<HTML>
<HEAD>
<TITLE>S-1</TITLE>
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>As filed with the Securities and Exchange Commission on
February&nbsp;10, 2006.</B>
</DIV>

<DIV align="right" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Registration
No.&nbsp;<FONT style="white-space: nowrap">333-&nbsp;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>
</DIV>

<DIV align="center" style="font-size: 6pt;color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 14pt;color: #000000; background: #ffffff; margin-top: 4pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>Washington,&nbsp;D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 18pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Form&nbsp;<FONT style="white-space: nowrap">S-1</FONT></B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>REGISTRATION STATEMENT</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>UNDER</B>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff;">
<B>THE SECURITIES ACT OF 1933</B>
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 24pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>RAM Holdings Ltd.</B>
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 8pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>(Exact name of Registrant as specified in its charter)</I>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="32%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="28%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>Bermuda</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>6351</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>Not Applicable</B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <I>(State or other jurisdiction of<BR>
    incorporation or organization)</I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <I>(Primary Standard Industrial<BR>
    Classification Code Number)</I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <I>(I.R.S. Employer<BR>
    Identification No.)</I></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>RAM Re House</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>46 Reid Street</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Hamilton HM 12 Bermuda</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Telephone: (441)&nbsp;296-6501</B>
</DIV>

<DIV align="center" style="font-size: 8pt;color: #000000; background: #ffffff;">
<I>(Address, including zip code, and telephone number,</I>
</DIV>

<DIV align="center" style="font-size: 8pt;color: #000000; background: #ffffff;">
<I>including area code, of Registrant&#146;s principal executive
offices)</I>
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CT Corporation System</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>111 Eighth Avenue, 13th&nbsp;Floor</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>New York, New York 10011</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Telephone: (212)&nbsp;894-8700</B>
</DIV>

<DIV align="center" style="font-size: 8pt;color: #000000; background: #ffffff;">
<I>(Name, address, including zip code, and telephone number,</I>
</DIV>

<DIV align="center" style="font-size: 8pt;color: #000000; background: #ffffff;">
<I>including area code, of agent for service)</I>
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B><I>Copies to:</I></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>Richard Lutenski<BR>
    Chief Financial Officer<BR>
    RAM Holdings Ltd.<BR>
    RAM Re House<BR>
    46 Reid Street<BR>
    Hamilton HM 12 Bermuda<BR>
    (441)&nbsp;296-6501</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>Michael Groll,&nbsp;Esq.<BR>
    Sheri E. Bloomberg,&nbsp;Esq.<BR>
    LeBoeuf, Lamb, Greene&nbsp;&#38; MacRae LLP<BR>
    125&nbsp;West 55th&nbsp;Street<BR>
    New York, NY 10019-5389<BR>
    (212)&nbsp;424-8000</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>Michael J. Schiavone,&nbsp;Esq.<BR>
    Shearman&nbsp;&#38; Sterling LLP<BR>
    599 Lexington Avenue<BR>
    New York, NY 10022-6069<BR>
    (212)&nbsp;848-4000</B></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Approximate date of commencement of the proposed sale of the
securities to the public:</B> As soon as practicable after the
Registration Statement becomes effective.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to
Rule&nbsp;415 under the Securities Act of 1933, check the
following
box.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If this form is filed to register additional securities for an
offering pursuant to Rule&nbsp;462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If this form is a post-effective amendment filed pursuant to
Rule&nbsp;462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If this form is a post-effective amendment filed pursuant to
Rule&nbsp;462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CALCULATION OF REGISTRATION FEE</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="40%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="24%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="28%">&nbsp;</TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Title of Each Class of</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Proposed Maximum Aggregate</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Amount of</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Securities to be Registered</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Offering Price(1)(2)</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Registration Fee</B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common Shares</DIV>
    </TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    $250,000,000</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    $26,750</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Estimated solely for the purpose of calculating the registration
    fee pursuant to Rule&nbsp;457 under the Securities Act of 1933,
    as amended.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Includes shares subject to the underwriters&#146; over-allotment
    option.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section&nbsp;8(a)
of the Securities Act of 1933, or until the Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section&nbsp;8(a), may determine.</B>
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 8pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 4pt;color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" cellpadding="5" style="border: 3pt double #000000; margin-bottom: 6pt; font-size: 10pt"><TR><TD>
<FONT style="font-size: 9pt" color="#E8112D">The information in
this prospectus is not complete and may be changed. We may not
sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any
jurisdiction where the offer is not permitted.

</FONT>
</TD></TR></TABLE>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 1pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>SUBJECT TO COMPLETION</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Preliminary Prospectus
dated &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2006</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>PROSPECTUS</B>
</DIV>

<DIV align="center" style="font-size: 14pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<IMG src="y17244y1724400.gif" alt="(RAM RE LOGO)">
</DIV>

<DIV align="center" style="font-size: 24pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>RAM Holdings Ltd.</B>
</DIV>

<DIV align="center" style="font-size: 14pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Common Shares</B>
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
RAM Holdings Ltd. and the selling shareholders are
offering &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares,
respectively, of our common shares in an underwritten offering.
This is our initial public offering and no public market exists
for our common shares. We anticipate that the initial public
offering price will be between
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. After the offering, the market price for our common
shares may be outside this range.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to apply to list our common shares on the New York
Stock Exchange under the symbol
&#147;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.&#148;
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 12pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Investing in our common shares involves risks that are
described in the &#147;Risk Factors&#148; section beginning on
page&nbsp;9 of this prospectus.</B>
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Per Share</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Public offering price</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Underwriting discounts</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds, before expenses, to us</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds, before expenses, to the Selling Shareholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To the extent the underwriters sell more
than &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares,
the underwriters have the option to purchase up to an
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common
shares from the selling shareholders at the initial public
offering price less the underwriting discount. The underwriters
can exercise this right at any time within 30&nbsp;days after
the offering.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>None of the Securities and Exchange Commission, any
U.S.&nbsp;state securities commission, the Minister of Finance
and the Registrar of Companies in Bermuda or the Bermuda
Monetary Authority have approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>The shares will be ready for delivery on or
about &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2006.</B>
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<I>Joint Book-Running Managers</I>
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 18pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="50%"></TD>
    <TD width="50%"></TD>
</TR>

<TR valign="top">
    <TD align="left"><B>Banc of America Securities LLC</B></TD>
    <TD align="right"><B>Merrill Lynch&nbsp;&#38; Co.</B></TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 14pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Keefe, Bruyette&nbsp;&#38; Woods</B>
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The date of this prospectus
is &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2006
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">

