and private equity investments    36,635        27,541        64,419
  Other                                         37,784         8,458        39,305
  Cash and cash equivalents                        194           163           277
                                               179,182       128,157       214,514
  Investment expenses                          (11,807 )     (10,157 )     (10,559 )
  Net investment income                      $ 167,375     $ 118,000     $ 203,955



Net investment income was $167.4 million in 2012, compared to $118.0 million in
2011. The $49.4 million increase in net investment income in 2012 was driven by
a $29.3 million increase in the returns from our allocation to senior secured
bank loan funds and insurance-linked securities included in other in the table
above, a $12.6 million increase from our fixed maturity investments portfolio
where higher average invested assets benefited from the tightening credit
spreads during 2012 and a $9.1 million increase in the returns from our
portfolio of hedge funds and private equity investments, with the increase
primarily from our private equity investments due to higher fund valuations.
Historically low interest rates as compared to recent years have lowered the
yields at which we invest our assets relative to historical levels. We expect
these developments, combined with the current composition of our investment
portfolio and other factors, to continue to put downward pressure on our net
investment income for the near term. The hedge fund, private equity and other
investment portfolios are accounted for at fair value with the change in fair
value recorded in net investment income which included net unrealized gains of
$38.2 million in 2012, compared to $12.7 million of net unrealized gains in
2011.
Net investment income was $118.0 million in 2011, compared to $204.0 million in
2010. The $86.0 million decrease in net investment income was principally driven
by a $36.9 million decrease in the returns from our hedge fund and private
equity investments due to lower returns in 2011, a $30.8 million decrease in the
returns on certain non-investment grade investments included in other
investments, and an $18.3 million decrease in net investment income related to
fixed maturity investments, which was driven by a widening in credit spreads
during 2011, and included $26.7 million of losses on derivatives and futures
used to hedge the interest rate exposure of credit sensitive fixed maturity
investments. The hedge fund, private equity and other investment portfolios are
accounted for at fair value with the change in fair value recorded in net
investment income which included net unrealized gains of $12.7 million in 2011,
compared to $57.5 million in 2010.
Commencing in the first quarter of 2011, we established a portfolio of certain
publicly traded equities which are reflected in our consolidated balance sheet
as equity investments trading. This portfolio of equity investments is carried
at fair value with dividend income included in net investment income, and
realized and unrealized gains included in net realized and unrealized gains on
investments, in our consolidated statements of operations and generated $1.1
million of net investment income in 2012, compared to $0.5

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million in 2011. We do not expect it to represent a material portion of our
invested assets or our financial results for the reasonably foreseeable period.
Net Realized and Unrealized Gains on Investments and Net Other-Than-Temporary
Impairments

  Year ended December 31,                         2012            2011            2010
  (in thousands)
  Gross realized gains                        $    97,787     $    79,358     $   138,814
  Gross realized losses                           (16,705 )       (30,659 )       (19,147 )
  Net realized gains on fixed maturity
  investments                                      81,082          48,699         119,667
  Net unrealized gains on fixed maturity
  investments trading                              75,283          19,404          24,777
  Net unrealized gains on equity investments
  trading                                           7,626           2,565               -
  Net realized and unrealized gains on
  investments                                 $   163,991     $    70,668     $   144,444
  Total other-than-temporary impairments             (395 )          (630 )          (831 )
  Portion recognized in other comprehensive
  income, before taxes                                 52              78               2
  Net other-than-temporary impairments        $      (343 )   $      (552 )   $      (829 )



Our investment portfolio is structured to preserve capital and provide us with a
high level of liquidity. A large majority of our investments are invested in the
fixed income markets and, therefore, our realized and unrealized holding gains
and losses on investments are highly correlated to fluctuations in interest
rates. Therefore, as interest rates decline, we will tend to have realized and
unrealized gains from our investment portfolio, and as interest rates rise, we
will tend to have realized and unrealized losses from our investment portfolio.
We experienced net realized and unrealized gains on investments of $164.0
million during 2012, the majority of which were derived from our portfolio of
fixed maturity investments. However, the trend towards historically low interest
rates (as compared to recent years) may reverse, resulting in a rising interest
rate environment which would tend to diminish our ability to generate net
realized gains on our portfolio of fixed maturity investments, and may result in
significant realized and unrealized losses on our investments in the future.
Net realized and unrealized gains on investments were $164.0 million in 2012,
compared to $70.7 million in 2011, an improvement of $93.3 million. In addition
to increased turnover in our fixed maturity investments portfolio generating
$81.1 million of net realized gains in 2012, unrealized gains on our fixed
maturity investments trading of $75.3 million during 2012 increased $55.9
million, compared to $19.4 million of unrealized gains in 2011, primarily due to
the net appreciation of our fixed maturity investment portfolio as a result of
tightening credit spreads during 2012. Included in net realized and unrealized
gains on investments in 2012 is $7.6 million of net unrealized gains on equity
investments trading due to increases in the share prices of our equity
positions.
Net realized and unrealized gains on investments were $70.7 million in 2011,
compared to $144.4 million in 2010, a decrease of $73.8 million. The unrealized
gains on our fixed maturity investments trading of $19.4 million during 2011
decreased $5.4 million, compared to $24.8 million in 2010, primarily as a result
of an increase in credit spreads during 2011.
Equity in Earnings (Losses) of Other Ventures

  Year ended December 31,                         2012            2011            2010
  (in thousands)
  Top Layer Re                                $    20,792     $   (37,471 )   $   (12,103 )
  Tower Hill Companies                              4,965           2,923           1,151
  Other                                            (2,519 )        (1,985 )          (862 )
  Total equity in earnings (losses) of other
  ventures                                    $    23,238     $   (36,533 )   $   (11,814 )




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Equity in earnings (losses) of other ventures primarily represents our pro-rata
share of the net income (loss) from our investments in Top Layer Re and the
Tower Hill Companies with the equity in earnings from the Tower Hill Companies
recorded one quarter in arrears.
Equity in earnings of other ventures was $23.2 million in 2012, compared to
losses of $36.5 million in 2011. The $59.8 million improvement in equity in
earnings of other ventures was primarily due to our equity in earnings of Top
Layer Re of $20.8 million during 2012, as a result of the absence of net claims
and claim expenses in Top Layer Re 2012, compared to 2011, which was negatively
impacted by net claims and claim expenses related to the 2011 New Zealand and
Tohoku earthquakes.
Equity in losses of other ventures was $36.5 million in 2011, compared to $11.8
million in 2010. The $24.7 million deterioration in equity in losses of other
ventures was primarily due to our equity in losses of Top Layer Re of $37.5
million during 2011, primarily as a result of Top Layer Re experiencing net
claims and claim expenses related to the 2011 New Zealand and Tohoku
earthquakes. During 2011, we sold our entire ownership interest in NBIC
Holdings, Inc. ("NBIC"), a holding company for a specialty underwriter of
homeowners' insurance products and services, for $12.0 million. Included in
Other in the table above, is equity in losses of NBIC of $2.8 million in 2011.
Other (Loss) Income

  Year ended December 31,                         2012             2011            2010
  (in thousands)
  Gain on NBIC                                $         -     $      4,836     $         -
  Mark-to-market on Platinum warrant                    -            2,975  

10,054

  Gain on sale of ChannelRe                             -                -  

15,835

Assumed and ceded reinsurance contracts

accounted for as derivatives and deposits (4,648 ) 37,414

5,214

Weather and energy risk management

  operations                                      (20,785 )        (45,030 )         8,149
  Other                                             2,528             (880 )         1,868
  Total other (loss) income                   $   (22,905 )   $       (685 )   $    41,120



In 2012 we incurred an other loss of $22.9 million, compared to an other loss of
$0.7 million in 2011. The $22.2 million deterioration in other income is
primarily due to:
•      a $42.1 million decrease in other income generated by our assumed and
       ceded reinsurance contracts accounted for at fair value, principally as a

result of $45.0 million of net recoverables from the Tohoku earthquake

during 2011 not reoccurring in 2012;

• the absence in 2012 of a mark-to-market adjustment on the Platinum warrant

due to its sale during the first quarter of 2011 and the sale of NBIC in

       the third quarter of 2011; and partially offset by


•      a relatively lower level of losses from our weather and energy risk

management operations of $20.8 million due to the unusually warm weather

experienced in parts of the United Kingdom and parts of the United States

during the first quarter of 2012, compared to losses from these operations

of $45.0 million in 2011.



In 2011, we incurred an other loss of $0.7 million, compared to generating $41.1
million of other income in 2010. The $41.8 million decrease is primarily due to
losses from our weather and energy risk management operations of $45.0 million
due to the unusually warm weather experienced in the United Kingdom and certain
parts of the United States during the fourth quarter of 2011, compared to income
of $8.1 million in 2010, combined with two nonrecurring items: a decrease in the
mark-to-market adjustment on the Platinum warrant due to its sale during the
first quarter of 2011, and the absence of a gain of $15.8 million which occurred
in the third quarter of 2010 on the sale of our entire ownership in ChannelRe
Holdings Ltd. ("ChannelRe"), as noted below. Offsetting the items noted above,
was other income of $37.4 million generated by our assumed and ceded reinsurance
contracts accounted for at fair value, compared to $5.2 million in 2010,
principally as a result of net recoverables from the Tohoku earthquake and a
gain on sale of NBIC of $4.8 million, as noted above.

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In 2010, we sold our entire ownership interest in ChannelRe, a financial
guaranty reinsurance company, for $15.8 million and recorded other income of
$15.8 million as a result of the sale. We no longer have an ownership interest
in ChannelRe and have no contractual obligations to provide capital or other
financial support to ChannelRe.
Certain contracts we enter into in our weather and energy risk operations are
informed in part on proprietary weather forecasts provided by our Weather
Predict subsidiary. The weather and energy risk operations in which we engage
are both seasonal and volatile, and there is no assurance that our performance
to date will be indicative of future periods.  We continue to allocate capital
to our weather and energy risk management operations. This operation continually
seeks new markets and relationships for its weather and energy risk products,
including leveraging strategic affiliations and ceding risk where appropriate.
Given current market opportunities, we have ceded a substantial portion of this
operation's risk portfolio under a master swap agreement with a highly rated
counterparty. Our results from these activities will therefore fluctuate on an
absolute or relative basis over time.  We have expanded our weather and energy
risk management operations in the last several years to include weather
contingent energy products and by increasing the size and volume of transactions
with respect to our previously existing weather and energy risk management
operations.  The weather and energy risk management operations results include
net realized and unrealized gains and losses on agreements with end users and
net realized and unrealized gains and losses on hedging and trading activities.
These activities present certain operational as well as financial risks, which
we seek to mitigate, although there can be no assurance that we will be able to
successfully mitigate such risks.
Corporate Expenses

  Year ended December 31,    2012        2011        2010
  (in thousands)
  Total corporate expenses $ 16,692    $ 18,264    $ 20,136



Corporate expenses include certain executive, director, legal and consulting
expenses, costs for research and development, impairment charges related to
goodwill and other intangible assets, and other miscellaneous costs, including
those associated with operating as a publicly traded company. Corporate expenses
were $16.7 million in 2012, compared to $18.3 million in 2011, with the decrease
driven by the absence of certain goodwill and intangible asset impairments of
$5.2 million which were incurred in 2011, and partially offset by a corporate
insurance recovery of $1.7 million, recorded in 2011, which did not reoccur in
2012. Corporate expenses were $18.3 million in 2011, compared to $20.1 million
in 2010, with the decrease primarily due to a decrease in legal and consulting
expenses. Included in corporate expenses during 2011, was $5.2 million of
impairment charges related to goodwill and intangible assets and a corporate
insurance recovery of $1.7 million which reduced our corporate expenses by a
like amount.

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Interest Expense and Preferred Share Dividends

  Year ended December 31,                                2012        2011        2010
  (in thousands)
  Interest expense
  DaVinciRe revolving credit facility                  $      -    $    474    $  2,029
  $100 million 5.875% Senior Notes                        5,875       5,875       5,875
  $250 million 5.75% Senior Notes                        14,375      14,375      11,373
  Other                                                   2,847       2,644       2,552
  Total interest expense                                 23,097      23,368      21,829
  Preferred share dividends
  $100 million 7.30% Series B Preference Shares               -           -       7,118
  $250 million 6.08% Series C Preference Shares          15,200      15,200      15,200
  $150 million 6.60% Series D Preference Shares (1)      19,695      19,800      19,800
  Total preferred share dividends                        34,895      35,000      42,118
  Total interest expense and preferred share dividends $ 57,992    $ 58,368    $ 63,947


(1) On November 27, 2012, we announced mandatory partial redemption of 6.0

million of our outstanding Series D Preference Shares at a redemption price

of $25.00 per Series D Preference Share. The partial redemption was allocated

by random lottery in accordance with the Depository Trust Company's rules and

procedures and on December 27, 2012 we redeemed the 6.0 million Series D

Preference Shares called for redemption for $150.0 million plus accrued and

unpaid dividends thereon. Following this transaction, 6.0 million Series D

Preference Shares remain outstanding.



Interest expense was relatively flat at $23.1 million in 2012, compared to $23.4
million in 2011. In addition, our preferred share dividends were also relatively
flat at $34.9 million in 2012, compared to $35.0 million in 2011; however with
the redemption of 6.0 million of our outstanding Series D Preference Shares as
noted in the table above, and in the absence of issuing new preference shares,
we expect our future preference share dividends to decrease in 2013.
Interest expense increased $1.5 million to $23.4 million in 2011, compared to
$21.8 million in 2010, primarily due to a full year of interest expense on the
$250.0 million of 5.75% Senior Notes which were issued by RRNAH on March 17,
2010. During 2011, our preferred share dividends decreased $7.1 million to $35.0
million, compared to $42.1 million in 2010, principally due to the redemption of
our 7.30% Series B Preference Shares on December 20, 2010, as noted below.
Income Tax Benefit (Expense)

  Year ended December 31,         2012       2011      2010
  (in thousands)
  Income tax (expense) benefit $ (1,429 )   $ 315    $ 6,124



We are subject to income taxes in certain jurisdictions in which we operate;
however, since the majority of our income is currently earned in Bermuda, a
non-taxable jurisdiction, the tax impact to our operations has historically been
minimal. During 2012, we incurred an income tax expense of $1.4 million, and in
2011 and 2010 we generated an income tax benefit of $0.3 million and $6.1
million, respectively, which was principally the result of our U.S. operations
incurring pretax losses.
Losses incurred within our U.S. tax-paying subsidiaries in the fourth quarter of
2011 were significant enough to result in a cumulative GAAP taxable loss for the
three year period ended December 31, 2011. We reassess our valuation allowance
on a quarterly basis and commencing with our reassessment effective December 31,
2011, we determined that it was more likely than not that we would not be able
to recover our U.S. net deferred tax asset and increased our valuation allowance
in the fourth quarter of 2011 to reduce our net deferred tax asset to $Nil. At
December 31, 2012, our U.S. tax-paying subsidiaries had a net deferred tax asset
of $37.7 million, for which a full valuation allowance has been provided. The
remaining valuation allowance as of December 31, 2012 relates exclusively to our
operations in Ireland and the U.K. Our Ireland and U.K. operations have produced
GAAP taxable losses and we currently do not believe it is

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more likely than not that we will be able to recover our net deferred tax assets
from these jurisdictions. Our valuation allowance totaled $48.2 million and
$35.0 million at December 31, 2012 and 2011, respectively.
Our effective income tax rate, which we calculate as income tax expense divided
by net income before taxes, may fluctuate significantly from period to period
depending on the geographic distribution of pre-tax net income in any given
period between different jurisdictions with comparatively higher tax rates and
those with comparatively lower tax rates. The geographic distribution of pre-tax
net income can vary significantly between periods due to, but not limited to,
the following factors: the business mix of net premiums written and earned; the
size and nature of net claims and claim expenses incurred; the amount and
geographic location of operating expenses, net investment income, net realized
and unrealized gains (losses) on investments; outstanding debt and related
interest expense; and the amount of specific adjustments to determine the income
tax basis in each of our operating jurisdictions. In addition, a significant
portion of our gross and net premiums are currently written and earned in
Bermuda, a non-taxable jurisdiction, including the majority of our catastrophe
business, which can result in significant volatility to our pre-tax net income
(loss) in any given period. We expect our consolidated effective tax rate to
increase in the future, as our global operations outside of Bermuda expand. In
addition, it is possible that we could be adversely affected by changes in tax
laws, regulation, or enforcement, any of which could increase our effective tax
rate more rapidly or steeply than we currently anticipate.
The preponderance of our revenue, and pre-tax income is generated by our
domestic operations (i.e. Bermuda) in the form of underwriting income and net
investment income, when compared to our foreign operations. The geographic
distribution of pre-tax net income can vary significantly between periods due
to, but not limited, to the following factors: the business mix of net premiums
written and earned; the size and nature of net claims and claim expenses
incurred; the amount and geographic location of operating expenses, net
investment income, net realized and unrealized gains (losses) on investments;
and the amount of specific adjustments to determine the income tax basis in each
of our operating jurisdictions.  Pre-tax income for our domestic operations
(i.e. Bermuda) was higher compared to our foreign operations for the years ended
December 31, 2012 and 2010 primarily as a result of the more volatile
catastrophe business underwritten in our Bermuda operations during these periods
being relatively free of catastrophe losses and thus generating higher levels of
net underwriting income than our foreign operations, which underwrite primarily
less volatile business and as a result produce lower levels of net underwriting
income in benign loss years. During the year ended December 31, 2011, our
domestic operations incurred a loss from continuing operations primarily as a
result of significant catastrophe losses experienced during the period resulting
in underwriting losses. In addition, our U.S. operations, which principally
includes our weather and energy risk management operations, experienced pre-tax
losses during the years ended December 31, 2012, 2011 and 2010.
Net (Income) Loss Attributable to Noncontrolling Interests

  Year ended December 31,                         2012            2011            2010
  (in thousands)
  Net (income) loss attributable to
  noncontrolling interests                    $  (148,040 )   $    33,157     $  (116,421 )



Our net income attributable to the noncontrolling interests was $148.0 million
in 2012, compared to a net loss attributable to noncontrolling interests of
$33.2 million in 2011. The $181.2 million change is primarily due to increased
profits at DaVinciRe as a result of significantly lower insured losses in
respect of large events, improved investment results and partially offset by a
decrease in our ownership percentage in DaVinciRe from 42.8% at December 31,
2011 to 30.8% at December 31, 2012. We expect our ownership in DaVinciRe to
fluctuate over time.
Our net loss attributable to the noncontrolling interests was $33.2 million in
2011, compared to net income attributable to noncontrolling interests of $116.4
million in 2010. The change is primarily due to net losses of DaVinciRe as
DaVinciRe incurred an underwriting loss in 2011, compared to underwriting income
in 2010, principally due to the 2011 Large Losses, as discussed above.

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Income (Loss) from Discontinued Operations


  Year ended December 31,                      2012        2011         

2010

(in thousands)

Income (loss) from discontinued operations $ 2,287 $ (15,890 ) $ 62,670




Income (loss) from discontinued operations includes the financial results of
substantially all of our U.S.-based insurance operations sold to QBE. Income
from discontinued operations of $2.3 million in 2012 is primarily due to
recognizing a gain of $1.0 million on the settlement of the Reserve Collar, as
noted below, compared to a loss from discontinued operations of $15.9 million in
2011 which was primarily due to the recognition of a $10.0 million expense
related to the contractually agreed obligation to pay, or otherwise reimburse,
QBE for amounts potentially up to $10.0 million in respect of net adverse
development on prior accident years net claims and claim expenses. Effective May
23, 2012, RenaissanceRe and QBE reached an agreement in respect of the Reserve
Collar, and RenaissanceRe paid QBE the sum of $9.0 million on June 1, 2012,
representing full and final settlement of the Reserve Collar. We had recognized
a $10.0 million liability and corresponding expense related to the Reserve
Collar due to purported net adverse development on prior accident years net
claims and claim expenses.  The $10.0 million represented the maximum amount
payable under the Reserve Collar.
Included in income from discontinued operations in 2010 is underwriting income
of $57.0 million primarily attributable to strong underwriting results for the
2010 crop year. Included in the underwriting result for 2010 was favorable
development on prior accident years of $56.0 million primarily related to the
crop insurance line of business which experienced a decrease in the frequency
and severity of reported loss activity in 2010 on the 2009 crop year.
LIQUIDITY AND CAPITAL RESOURCES
Financial Condition
RenaissanceRe is a holding company, and we therefore rely on dividends from our
subsidiaries and investment income to make principal and interest payments on
our debt and to make dividend payments to our preference and common
shareholders.
The payment of dividends by our subsidiaries is, under certain circumstances,
limited under statutory regulations and insurance law, which require our
insurance subsidiaries to maintain certain measures of solvency and liquidity.
In addition, Bermuda regulations require approval from the Bermuda Monetary
Authority ("BMA") for any reduction of capital in excess of 15% of statutory
capital, as defined in the Insurance Act. The Insurance Act also requires these
Bermuda insurance subsidiaries of the Company to maintain certain measures of
solvency and liquidity. At December 31, 2012, the statutory capital and surplus
of our Bermuda insurance subsidiaries was $3.1 billion (December 31, 2011 - $2.7
billion) and the minimum amount required to be maintained under Bermuda law, the
Minimum Solvency Margin, was $554.8 million (December 31, 2011 - $552.9
million). During 2012, Renaissance Reinsurance, DaVinciRe and the operating
subsidiaries of RenRe Insurance Holdings Ltd. returned capital to our holding
company, which included dividends declared and return of capital, net of capital
contributions received of $282.0 million, $133.3 million and $Nil, respectively
(2011 - $6.7 million, $77.9 million and $547.3 million, respectively).
As discussed in the "Capital Resources" section below, Renaissance Reinsurance
is obligated to make a mandatory capital contribution of up to $50.0 million in
the event that a loss reduces Top Layer Re's capital below a specified level.
Under the Insurance Act, Renaissance Reinsurance and DaVinci are classified as
Class 4 insurers, and therefore must maintain capital at a level equal to its
Enhanced Capital Requirement ("ECR") which is established by reference to the
Bermuda Solvency and Capital Requirement ("BSCR") model. The BSCR is a standard
mathematical model designed to give the BMA more advanced methods for
determining an insurer's capital adequacy. Underlying the BSCR is the belief
that all insurers should operate on an ongoing basis with a view to maintaining
their capital at a prudent level in excess of the minimum solvency margin
otherwise prescribed under the Insurance Act. Alternatively, under the Insurance
Act, insurers may, subject to the terms of the Insurance Act and to the BMA's
oversight, elect to utilize an approved internal

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capital model to determine regulatory capital. In either case, the ECR shall at
all times equal or exceed the Class 4 insurer's Minimum Solvency Margin and may
be adjusted in circumstances where the BMA concludes that the insurer's risk
profile deviates significantly from the assumptions underlying its ECR or the
insurer's assessment of its risk management policies and practices used to
calculate the ECR applicable to it. While not specifically referred to in the
Insurance Act, the BMA has also established a Target Capital Level ("TCL") for
each Class 4 insurer equal to 120% of its ECR. While a Class 4 insurer is not
currently required to maintain its statutory capital and surplus at this level,
the TCL serves as an early warning tool for the BMA and failure to maintain
statutory capital at least equal to the TCL will likely result in increased BMA
regulatory oversight. The 2012 BSCR for Renaissance Reinsurance and DaVinci must
be filed with the BMA on or before April 30, 2013; at this time, we believe both
companies will exceed the target level of required capital.
RenaissanceRe Corporate Capital (UK) Limited and Syndicate 1458 are subject to
oversight by the Council of Lloyd's. RenaissanceRe Syndicate Management Limited
is subject to regulation by the Financial Services Authority ("FSA") under the
Financial Services and Markets Act 2000. Underwriting capacity of a member of
Lloyd's must be supported by providing a deposit in the form of cash, securities
or letters of credit, which are referred to as Funds at Lloyd's ("FAL"). This
amount is determined by Lloyd's and is based on Syndicate 1458's solvency and
capital requirement as calculated through its internal model. In addition, if
the FAL are not sufficient to cover all losses, the Lloyd's Central Fund
provides an additional level of security for policyholders. At December 31,
2012, the FAL requirement set by Lloyd's for Syndicate 1458 is £183.2 million
based on its business plan, approved in November 2012 (2011 - £93.8 million
based on its business plan, approved November 2011). Actual FAL posted for
Syndicate 1458 at December 31, 2012 by RenaissanceRe CCL is $222.0 million and
£45.5 million supported 100% by letters of credit (2011 - $118.5 million and
£24.5 million).
As discussed in the "Capital Resources" section below, Renaissance Reinsurance
is obligated to make a mandatory capital contribution of up to $50.0 million in
the event that a loss reduces Top Layer Re's capital below a specified level.
Although not required to maintain Top Layer Re's minimum solvency margin as
defined by the BMA, nor contractually obligated to, Renaissance Reinsurance
contributed $38.5 million in additional paid-in capital to Top Layer Re during
2011, following the 2011 New Zealand and Tohoku earthquakes.
In the aggregate, our operating subsidiaries have historically produced
sufficient cash flows to meet their expected claims payments and operational
expenses and to provide dividend payments to us. Our subsidiaries also maintain
a concentration of investments in high quality liquid securities, which
management believes will provide additional liquidity for extraordinary claims
payments should the need arise. See "Capital Resources" section below.
Liquidity and Cash Flows
Holding Company Liquidity
As a Bermuda-domiciled holding company, RenaissanceRe has no operations of its
own and its assets consist primarily of investments in subsidiaries.
Accordingly, RenaissanceRe's future cash flows largely depend on the
availability of dividends or other statutorily permissible payments from
subsidiaries. The ability to pay such dividends is limited by the applicable
laws and regulations of the various countries and states in which these
subsidiaries operate, including, among others, Bermuda, the U.S., Ireland, and
the U.K. Refer to "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations, Liquidity and Capital Resources, Financial
Condition" for further discussion and details regarding dividend capacity of our
major operating subsidiaries.
RenaissanceRe's principal uses of liquidity are common share related
transactions including dividend payments to holders of its common shareholders
as well as share buybacks, preference share related transactions including
dividend payments to its preference shareholders as well as preference share
buybacks from time to time, interest and principal payments on debt, capital
investments in its subsidiaries and certain corporate operating expenses.

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We attempt to structure our organization such that it facilitates efficient
capital movements between RenaissanceRe and its operating subsidiaries and to
ensure that adequate liquidity is available when required, giving consideration
to applicable laws and regulations, and the domiciliary location of sources of
liquidity and related obligations.
Sources of Liquidity
Historically, cash receipts from operations, consisting of premiums and
investment income, generally have provided sufficient funds to pay losses as
well as operating expenses of our subsidiaries and to fund dividends to
RenaissanceRe. Cash receipts from operations are generally derived from the
receipt of investment income on our investment portfolio as well as the net
receipt of premiums less claims and claims expenses related to our underwriting
activities. The Company's operating subsidiaries provide liquidity in that
premiums are generally received months or even years before losses are paid
under the policies related to such premiums. Premiums and acquisition expenses
are settled based on terms of trade as stipulated by an underwriting contract,
and generally are received within the first year of inception of a policy when
the premium is written, but can be longer on certain reinsurance business
assumed. Operating expenses are generally paid within a year of being incurred.
Claims and claims expenses, may take a much longer time before they are reported
and ultimately settled, requiring the establishment of reserves for claims and
claim expenses. Therefore, the amount of claims paid in any one year is not
necessarily related to the amount of net claims incurred, as reported in the
consolidated statement of operations.
As a result of the combination of current market conditions, lower investment
yields, and a large portion of the coverages we provide can produce losses of
high severity and low frequency, it is not possible to accurately predict our
future cash flows from operating activities. As a consequence, cash flows from
operating activities may fluctuate, perhaps significantly, between individual
quarters and years. Due to the magnitude and relatively recent occurrence of
certain large loss events, meaningful uncertainty remains regarding losses from
these events and our actual ultimate net losses from these events may vary from
preliminary estimates, perhaps materially. As a result, our cash flows from
operations would be impacted accordingly.
We are a "well-known seasoned issuer" as defined by the rules promulgated under
the Securities Act and we maintain a "shelf" Registration Statement on Form S-3
(the "Shelf Registration Statement") under the Securities Act and are eligible
to file additional automatically effective Registration Statements of Form S-3
in the future for the potential offering and sale of an unlimited amount of debt
and equity securities. The Shelf Registration Statement allows for various types
of securities to be offered, including, but not limited to the following: common
shares, preference shares and debt securities.
In addition we maintain letter of credit facilities which provide liquidity.
Refer to "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations, Liquidity and Capital Resources, Capital Resources"
for details of these facilities.