</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<!-- TOC -->
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>TABLE OF CONTENTS</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="90%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Page</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#101'>Prospectus Summary</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#102'>Risk Factors</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#103'>Forward-Looking Statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>26</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#104'>Reorganization Transactions</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>27</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#105'>Use of Proceeds</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>27</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#106'>Dividend Policy</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>27</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#107'>Capitalization</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>28</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#108'>Dilution</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>29</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#109'>Selected Combined Financial Information</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>30</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#110'>Management&#146;s Discussion and Analysis
    of Financial Condition and Results of Operations</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>31</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#111'>Industry Overview</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>47</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#112'>Business</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>51</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#113'>Management</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>71</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#114'>Principal and Selling Shareholders</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>85</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#115'>Certain Relationships and Related
    Transactions</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>88</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#116'>Material Tax Considerations</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>89</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#117'>ERISA Considerations</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>98</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#118'>Description of Share Capital</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>100</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#119'>Shares Eligible for Future Sale</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>110</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#120'>Underwriting</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>112</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#121'>Legal Matters</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>118</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#122'>Experts</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>118</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#123'>Where You Can Find More Information</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>118</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#124'>Enforceability of Civil Liabilities Under
    United States Federal Securities Laws and Other Matters</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>119</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#125'>Glossary of Selected Reinsurance,
    Insurance, Investment and Other Terms</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>120</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#126'>Index to Financial Statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>F-1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y17244exv4w2.txt">EX-4.2: FISCAL AGENCY AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y17244exv4w3.txt">EX-4.3: 6.875% SENIOR NOTE</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y17244exv10w8.txt">EX-10.8: 2000 SUPPLEMENTAL RETIREMENT PLAN</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y17244exv10w9.txt">EX-10.9: 2001 STOCK OPTION PLAN</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y17244exv10w12.txt">EX-10.12: PAYMENT AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y17244exv10w13.txt">EX-10.13: PAYMENT AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y17244exv10w16.txt">EX-10.16: AMENDED AND RESTATED CREDIT AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y17244exv10w17.txt">EX-10.17: CREDIT AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y17244exv10w18.txt">EX-10.18: PUT OPTION AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y17244exv10w19.txt">EX-10.19: CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF CLASS B PREFERENCE SHARES</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y17244exv23w1.txt">EX-23.1: CONSENT OF PRICEWATERHOUSECOOPERS (BERMUDA)</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y17244exv99w2.txt">EX-99.2: AUDIT COMMITTEE CHARTER</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y17244exv99w3.txt">EX-99.3: COMPENSATION COMMITTEE CHARTER</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y17244exv99w4.txt">EX-99.4: NOMINATING AND GOVERNANCE COMMITTEE CHARTER</A></FONT></TD></TR>
</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<!-- /TOC -->
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Until &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2006, which is the 25th&nbsp;day after the date of this
prospectus, all dealers that buy, sell or trade our common
shares, whether or not participating in this offering, may be
required to deliver a prospectus. This is in addition to the
dealers&#146; obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>You should rely only on the information contained in this
prospectus. We have not, and the underwriters have not,
authorized any other person to provide you with information that
is different from that contained in this prospectus, including
any information included on our website. We are offering to sell
and seeking offers to buy these securities only in jurisdictions
where offers and sales are permitted. The information contained
in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this
prospectus or of any sale of common shares.</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Common shares may be offered or sold in Bermuda only in
compliance with the provisions of the Investment Business Act of
2003 of Bermuda, which regulates the sale of securities in
Bermuda. In addition, the Bermuda Monetary Authority, which we
refer to as the BMA, must approve all issuances and transfers of
shares of a Bermuda exempted company. We intend to apply to the
BMA for its permission for the issue and subsequent transfer of
the common shares being offered pursuant to this prospectus, as
long as the common shares are listed on the New York Stock
Exchange, to and among persons who are resident and non-resident
of Bermuda for exchange control purposes. In addition, we will
deliver to and file a copy of this prospectus with the Registrar
of Companies in Bermuda in accordance with Bermuda law. The BMA
and the Registrar of Companies accept no responsibility for the
financial soundness of any proposal or for the correctness of
any of the statements made or opinions expressed in this
prospectus.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">i