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Cash Flows

  Year ended December 31,                         2012            2011            2010
  (in thousands)
  Net cash provided by operating activities   $   716,929     $   165,933     $   494,720
  Net cash (used in) provided by investing
  activities                                      (71,677 )       315,031         108,610
  Net cash used in financing activities          (538,570 )      (542,236 )      (531,592 )
  Effect of exchange rate changes on foreign
  currency cash                                     1,692             518          (1,003 )
  Net increase (decrease) in cash and cash
  equivalents                                     108,374         (60,754 )        70,735
  Cash and cash equivalents, beginning of
  period                                          216,984         277,738         203,112
  Cash and cash equivalents, end of period    $   325,358     $   216,984     $   277,738



During 2012, our cash and cash equivalents increased $108.4 million, to $325.4
million at December 31, 2012, compared to $217.0 million at December 31, 2011.
Cash flows provided by operating activities. Cash flows provided by operating
activities during 2012 were $716.9 million, compared to $165.9 million in 2011.
Cash flows provided by operating activities during 2012 were primarily the
result of certain adjustments to reconcile our net income of $748.9 million to
net cash provided by operating activities, including: a reduction in reinsurance
recoverable of $211.5 million primarily due to the collection of those balances,
an increase in unearned premiums of $51.9 million due to the timing of, and
growth in, our gross premiums written, and a $33.5 million increase in
reinsurance balances payable due to the timing of, and increase in, our premiums
ceded, and partially offset by an adjustment for net realized and unrealized
gains on investments of $164.0 million due to improved total returns in our
portfolios of fixed maturity and other investments, a decrease in our reserve
for claims and claim expenses of $113.0 million driven by the payment of claims
and by favorable development on prior accident years net claims and claims
expenses during 2012, an increase in premiums receivable of $19.5 million due to
increased gross premiums written and an increase in our prepaid reinsurance
premiums of $18.6 million due to the timing of, and increase in, our premiums
ceded. As discussed under "Summary of Results of Operations", we generated
higher underwriting income and higher investment results in 2012 compared to
2011, which contributed to the increase in cash flows provided by operating
activities.
Cash flows used in investing activities. During 2012, our cash flows used in
investing activities were $71.7 million, principally reflecting our net
investment in fixed maturity investments trading of $343.4 million, which was
funded primarily by cash provided by our operating activities and net sales of
other investments, short term investments and fixed maturity investments
available for sale of $150.8 million, $68.8 million and $65.2 million,
respectively.
Cash flows used in financing activities. Our cash flows used in financing
activities in 2012 were $538.6 million, and were principally the result of the
settlement of $463.3 million of our common share repurchases, the payment of
$53.4 million and $34.9 million in dividends to our common and preferred
shareholders, respectively, and the redemption of $150.0 million of our Series D
preference shares during the fourth quarter, partially offset by net inflows of
$164.9 million related to additional third party equity capital raised during
2012 in our redeemable noncontrolling interest - DaVinciRe.

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During 2011, our cash and cash equivalents decreased $60.8 million, to $217.0
million at December 31, 2011, compared to $277.7 million at December 31, 2010.
Cash flows provided by operating activities. Cash flows provided by operating
activities during 2011 were $165.9 million, compared to $494.7 million in 2010.
Cash flows provided by operating activities during 2011 were primarily the
result of certain adjustments to reconcile our net loss of $90.4 million to net
cash provided by operating activities, including: an increase in our reserve for
claims and claim expenses of $734.5 million driven by the significant
catastrophes in 2011; an increase in unearned premiums of $61.5 million due to
growth in our gross premiums written; and partially offset by an increase in
premiums receivable and reinsurance recoverable of $149.8 million and $302.3
million, respectively; a decrease in reinsurance balances payable of $61.1
million; and net realized and unrealized gains on investments of $70.7 million.
As discussed under "Summary of Results of Operations", in 2011 we incurred
significant underwriting losses and lower investment results, which contributed
to the decrease in cash flows provided by operating activities.
Cash flows provided by investing activities. During 2011, our cash flows
provided by investing activities were $315.0 million, which principally
reflected $269.5 million in net proceeds from the sale of substantially all of
our U.S.-based insurance operations to QBE and $47.9 million related to the sale
of our Platinum warrant during the first quarter of 2011. In response to the
large catastrophes of 2011 and our payment of valid claims quickly, we had net
sales of short term investments of $103.1 million. In addition, we invested a
portion of our net cash provided by operating activities in fixed maturity
investments and investments in other ventures.
Cash flows used in financing activities. Our cash flows used in financing
activities in 2011 were $542.2 million, principally comprised of the repurchase
of $191.6 million of our common shares, the payment of $53.5 million and $35.0
million in dividends to our common and preferred shareholders, respectively, the
repurchase of $132.2 million of DaVinciRe shares and the repayment of the
outstanding principal of the DaVinciRe revolving credit facility of $200.0
million, as discussed below in the "Capital Resources" section. Partially
offsetting the above cash flows used in financing activities was a $70.0 million
cash inflow attributable to redeemable noncontrolling interest related to the
DaVinciRe equity capital raise executed during the second quarter of 2011.
Reserves for Claims and Claim Expenses
We believe the most significant accounting judgment made by management is our
estimate of claims and claim expense reserves. Claims and claim expense reserves
represent estimates, including actuarial and statistical projections at a given
point in time, of the ultimate settlement and administration costs for unpaid
claims and claim expenses arising from the insurance and reinsurance contracts
we sell. We establish our claims and claim expense reserves by taking claims
reported to us by insureds and ceding companies, but which have not yet been
paid ("case reserves"), adding the costs for additional case reserves
("additional case reserves") which represent our estimates for claims previously
reported to us which we believe may not be adequately reserved as of that date,
and adding estimates for the anticipated cost of IBNR.

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The following table summarizes our claims and claim expense reserves by line of business and split between case reserves, additional case reserves and IBNR:


                          Case         Additional
  At December 31, 2012  Reserves     Case Reserves        IBNR         Total
  (in thousands)
  Catastrophe          $ 706,264    $       222,208    $ 255,786    $ 1,184,258
  Specialty              111,234             80,971      286,108        478,313
  Total Reinsurance      817,498            303,179      541,894      1,662,571
  Lloyd's                 29,260             10,548      109,662        149,470
  Other                   17,016              8,522       41,798         67,336
  Total                $ 863,774    $       322,249    $ 693,354    $ 1,879,377

At December 31, 2011

  (in thousands)
  Catastrophe          $ 681,771    $       271,990    $ 388,147    $ 1,341,908
  Specialty              120,189             49,840      301,589        471,618
  Total Reinsurance      801,960            321,830      689,736      1,813,526
  Lloyd's                 17,909             14,459       55,127         87,495
  Other                   32,944              3,515       54,874         91,333
  Total                $ 852,813    $       339,804    $ 799,737    $ 1,992,354



Our estimates of claims and claim expense reserves are not precise in that,
among other matters, they are based on predictions of future developments and
estimates of future trends and other variable factors. Some, but not all, of our
reserves are further subject to the uncertainty inherent in actuarial
methodologies and estimates. Because a reserve estimate is simply an insurer's
estimate at a point in time of its ultimate liability, and because there are
numerous factors which affect reserves and claims payments that cannot be
determined with certainty in advance, our ultimate payments will vary, perhaps
materially, from our estimates of reserves. If we determine in a subsequent
period that adjustments to our previously established reserves are appropriate,
such adjustments are recorded in the period in which they are identified. During
the year ended December 31, 2012, changes to prior year estimated claims
reserves increased our net income by $158.0 million (2011 - decreased our net
loss by $132.0 million, 2010 - increased out net income by $302.1 million),
excluding the consideration of changes in reinstatement premium, profit
commissions, redeemable noncontrolling interest - DaVinciRe, equity in net
claims and claim expenses of Top Layer Re and income tax.
Our reserving methodology for each line of business uses a loss reserving
process that calculates a point estimate for the Company's ultimate settlement
and administration costs for claims and claim expenses. We do not calculate a
range of estimates. We use this point estimate, along with paid claims and case
reserves, to record our best estimate of additional case reserves and IBNR in
our consolidated financial statements. Under GAAP, we are not permitted to
establish estimates for catastrophe claims and claim expense reserves until an
event occurs that gives rise to a loss.
Reserving for our reinsurance claims involves other uncertainties, such as the
dependence on information from ceding companies, which among other matters,
includes the time lag inherent in reporting information from the primary insurer
to us or to our ceding companies and differing reserving practices among ceding
companies. The information received from ceding companies is typically in the
form of bordereaux, broker notifications of loss and/or discussions with ceding
companies or their brokers. This information can be received on a monthly,
quarterly or transactional basis and normally includes estimates of paid claims
and case reserves. We sometimes also receive an estimate or provision for IBNR.
This information is often updated and adjusted from time to time during the loss
settlement period as new data or facts in respect of initial claims, client
accounts, industry or event trends may be reported or emerge in addition to
changes in applicable statutory and case laws.
Our estimates of losses from large events are based on factors including
currently available information derived from the Company's claims information
from certain customers and brokers, industry assessments of losses from the
events, proprietary models, and the terms and conditions of our contracts. The

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uncertainty of our estimates for certain of these large events is additionally
impacted by the preliminary nature of the information available, the magnitude
and relative infrequency of the events, the expected duration of the respective
claims development period, inadequacies in the data provided thus far by
industry participants and the potential for further reporting lags or
insufficiencies (particularly in respect of the Chilean, 2010 New Zealand, 2011
New Zealand and Tohoku earthquakes); and in the case of storm Sandy and the
Thailand flooding, significant uncertainty as to the form of the claims and
legal issues, under the relevant terms of insurance contracts and reinsurance
treaties. In addition, a significant portion of the net claims and claim
expenses associated with storm Sandy and the New Zealand and Tohoku earthquakes
are concentrated with a few large clients and therefore the loss estimates for
these events may vary significantly based on the claims experience of those
clients. Loss reserve estimation in respect of our retrocessional contracts
poses further challenges compared to directly assumed reinsurance. A significant
portion of our reinsurance recoverable relates to the New Zealand and Tohoku
earthquakes. There is inherent uncertainty and complexity in evaluating loss
reserve levels and reinsurance recoverable amounts, due to the nature of the
losses relating to earthquake events, including that loss development time
frames tend to take longer with respect to earthquake events. The contingent
nature of business interruption and other exposures will also impact losses in a
meaningful way, especially with regard to storm Sandy, the Tohoku earthquake and
Thailand flooding, which we believe may give rise to significant complexity in
respect of claims handling, claims adjustment and other coverage issues, over
time. Given the magnitude and relatively recent occurrence of these large
events, meaningful uncertainty remains regarding total covered losses for the
insurance industry and, accordingly, several of the key assumptions underlying
our loss estimates. In addition, our actual net losses from these events may
increase if our reinsurers or other obligors fail to meet their obligations.
Because of the inherent uncertainties discussed above, we have developed a
reserving philosophy which attempts to incorporate prudent assumptions and
estimates, and we have generally experienced favorable net development on prior
year reserves in the last several years. However, there is no assurance that
this will occur in future periods
Our reserving techniques, assumptions and processes differ between our property
catastrophe reinsurance and specialty reinsurance units within our Reinsurance
segment and within our Lloyd's segment. Refer to "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations,
Summary of Critical Accounting Estimates, Claims and Claim Expense Reserves" for
more information on the risks we insure and reinsure, the reserving techniques,
assumptions and processes we follow to estimate our claims and claim expense
reserves, and our current estimates versus our initial estimates of our claims
reserves, for each of these units.
Capital Resources
Our total capital resources are as follows:

  At December 31,                                 2012            2011           Change
  (in thousands)
  Common shareholders' equity                 $ 3,103,065     $ 3,055,193     $    47,872
  Preference shares                               400,000         550,000        (150,000 )
  Total shareholders' equity attributable to
  RenaissanceRe                                 3,503,065       3,605,193        (102,128 )
  5.875% Senior Notes                             100,000         100,000               -
  5.750% Senior Notes                             249,339         249,247              92
  RenaissanceRe revolving credit facility -
  borrowed                                              -               -               -
  RenaissanceRe revolving credit facility -
  unborrowed                                      150,000         150,000               -
  Renaissance Trading credit facility -
  borrowed                                          2,436           4,373          (1,937 )
  Renaissance Trading credit facility -
  unborrowed                                       17,564           5,627          11,937
  Total capital resources                     $ 4,022,404     $ 4,114,440     $   (92,036 )




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In 2012, our capital resources decreased by $92.0 million, principally due to
the redemption of 6.0 million of our Series D Preferences Shares, or $150.0
million, as discussed below, $53.4 million of dividends on our common shares,
$494.4 million of common share repurchases as discussed in more detail in "Part
II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds", and
partially offset by comprehensive income of $602.8 million.
Preference Shares
In December 2006, we raised $300.0 million through the issuance of 12.0 million
Series D Preference Shares; in March 2004, we raised $250.0 million through the
issuance of 10.0 million Series C Preference Shares; and in February 2003, we
raised $100.0 million through the issuance of 4.0 million Series B Preference
Shares. On November 17, 2010, we gave redemption notices to the holders of the
7.30% Series B Preference Shares to redeem such shares for $25.00 per share. On
December 20, 2010, we redeemed all of the issued and outstanding 7.30% Series B
Preference Shares for $100.0 million plus accrued and unpaid dividends thereon.
On November 27, 2012, we announced mandatory partial redemption of 6.0 million
of our outstanding Series D Preference Shares at a redemption price of $25.00
per Series D Preference Share. The partial redemption was allocated by random
lottery in accordance with the Depository Trust Company's rules and procedures
and on December 27, 2012 we redeemed the 6.0 million Series D Preference Shares
called for redemption for $150.0 million plus accrued and unpaid dividends
thereon. Following this transaction, 6.0 million Series D Preference Shares
remain outstanding. The Series D and Series C Preference Shares may be redeemed
at $25.00 per share at our option. Dividends on the Series D and Series C
Preference Shares are cumulative from the date of original issuance and are
payable quarterly in arrears at 6.60% and 6.08%, respectively, when, if and as
declared by the Board of Directors. The preference shares have no stated
maturity and are not convertible into any other of our securities.
5.875% Senior Notes
In January 2003, the Company issued $100.0 million, which represented the
carrying amount on the Company's consolidated balance sheet, of 5.875% Senior
Notes due February 15, 2013, with interest on the notes payable on February 15
and August 15 of each year. The Company repaid the notes in full upon their
scheduled maturity on February 15, 2013 using available cash and investments.
The Company does not have current plans to replace the notes with additional
indebtedness.
5.75% Senior Notes
On March 17, 2010, RRNAH issued $250.0 million of 5.75% Senior Notes due
March 15, 2020, with interest on the notes payable on March 15 and September 15
of each year. The notes, which are senior obligations, are guaranteed by
RenaissanceRe and can be redeemed by RRNAH prior to maturity, subject to the
payment of a "make-whole" premium. The Notes were issued pursuant to an
Indenture, dated as of March 17, 2010, by and among RenaissanceRe, RRNAH, and
Deutsche Bank Trust Company Americas, as trustee (the "Trustee"), as
supplemented by the First Supplemental Indenture, dated as of March 17, 2010 (as
so supplemented, the "Indenture").
RenaissanceRe Revolving Credit Facility (the "Credit Agreement")
Effective May 17, 2012, RenaissanceRe entered into a credit agreement with
various banks and financial institutions parties thereto (collectively, the
"Lenders"), Wells Fargo Bank, National Association ("Wells Fargo"), as fronting
bank, letter of credit administrator and administrative agent for the Lenders,
Citibank, N.A. ("Citibank"), as syndication agent, and Wells Fargo Securities,
LLC and Citigroup Global Markets Inc., as joint lead arrangers and joint lead
bookrunners (the "Credit Agreement"). The Credit Agreement replaced the prior
credit agreement, dated as of April 22, 2010, which was terminated concurrently
with the effectiveness of the Credit Agreement.
The Credit Agreement provides for a revolving commitment to RenaissanceRe of
$150.0 million, including the issuance of letters of credit for the account of
RenaissanceRe and RenaissanceRe's insurance subsidiaries of up to $150.0 million
and the issuance of letters of credit for the account of RenaissanceRe's
non-insurance subsidiaries of up to $50.0 million. RenaissanceRe has the right,
subject to satisfying certain conditions, to increase the size of the facility
to $250.0 million. Amounts borrowed under the Credit