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='101'></A>
</DIV>

<!-- link1 "PROSPECTUS SUMMARY" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>PROSPECTUS SUMMARY</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>This summary highlights information contained elsewhere in
this prospectus and may not contain all of the information that
may be important to you. In this prospectus, references to the
&#147;Company,&#148; &#147;we,&#148; &#147;us&#148; or
&#147;our&#148; refer to RAM Holdings Ltd. and/or RAM
Reinsurance Company Ltd., its wholly-owned Bermuda subsidiary.
References to &#147;RAM Re&#148; refer solely to RAM Reinsurance
Company Ltd. and references to &#147;RAM Holdings&#148; refer
solely to RAM Holdings Ltd. References in this prospectus to
&#147;dollars&#148; or &#147;$&#148; are to the lawful currency
of the United States, unless the context otherwise requires.
Unless otherwise stated, all figures in this prospectus assume
a &nbsp;for 1 subdivision of our common shares and the issuance
of bonus shares on
a &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for
1 basis to be effected prior to the closing of this offering and
no exercise of the underwriters&#146; over-allotment option.
Unless otherwise stated, this prospectus also assumes that the
amalgamation between RAM Holdings and RAM Holdings&nbsp;II Ltd.,
which we refer to as Holdings&nbsp;II, described under the
caption &#147;Reorganization Transactions&#148; has occurred.
Although this summary contains important information about our
Company and this offering, you should read it together with the
more detailed information and our financial statements and the
notes to those statements appearing elsewhere in this
prospectus. For your convenience, we have provided a Glossary of
Selected Reinsurance, Insurance, Investment and Other Terms,
which is located at the end of this prospectus.</I>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>RAM Holdings Ltd.</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Our Company</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
RAM Holdings was founded in 1998 as a Bermuda-based provider of
financial guaranty reinsurance. We conduct substantially all of
our operations through our wholly-owned subsidiary, RAM
Reinsurance Company Ltd. We provide financial guaranty
reinsurance for public finance and structured finance
obligations, covering risks in both the United States and
international markets. We are currently the only financial
guaranty reinsurer that is both rated &#147;AAA&#148; by
Standard&nbsp;&#38; Poor&#146;s Ratings Services, a division of
The McGraw-Hill Companies, Inc., which we refer to as
Standard&nbsp;&#38; Poor&#146;s, and focused solely on providing
reinsurance to third parties.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe our business is characterized by low loss experience
and relatively predictable and stable earned premiums. We have
low loss experience because we operate in an industry in which
financial guaranty insurance is underwritten to a remote-loss
standard. We have relatively predictable earned premiums because
our business model allows us to build a large unearned premium
reserve ($163.8&nbsp;million of unearned premium compared to
$319.3&nbsp;million of equity as determined in accordance with
U.S.&nbsp;generally accepted accounting principles, or
U.S.&nbsp;GAAP, as of September&nbsp;30, 2005) that is gradually
earned as revenue over a relatively long time period which for
some exposures can extend to 20&nbsp;years or more.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our business model is predicated on specialization, in that our
financial resources are dedicated exclusively to the financial
guaranty reinsurance business. We do not use our capital to
compete with our customers in the primary financial guaranty
insurance market. Key factors supporting our business model
include: we are focused on the well-established municipal bond
and asset securitization markets, we underwrite reinsurance that
is believed to have a remote risk of loss, and we derive a
significant percentage of revenues from net investment income on
high-quality investments. We believe that our customer-focused
strategy and our demonstrated successes, as well as the limited
number of highly-rated competitors, provide us with a
competitive advantage that will allow us to continue to grow our
business.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
With our focused business strategy, we have improved our
operating results over time. Our new business production (gross
written premiums) has increased at a compound annual growth rate
of nearly 33% from 2000 through year-end 2004, and has grown
over 15% for the nine months ended on September&nbsp;30, 2005
over the comparable 2004 period. Our unearned premium reserve
has increased from $45.6&nbsp;million at year-end 2000 to
$140.0&nbsp;million at year-end 2004, representing a 32%
compound annual growth rate, and was $163.8&nbsp;million as of
September&nbsp;30, 2005.
</DIV>
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of the date of this prospectus, RAM Re had a financial
strength rating of &#147;AAA&#148; by Standard&nbsp;&#38;
Poor&#146;s and &#147;Aa3&#148; by Moody&#146;s Investors
Service, Inc., which we refer to as Moody&#146;s<I>.</I>
Financial strength ratings are an important factor in
establishing our competitive position in the financial guaranty
reinsurance markets. The objective of these ratings is to
provide an independent opinion of our financial strength and our
ability to meet ongoing obligations to ceding companies. In
addition, the credit received by the ceding companies from the
rating agencies for ceding insured obligations is primarily
based upon the ratings of their reinsurers.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Our Products and Industry</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Financial guaranty insurance provides an unconditional and
irrevocable guarantee which protects the holder of a financial
obligation against non-payment of principal and interest when
due. Unlike other forms of insurance, financial guaranty
insurance is underwritten to a remote-loss standard, meaning
that risks are insured only if an insurer expects that no loss
will occur during the term of the policy.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Both issuers and investors benefit from financial guaranty
insurance. Issuers benefit when the insurance has the effect of
lowering an issuer&#146;s cost of borrowing because the
insurance premium is less than the value of the spread between
the yield on the insured obligation (carrying the credit rating
of the insurer) and the yield on the uninsured obligation.
Financial guaranty insurance also increases the marketability of
obligations issued by infrequent or unknown issuers or
obligations with complex structures. Investors benefit from
increased liquidity in the secondary market, reduced exposure to
price volatility caused by changes in the credit quality of the
underlying insured issue, and added protection against a
potential loss in the event that the obligor defaults on its
obligation.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Financial guaranty insurance is generally provided for public
finance obligations and structured finance obligations. Public
finance obligations consist primarily of debt obligations issued
by or on behalf of states or other governmental entities or
their political subdivisions (counties, cities, towns and
villages, utility districts, public housing and transportation
authorities), other public and quasi-public entities (including
public universities and not-for-profit hospitals, and
<FONT style="white-space: nowrap">non-U.S.&nbsp;</FONT>sovereigns
and their political subdivisions), private universities,
hospitals and investor-owned utilities, or IOUs.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Structured finance obligations are generally securities backed
by pools of assets such as residential mortgage loans, consumer
or trade receivables, securities, short-term bank deposits or
other assets having a specified cash flow or market value which
are generally held by a special purpose issuing entity.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Financial guaranty reinsurance represents our obligation, in
consideration of premiums paid to us, to indemnify an insurance
company, the &#147;primary insurer,&#148; against the portion of
any loss which the primary insurer may sustain under that part
of a financial guaranty policy which it has ceded to us.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Our Customers</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our customers are the seven primary monoline financial guaranty
insurers, whom we refer to as the primary insurers. The four
largest primary insurers are MBIA Insurance Corporation, or
MBIA, Financial Security Assurance Inc., or FSA, Financial
Guaranty Insurance Company, or FGIC, and Ambac Assurance
Corporation, or Ambac, representing a majority of the financial
guaranty industry&#146;s capitalization and insurance in force.
Other primary insurers include CDC IXIS Financial Guaranty North
America, Inc., or CIFG, XL Capital Assurance Inc., or XLCA, and
Assured Guaranty Corp., or Assured Guaranty, who compete
directly with the four major primary insurers. As of
September&nbsp;30, 2005, we had quota share reinsurance treaties
in place with Ambac, FSA and MBIA. Under our quota share
reinsurance treaties, our customers are required to cede, and we
are required to assume, specific obligations underwritten by our
customers over a period of time, typically one year. For the
nine months ended September&nbsp;30, 2005, approximately 85% of
our written premiums were derived from these three ceding
companies under our treaties. As of September&nbsp;30, 2005, we
also had facultative arrangements with each of the seven
above-mentioned primary insurers. In facultative transactions we
assume, and the primary insurer cedes, part or all of one or
more specific financial guarantees on a case-by-case basis.
Under our
</DIV>
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">2
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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
facultative arrangements, we have the ability to accept or
reject individual transactions submitted to us by our customers.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Current Industry Conditions</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Several trends in the financial guaranty reinsurance business
have emerged that should provide us with notable growth
opportunities. Underwriting capacity, meaning the
U.S.&nbsp;based statutory capital available for financial
guaranty reinsurance, is more limited now than it was in 2002,
and we believe such capacity is not likely to increase in the
immediate future. Many of the large multi-line insurance
companies that began participating in the financial guaranty
reinsurance market in the 1990s have exited the market in order
to refocus on their traditional lines of business. The exit
strategy of multi-line insurance companies has been driven by
favorable operating developments in their core property-casualty
insurance markets and by rating agency downgrades which preclude
multi-line companies from serving as an economic source of
financial guaranty reinsurance. The rating agency criteria for
financial guaranty reinsurance companies have also become more
stringent, making it more difficult for new competitors to enter
the market.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Primarily as a result of two multi-line reinsurers exiting the
financial guaranty reinsurance market without the replacement of
additional reinsurance capacity, the par value of insurance
ceded by the &#147;AAA&#148;-rated primary insurers (MBIA, FSA,
FGIC, Ambac, CIFG and XLCA) declined from approximately
$70.8&nbsp;billion for the year ended December&nbsp;31, 2002 to
approximately $46.0&nbsp;billion in 2003. In 2004 and the first
nine months of 2005, activity began to recover and par value
ceded by the &#147;AAA&#148;-rated primary insurers increased to
$51.6&nbsp;billion in 2004 and was approximately
$43.1&nbsp;billion in the nine months ending September&nbsp;30,
2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Our Competitive Strengths</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe certain characteristics distinguish us from our
competitors and provide opportunities for growth, including:
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Strong Financial Strength Ratings.</I> Our operating
    subsidiary, RAM Re, has financial strength ratings of
    &#147;AAA&#148; from Standard&nbsp;&#38; Poor&#146;s and
    &#147;Aa3&#148; from Moody&#146;s. We believe these ratings are
    highly attractive relative to non-&#147;AAA&#148;-rated
    reinsurance sources and provide important capital benefits to
    primary insurers.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Unique Business Model.</I> We are currently the only
    &#147;AAA&#148;-rated financial guaranty reinsurer focused
    solely on providing financial guaranty reinsurance to third
    parties. By providing dedicated reinsurance capacity, we have
    been able to increase par outstanding by a compound annual
    growth rate of 22.4% since 2000 through year-end 2004.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Capacity for Operating Efficiencies.</I> We have decreased
    our operating expense ratio from 33.1% in 2000 to 29.9% for the
    nine months ended September&nbsp;30, 2005. In the future, we
    believe we can continue to enhance our operating margins by
    continuing to increase our revenue base without significantly
    increasing our infrastructure and staffing.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Focused Treaty-based Business Mix.</I> For the nine months
    ended September&nbsp;30, 2005, approximately 85% of our gross
    written premiums were sourced from treaty business that was
    derived from long-standing reinsurance relationships with three
    ceding companies. Our emphasis on treaties represents a stable
    source of business that can be conducted efficiently.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Experienced Management Team.</I> Our management team has an
    average of 11.5&nbsp;years of experience in the financial
    guaranty industry. Additionally, our management has broad
    experience in the industry, with most having previously worked
    for the primary insurers in the financial guaranty industry.</TD>
</TR>

</TABLE>
</DIV>

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    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Bermuda Domicile.</I> As a Bermuda company, we are not
    subject to corporate income tax. We believe that our Bermuda
    domicile provides advantages over our non-Bermuda domiciled
    competitors who are subject to corporate income tax.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Our Business Strategy</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our corporate objective is to build shareholder value by
increasing shareholders&#146; equity through stable and
high-quality earnings growth. We intend to achieve this
objective with the following strategies:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="1%"></TD>
    <TD width="96%"></TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Maintaining our Financial Strength Ratings.</I> We intend to
    underwrite business and invest our portfolio in a manner
    consistent with maintaining our current ratings in order to
    maximize the benefits of our reinsurance products for our
    customers.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Achieving Attractive Risk-Adjusted Returns on Capital.</I> We
    strive to maintain an efficient capital base and to use a
    disciplined underwriting approach to achieve high, risk-adjusted
    returns on capital and to promote optimal diversification.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Enhancing Operating Margins.</I> We intend to continue to
    grow our treaty-based revenue without significantly increasing
    our infrastructure and staffing, which we believe will reduce
    our expense ratio over time.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Expanding Market Share.</I> We plan to continue to increase
    our share of existing treaties, establish new treaties and
    selectively increase our facultative underwriting for the
    &#147;AAA&#148;-rated primary insurers in order to selectively
    expand our market share.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Managing Risk of our Investment Portfolio.</I> We plan to
    continue to manage invested assets with the goal of preserving
    principal while providing a stable stream of investment income
    and controlling market risk.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Risks Relating to our Company</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As part of your evaluation of our Company, you should take into
account the risks relating to our Company, which include:
</DIV>

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    <TD width="1%"></TD>
    <TD width="96%"></TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Possibility of Negative Ratings Action. </I>If
    Standard&nbsp;&#38; Poor&#146;s or Moody&#146;s places RAM Re on
    credit watch or downgrades RAM Re&#146;s financial strength
    ratings, it could have a material adverse effect on our ability
    to compete and would significantly decrease the value of the
    reinsurance we provide.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Dependence on a Small Number of Customers.</I> Because we
    derive substantially all of our revenues from premiums ceded by
    the largest primary financial guaranty insurers, any significant
    reduction in premiums ceded by one or more of these primary
    insurers could have a material adverse effect on our financial
    condition and results of operations.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Risks Associated with Reinsurance Underwriting.</I> We do not
    separately evaluate the individual risks assumed under the
    treaties we maintain with our customers. We are subject to the
    possibility that the primary insurers may not have evaluated
    adequately the risks or may have selected the risks they choose
    to reinsure with us in a manner adverse to our interests such
    that the premiums we receive may not sufficiently compensate us
    for the risks we assume.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Loss of Key Employees. </I>If we were to lose the services of
    members of our management team, our business could be adversely
    affected.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Business Subject to General Economic and Capital Markets
    Factors.</I> Our business, and the risks associated with our
    business, depend in large measure on general economic conditions
    and capital markets activities that affect market demand for
    financial guaranty insurance and income earned on our investment
    portfolio, including the potential negative impact of recessions
    and business failures as well as any narrowing of the credit
    spread between insured and uninsured obligations.</TD>
</TR>

</TABLE>
</DIV>

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Adequacy of Loss Reserves.</I> We establish estimated
    liabilities, or loss reserves, to reflect the estimated cost of
    claims incurred that we will ultimately be required to pay in
    respect of reinsurance we have written. If our loss reserves at
    any time are determined to be inadequate, we would be required
    to increase loss reserves at the time of such determination.
    This could cause a material increase in our liabilities and a
    reduction in our profitability, or possibly an operating loss
    and reduction of capital.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Taxation.</I> We manage our business so that we and RAM Re
    should not be subject to U.S.&nbsp;federal income tax. However,
    we cannot be certain that the U.S.&nbsp;Internal Revenue
    Service, which we refer to as the IRS, will not contend
    successfully that we are or RAM Re is engaged in a trade or
    business in the United States and thus subject to
    U.S.&nbsp;federal income taxation.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For more information about these and other risks relating to our
Company, see &#147;Risk Factors&#148; beginning on page&nbsp;9.
You should carefully consider these risk factors together with
all the other information included in this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Organization; Reorganization Transactions</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
RAM Holdings and Holdings&nbsp;II were each incorporated on
January&nbsp;28, 1998 under the laws of Bermuda solely for the
purpose of becoming a holding company for RAM Re. RAM Re was
incorporated on January&nbsp;28, 1998 under the laws of Bermuda
as an entity through which we conduct our financial guaranty
reinsurance business.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
RAM Holdings and Holdings&nbsp;II, the owners of all of the
voting and non-voting common shares of RAM Re, will enter into
an amalgamation agreement (merger agreement) pursuant to which
the two companies will become amalgamated
(merged)&nbsp;effective immediately prior to the completion of
this offering. The shareholders of RAM Holdings and
Holdings&nbsp;II will approve the amalgamation agreement to be
effective shortly before the completion of this offering. Upon
the completion of the amalgamation, all of the shares of RAM Re
will be held by RAM Holdings as the surviving entity and RAM
Holdings will effect
a &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for
1 subdivision of our common shares and the issuance of bonus
shares on
a &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for&nbsp;1
basis. Unless otherwise specifically stated, this prospectus
assumes the amalgamation, the share subdivision and the issuance
of bonus shares have occurred.
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Principal Executive Offices</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our principal executive offices are located at RAM Re House, 46
Reid Street, Hamilton HM 12 Bermuda and our telephone number at
that location is (441)&nbsp;296-6501. Our website is located at
www.ramre.bm.
</DIV>
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">5
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>The Offering</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
    Common shares offered by us</TD>
    <TD></TD>
    <TD valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Common shares offered by selling shareholders</TD>
    <TD></TD>
    <TD valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Common shares outstanding after this offering(1)</TD>
    <TD></TD>
    <TD valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Use of proceeds</TD>
    <TD></TD>
    <TD valign="top">
    We estimate that our net proceeds from the offering of our
    common shares, after deducting the underwriters&#146; discount
    and estimated offering expenses payable by us, will be
    approximately
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million.
    We presently intend to contribute substantially all of the net
    proceeds of this offering received by us to RAM Re, to increase
    its capital and surplus in order to increase its underwriting
    capacity.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    We will not receive any proceeds from the sale of common shares
    by the selling shareholders.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Dividend policy</TD>
    <TD></TD>
    <TD valign="top">
    We do not currently intend to pay dividends on our common
    shares. See &#147;Dividend Policy.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Voting limitation</TD>
    <TD></TD>
    <TD valign="top">
    Our bye-laws contain a provision limiting the voting rights of
    any shareholder, if the shares held by such shareholder are
    treated as &#147;controlled shares&#148; (as defined below in
    &#147;Risks Related to Taxation&nbsp;&#151; Holders of 10% or
    more of our shares may be subject to U.S.&nbsp;income taxation
    under the controlled foreign corporation rules&#148;) of any
    &#147;U.S.&nbsp;Person&#148; (as defined below in &#147;Risks
    Related to Taxation&nbsp;&#151; Holders of 10% or more of our
    shares may be subject to U.S.&nbsp;income taxation under the
    controlled foreign corporation rules&#148;) other than The PMI
    Group, Inc., or PMI, and such controlled shares constitute more
    than 9.9% of the votes conferred by our issued shares. In
    addition, at any time that the controlled shares of PMI
    constitute (i) more than&nbsp;9.9% of the voting power conferred
    by our issued shares and (ii)&nbsp;24.5% or more of either the
    voting power or value of our issued shares, the voting rights
    with respect to the controlled shares owned by PMI will be
    limited to a voting power of 9.9%.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    In the event the above voting limitations must be applied as
    described above, the voting limitation shall apply to PMI only
    after the limitation has been applied to all other shareholders
    whose votes are subject to reduction and the voting power held
    by PMI shall not be reduced to below 9.9% by operation of these
    provisions. It is possible that as a result of the operation of
    these provisions, certain other investors may have their voting
    powers</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 0pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
1&nbsp;The number of shares shown to be outstanding after this
offering assumes the completion of the amalgamation and
the &nbsp;for 1 subdivision of our common shares and the
issuance of bonus shares on
a &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for&nbsp;1
basis described in &#147;Reorganization Transactions&#148; and
excludes &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common
shares that may be issued pursuant to the underwriters&#146;
over-allotment option and
excludes &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common
shares that may be issued pursuant to outstanding options and
shares reserved for issuance under our employee benefit plans
described in &#147;Management&nbsp;&#151; Long-Term Employment
Benefits.&#148;
</DIV>
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">6

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
significantly limited. See &#147;Description of Share
Capital&nbsp;&#151; Limitation on Voting Rights.&#148;
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
    Transfer restrictions</TD>
    <TD></TD>
    <TD valign="top">
    Our shares are subject to transfer, issuance and repurchase
    restrictions to avoid a non-de minimis adverse tax, legal or
    regulatory consequence to us, any direct or indirect holder of
    our shares or its affiliates. See &#147;Description of Share
    Capital&nbsp;&#151; Restrictions on Transfer of Common
    Shares.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Proposed NYSE symbol</TD>
    <TD></TD>
    <TD valign="top">
</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Risk factors</TD>
    <TD></TD>
    <TD valign="top">
    See &#147;Risk Factors&#148; and other information included in
    this prospectus for a discussion of factors that should be
    considered carefully before deciding whether to invest in our
    common shares.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">7