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Agreement bear interest at a rate selected by RenaissanceRe equal to the Base
Rate or LIBOR (each as defined in the Credit Agreement) plus a margin, all as
more fully set forth in the Credit Agreement.
The Credit Agreement contains representations, warranties and covenants
customary for bank loan facilities of this type. In addition to customary
covenants which limit RenaissanceRe and its subsidiaries' ability to merge,
consolidate, enter into negative pledge agreements, sell a substantial amount of
assets, incur liens and declare or pay dividends under certain circumstances,
the Credit Agreement also contains certain financial covenants. These financial
covenants generally provide that consolidated debt to capital shall not exceed
the ratio of 0.35:1 and that the consolidated net worth of RenaissanceRe and
Renaissance Reinsurance shall equal or exceed approximately $2.1 billion and
$1.1 billion, respectively (the "Net Worth Requirements"). The Net Worth
Requirements are recalculated effective as of the end of each fiscal year, all
as more fully set forth in the Credit Agreement. The scheduled commitment
maturity date of the Credit Agreement is May 17, 2015.
In the event of the occurrence and continuation of certain events of default,
the administrative agent shall, at the request of the Required Lenders (as
defined in the Credit Agreement), or may, with the consent of the Required
Lenders, among other things, take any or all of the following actions: terminate
the Lenders' obligations to make loans or issue letters of credit, accelerate
the outstanding obligations of RenaissanceRe under the Credit Agreement and
require RenaissanceRe to cash collateralize the outstanding letter of credit
obligations in an amount equal to 103% thereof.
DaVinciRe Revolving Credit Facility
DaVinciRe was a party to a Third Amended and Restated Credit Agreement, dated as
of April 5, 2006 (the "DaVinciRe Credit Agreement"), which provided for a
revolving credit facility in an aggregate amount of up to $200.0 million and was
scheduled to mature on April 5, 2011. On April 1, 2011, DaVinciRe repaid in full
the $200.0 million borrowed under the DaVinciRe Credit Agreement and terminated
the lenders' lending commitment thereunder. In connection with such repayment
and termination, on March 30, 2011, DaVinciRe entered into a loan agreement with
RenaissanceRe (the "Loan Agreement") under which RenaissanceRe made a loan to
DaVinciRe in the principal amount of $200.0 million on April 1, 2011. The loan
matures on March 31, 2021 and interest on the loan is payable at a rate of three
month LIBOR plus 3.5% and is due at the end of each March, June, September and
December, commencing on June 30, 2011. Under the terms of the Loan Agreement,
DaVinciRe is required to maintain a debt to capital ratio of no greater than
0.40:1 and a net worth of no less than $500.0 million. On December 21, 2012,
DaVinciRe repaid $100.0 million of principal under the Loan Agreement and at
December 31, 2012, $100.0 million remained outstanding under the Loan Agreement.
No additional amounts may be borrowed by DaVinciRe under the Loan Agreement.
Principal Letter of Credit Facility
Effective May 17, 2012, RenaissanceRe and certain of its affiliates, Renaissance
Reinsurance, ROE, Glencoe and DaVinci (such affiliates, collectively, the
"Account Parties"), entered into a Fourth Amended and Restated Reimbursement
Agreement with various banks and financial institutions parties thereto
(collectively, the "Banks"), Wells Fargo, as issuing bank, administrative agent
and collateral agent for the Banks, and certain other agents (the "Reimbursement
Agreement"). The Reimbursement Agreement amended and restated in its entirety
the Third Amended and Restated Reimbursement Agreement, dated as of April 22,
2010 (the "Prior Reimbursement Agreement"), which was terminated concurrently
with the effectiveness of the Reimbursement Agreement.
The Reimbursement Agreement continues to serve as RenaissanceRe's principal
secured letter of credit facility and the commitments thereunder expire on May
17, 2015. The Reimbursement Agreement provides a commitment from the Banks in an
aggregate amount of $450.0 million, which may be increased up to an amount not
to exceed $800.0 million, subject to RenaissanceRe satisfying certain
conditions. The Reimbursement Agreement contains representations, warranties and
covenants in respect of RenaissanceRe, the Account Parties and their respective
subsidiaries that are customary for facilities of this type, including customary
covenants limiting the ability to merge, consolidate and sell a substantial
amount of assets. The Reimbursement Agreement contains certain financial
covenants requiring RenaissanceRe and DaVinci to maintain a minimum net worth of
approximately $1.8 billion and $749.1 million, respectively,

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which requirements are recalculated effective as of the end of each fiscal year,
all as more fully set forth in the Reimbursement Agreement.
Under the Reimbursement Agreement, each Account Party is required to pledge
eligible collateral having a value sufficient to cover all of its obligations
under the Reimbursement Agreement, including reimbursement obligations for
outstanding letters of credit issued for its account. In the case of an event of
default under the Reimbursement Agreement, and in certain other circumstances
set forth in the Reimbursement Agreement, including, among others, a decrease in
the net worth of an Account Party below the level specified therein for such
Account Party, a decline in collateral value, and certain failures to maintain
specified ratings, the Banks may exercise certain remedies, including conversion
of collateral into cash.
Under the Reimbursement Agreement, redeemable preference shares of Renaissance
Investment Holdings Ltd. are no longer eligible collateral. Therefore, the
Second Amended and Restated RIHL Undertaking and Agreement, dated as of
April 22, 2010, entered into in connection with the Prior Reimbursement
Agreement, was terminated concurrently with the execution of the Reimbursement
Agreement.
At December 31, 2012, we had $204.6 million of letters of credit with effective
dates on or before December 31, 2012 outstanding under the Reimbursement
Agreement.
Bilateral Letter of Credit Facility ("Bilateral Facility")
Effective September 17, 2010, each of Renaissance Reinsurance, DaVinci and
Glencoe (collectively, the "Bilateral Facility Participants"), entered into a
secured letter of credit facility with Citibank Europe plc ("CEP"). The
Bilateral Facility provides a commitment from CEP to issue letters of credit for
the account of one or more of the Bilateral Facility Participants and their
respective subsidiaries in multiple currencies and in an aggregate amount of up
to $300.0 million. The Bilateral Facility expires on December 31, 2013 and is
evidenced by a Facility Letter (as amended) and three separate Master Agreements
between CEP and each of the Bilateral Facility Participants, as well as certain
ancillary agreements. At December 31, 2012, $292.9 million remained unused and
available to the Bilateral Facility Participants under the Bilateral Facility.
Under the Bilateral Facility, each of the Bilateral Facility Participants is
severally obligated to pledge to CEP at all times during the term of the
Bilateral Facility certain securities with a collateral value (as determined as
therein provided) that equals or exceeds 100% of the aggregate amount of its
then-outstanding letters of credit. In the case of an event of default under the
Bilateral Facility with respect to a Bilateral Facility Participant, CEP may
exercise certain remedies with respect to such Bilateral Facility Participant,
including terminating its commitment to such Bilateral Facility Participant
under the Bilateral Facility and taking certain actions with respect to the
collateral pledged by such Bilateral Facility Participant (including the sale
thereof).  In the Facility Letter, each of Renaissance Reinsurance, DaVinci and
Glencoe makes, as to itself, representations and warranties that are customary
for facilities of this type and severally agrees that it will comply with
certain informational and other undertakings, including those regarding the
delivery of quarterly and annual financial statements.
Funds at Lloyd's Letter of Credit Facility
On April 26, 2010, Renaissance Reinsurance and CEP entered into an Amended and
Restated Pledge Agreement (the "Pledge Agreement") in respect of its letter of
credit facility with CEP which is evidenced by the Master Reimbursement
Agreement, dated as of April 29, 2009, which provides for the issuance and
renewal of letters of credit used to support business written by Syndicate 1458.
At December 31, 2012, two letters of credit issued by CEP under the
Reimbursement Agreement were outstanding, in the amount of $222.0 million and
£45.5 million, respectively. Pursuant to the Pledge Agreement, Renaissance
Reinsurance has agreed to pledge to CEP at all times during the term of the
Reimbursement Agreement certain securities with a collateral value equal to 100%
of the aggregate amount of the then-outstanding letters of credit issued under
the Reimbursement Agreement.

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Letters of Credit
At December 31, 2012, we had total letters of credit outstanding under all
facilities of $507.2 million.
Renaissance Reinsurance is also party to a collateralized letter of credit and
reimbursement agreement in the amount of $37.5 million that supports our Top
Layer Re joint venture. Renaissance Reinsurance is obligated to make a mandatory
capital contribution of up to $50.0 million in the event that a loss reduces Top
Layer Re's capital below a specified level.
Multi-Beneficiary Reinsurance Trusts
Effective March 15, 2011, each of Renaissance Reinsurance and DaVinci was
approved as a Trusteed Reinsurer in the State of New York and established a
multi-beneficiary reinsurance trust ("MBRT") to collateralize its respective
(re)insurance liabilities associated with U.S. domiciled cedants. The MBRTs are
subject to the rules and regulations of the State of New York and the respective
deed of trust, including but not limited to certain minimum capital funding
requirements, investment guidelines, capital distribution restrictions and
regulatory reporting requirements. Following the initial approval in the State
of New York, Renaissance Reinsurance and DaVinci submitted applications to all
U.S. states to become Trusteed Reinsurers. As of December 31, 2012, Renaissance
Reinsurance and DaVinci are approved in 51 and 50 U.S. states, respectively. We
expect, over time, to transition cedants with existing outstanding letters of
credit, to the appropriate MBRT as determined by cedant state of domicile,
thereby reducing our absolute and relative reliance on letters of credit. New
business incepting with cedants domiciled in approved states will be
collateralized using a MBRT. Cedants collateralized with a MBRT will be eligible
for automatic reinsurance credit in their respective U.S. regulatory filings.
Assets held under trust at December 31, 2012 with respect to the MBRTs totaled
$508.7 million and $180.1 million for Renaissance Reinsurance and DaVinci,
respectively, compared to the minimum amount required under U.S. state
regulations of $494.9 million and $169.1 million, respectively.
Multi-Beneficiary Reduced Collateral Reinsurance Trusts
Effective December 31, 2012, each of Renaissance Reinsurance and DaVinci was
approved as an Accredited Reinsurer in the state of New York and established a
multi-beneficiary reduced collateral reinsurance trust ("RCT") to collateralize
its (re)insurance liabilities associated with U.S. domiciled cedants in certain
states where Renaissance Reinsurance or DaVinci is approved as an Accredited
Reinsurer, thereby providing for a reduction in collateral requirements to 20%
of the net outstanding insurance liabilities. The RCTs are subject to the rules
and regulations of the state of New York and the respective deed of trust,
including but not limited to certain minimum capital funding requirements,
investment guidelines, capital distribution restrictions and regulatory
reporting requirements. Assets held under trust at December 31, 2012 with
respect to the RCTs totaled $11.0 million and $11.0 million for Renaissance
Reinsurance and DaVinci, respectively, compared to the minimum amount required
under U.S. state regulations of $10.0 million and $10.0 million, respectively.
Renaissance Trading Margin Facility and Guarantees
Renaissance Trading maintains a brokerage facility with a prime broker, which
has an associated margin facility of $20.0 million.  This margin facility, which
allows Renaissance Trading to manage its cash position related to its exchange
traded products, is supported by a $25.0 million guarantee issued by
RenaissanceRe.  Interest on amounts outstanding under this facility is at
overnight LIBOR plus 200 basis points.  At December 31, 2012, $2.4 million was
outstanding under the facility.
At December 31, 2012, RenaissanceRe had provided guarantees in the aggregate
amount of $304.3 million to certain counterparties of the weather and energy
risk operations of Renaissance Trading. In the future, RenaissanceRe may issue
guarantees for other purposes or increase the amount of guarantees issued to
counterparties of Renaissance Trading.
Redeemable Noncontrolling Interest - DaVinciRe
DaVinciRe shareholders are party to a shareholders agreement (the "Shareholders
Agreement") which provides DaVinciRe shareholders, excluding us, with certain
redemption rights that enable each shareholder to notify DaVinciRe of such
shareholder's desire for DaVinciRe to repurchase up to half of such
shareholder's aggregate number of shares held, subject to certain limitations,
such as limiting the aggregate

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of all share repurchase requests to 25% of DaVinciRe's capital in any given year
and satisfying all applicable regulatory requirements. If total shareholder
requests exceed 25% of DaVinciRe's capital, the number of shares repurchased
will be reduced among the requesting shareholders pro-rata, based on the amounts
desired to be repurchased. Shareholders desiring to have DaVinciRe repurchase
their shares must notify DaVinciRe before March 1 of each year. The repurchase
price will be based on GAAP book value as of the end of the year in which the
shareholder notice is given, and the repurchase will be effective as of such
date. Payment will be made by April 1 of the following year, following delivery
of the audited financial statements for the year in which the repurchase was
effective. The repurchase price is subject to a true-up for development on
outstanding loss reserves after settlement of all claims relating to the
applicable years.
Effective January 1, 2012, an existing third party shareholder sold a portion of
its shares in DaVinciRe to a new third party shareholder.  In connection with
the sale by the existing third party shareholder, DaVinciRe retained a $4.9
million holdback.  In addition, effective January 1, 2012, we sold a portion of
our shares of DaVinci Re to a separate new third party shareholder.  We sold
these shares for $98.9 million, net of a $10.0 million reserve holdback due from
DaVinciRe.
Certain third party shareholders of DaVinciRe submitted repurchase notices on or
before the required annual redemption notice date of March 1, 2012, in
accordance with the Shareholders Agreement.  The repurchase notices submitted on
or before March 1, 2012, were for shares of DaVinciRe with a GAAP book value of
$53.2 million at December 31, 2012.
On June 1, 2012, DaVinciRe completed an equity raise of $49.3 million from a new
third party investor.  In addition, the Company and an existing third party
investor each sold $24.7 million in common shares of DaVinciRe to another
existing third party investor, for a total of $49.4 million.  In connection with
the sale by the Company and the existing third party investor, DaVinciRe
retained a $5.0 million holdback.  As a result of the above transactions, the
Company's ownership in DaVinciRe decreased to 31.5% effective retroactively to
January 1, 2012.
On October 1, 2012, the Company sold a portion of its shares of DaVinciRe to a
new third party shareholder for $9.8 million. The Company's ownership in
DaVinciRe decreased to 30.8% effective October 1, 2012 as a result of this sale.
During January 2013 DaVinciRe redeemed shares from certain DaVinciRe
shareholders, including the Company, while certain other existing DaVinciRe
shareholders purchased additional shares in DaVinciRe. The net redemption as a
result of these transactions was $150.0 million. In connection with the
redemptions, DaVinciRe retained a $20.5 million holdback. Our ownership in
DaVinciRe was 30.8% at December 31, 2012 and subsequent to the above
transactions, our ownership in DaVinciRe increased to 32.9% effective January 1,
2013. We expect our ownership in DaVinciRe to fluctuate over time.
Ratings
Financial strength ratings are an important factor in respect of the competitive
position of reinsurance and insurance companies. Rating organizations
continually review the financial positions of our reinsurers and insurers. We
continue to receive high claims-paying and financial strength ratings from A.M.
Best, S&P, Moody's and Fitch. These ratings represent independent opinions of an
insurer's financial strength, operating performance and ability to meet
policyholder obligations, and are not an evaluation directed toward the
protection of investors or a recommendation to buy, sell or hold any of our
securities.