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Summary Combined Financial Information</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>The following tables present our historical financial and
operating data as of the dates and for the periods indicated. We
derived the selected combined data as of and for each of the
three years in the period ended December&nbsp;31, 2004, from our
audited combined financial statements, which have been prepared
in accordance with U.S.&nbsp;GAAP and appear elsewhere in this
prospectus. We derived the selected combined data as of and for
each of the two years in the period ended December&nbsp;31,
2001, from our audited combined financial statements, which have
been prepared in accordance with U.S.&nbsp;GAAP and which are
not included in this prospectus. We derived the summary combined
data as of and for the nine months ended September&nbsp;30, 2005
from our unaudited combined financial statements. Our historical
results of operations are not necessarily indicative of the
results to be expected for any future periods and the results
for the nine months ended September&nbsp;30, 2005 should not be
considered indicative of results expected for the full year. You
should read this summary in conjunction with
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#148; and the financial
statements and related notes appearing elsewhere in this
prospectus.</I>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of and for the</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Nine Months Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="19">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>As of and for the Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(Unaudited)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B>(Dollars in thousands, except as indicated otherwise)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Statement of Operations Data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross written premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>55,220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>48,212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>66,057</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>67,880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>36,205</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26,544</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,346</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net earned premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,425</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,721</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,543</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,561</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,898</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,327</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net investment income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,864</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,824</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,021</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net realized investment (losses) gains</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,137</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>560</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>536</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,097</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,927</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>252</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net unrealized (losses) gains on credit derivatives</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,544</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,757</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>456</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(613</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,608</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,469</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,600</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss and loss adjustment expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,579</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,994</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>910</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>653</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acquisition expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,571</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,223</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,927</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,032</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,042</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,926</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,087</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,057</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,278</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,259</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,524</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,667</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,486</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,829</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,734</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,252</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,933</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance Sheet Data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investments and cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>465,193</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>428,671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>440,992</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>356,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>226,161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>195,141</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>166,755</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred acquisition costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65,777</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55,881</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58,653</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,017</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,712</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,976</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>540,749</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>542,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>510,798</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>426,260</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>277,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>234,646</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>201,253</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Losses and loss expense reserve</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,274</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,493</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,821</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,401</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,382</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,529</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unearned premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>163,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>129,567</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>140,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>120,182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59,201</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,555</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>221,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>235,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>199,293</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>137,005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91,537</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65,604</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,977</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive (loss) income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,954</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,507</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,787</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,733</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>998</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shareholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>319,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>307,507</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>311,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>289,255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>185,490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>169,042</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>150,276</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="30">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Selected Ratios (Based on U.S.&nbsp;GAAP Income Statement
    Data)(1):</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss and loss adjustment expense ratio(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.9</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expense ratio(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75.21</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Combined ratio</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>80.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>97.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>82.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD colspan="30">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Other Data&nbsp;&#151; Financial Guaranty:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Par outstanding (in millions)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26,702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20,708</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22,154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19,773</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,888</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S.&nbsp;Basis Statutory Capital (in millions)(4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>277.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>277.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>274.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>230.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>135.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>131.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>123.0</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    These ratios are used by management in order to compare our
    performance to benchmarks commonly used by rating agencies and
    analysts that monitor the insurance industry.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Calculated by dividing loss and loss adjustment expenses by net
    earned premiums.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Calculated by dividing the sum of acquisition expenses and
    operating expenses by net earned premiums.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Our estimate of the sum of U.S.&nbsp;basis policyholder surplus
    and contingency reserve, as RAM Re files Bermuda statutory
    financial statements.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">8

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='102'></A>
</DIV>

<!-- link1 "RISK FACTORS" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>RISK FACTORS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>An investment in our common shares involves a number of
risks. You should carefully consider the following information
about these risks, together with the other information contained
in this prospectus, before investing in our common shares. The
risks and uncertainties described below are not the only ones we
face. However, these are the risks our management believes are
material. Additional risks not presently known to us or that we
currently deem immaterial may also impair our business, results
of operations or financial condition. Any of the risks described
below could result in a significant or material adverse effect
on our results of operations or financial condition, and a
corresponding decline in the market price of our common shares.
You could lose all or part of your investment. This prospectus
also contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from
those anticipated in the forward-looking statements as a result
of certain factors, including the risks described below and
elsewhere in this prospectus. See &#147;Forward-Looking
Statements.&#148;</I>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Risks Related to Our Company</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>An adverse rating action concerning RAM Re&#146;s ratings
    could have a material adverse effect on our ability to compete
    in the financial guaranty reinsurance industry and would
    significantly decrease the value of the reinsurance we
    provide.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
RAM Re currently has a financial strength rating of
&#147;AAA&#148; by Standard&nbsp;&#38; Poor&#146;s and a
financial strength rating of &#147;Aa3&#148; by Moody&#146;s, in
each case with a stable outlook. A downgrade of either of these
ratings or a decrease in the credit given for our reinsurance
would negatively affect the value of our reinsurance. For
example, under Standard&nbsp;&#38; Poor&#146;s current
guidelines for assigning credit to reinsurance, if RAM Re&#146;s
rating were downgraded from &#147;AAA&#148; to &#147;AA,&#148;
there would be a 30% decrease in the benefits financial
guarantors receive from ceding business to us based on
Standard&nbsp;&#38; Poor&#146;s model. In addition to potential
negative effects on future business, a downgrade of the ratings
assigned to RAM Re by either rating agency would harm our
competitive position in the reinsurance industry. If RAM Re
experienced a rating downgrade, the primary insurers would have
the ability under our contracts with them to either reprice
existing business through increases in the ceding commission
payable by us or terminate and recapture their existing business
with us. A downgrade of RAM Re&#146;s ratings, the placing of
RAM Re&#146;s ratings on negative credit watch or under review
for a ratings downgrade, or a decrease in the credit given for
our reinsurance would also negatively affect our ability to
negotiate favorable terms with primary insurers in the future.
Any downgrade in RAM Re&#146;s financial strength rating, or the
placement of RAM Re&#146;s financial strength rating on negative
credit watch, could have a material adverse effect on our
business, financial condition and results of operations. In
addition, a decrease in the credit given for our reinsurance by
either rating agency would negatively affect pricing under our
existing and future contracts, which in turn could have a
material adverse effect on our business, financial condition and
results of operations.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>We depend on a small number of primary insurers to provide
    us with a substantial portion of our business.</I></B></TD>
</TR>

</TABLE>

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A significant reduction in the amount of reinsurance ceded by
one or more of the primary insurers who are our principal
customers could have a material adverse effect on our results of
operations. We derive substantially all of our financial
guaranty revenues from premiums ceded by the four largest
primary financial guaranty insurers. In 2002, 2003 and 2004,
these four major primary insurers accounted for approximately
100%, 99% and 97% of our gross written premiums, respectively.
Through September&nbsp;30, 2005, the four primary insurers
accounted for approximately 96% of our gross written premiums
and three of those four primary insurers accounted for
approximately 87% of our gross written premiums. A number of
factors could cause a reduction in our business with any of our
primary insurers, including higher retention levels by a primary
insurer, a reduction in the amount of business written by the
primary insurers, an adverse rating action with respect to the
financial strength rating of RAM Re, increased participation by
one or more of the primary insurers in financial guaranty
reinsurance through strategic alliances or the greater use of
other forms of credit enhancements or transaction structures as
an
</DIV>

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alternative to traditional financial guaranty reinsurance. For
example, since 2003 we have not had a quota share treaty with
one of the major primary insurers because of its decision not to
use treaties for its reinsurance needs. To our knowledge, this
primary insurer has not entered into any quota share treaty with
any financial guaranty reinsurer. The loss of treaty business
from this customer has increased our dependence on the three
other main primary insurers. While we expect to continue to
write facultative business with this customer in the future, if
it or any of the other three main primary insurers were to cease
or substantially decrease ceding business to us, our dependence
on the remaining primary insurers would increase further and we
may not be able to replace the loss of business. We also depend
on the major primary insurers in that our ability to receive
profitable pricing for our reinsurance depends largely on prices
charged by the primary insurers for their insurance coverage and
the amount of ceding commissions paid by us to these primary
insurers.
</DIV>