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Presented below are the ratings of our principal operating subsidiaries and
joint ventures by segment and the ERM rating of RenaissanceRe as of February 20,
2013.

  February 20, 2013                 A.M. Best    S&P (4)    Moody's   Fitch
  REINSURANCE SEGMENT (1)
  Renaissance Reinsurance              A+          AA-        A1       A+
  DaVinci                               A          A+         A3        -
  Glencoe                               A           A          -        -
  Top Layer Re                         A+          AA          -        -
  ROE                                  A+          AA-         -        -
  LLOYD'S SEGMENT
  Syndicate 1458                        -           -          -        -
  Lloyd's Overall Market Rating (2)     A          A+          -       A+
  RENAISSANCERE (3)                     -       Excellent      -        -


(1) The A.M. Best, S&P, Moody's and Fitch ratings for the companies in the

Reinsurance segment reflect the insurer's financial strength rating.

(2) The A.M. Best, S&P and Fitch ratings for the Lloyd's Overall Market Rating

represent its financial strength rating.

(3) The S&P rating for RenaissanceRe represents rating on its Enterprise Risk

Management practices.

(4) The S&P ratings for the companies in the Reinsurance segment reflect, in

addition to the insurer's financial strength rating, the insurer's issuer

credit rating.

A.M. Best.  "A+" is the second highest designation of A.M. Best's sixteen rating
levels. "A+" rated insurance companies are defined as "Superior" companies and
are considered by A.M. Best to have a very strong ability to meet their
obligations to policyholders. "A" is the third highest designation assigned by
A.M. Best, representing A.M. Best's opinion that the insurer has an "Excellent"
ability to meet its ongoing obligations to policyholders.
On May 21, 2012, A.M. Best affirmed the financial strength rating ("FSR") of
"A+" (Superior) of each of Renaissance Reinsurance and ROE. Concurrently, A.M.
Best affirmed the FSR of "A" (Excellent) of each of DaVinci and Glencoe. The
outlook is stable for these ratings.
On May 23, 2011, A.M. Best affirmed the FSR of A+ (Superior) of Top Layer Re.
The outlook is stable for this rating.
S&P.  The "AA" range ("AA+", "AA", AA-"), which has been assigned by S&P to
Renaissance Reinsurance, ROE and Top Layer Re, is the second highest rating
assigned by S&P, and indicates that S&P believes the insurers have very strong
financial security characteristics, differing only slightly from those rated
higher. S&P assigns an issuer credit rating to an entity which is an opinion on
the credit worthiness of the obligor with respect to a specific financial
obligation.
On June 23, 2011, S&P affirmed its "A" issuer credit rating ("ICR") on
RenaissanceRe. At the same time, S&P affirmed its "A" senior debt rating on our
senior unsecured notes. In addition, S&P affirmed its "AA-" ICR and FSR on
Renaissance Reinsurance and ROE and its "A+" and "A" ICR and FSR on DaVinci and
Glencoe, respectively. The outlook is stable for these ratings.
On May 17, 2011, following the sale of substantially all of our U.S.-based
insurance operations, S&P lowered Glencoe's ICR to "A" from "A+". The outlook is
stable for this rating.
On November 1, 2010, S&P revised its outlook on Top Layer to stable from
negative and at the same time, affirmed Top Layer's ICR and FSR of "AA".
In addition, S&P assesses companies' ERM practices, which is an opinion on the
many critical dimensions of risk that determine overall creditworthiness.
RenaissanceRe has been assigned an ERM rating of "Excellent", which is the
highest rating assigned by S&P, and indicates that S&P believes RenaissanceRe
has extremely strong capabilities to consistently identify, measure, and manage
risk exposures and losses within RenaissanceRe's predetermined tolerance
guidelines.

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Moody's.  Moody's Insurance Financial Strength Ratings and Moody's Credit
Ratings represent its opinions of the ability of insurance companies to pay
punctually policyholder claims and obligations and senior unsecured debt
instruments. Moody's believes that insurance companies rated "A1", such as
Renaissance Reinsurance, and companies rated "A3", such as DaVinci, offer good
financial security. However, Moody's believes that elements may be present which
suggest a susceptibility to impairment sometime in the future.
On June 30, 2011, Moody's assigned an "A3" insurance FSR to DaVinci and a "Baa2"
long-term issuer rating to DaVinciRe Holdings Ltd. The outlook is stable for
this rating.
On November 18, 2010, following the public announcement that we entered into a
definitive agreement with QBE to sell substantially all of our U.S. based
insurance operations, Moody's affirmed the "A1" insurance FSR of Renaissance
Reinsurance. The outlook is stable for this rating.
Fitch.  Fitch's Issuer Financial Strength ("IFS") ratings provide an assessment
of the financial strength of an insurance organization. Fitch believes that
insurance companies rated "A+", such as Renaissance Reinsurance, have "Strong"
capacity to meet policyholders and contract obligations on a timely basis with a
low expectation of ceased or interrupted payments.
On January 3, 2013, Fitch affirmed the IFS of Renaissance Reinsurance at "A+".
The outlook is stable for this rating.
Lloyd's Overall Market Rating
A.M. Best, S&P and Fitch have each assigned an FSR to the Lloyd's overall
market. The financial risks to policy holders of syndicates within the Lloyd's
market are partially mutualized through the Lloyd's Central Fund, to which all
underwriting members contribute. Because of the presence of the Lloyd's Central
Fund, and the current legal and regulatory structure of the Lloyd's market, FSRs
on individual syndicates would not be particularly meaningful and in any event
would not be lower than the FSR of the Lloyd's overall market.
While the ratings of our principal operating subsidiaries and joint ventures
remain among the highest in our business, adverse ratings actions could have a
negative effect on our ability to fully realize current or future market
opportunities. In addition, it is common for our reinsurance contracts to
contain provisions permitting our customers to cancel coverage pro-rata if our
relevant operating subsidiary is downgraded below a certain rating level.
Whether a client would exercise this right would depend, among other factors, on
the reason for such a downgrade, the extent of the downgrade, the prevailing
market conditions and the pricing and availability of replacement reinsurance
coverage. Therefore, in the event of a downgrade, it is not possible to predict
in advance the extent to which this cancellation right would be exercised, if at
all, or what effect such cancellations would have on our financial condition or
future operations, but such effect potentially could be material. To date we are
not aware that we have experienced such a cancellation. Our ratings are subject
to periodic review and may be revised or revoked by the agencies which issue
them. None of our operating subsidiaries which conduct the trading activities of
REAL are currently rated by any of the nationally recognized rating agencies.

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Investments

The table below shows the aggregate amounts of our invested assets:


  At December 31,                                             2012                      2011

(in thousands, except percentages)

  U.S. treasuries                                    $ 1,259,800      19.8 

% $ 885,152 14.3 %

  Agencies                                               315,154       5.0 

% 158,561 2.6 %

  Non-U.S. government (Sovereign debt)                   133,198       2.1 

% 227,912 3.7 %

  FDIC guaranteed corporate                                    -         - 

% 423,630 6.8 %

  Non-U.S. government-backed corporate                   349,514       5.5 %       641,082      10.3 %
  Corporate                                            1,615,207      25.4 %     1,206,904      19.4 %
  Agency mortgage-backed                                 408,531       6.4 %       441,749       7.1 %
  Non-agency mortgage-backed                             248,339       3.9 %       104,771       1.7 %
  Commercial mortgage-backed                             406,166       6.4 %       325,729       5.2 %
  Asset-backed                                            12,954       0.2 %        18,027       0.3 %

Total fixed maturity investments, at fair value 4,748,863 74.7 % 4,433,517 71.4 %

  Short term investments, at fair value                  821,163      12.9 

% 905,477 14.6 %

  Equity investments trading, at fair value               58,186       0.9 

% 50,560 0.8 %

  Other investments, at fair value                       644,711      10.1 

% 748,984 12.1 %

  Total managed investment portfolio                   6,360,647      98.6 

% 6,138,538 98.9 %

  Investments in other ventures, under equity method      87,724       1.4 %        70,714       1.1 %
  Total investments                                  $ 6,360,647     100.0 %   $ 6,209,252     100.0 %



At December 31, 2012, we held investments totaling $6.4 billion, compared to
$6.2 billion at December 31, 2011, with net unrealized appreciation included in
accumulated other comprehensive income of $13.6 million at December 31, 2012,
compared to $11.8 million at December 31, 2011. Our investment guidelines stress
preservation of capital, market liquidity, and diversification of risk.
Notwithstanding the foregoing, our investments are subject to market-wide risks
and fluctuations, as well as to risks inherent in particular securities. Refer
to "Note 6. Fair Value Measurements" in our notes to the consolidated financial
statements for additional information regarding the fair value of measurement of
our investments.
As the reinsurance coverages we sell include substantial protection for damages
resulting from natural and man-made catastrophes, we expect from time to time to
become liable for substantial claim payments on short notice. Accordingly, our
investment portfolio as a whole is structured to seek to preserve capital and
provide a high level of liquidity which means that the large majority of our
investment portfolio consists of highly rated fixed income securities, including
U.S. treasuries, agencies, highly rated sovereign and supranational securities,
high-grade corporate securities and mortgage-backed and asset-backed securities.
We also have an allocation to other investments, including hedge funds, private
equity partnerships, senior secured bank loan funds and other investments. At
December 31, 2012, these other investments totaled $644.7 million, or 10.1%, of
our total investments (2011 - $749.0 million or 12.1%).

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The following table summarizes the composition of the amortized cost and fair
value of our investment portfolio at the dates indicated by ratings as assigned
by S&P, or Moody's and/or other rating agencies when S&P ratings were not
available, and the respective effective yield.

                                                                                                                              Credit Rating (1)
                                                           % of Total                                                                                       Non-
                             Amortized                     Investment    Weighted Average                                                                Investment
  December 31, 2012             Cost        Fair Value      Portfolio    Effective Yield         AAA             AA              A            BBB          Grade        Not Rated
  Short term investments    $  821,163     $   821,163          12.9 %       0.2 %          $   753,883     $    63,737     $     163     $   3,371     $        9     $       -
                                                 100.0 %                                           91.8 %           7.8 %           - %         0.4 %            - %           - %
  Fixed maturity
  investments
  U.S. treasuries            1,256,607       1,259,800          19.8 %       0.4 %                    -       1,259,800             -             -              -             -
  Agencies
  Fannie Mae & Freddie Mac     289,884         292,098           4.6 %       0.6 %                    -         292,098             -             -              -             -
  Other agencies                22,865          23,056           0.4 %       0.7 %                    -          23,056             -             -              -             -
  Total agencies               312,749         315,154           5.0 %       0.7 %                    -         315,154             -             -              -             -
  Non-U.S. government
  (Sovereign debt)             128,207         133,198           2.1 %       1.9 %               66,653          23,914         6,828        21,767         13,793           243
  Non-U.S.
  government-backed
  corporate                    343,924         349,514           5.5 %       0.7 %              287,288          56,059         6,167             -              -             -
  Corporate                  1,552,194       1,615,207          25.4 %       2.6 %               25,361         263,541       765,050       280,598        265,045        15,612
  Mortgage-backed
  Residential
  mortgage-backed
  Agency securities            404,423         408,531           6.4 %       1.3 %                    -         408,531             -             -              -             -
  Non-agency securities -
  Prime                        124,832         131,819           2.1 %       3.6 %               17,159           7,402         6,247         8,286         92,725             -
  Non-agency securities -
  Alt A                        107,485         116,520           1.8 %       5.2 %                5,152           1,951        13,385        11,876         84,156             -
  Total residential
  mortgage-backed              636,740         656,870          10.3 %       2.5 %               22,311         417,884        19,632        20,162        176,881             -
  Commercial
  mortgage-backed              383,176         406,166           6.4 %       1.7 %              266,325          92,820        47,021             -              -             -

Total mortgage-backed 1,019,916 1,063,036 16.7 %

 2.2 %              288,636         510,704        66,653        20,162        176,881             -
  Asset-backed
  Credit cards                   4,270           4,623           0.1 %       1.7 %                4,623               -             -             -              -             -
  Auto loans                     2,119           2,238             - %       0.9 %                2,238               -             -             -              -             -
  Student loans                  1,626           1,650             - %       1.0 %                1,650               -             -             -              -             -
  Other                          4,195           4,443           0.1 %       2.7 %                4,443               -             -             -              -             -
  Total asset-backed            12,210          12,954           0.2 %       1.8 %               12,954               -             -             -              -             -

Total securitized assets 1,032,126 1,075,990 16.9 %

  2.2 %              301,590         510,704        66,653        20,162        176,881             -

Total fixed maturity

  investments                4,625,807       4,748,863          74.7 %       1.6 %              680,892       2,429,172       844,698       322,527        455,719        15,855
                                                 100.0 %                                           14.3 %          51.2 %        17.8 %         6.8 %          9.6 %         0.3 %
  Equity investments
  trading                                       58,186           0.9 %                                -               -             -             -              -        58,186
                                                 100.0 %                                              - %             - %           - %           - %            - %       100.0 %
  Other investments
  Private equity
  partnerships                                 344,669           5.4 %                                -               -             -             -              -       344,669
  Senior secured bank loan
  funds                                        202,929           3.2 %                                -               -             -             -        172,334        30,595
  Catastrophe bonds                             91,310           1.4 %                                -               -             -             -         91,310             -
  Hedge funds                                    5,803           0.1 %                                -               -             -             -              -         5,803
  Total other investments                      644,711          10.1 %                                -               -             -             -        263,644       381,067
                                                 100.0 %                                              - %             - %           - %           - %         40.9 %        59.1 %
  Investments in other
  ventures                                      87,724           1.4 %                                -               -             -             -              -        87,724
                                                 100.0 %                                              - %             - %           - %           - %            - %       100.0 %
  Total investment
  portfolio                                $ 6,360,647         100.0 %                      $ 1,434,775     $ 2,492,909     $ 844,861     $ 325,898     $  719,372     $ 542,832
                                                 100.0 %                                           22.6 %          39.2 %        13.3 %         5.1 %         11.3 %         8.5 %


(1) The credit ratings included in this table are those assigned by S&P. When

ratings provided by S&P were not available, ratings from other nationally

recognized rating agencies were used. The Company has grouped short term

investments with an A-1+ and A-1 short term issue credit rating as AAA, short

term investments with A-2 short term issue credit rating as AA and short term

    investments with an A-3 short term issue credit rating as A.



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Fixed Maturity Investments and Short Term Investments
At December 31, 2012, our fixed maturity investments and short term investment
portfolio had a dollar-weighted average credit quality rating of AA (2011 - AA)
and a weighted average effective yield of 1.4% (2011 - 1.9%). At December 31,
2012, our non-investment grade and not rated fixed maturity investments totaled
$471.6 million or 9.9% of our fixed maturity investments (2011 - $199.1 million
or 4.5%, respectively). In addition, within our other investments category we
have several funds that invest in non-investment grade and not rated fixed
income securities and non-investment grade cat-linked securities. At
December 31, 2012, the funds that invest in non-investment grade and not rated
fixed income securities and non-investment grade cat-linked securities totaled
$294.2 million (2011 - $328.9 million).
At December 31, 2012, we had $821.2 million of short term investments (2011 -
$905.5 million). Short term investments are managed as part of our investment
portfolio and have a maturity of one year or less when purchased. Short term
investments are carried at amortized cost, which approximates fair value.
Our duration for our fixed maturity investments and short term investments at
December 31, 2012 was 2.2 years (2011 - 2.6 years). From time to time, we may
reevaluate the duration of our portfolio in light of the duration of our
liabilities and market conditions.
As with other fixed income investments, the value of our fixed maturity
investments will fluctuate with changes in the interest rate environment and
when changes occur in the overall investment market and in overall economic
conditions. Additionally, our differing asset classes expose us to other risks
which could cause a reduction in the value of our investments. Examples of some
of these risks include:
•   Changes in the overall interest rate environment can expose us to "prepayment
    risk" on our mortgage-backed investments. When interest rates decline,
    consumers will generally make prepayments on their mortgages and, as a
    result, our investments in mortgage-backed securities will be repaid to us

more quickly than we might have originally anticipated. When we receive these

prepayments, our opportunities to reinvest these proceeds back into the

investment markets will likely be at reduced interest rates. Conversely, when

interest rates increase, consumers will generally make fewer prepayments on

their mortgages and, as a result, our investments in mortgage-backed

securities will be repaid to us less quickly than we might have originally

anticipated. This will increase the duration of our portfolio, which is

disadvantageous to us in a rising interest rate environment.

• Our investments in mortgage-backed securities are also subject to default

risk. This risk is due in part to defaults on the underlying securitized

mortgages, which would decrease the market value of the investment and be

disadvantageous to us. Similar risks apply to other asset-backed securities

in which we may invest from time to time.

• Our investments in debt securities of other corporations are exposed to

losses from insolvencies of these corporations, and our investment portfolio

can also deteriorate based on reduced credit quality of these corporations.

We are also exposed to the impact of widening credit spreads even if specific

securities are not downgraded.

• Our investments in asset-backed securities are subject to prepayment risks,

as noted above, and to the structural risks of these securities. The

structural risks primarily emanate from the priority of each security in the

issuer's overall capital structure. We are also exposed to the impact of

widening credit spreads.

• Within our other investments category, we have several funds that invest in

non-investment grade fixed income securities as well as securities

denominated in foreign currencies. These investments expose us to losses from

insolvencies and other credit-related issues. We are also exposed to

fluctuations in foreign exchange rates that may result in realized losses to

    us if our exposures are not hedged or if our hedging strategies are not
    effective and also to widening of credit spreads.



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The following table summarizes the fair value by contractual maturity of our
fixed maturity investment portfolio at the dates indicated. Actual maturities
may differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without penalty.

  At December 31,                             2012                           2011
  (in thousands, except
  percentages)
  Due in less than one year       $   433,074            9.1 %   $   619,845           14.0 %
  Due after one through five
  years                             2,389,856           50.3 %     2,035,383           45.9 %
  Due after five through ten
  years                               711,844           15.0 %       742,050           16.7 %
  Due after ten years                 138,099            2.9 %       145,963            3.3 %
  Mortgage-backed                   1,063,036           22.4 %       872,249           19.7 %
  Asset-backed                         12,954            0.3 %        18,027            0.4 %
  Total fixed maturity
  investments, at fair value      $ 4,748,863          100.0 %   $ 4,433,517          100.0 %



Corporate Fixed Maturity Investments
The following table summarizes the composition of the fair value of our
corporate fixed maturity investments at the date indicated by ratings as
assigned by S&P, or Moody's and/or other rating agencies when S&P ratings were
not available.

  At December 31, 2012
  (in thousands)
                                                                                               Non-Investment
  Sector                  Total          AAA           AA             A            BBB             Grade            Not Rated
  Financials          $   697,161     $ 15,908     $ 148,549     $ 417,084     $  61,095     $         41,534     $    12,991
  Industrial,
  utilities and
  energy                  342,474        6,908        32,997       125,294       103,725               71,852           1,698
  Communications and
  technology              229,444        1,656        13,866       106,747        51,493               55,682               -
  Consumer                157,828            -        11,036        54,766        37,648               53,533             845
  Health care             110,827            -        52,523        30,802         3,372               24,130               -
  Basic materials          60,068            -             -        22,649        21,258               16,083              78
  Other                    17,405          889         4,570         7,708         2,007                2,231               -
  Total corporate
  fixed maturity
  investments, at
  fair value (1)      $ 1,615,207     $ 25,361     $ 263,541     $ 765,050     $ 280,598     $        265,045     $    15,612


(1) Excludes non-U.S. government-backed corporate fixed maturity investments, at

    fair value.



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The following table summarizes the composition of the fair value of the fixed
maturity investments and short term investments of our top ten corporate issuers
at the date indicated.

  At December 31, 2012
  (in thousands)
                                          Short term      Fixed  maturity
  Issuer                     Total       investments        investments
  JP Morgan Chase & Co.    $  64,532    $       1,552    $          62,980
  General Electric Company    56,039                -               56,039
  Bank of America Corp.       53,290              163               53,127
  Goldman Sachs Group Inc.    52,126                -               52,126
  Citigroup Inc.              47,160                -               47,160
  HSBC Holdings PLC           37,872                -               37,872
  Morgan Stanley              32,984                -               32,984
  AT&T Inc.                   27,881                -               27,881
  BP PLC                      21,920                -               21,920
  Wells Fargo & Co.           20,587                -               20,587
  Total (1)                $ 414,391    $       1,715    $         412,676


(1) Excludes non-U.S. government-backed corporate fixed maturity investments,

    repurchase agreements and commercial paper, at fair value.



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European Debt Exposures
The table below presents our exposure by country to European government and
corporate issuers within our fixed maturity and short term investments
portfolio, further segregated by sector, subsector and credit rating. For
corporate issuers, the country of issuer is determined by assessing both the
location of principal management as well as the primary country of business
activity.

                                                                           Sector                                                             Credit Rating
                                                      Non-U.S.               Non-U.S.
  At December 31,   Amortized      Fair Value        Government          Government-backed                                                                              Non-Investment
  2012               Cost (1)         (1)         (Sovereign debt)           Corporate           Corporate         AAA           AA             A           BBB             Grade
  (in thousands)
  Country of
  Issuer
  Non-Eurozone
  United
  Kingdom          $  135,475     $  140,486     $         10,296     $              26,730     $  103,460     $  37,026     $  19,500     $  68,618     $ 10,467     $          4,875
  Sweden               27,751         28,531                    -                    10,155         18,376        10,155        17,846           530            -                    -
  Norway               26,068         26,799                    -                     8,047         18,752        11,260         7,368           988            -                7,183
  Denmark              36,256         36,498                7,787                    28,590            121        36,498             -             -            -                    -
  Switzerland          42,771         44,157                    -                         -         44,157             -        19,197        23,886        1,074                    -
  Russian
  Federation           14,139         15,220                4,628                         -         10,592             -             -             -       14,217                1,003
  Other                 8,814          9,441                7,419                         -          2,022             -             -         1,372        3,930                4,139
  Non-Eurozone
  Total            $  291,274     $  301,132     $         30,130     $              73,522     $  197,480     $  94,939     $  63,911     $  95,394     $ 29,688     $         17,200
  Eurozone
  Netherlands      $  119,744     $  122,049     $          8,134     $              79,944     $   33,971     $  89,123     $  11,532     $  18,688     $  1,552     $          1,154
  France               45,042         46,149                    -                    23,824         22,325             -        28,978        16,148          517                  506
  Austria              40,214         40,342                7,721                    32,621              -             -        40,342             -            -                    -
  Germany              57,900         58,645                  142                    29,447         29,056        32,997             -        22,345          744                2,559
  Finland              21,352         21,414               21,414                         -              -        21,414             -             -            -                    -
  Luxembourg            6,249          6,167                    -                         -          6,167             -             -             -            -                6,167
  Belgium              17,433         17,640                    -                         -         17,640             -             -        14,938        2,702                    -
                      307,934        312,406               37,411                   165,836        109,159       143,534        80,852        72,119        5,515               10,386
  Ireland               1,042          1,049                    -                         -          1,049             -             -             -        1,049                    -
  Italy                   834            902                    -                         -            902             -             -             -            -                  902
  Spain                 4,047          4,110                    -                         -          4,110             -             -         1,341          674                2,095
  Greece                    -              -                    -                         -              -             -             -             -            -                    -
  Portugal                  -              -                    -                         -              -             -             -             -            -                    -
                   $    5,923     $    6,061     $              -     $                   -     $    6,061     $       -     $       -     $   1,341     $  1,723     $          2,997
  Eurozone Total   $  313,857     $  318,467     $         37,411     $             165,836     $  115,220     $ 143,534     $  80,852     $  73,460     $  7,238     $         13,383
  European Issuer
  Total            $  605,131     $  619,599     $         67,541     $             239,358     $  312,700     $ 238,473     $ 144,763     $ 168,854     $ 36,926     $         30,583

  Subsector
  Non-US
  Government       $   65,710     $   67,541     $         67,541     $                   -     $        -     $  47,774     $   7,721     $   1,371     $  6,924     $          3,751
  Financial           336,178        343,669                    -                   198,747        144,922       174,077        70,397        81,941        8,252                9,002
  Industrial,
  Utilities &
  Energy               92,963         95,659                    -                    23,990         71,669             -        44,018        41,247        7,574                2,820
  Other               110,280        112,730                    -                    16,621         96,109        16,622        22,627        44,295       14,176               15,010
  Total            $  605,131     $  619,599     $         67,541     $             239,358     $  312,700     $ 238,473     $ 144,763     $ 168,854     $ 36,926     $         30,583


(1) Included in amortized cost and fair value is $0.2 million and $0.3 million,

respectively, of fixed maturity investments available for sale.



At December 31, 2012, we held fixed maturity and short term investments with a
fair value of $619.6 million and weighted average credit rating of AA in
European issuers, including holdings of $67.5 million, $239.4 million and $312.7
million related to non-U.S. government (Sovereign debt), non-U.S. government
backed corporates and corporates, respectively. Our holdings of fixed maturity
investment and short term investments in Ireland, Italy, Spain, Greece and
Portugal was comprised entirely of corporate securities and had a fair value of
$6.1 million at December 31, 2012.

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At December 31, 2012, we had European foreign currency forward contracts
outstanding, primarily related to the Euro, British pound sterling and Norwegian
krone, with $103.5 million in notional long positions, $130.7 million in
notional short positions and fair value liability position of $0.1 million. From
time to time, we enter into foreign currency forward contracts to economically
hedge our exposure to currency fluctuations from certain non-U.S. denominated
investments. We typically use these hedges to hedge fixed maturity investments
with exposure to European currencies. In certain instances, we may assume
foreign exchange risk as part of our investment strategy.
In addition to our Eurozone sovereign debt exposure noted above, we have
investments in private equity funds, hedge funds, bank loan funds and a non-U.S.
dollar fixed income fund that may have exposure to European sovereign debt. 