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    <B><I>If we are unable to renew our existing treaties with our
    customers, our business and financial condition could be
    adversely affected.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each of our quota share reinsurance treaties with our primary
insurer customers is for a term of one year and provides that it
may be terminated, on a run-off basis, by either party upon
notice to the other on or after the term ends. Each quota share
reinsurance treaty may also be terminated upon the happening of
certain events, such as a downgrade of our financial strength
rating, prior to the expiration of its term. In the ordinary
course of business and consistent with the practice within the
financial guaranty reinsurance industry, our customers typically
will send us a notice of termination of their quota share
reinsurance treaty prior to the expiration of its annual term.
In most cases, we then negotiate renewal terms for the treaty
with the customer. While we generally have been able to renew
our existing quota share reinsurance treaties annually, we
cannot assure you that any of our customers will renew their
quota share reinsurance treaties with us or that the terms on
which any treaty is renewed will be as favorable to us. Any such
failure to renew our existing treaties or failure to negotiate
favorable treaty terms could have a material adverse effect on
our business and financial condition.
</DIV>

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    <TD>
    <B><I>The size of our capital base may not allow us to compete
    effectively in our industry and may adversely affect our ability
    to grow our business and execute our business strategy.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We currently have a smaller capital base than substantially all
of the financial guaranty reinsurers with which we compete. This
effectively may reduce our ability to compete with these
reinsurers. Larger competitors have several advantages over us
because of their size, including being able to take larger
shares of facultative transactions and treaty business, being
able to offer larger single risk limits, having greater
economies of scale, benefiting from implicit or explicit
parental support and having more diverse product lines. In
addition to monoline financial guaranty reinsurers, there are a
few multi-line companies that participate in the financial
guaranty reinsurance market. To the extent that any of the
existing companies or potential new market entrants engage in
practices that result in decreased prices for reinsurance, our
results of operations could be adversely affected, which would
adversely affect our ability to grow our business and execute
our business strategy.
</DIV>

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    <B><I>If we cannot obtain necessary capital on favorable terms
    or at all, our business, operating results and financial
    condition could be adversely affected.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our future capital requirements depend on many factors,
including our ability to write new business successfully and our
ability to establish reserves at levels sufficient to cover
losses. Although we may, to the extent that capacity is
available, establish retrocessional facilities and other soft
capital facilities (which could include lines of credit, credit
swap facilities and similar capital support mechanisms) with
providers with ratings comparable to our own, no assurance can
be given that such facilities can be established, or if
established, that one or more of the rating agencies will not
downgrade or withdraw the financial strength ratings of such
providers in the future. In addition, no assurance can be given
that a replacement provider on any facility we establish would
be available. To the extent that our existing capital is
insufficient to fund future operating requirements and/or cover
losses, we may need to raise additional
</DIV>

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funds through financings or curtail our growth and reduce our
risk exposure portfolio. Any equity or debt financing, if
available at all, may be on terms that are not favorable to us.
In the case of equity financings, dilution to our shareholders
could result, and the securities issued may have rights,
preferences and privileges that are senior to those of the
shares offered under this prospectus. If our need for capital
arises because of significant losses, the occurrence of these
losses may make it more difficult for us to raise the necessary
capital. To the extent that additional capital is needed, our
failure to obtain the necessary capital on favorable terms or at
all would adversely affect our business, ratings, operating
results and financial condition.
</DIV>

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    <B><I>We could be adversely affected by the loss of one or more
    principal employees or by an inability to retain and attract
    staff.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our business model is predicated upon the assumption that a
small group of highly experienced individuals will be able to
successfully implement our business plan. We currently have 15
employees and we rely substantially upon the services of Vernon
M. Endo, our Chief Executive Officer, and Richard Lutenski, our
Chief Financial Officer. Our success depends upon our ability to
retain and attract qualified employees and upon the ability of
our senior management and other key employees to implement our
business strategy. We believe there are only a limited number of
available qualified executives in the financial guaranty
reinsurance industry. Further, we require our employees to work
in Bermuda, which limits our ability to attract qualified
personnel. The loss of the services of Mr.&nbsp;Endo or
Mr.&nbsp;Lutenski or of any of our senior officers or other key
members of our management team could have a material adverse
effect on our business.
</DIV>

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    <TD>
    <B><I>Our ability to conduct our business may be adversely
    affected by Bermuda employment restrictions.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our location in Bermuda may serve as an impediment to attracting
and retaining experienced personnel. Under Bermuda law,
non-Bermudians (other than spouses of Bermudians, holders of a
permanent resident&#146;s certificate or holders of a working
resident&#146;s certificate) may not engage in any gainful
occupation in Bermuda without an appropriate governmental work
permit. Work permits may be granted or extended by the Bermuda
government upon showing that, after proper public advertisement
in most cases, no Bermudian (or spouse of a Bermudian, holder of
a permanent resident&#146;s certificate or holder of a working
resident&#146;s certificate) is available who meets the minimum
standard requirements for the advertised position. The Bermuda
government recently announced a new policy limiting the duration
of work permits to six years, with certain exemptions for key
employees. None of our senior management team are Bermudian, and
all of our officers are working in Bermuda under work permits
with expiry dates. The work permits for our senior management
will expire at various dates beginning in 2008. It is possible
that we could lose the services of one or more of these people
if we are unable to obtain or renew their work permits, which
may significantly and adversely affect our business.
</DIV>

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    <TD>
    <B><I>We rely to a significant degree on the underwriting
    decisions of the primary insurers and the risks associated with
    reinsurance underwriting could adversely affect us.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We conduct a substantial amount of our reinsurance business
through reinsurance treaties entered into with certain primary
insurers. As of December&nbsp;31, 2005, we had quota share
reinsurance treaties in place with three of the four largest
primary insurers. All financial guaranty transactions entered
into by a primary insurer that meet a treaty&#146;s inclusion
parameters are automatically ceded to us, according to the
participation percentage set forth in the treaty. Individual
transactions entered into with a primary insurer that are
&#147;treaty eligible&#148; may not be rejected by us during the
term of the reinsurance treaty. We do not separately evaluate
each of the individual risks assumed under our reinsurance
treaties. Therefore, we depend to a significant degree on the
original underwriting decisions made by primary insurers. We
cannot assure you that these primary insurers will adequately
evaluate the risks underwritten by them and subsequently
reinsured by us. Any unfavorable decisions made by these primary
insurers could adversely affect our financial condition or
results of operations and the premiums ceded may not adequately
compensate us for the risks we assume.
</DIV>

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    <TD>
    <B><I>Adverse selection by ceding primary insurers may adversely
    affect our financial condition and results of operations.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Most of our reinsurance business is written under treaties which
generally give a primary insurer some ability to select the
obligations ceded to us as long as the obligations are covered
by the terms of the treaty. Under our treaties, we generally do
not have the right to refuse such obligations, although we do
have some ability to add to &#147;exclusion lists&#148; certain
categories of obligations that we will not be required to
reinsure. As a result, primary insurers may adversely select the
insured obligations ceded to us (that is, cede those policies
that have greater risk relative to premium), thereby increasing
the chances that we will pay a claim or be required to maintain
additional capital by the rating agencies. Adverse selection by
the primary insurers could have a material adverse effect on our
financial condition and results of operations.
</DIV>

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    <TD>
    <B><I>We may incur liabilities because of the unconditional
    nature of our financial guaranty reinsurance policies.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Issuers of obligations insured by the financial guarantors whose
obligations we reinsure may default on those obligations because
of fraudulent or other intentional misconduct on the part of
such issuers, their officers or directors, employees, agents or
outside advisers or, in the case of public finance obligations,
public officials. Financial guaranty reinsurance provided by us
is unconditional and does not provide for any exclusion of
liability based on fraud or other misconduct. Despite any risk
analysis conducted by us or by the financial guarantors we
reinsure, it is impossible to predict which, if any, of the
obligations reinsured by us will result in claims against us
because of such fraudulent or other intentional misconduct
involving the issuer, or whether or to what extent we will have
any remedy available to us against any party in connection with
such conduct. Any such claims could have a material adverse
effect on our financial condition and results of operations.
</DIV>