We

also have exposure to European sovereign debt directly and indirectly through
our underwriting portfolio.  This portfolio contains insurance and reinsurance
risks that we have assumed and ceded in respect of risks related to companies
located within Europe, to companies that provide coverage within Europe, and to
companies that have investments in European sovereign debt.  We underwrite these
risks in accordance with our underwriting standards as described in "Item 1.
Business, Underwriting and Enterprise Risk Management".  As a result of the
underwriting operations noted above, our cash and cash equivalents, premiums
receivable, reinsurance recoverable, reserve for claims and claim expenses may
be indirectly impacted by European debt exposure. In addition, see "Note. 19
Derivative Instruments of our Notes to Consolidated Financial Statements" for
additional information regarding underwriting operations related foreign
currency contracts outstanding related to the balances noted above. We will
continue to monitor our Eurozone risks, but to date, the financial turmoil
within Europe has not materially impacted our results of operations or financial
condition.
Other Investments
The table below shows our portfolio of other investments:

  At December 31,                    2012         2011         Change
  (in thousands)
  Private equity partnerships     $ 344,669    $ 367,909    $  (23,240 )
  Senior secured bank loan funds    202,929      257,870       (54,941 )
  Catastrophe bonds                  91,310       70,999        20,311
  Hedge funds                         5,803       21,344       (15,541 )
  Non-U.S. fixed income funds             -       28,862       (28,862 )
  Miscellaneous other investments         -        2,000        (2,000 )
  Total other investments         $ 644,711    $ 748,984    $ (104,273 )



We account for our other investments at fair value in accordance with FASB ASC
Topic Financial Instruments. The fair value of certain of our fund investments,
which principally include hedge funds, private equity funds, senior secured bank
loan funds and non-U.S. fixed income funds, are recorded on our balance sheet in
other investments, and is generally established on the basis of the net
valuation criteria established by the managers of such investments, if
applicable. The net valuation criteria established by the managers of such
investments is established in accordance with the governing documents of such
investments. Many of our fund investments are subject to restrictions on
redemptions and sales which are determined by the governing documents and limit
our ability to liquidate these investments in the short term. Certain of our
fund managers, fund administrators, or both, are unable to provide final fund
valuations as of our current reporting date. The typical reporting lag
experienced by us to receive a final net asset value report is one month for
hedge funds, senior secured bank loan funds and non-U.S. fixed income funds and
three months for private equity funds, although, in the past, in respect of
certain of our private equity funds, we have on occasion experienced delays of
up to six months at year end, as the private equity funds typically complete
their respective year-end audits before releasing their final net asset value
statements.
In circumstances where there is a reporting lag between the current period end
reporting date and the reporting date of the latest fund valuation, we estimate
the fair value of these funds by starting with the prior month or quarter-end
fund valuations, adjusting these valuations for actual capital calls,
redemptions or distributions, as well as the impact of changes in foreign
currency exchange rates, and then estimating the

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return for the current period. In circumstances in which we estimate the return
for the current period, all information available to us is utilized. This
principally includes preliminary estimates reported to us by our fund managers,
obtaining the valuation of underlying portfolio investments where such
underlying investments are publicly traded and therefore have a readily
observable price, using information that is available to us with respect to the
underlying investments, reviewing various indices for similar investments or
asset classes, as well as estimating returns based on the results of similar
types of investments for which we have obtained reported results, or other
valuation methods, where possible. Actual final fund valuations may differ,
perhaps materially so, from our estimates and these differences are recorded in
our statement of operations in the period in which they are reported to us as a
change in estimate. Included in net investment income for the year ended
December 31, 2012 is a loss of $4.7 million (2011 - loss of $1.4 million, 2010 -
income of $5.3 million) representing the change in estimate during the period
related to the difference between our estimated net investment income due to the
lag in reporting discussed above and the actual amount as reported in the final
net asset values provided by our fund managers.
Our estimate of the fair value of catastrophe bonds are based on quoted market
prices, or when such prices are not available, by reference to broker or
underwriter bid indications. Refer to "Note 6. Fair Value Measurements" in our
notes to the consolidated financial statements for additional information
regarding the fair value of measurement of our other investments.
Interest income, income distributions and realized and unrealized gains (losses)
on other investments are included in net investment income and resulted in $74.4
million of net investment income for the year ended December 31, 2012 (2011 -
$36.0 million, 2010 - $103.7 million). Of this amount, $38.2 million relates to
net unrealized gains (2011 - unrealized gains of $12.7 million, 2010 -
unrealized gains of $57.5 million).
We have committed capital to private equity partnerships and other entities of
$708.9 million, of which $655.5 million has been contributed at December 31,
2012. Our remaining commitments to these investments at December 31, 2012
totaled $133.2 million. In the future, we may enter into additional commitments
in respect of private equity partnerships or individual portfolio company
investment opportunities.
Measuring the Fair Value of Other Investments Using Net Asset Valuations
The table below shows our portfolio of other investments measured using net
asset valuations:

                                                                          Redemption   Redemption
                                                                            Notice       Notice
                                                                            Period       Period
                                              Unfunded       Redemption    (Minimum     (Maximum
  At December 31, 2012      Fair Value       Commitments     Frequency      Days)        Days)
  Private equity
  partnerships            $    344,669     $      91,762     See below    See below    See below
  Senior secured bank
  loan funds                   202,929            17,506     See below    See below    See below
  Hedge funds                    5,803                 -     See below    See below    See below
  Total other investments
  measured using net
  asset valuations        $    553,401     $     109,268



Private equity partnerships - Included in our investments in private equity
partnerships are alternative asset limited partnerships (or similar corporate
structures) that invest in certain private equity asset classes including U.S.
and global leveraged buyouts; mezzanine investments; distressed securities; real
estate; and oil, gas and power. The fair values of the investments in this
category have been estimated using the net asset value of the investments, as
discussed in detail above. We generally have no right to redeem our interest in
any of these private equity partnerships in advance of dissolution of the
applicable partnership. Instead, the nature of these investments is that
distributions are received by us in connection with the liquidation of the
underlying assets of the applicable limited partnership. It is estimated that
the majority of the underlying assets of the limited partnerships would
liquidate over 7 to 10 years from inception of the limited partnership.

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Senior secured bank loan funds - Our investment in senior secured bank loan
funds includes funds that invest primarily in bank loans and other senior debt
instruments. The fair values of the investments in this category have been
determined using the net asset value per share of the funds or the estimated net
asset per share where applicable, as discussed in detail above. Investments of
$172.3 million are redeemable, in part on a monthly basis, or in whole over a
three month period.
We also have $30.6 million invested in closed end funds which invest in loans.
We have no right to require redemption of our investment in these funds.
Hedge funds - We invest in hedge funds that pursue multiple strategies. The fair
values of the investments in this category are estimated using the net asset
value per share of the funds, as discussed in detail above. Our investments in
hedge funds at December 31, 2012, are $5.8 million of so called "side pocket"
investments which are not redeemable at the option of the shareholder. We fully
redeemed the remaining non-side pocket investments in hedge funds in June 2012.
We have retained our interest in the side pocket investments until the
underlying investments attributable to such side pockets are liquidated,
realized or deemed realized at the discretion of the fund manager.
Investments in Other Ventures, under Equity Method
The table below shows our investments in other ventures, under equity method:

  At December 31,                                          2012                                                   2011
  (in thousands, except
  percentages)                       Investment      Ownership %      Carrying  Value       Investment      Ownership %      Carrying  Value
  THIG                             $     50,000          25.0 %     $          28,303     $     50,000          25.0 %     $          32,645
  Tower Hill                             10,000          28.6 %                13,969           10,000          28.6 %                14,173
  Tower Hill Signature                      500          25.0 %                   896              500          25.0 %                     -
  Total Tower Hill Companies             60,500                                43,168           60,500                                46,818
  Top Layer Re                           65,375          50.0 %                36,664           65,375          50.0 %                15,872
  Other                                   8,226          38.8 %                 7,892            6,000          40.0 %                 8,024
  Total investments in other
  ventures, under equity method    $    134,101                     $          87,724     $    131,875                     $          70,714



Top Layer Re incurred net claims and claims expenses from the 2011 New Zealand
and Tohoku earthquakes; subsequently, the Company contributed $38.5 million of
additional paid-in capital to Top Layer Re to replenish its capital position.
Our equity in earnings of the Tower Hill Companies are reported one quarter in
arrears.
Effects of Inflation
The potential exists, after a catastrophe loss, for the development of
inflationary pressures in a local economy. The anticipated effects on us are
considered in our catastrophe loss models. Our estimates of the potential
effects of inflation are also considered in pricing and in estimating reserves
for unpaid claims and claim expenses. In addition, it is possible that the risk
of general economic inflation has increased which could, among other things,
cause claims and claim expenses to increase and also impact the performance of
our investment portfolio. The actual effects of this potential increase in
inflation on our results cannot be accurately known until, among other items,
claims are ultimately settled. The onset, duration and severity of an
inflationary period cannot be estimated with precision.
Off-Balance Sheet and Special Purpose Entity Arrangements
At December 31, 2012, we have not entered into any off-balance sheet
arrangements, as defined by Item 303(a)(4) of Regulation S-K.

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Contractual Obligations
In the normal course of its business, the Company is a party to a variety of
contractual obligations and these are considered by the Company when assessing
its liquidity requirements.
The table below shows our contractual obligations:

                                               Less than 1                                        More than 5
  At December 31, 2012           Total             year           1-3 years       3-5 years          years
  (in thousands)
  Long term debt obligations
  (1)
  5.875% Senior Notes        $   100,740     $      100,740     $         -     $         -     $           -
  5.75% Senior Notes             363,539             14,375          28,750          38,750           281,664
  Private equity and
  investment commitments (2)     133,161            133,161               -               -                 -
  Operating lease
  obligations                     26,267              6,829          10,647           5,777             3,014
  Capital lease obligations       43,082              3,017           6,034           5,434            28,597
  Payable for investments
  purchased                      278,787            278,787               -               -                 -
  Reserve for claims and
  claim expenses (3)           1,879,377            642,819         659,865         230,006           346,687
  Renaissance Trading credit
  facility                         2,436              2,436               -               -                 -
  Other                            7,324              5,915           1,206             203                 -
  Total contractual
  obligations                $ 2,834,713     $    1,188,079     $   706,502     $   280,170     $     659,962


(1) Includes contractual interest payments.

(2) The private equity and investment commitments do not have a defined

contractual commitment date and we have therefore included them in the less

than one year category.

(3) We caution the reader that the information provided above related to

estimated future payment dates of our reserves for claims and claim expenses

is not prepared or utilized for internal purposes and that we currently do

not estimate the future payment dates of claims and claim expenses. Because

of the nature of the coverages that we provide, the amount and timing of the

cash flows associated with our policy liabilities will fluctuate, perhaps

significantly, and therefore are highly uncertain. We have based our

estimates of future claim payments upon benchmark industry payment patterns,

drawing upon available relevant sources of loss and allocated loss adjustment

expense development data. These benchmarks are revised periodically as new

trends emerge. We believe that it is likely that this benchmark data will not

be predictive of our future claim payments and that material fluctuations can

occur due to the nature of the losses which we insure and the coverages which

we provide.



In certain circumstances, many of our contractual obligations may be accelerated
to dates other than those reflected in the table, due to defaults under the
agreements governing those obligations (including pursuant to cross-default
provisions in such agreements) or in connection with certain changes in control
of the Company, if applicable. In addition, in connection with any such default
under the agreement governing these obligations, in certain circumstances, these
obligations may bear an increased interest rate or be subject to penalties as a
result of such a default.
CURRENT OUTLOOK
Catastrophe Exposed Market Developments
Notwithstanding the severe global catastrophic losses during 2011, the advent in
late 2012 of storm Sandy, one of the most significant insured losses on record,
and the increased frequency of severe weather events during this period in many
high-insurance-penetration regions, the global insurance and reinsurance markets
entered 2013 with near-record levels of industry wide capital held by private
market insurers and reinsurers, and diminished growth of demand for many
coverages and solutions, outside of the impacted regions and in respect of
certain products and lines. During the January 2013 and June and July 2012
reinsurance renewals, we believe that supply, principally from traditional
market participants and complemented by alternative capital providers, more than
offset market demand, resulting in a dampening of overall market pricing on a
risk-adjusted basis, except for, in general, loss impacted treaties and
contracts. Moreover, we believe that many of the positive factors that had
previously impacted market conditions have now been absorbed by the market and,
we believe, are unlikely to drive further improvement in our core
catastrophe-exposed markets absent new developments. Moreover, we believe that
supply of capital remains at historically high levels, from both traditional and
alternative market

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participants, and may well increase in respect of the June and July 2013
renewals.  Accordingly, we cannot assure you that the recent level of market
demand and renewals will be sustained, or that we can continue to improve the
size and portfolio quality of our book of business.
According to the National Oceanic and Atmospheric Administration ("NOAA"), whose
records date back to 1895, 2012 continued a period of high Atlantic basin
hurricane activity, with 19 named storms, of which 10 became hurricanes, with
one major hurricane. In late October, storm Sandy impacted the Mid-Atlantic and
Northeast coasts of the U.S., ultimately making landfall in New Jersey, with
tropical storm force or greater winds at landfall extending over approximately
550,000 square miles.  In addition, storm Sandy generated significant storm
surge, which contributed substantially to loss of life, widespread power
outages, significant disruptions to travel and devastating flooding throughout a
number of states, including New York and New Jersey.  Storm Sandy is currently
estimated to have been the largest Atlantic hurricane in diameter ever recorded
and to have produced the lowest barometric pressure readings for an Atlantic
windstorm north of North Carolina. In addition, according to NOAA, 2012 was the
hottest year ever recorded in the U.S., continuing a period of increasing air
and water temperatures at measured locations. Among other things, the extreme
weather experienced, particularly including the severe and ongoing drought
conditions throughout most of the Midwestern region of the U.S., adversely
impacted the production of a range of crops, including those subject to the U.S.
federal government's multi-peril crop insurance program.
General Economic Conditions
Meaningful uncertainty remains regarding the strength, duration and
comprehensiveness of any economic recovery in the U.S. and our other key
markets. In particular, global economic markets, including many of the key
markets which we serve, may continue to be adversely impacted by the financial
and fiscal instability of several European jurisdictions and, increasingly, the
Eurozone market as a whole. Accordingly, we continue to believe that meaningful
risk remains for continued uncertainty or disruptions in general economic and
financial market conditions, which could give rise to increased economic
uncertainty, or to further deterioration of economic conditions. Moreover, if
economic growth were to return, such growth may be only at a comparably
suppressed rate for a relatively extended period of time. Declining or weak
economic conditions could reduce demand for the products sold by us or our
customers, or our overall ability to write business at risk-adequate rates could
weaken. In addition, persistent low levels of economic activity could adversely
impact other areas of our financial performance, such as by contributing to
unforeseen premium adjustments, mid-term policy cancellations or commutations,
or asset devaluation. Any of the foregoing or other outcomes of a prolonged
period of relative economic weakness could adversely impact our financial
position or results of operations. In addition, during a period of extended
economic weakness, we believe our consolidated credit risk, reflecting our
counterparty dealings with customers, agents, brokers, retrocessionaires,
capital providers and parties associated with our investment portfolio, among
others, is likely to be increased. Several of these risks could materialize, and
our financial results could be negatively impacted, even after the end of any
economic downturn.
Moreover, we continue to monitor the risk that our principal markets will
experience increased inflationary conditions, which would, among other things,
cause costs related to our claims and claim expenses to increase, and impact the
performance of our investment portfolio.  The onset, duration and severity of an
inflationary period cannot be estimated with precision. The sovereign debt
crisis in Europe and the related financial restructuring efforts has, among
other factors, made it more difficult to predict the inflationary environment.
Our catastrophe-exposed operations are subject to the ever-present potential for
significant volatility in capital due primarily to our exposure to severe
catastrophic events. Our specialty reinsurance portfolio is also exposed to
emerging risks arising from the ongoing relative economic weakness, including
with respect to a potential increase of claims in directors and officers, errors
and omissions, surety, casualty clash and other lines of business.
Historically low interest rates and lower spreads have lowered the yields at
which we invest our assets relative to historical levels. We expect these
developments, combined with the current composition of our investment portfolio
and other factors, to continue to put substantial downward pressure on our net
investment income for the near term. In addition to impacting our reported net
income, potential future losses on our investment portfolio, including potential
future mark-to-market results, would adversely impact our equity capital.
Moreover, as we invest cash from new premiums written or reinvest the proceeds
of

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invested assets that mature or that we choose to sell, the yield on our
portfolio is impacted by the prevailing environment of comparably low yields.
While it is possible yields will improve in future periods, we currently expect
the challenging economic conditions to persist and we are unable to predict with
certainty when conditions will substantially improve, or the pace of any such
improvement.
Market Conditions and Competition
Leading global intermediaries and other sources have generally reported that the
U.S. casualty reinsurance market continues to reflect a relatively soft pricing
environment, with pockets of niche or specialty casualty renewals providing more
attractive opportunities for stronger or well-positioned reinsurers. We
anticipate that persistent low investment returns and, to a degree, balance
sheet issues in the broader market may favorably impact demand for coverages on
terms that we find attractive. However, we cannot assure you that any increased
demand will indeed materialize or that we will be successful in consummating new
or expanded transactions.
We currently anticipate a continued level of demand for our catastrophe
coverages over coming periods, offset by ample and likely increasing supplies of
private market capital. Even in the aftermath of storm Sandy and continued
capital return initiatives by many market participants, the primary insurance
and reinsurance sectors each continue to hold historically high levels of
capital. While we do not anticipate industry capital to diminish, or the
impairment of meaningful market participants, as a result of storm Sandy, it is
possible that storm Sandy will contribute to enhanced perceptions of risk,
particularly of mid-Atlantic and Northeastern windstorm exposure, the risks
which arise from business interruption and commercial interruption exposure, and
the penetration of U.S. flood risk in the private insurance market. Moreover, it
is possible consumer demand will increase compared to market expectations prior
to storm Sandy. However, it is possible that none of these factors may be borne
out or influence the market in any meaningful way; moreover, the relatively
attractive prevailing market conditions for many of the products in which we
specialize could in any case also be offset by adverse or unforeseen factors,
including the availability of alternative capital and the high levels of capital
held by traditional reinsurers. Renewal terms vary widely by insured account and
our ability to shape our portfolio to improve its risk and return
characteristics as estimated by us is subject to a range of competitive and
commercial factors. While we believe that our strong relationships, and track
record of superior claims paying ability and other client service will enable us
to compete for the business we find attractive, we may not succeed in doing so;
moreover, our relationships in emerging markets are not as developed as they are
in our current core markets.
The market for our catastrophe reinsurance products is generally dynamic and
volatile. The market dynamics noted above, increased or decreased catastrophe
loss activity, and changes in the amount of capital in the industry can result
in significant changes to the pricing, policy terms and demand for our
catastrophe reinsurance products over a relatively short period of time. In
addition, changes in state-sponsored catastrophe funds, or residual markets,
which have generally grown dramatically in recent years, or the implementation
of new government-subsidized or sponsored programs, can dramatically alter
market conditions. We believe that the overall trend of increased frequency and
severity of tropical cyclones experienced in recent years may continue for the
foreseeable future. Increased understanding of the potential increase in
frequency and severity of storms may contribute to increased demand for
protection in respect of coastal risks which could impact pricing and terms and
conditions in coastal areas over time. Overall, we expect higher property loss
cost trends, driven by increased severity and by the potential for increased
frequency, to continue in the future. At the same time, certain markets we
target continue to be impacted by fundamental weakness experienced by primary
insurers, due to ongoing economic weakness and, in many cases, inadequate
primary insurance rate levels, including without limitation insurers operating
on an admitted basis in Florida. These conditions, which occurred in a period
characterized by relatively low insured catastrophic losses for these respective
regions, have contributed to certain publicly announced instances of insolvency,
regulatory supervision and other regulatory actions, and have weakened the
ability of certain carriers to invest in reinsurance and other protections for
coming periods, and in some cases to meet their existing premium obligations. It
is possible that these dynamics will continue in future periods.

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In addition, we continue to explore potential strategic transactions or
investments, and other opportunities, from time to time that are presented to us
or that we originate. In evaluating these potential investments and
opportunities, we seek to improve the portfolio optimization of our business as
a whole, to enhance our strategy, to achieve an attractive estimated return on
equity in respect of investments, to develop or capitalize on a competitive
advantage, and to source business opportunities that will not detract from our
core operations.
Legislative and Regulatory Update
In August 2012, Congressman Albio Sires introduced the Taxpayers' Protection Act
(HR 6477). The bill would establish a federal catastrophe fund where eligible
states can purchase reinsurance directly from the federal government. In January
2013, Congresswoman Frederica Wilson introduced the Homeowners' Defense Act
which would, if enacted, provide for the creation of (i) a federal reinsurance
catastrophe fund; (ii) a federal consortium to facilitate qualifying state
residual markets and catastrophe funds in securing reinsurance; and (iii) a
federal bond guarantee program for state catastrophe funds in qualifying state
residual markets. In January 2013, Congressman Dennis Ross introduced the
Homeowners' Insurance Protection Act (HR 240). The bill would create a federal
catastrophe reinsurance program to back up federal reinsurance programs.
If enacted, any of these bills, or legislation similar to these proposals,
would, we believe, likely contribute to the growth of state entities offering
below market priced insurance and reinsurance in a manner adverse to us and
market participants more generally. While none of this legislation has been
enacted to date, and although we believe such legislation will continue to be
vigorously opposed, if adopted these bills would likely diminish the role of
private market catastrophe reinsurers and could adversely impact our financial
results, perhaps materially.
In June 2012, Congress passed the Biggert-Waters Flood Insurance Reform and
Modernization Act of 2012, which provided for a five-year renewal of the NFIP
and effected substantial reforms in the program. The NFIP had not been subject
to a long-term renewal since 2004. Among other things, pursuant to this statute,
the Federal Emergency Management Agency ("FEMA") is explicitly authorized to
carry out initiatives to determine the capacity of private insurers, reinsurers,
and financial markets to assume a greater portion of the flood risk exposure in
the U.S., and to assess the capacity of the private reinsurance market to assume
some of the program's risk. FEMA is required to submit a report on this
assessment within six months of enactment. The bill also increased the annual
limitation on program premium increases from 10% to 20% of the average of the
risk premium rates for certain properties concerned; established a four-year
phase-in, after the first year, in annual 20% increments, of full actuarial
rates for a newly mapped risk premium rate area; instructed FEMA to establish
new flood insurance rate maps; allows multi-family properties to purchase NFIP
polices; and introduces minimum deductibles for flood claims. We believe that
these reforms could increase the role of private risk-bearing capital in respect
of U.S. flood perils, perhaps significantly. However, we cannot assure you that
the bill will materially benefit private carriers, or that we will succeed in
participating in any positive market developments that may transpire.
In 2007, the State of Florida enacted legislation to expand the Florida
Hurricane Catastrophe Fund's ("FHCF") provision of below-market rate reinsurance
to up to $28.0 billion per season (the "2007 Florida Bill"). In May of 2009, the
Florida legislature enacted Bill No. CS/HB 1495 (the "2009 Bill"), which will
gradually phase out $12.0 billion in optional reinsurance coverage under the
FHCF over the succeeding five years. The 2009 Bill similarly allows the
state-sponsored property insurer, Citizens Property Insurance Corporation
("Citizens"), to raise its rates up to 10% starting in 2010 and every year
thereafter, until such time that it has sufficient funds to pay its claims and
expenses.  The rate increases and cut back on coverage by FHCF and Citizens are
expected to support, over time, a relatively increased role of the private
insurers in Florida, a market in which we have established substantial market
share.
In May 2011, the Florida legislature passed Florida Senate bill 408 ("SB 408"),
relating principally to property insurance. Among other things, SB 408 requires
an increase in minimum capital and surplus for newly licensed Florida domestic
insurers from $5.0 million to $15.0 million; institutes a 3-year claims filing
deadline for new and reopened claims from the date of a hurricane or windstorm;
allows an insurer to offer coverage where replacement cost value is paid, but
initial payment is limited to actual cash value; allows admitted insurers to
seek rate increases up to 15% to adjust for third party reinsurance costs; and
institutes a range of reforms relating to various matters that have increased
the costs of insuring sinkholes in Florida.

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While we believe SB 408 should contribute over time to stabilization of the
Florida market, legislation intended to further reform and stabilize Citizens
was not passed in the 2011 or 2012 legislative sessions and is uncertain in
2013.
On February 16, 2012, the Florida Senate Banking and Insurance Committee
approved, with one dissenting vote, legislation to reform the FHCF and solidify
its financial fund. The bill provided for incremental reductions in the FHCF
limit which admitted carriers are mandated to buy from the FHCF from an industry
aggregate of $17.0 billion to $12.0 billion by 2015; would have reduced the 90%
purchase option (the percentage of the FHCF mandatory coverage layer a company
purchases) which is selected by most insurers to 75% by 2015; and would have
increased the industry wide "retention", or deductible, from $7.3 to $8.0
billion. While the bill did not pass the full legislature in 2012, its sponsor
has announced an intention to reintroduce the legislation in 2013. We cannot
estimate the likelihood of enactment, or the possible final form of this or
similar legislation.
We believe the 2007 Florida Bill caused a substantial decline in the private
reinsurance and insurance markets in and relating to Florida, and contributed to
the ongoing instability in the Florida primary insurance market, where many
insurers have reported substantial and continuing losses from 2009 through 2012,
an unusually low period for catastrophe losses in the state. Because of our
position as one of the largest providers of catastrophe-exposed coverage, both
on a global basis and in respect of the Florida market, the 2007 Florida Bill
and the weakened financial position of Florida insurers may have a
disproportionate adverse impact on us compared to other reinsurance market
participants. The advent of a large windstorm, or of multiple smaller storms,
could challenge the assessment-based claims paying capacity of Citizens and the
FHCF. In May 2012, the FHCF Advisory Council approved official bonding capacity
estimates in respect of the current contract year, reflecting the amount of
post-catastrophe bonding currently estimated to be achievable by the FHCF's
management and lead financial advisor.  The FHCF projected a 2012 year-end fund
balance of approximately $8.5 billion, and a total bonding capacity estimate of
$7.0 billion; given the FHCF's total potential claims-paying obligation of $17.3
billion, this estimated claims-paying capacity of approximately $15.6 billion
was therefore estimated by the FHCF's lead adviser to reflect a potential
shortfall of $1.8 billion in respect of an initial season or event.  Any
inability, or delay, in the claims paying ability of these entities or of
private market participants could further weaken or destabilize the Florida
market, potentially giving rise to an unpredictable range of adverse impacts.
The FHCF and the Florida Office of Insurance Regulation ("OIR") have each
estimated that even partial failure, or deferral, of the FHCF's ability to pay
claims in full could substantially weaken numerous private insurers, with the
OIR having estimated that a 25% shortfall in the FHCF's claims-paying capacity
could cause as many as 24 of the top 50 insurers in the state to have less than
the statutory minimum surplus of $5.0 million, with such insurers representing
approximately 35% of the market based on premium volume, or approximately 2.2
million policies. Adverse market, regulatory or legislative changes impacting
Florida could affect our ability to sell certain of our products, to collect
premiums we may be owed on policies we have already written, to renew business
with our customers for future periods, or have other adverse impacts, some of
which may be difficult to foresee, and could therefore have a material adverse
effect on our operations.
Internationally, in the wake of the large natural catastrophes in 2011 a number
of proposals have been introduced to alter the financing of natural catastrophes
in several of the markets in which we operate. For example, the Thailand
government has announced it is studying proposals for a natural catastrophe
fund, under which the government would provide coverage for natural disasters in
excess of an industry retention and below a certain limit, after which private
reinsurers would continue to participate. The government of the Philippines has
announced that it is considering similar proposals. A range of proposals from
varying stakeholders have been reported to have been made to alter the current
regimes for insuring flood risk in the U.K., flood risk in Australia and
earthquake risk in New Zealand. If these proposals are enacted and reduce market
opportunities for our clients or for the reinsurance industry, we could be
adversely impacted.
Over the past few years the U.S. Congress has considered legislation which, if
passed, would deny U.S. insurers and reinsurers the deduction for reinsurance
placed with non-U.S. affiliates. In February 2012, the Obama administration
included a formal proposal for such a provision in its budget proposal. As
described in the administration's 2012 budget request, the proposal would deny
an insurance company a deduction for premiums and other amounts paid to
affiliated foreign companies with respect to reinsurance of property and
casualty risks to the extent that the foreign reinsurer (or its parent company)
is not subject to U.S. income tax with respect to the premiums received; and
would exclude from the insurance company's income (in the same proportion in
which the premium deduction was denied) any return premiums, ceding

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commissions, reinsurance recovered, or other amounts received with respect to
reinsurance policies for which a premium deduction is wholly or partially
denied. We believe that the passage of such legislation could adversely affect
the reinsurance market broadly and potentially impact our own current or future
operations in particular.
On February 11, 2013, U.S. Senators Carl Levin and Sheldon Whitehouse introduced
legislation in the U.S. Senate entitled the "Cut Unjustified Tax Loopholes Act".
Similar legislation was also proposed earlier in 2013 as well as in 2012, 2011
and 2010. If enacted, this legislation would, among other things, cause to be
treated as a U.S. corporation for U.S. tax purposes generally, certain corporate
entities if the "management and control" of such a corporation is, directly or
indirectly, treated as occurring primarily within the U.S. The proposed
legislation provides that a corporation will be so treated if substantially all
of the executive officers and senior management of the corporation who exercise
day-to-day responsibility for making decisions involving strategic, financial,
and operational policies of the corporation are located primarily within the
U.S. To date, this legislation has not been approved by either the House of
Representatives or the Senate. However, we can provide no assurance that this
legislation or similar legislation will not ultimately be adopted. While we do
not believe that the legislation would negatively impact us, it is possible that
an adopted bill would include additional or expanded provisions which could
negatively impact us, or that the interpretation or enforcement of the current
proposal, if enacted, would be more expansive or adverse than we currently
estimate.
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