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    <TD>
    <B><I>The performance of our investment portfolio may be
    adversely affected by economic conditions and by decisions of
    our investment manager.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Investment income is one of the primary sources of cash flow
supporting our operations and claim payments. The success of our
investment activity is influenced by general economic conditions
that may adversely affect the markets for interest rate
sensitive securities, including the extent and timing of
investor participation in such markets, the level and volatility
of interest rates and, consequently, the value of such
fixed-income securities. In addition, if our claims exceed our
cashflow, we could have unexpected losses resulting from forced
liquidation of investments before their maturity. We have
retained the professional asset management firm of MBIA Capital
Management Corp., or MBIA Capital, a wholly-owned subsidiary of
one of our shareholders, to manage our investment portfolio. Our
investment manager has discretionary authority over our
investment portfolio, subject to the investment guidelines
adopted by us and periodic review by the audit committee of our
board of directors. As a result, the performance of our
investment portfolio depends to a great extent on the ability of
our investment manager to select and manage appropriate
investments. Although our investment policies stress
diversification of risks and conservation of principal and
liquidity, our investments are subject to market-wide risks and
fluctuations, as well as to risks inherent in any particular
security or security position. For example, for the nine months
ended September&nbsp;30, 2005, we experienced net realized
investment losses on sales/maturity of securities of
$1.1&nbsp;million compared to a gain of $0.6&nbsp;million for
the nine months ended September&nbsp;30, 2004. Investment losses
for the nine months ended September&nbsp;30, 2005 and gains in
the comparable 2004 period were primarily attributable to
repositioning within our fixed income securities portfolio and
sales of securities at prevailing interest rates that were
higher in 2005 and lower in 2004 than at the time a security was
purchased. Investment losses could significantly decrease our
assets and surplus, resulting in a material adverse effect on
our financial condition and results of operations.
</DIV>

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    <TD>
    <B><I>Our net income may be volatile because a portion of the
    credit risk we assume is in the form of credit derivatives that
    are accounted for under Statement of Financial Accounting
    Standards No.&nbsp;133, or FAS&nbsp;133, which requires that
    these instruments be revalued quarterly.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Credit derivatives are classified as derivatives under
FAS&nbsp;133. Derivatives must be accounted for either as assets
or liabilities on the balance sheet and measured at fair market
value. Any event causing credit spreads (that is, the difference
in interest rates between comparable securities having different
credit risk) on an underlying security referenced in a credit
derivative in our portfolio either to widen or to tighten may
affect the fair value of the credit derivative and may increase
the volatility of our earnings. Although there is no cash flow
effect from this &#147;marking to market,&#148; net changes in
the fair market value of the derivative are reported in our
statement of operations and therefore will affect our reported
earnings. For example, for the nine months ended
September&nbsp;30, 2005, we reported net unrealized losses on
credit derivatives of $2.5&nbsp;million, compared to a gain of
$2.2&nbsp;million for the nine months ended September&nbsp;30,
2004. If the derivative is held to maturity and no credit loss
is incurred, any losses or gains previously reported would be
offset by corresponding gains or losses during the term of the
derivative such that they would cumulatively net to zero at
maturity.
</DIV>

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Common events that may cause credit spreads on an underlying
municipal or corporate security referenced in a credit
derivative to fluctuate include changes in the state of national
or regional economic conditions, industry cyclicality, changes
to a company&#146;s competitive position within an industry,
management changes, changes in the ratings of the underlying
security, movements in interest rates, default or failure to pay
interest, or any other factor leading investors to revise
expectations about the issuer&#146;s ability to pay principal
and interest on its debt obligations. Similarly, common events
that may cause credit spreads on an underlying structured
security referenced in a credit derivative to fluctuate may
include the occurrence and severity of collateral defaults,
changes in demographic trends and their impact on the levels of
credit enhancement, rating changes, changes in interest rates or
prepayment speeds, or any other factor leading investors to
revise expectations about the risk of the collateral or the
ability of the servicer to collect payments on the underlying
assets sufficient to pay principal and interest. Estimating the
fair value of credit derivatives involves substantial judgment
as there is no standard accepted fair value model. All models
require significant assumptions and many derivatives are not
actively traded or exchanged.
</DIV>

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    <B><I>We may be adversely affected by public finance exposures
    in counties impacted by Hurricane Katrina.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of June&nbsp;30, 2005, our par outstanding on public finance
exposures in counties designated by the Federal Emergency
Management Agency, which we refer to as FEMA, for both
individual and public assistance in the States of Louisiana,
Mississippi and Alabama totals approximately $119&nbsp;million,
and of that amount approximately $36&nbsp;million is in Greater
New Orleans (comprised of Orleans, St. Bernard, St. Charles,
Plaquemines and Jefferson parishes). Within the affected areas,
we are closely monitoring 23 specific obligations with net par
outstanding of approximately $40&nbsp;million. As of
September&nbsp;30, 2005, we have not recorded any portfolio
reserves or case reserves for this event; and no case reserves
have been reported to us by any of our primary insurer clients
through September&nbsp;30, 2005. In addition, only four claims
have been paid, in the total amount of approximately $13,000,
for which a full reimbursement has been received. Significant
uncertainty exists with regard to both the probability of
defaults occurring and the loss severities that will apply to
any defaults that do occur. The occurrence of any such defaults
or significant loss severities could materially adversely affect
our financial condition and results of operations.
</DIV>

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    <TD>
    <B><I>We could face unanticipated losses from war, terrorism,
    business failures, political unrest and natural disasters, and
    these or other unanticipated losses could have a material
    adverse effect on our financial condition and results of
    operations.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We may have exposure to large, unexpected losses resulting from
future man-made and natural catastrophic events, such as acts of
war, acts of terrorism, political instability, hurricanes,
earthquakes and floods. For example, as discussed in the
preceding risk factor, we currently have public finance
exposures in counties impacted by Hurricane Katrina. We also may
have exposure to significant downturns in
</DIV>

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economic conditions, including recessions in particular
geographic areas and business failures in particular industries.
For example, recent bankruptcies in the commercial airline
business have resulted in potential structured finance exposures
for us with respect to insured obligations known as Enhanced
Equipment Trust&nbsp;Certificates, which we refer to as EETCs.
We define EETCs as securitizations backed by whole aircraft
leases or mortgages with a single lessee or mortgagor and
limited cross-collateralization of first loss credit support.
EETCs are distinguished from pooled aircraft securitizations,
which have multiple lessees or mortgagors and/or
cross-collateralized first loss credit support. We have
reinsured EETC&#146;s with par outstanding as of
September&nbsp;30, 2005 of $130&nbsp;million, of which
$127&nbsp;million is on our watch list. These risks are
inherently unpredictable and recent events may lead to increased
frequency and severity of defaults under the policies we
reinsure. It is difficult to predict the timing of these events
with statistical certainty or to estimate the amount of loss
that any given occurrence will generate. To the extent that
losses from these risks occur in excess of amounts we have
reserved, our financial condition and results of operations
could be materially adversely affected.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Our holding company structure and certain regulatory and
    other constraints affect our ability to pay dividends and make
    other payments.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
RAM Holdings is a holding company and as such has no substantial
operations of its own or assets other than its ownership of the
shares of its only subsidiary, RAM Re. For the near future,
dividends and other permitted distributions from RAM Re are
expected to be RAM Holdings&#146; only source of funds to meet
ongoing cash requirements, including debt service payments and
other expenses, and to pay dividends, if any, to shareholders.
Bermuda law and regulations, including but not limited to
Bermuda insurance regulations, restrict the declaration and
payment of dividends and the making of distributions by RAM Re,
unless certain regulatory requirements are met. In addition,
certain treaty obligations incurred by RAM Re in the course of
its business require it to post collateral in trusts and those
funds are unavailable for dividend or distribution to RAM
Holdings. The inability of RAM Re to pay dividends in an amount
sufficient to enable RAM Holdings to meet its cash requirements
at the holding company level could affect RAM Holdings&#146;
ability to repay debt or have a material adverse effect on its
operations.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
RAM Holdings is also subject to regulatory constraints in
Bermuda that will affect its ability to pay dividends on its
common shares and make other payments. In addition, payments of
principal to the holder of our $40.0&nbsp;million aggregate
principal amount of 6.875%&nbsp;Senior Notes due 2024 will
receive priority over any payments of dividends on our common
shares. See &#147;&#151;&nbsp;Risks Related to Our Status as a
Bermuda Company&nbsp;&#151; Our ability to pay dividends may be
limited by Bermuda law,&#148; &#147;Dividend Policy,&#148;
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&nbsp;&#151; Liquidity and
Capital Resources,&#148; and &#147;Regulatory Matters&#148;.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Estimates of losses, income and expenses relating to
    underwriting financial guaranty products are based on modeling
    and assumptions that, if incorrect, could have a material
    adverse affect on our financial condition and results of
    operations.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our decisions to underwrite financial guaranty products are
based on historical data and models. There can be no assurance
that the historical data relating to financial guaranty losses
available to and relied on by the industry, including us, will
approximate actual experience in the future. For example, the
sample period for observed occurrences may not be adequate, the
underlying conditions from which historical loss data were
derived may have changed, and historical data with respect to
certain types of losses may be inadequate. Actual cash flows may
also deviate significantly from assumptions, and such deviations
could have a material adverse effect on our financial condition
and operating results.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>If claims exceed our loss reserves, our financial results
    could be significantly adversely affected.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our results of operations and financial condition depend upon
our ability to assess accurately and manage the potential losses
associated with the risks that we reinsure. There is a diversity
of practice within the financial guaranty industry in loss
reserving practices and setting our loss reserves involves
significant reliance on estimates of the likelihood, magnitude
and timing of anticipated losses. In making
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
such estimates, we significantly rely on reports of loss claims
from our primary insurers. We establish both case basis and
unallocated reserves for losses. We establish case basis
reserves when we determine a default has occurred or there is a
high probability of a default. We also maintain unallocated
reserves to reflect our estimate of general deterioration in our
insured credits. While we use the most current information
available and our best judgment in setting reserve estimates,
this is an inherently uncertain process. Accordingly, actual
claims and claim expenses paid will deviate from the reserve
estimates reflected in our combined financial statements, and
such deviations could be material. If our loss reserves at any
time are determined to be inadequate, we will be required to
increase loss reserves at the time of such determination. This
could significantly adversely impact our financial results.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Several of our founding shareholders may have conflicts of
    interest with us and they may take actions with respect to their
    ownership interests that have an adverse effect on our other
    shareholders.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Some of our shareholders engage in commercial activities and
enter into transactions or agreements with us or in competition
with us, which may give rise to conflicts of interest. These
parties may take actions that are not in our other
shareholders&#146; best interests. See &#147;Certain
Relationships and Related Transactions&nbsp;&#151; Transactions
and Relationships with Investors.&#148; In addition, we may not
be in a position to influence any party&#146;s decision to
engage in activities that would give rise to a conflict of
interest. For example, our largest shareholder, PMI, is expected
to have more than 20% of the voting power of our shares after
the completion of this offering and therefore would have the
ability to elect two directors through cumulative voting. PMI
could use its influence in a manner adverse to our other
shareholders&#146; best interests.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Risks Related to Our Industry</B>
</DIV>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>The primary financial guaranty insurance industry remains
    in an excess capital position which, if it continues, could
    result in lower amounts of insurance ceded.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Because of the significant increase in capital by many of the
large primary insurers and the recent lower growth in new
business, many of the primary insurers have sufficient capital
to support their business pursuant to regulatory and rating
agency capital requirements. This is one reason why the primary
insurers have ceded less reinsurance in 2003 and through the
nine months ended September&nbsp;30, 2005, than in prior recent
years. If this excess capital position continues for a prolonged
period, the primary insurers are likely to cut back or cancel
treaties, increase ceding commissions, increase adverse
selection of obligations ceded to reinsurers and generally
diminish the business terms on which they cede business. Any of
these activities would have an adverse effect on our financial
condition and results of operation.
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Increased capacity in the financial guaranty reinsurance
    industry may have a material adverse effect on the
    industry.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The current number of financial guaranty reinsurance companies
is relatively limited. Consequently, the industry is
particularly vulnerable to swings in capacity based on the entry
or exit of one or a small number of financial guaranty
reinsurers. The most significant barriers to entry for new
financial guaranty reinsurance competitors are rating agency
requirements and regulatory capital requirements, both of which
are lower for entrants into the financial guaranty reinsurance
market than for the primary financial guaranty market. New
entrants into the market could have an adverse effect on all
financial guaranty reinsurers by offering reinsurance on more
favorable terms than currently being offered by existing
reinsurers.
</DIV>

<DIV style="margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Market demand for financial guaranty products may
    decrease, affecting the profitability and competitiveness of the
    reinsurance industry.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The demand for financial guaranty reinsurance depends upon many
factors, most of which are beyond our control. In addition to
the capital position of the primary insurers, the financial
guaranty reinsurance industry, and the risks associated with the
industry, tend to be cyclical and track the demand for primary
financial guaranty insurance. The primary financial guaranty
insurance industry could be materially adversely affected by
extended national or regional economic recessions, business
failures, terrorist acts,
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
acts of war or combinations of such factors. In particular, the
perceived financial strength of financial guaranty insurers
affects demand for financial guaranty insurance, which in turn
affects demand for reinsurance. Should a major financial
guarantor, or the industry generally, have its financial
strength ratings lowered, or suffer a deterioration in investor
confidence, demand for financial guaranty insurance and as a
result, reinsurance, may be reduced or eliminated entirely.
Further, demand for financial guaranty insurance may be
negatively affected to the extent that conditions arise which
narrow the credit spread between insured and uninsured
obligations or between &#147;AAA&#148; rated securities and
lower rated securities. The purchase of insurance during periods
of relatively narrower credit rate spreads will generally
provide lower cost savings to the issuer than during periods of
relatively wider spreads. These lower cost savings generally are
accompanied by a corresponding decrease in demand for financial
guaranty insurance and as a result, decreased demand for the
type of reinsurance that we provide.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Premium rates for financial guaranty reinsurance products
    may decline due to factors beyond the control of financial
    guaranty reinsurers.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Premium rates on financial guaranty reinsurance are equal to
premium rates charged by the primary insurer less the ceding
commission paid by the reinsurer. Premium rates charged by
primary insurers are affected by factors beyond the control of
financial guaranty reinsurers, such as investor appraisals of
the insured credits, the spread between interest rates
prevailing on insured and uninsured obligations and capital
charges associated with these exposures as determined by the
rating agencies, competition among primary insurers as well as
competition with other forms of credit enhancement. Accordingly,
any decline in premium rates on business written by the primary
insurers would have a negative effect on the premium rates and
the profitability of reinsurers, including us.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Changes to accounting rules relating to loss reserve
    practices in the financial guaranty insurance and reinsurance
    industry could have a material adverse effect on the
    industry.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In January and February of 2005, the Securities and Exchange
Commission, or the SEC, discussed with financial guaranty
industry participants the diversity in practice with respect to
their accounting policies for loss reserves. In June 2005, the
Financial Accounting Standards Board, or the FASB, added a
project to its agenda to consider the accounting by financial
guaranty insurers for claims liability recognition, premium
recognition and deferred acquisition costs. The proposed and
final documents are expected to be issued in 2006. When the FASB
or the SEC reaches a conclusion on this issue, we and the rest
of the financial guaranty industry may be required to change
some aspects of our loss reserving policies and the potential
changes could extend to premium and expense recognition, which
in turn could have a material adverse effect on us and the
financial guaranty industry.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Legislative and regulatory changes and interpretations
    could harm the financial guaranty reinsurance industry.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Changes in laws and regulations affecting the public finance and
structured securities markets, the financial guaranty insurance
and reinsurance markets and the credit derivative markets, as
well as other governmental regulations, may subject reinsurers
of financial guaranty products to additional legal liability,
affect the demand for the products they provide or increase
costs. The business and legal liabilities of reinsurers of
financial guaranty products may also be affected by consumer
lending and insurance laws and regulations in the countries of
policy origin. If changes with respect to these laws and
regulations are resolved in a way that is unfavorable to the
industry, revenues and profitability of the industry could
significantly decline.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Risks Related to our Common Shares and this Offering</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>There is no prior public market for our common shares and
    no assurance that an active trading market will develop.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There currently is no public trading market for our common
shares and there can be no assurance that an active trading
market will develop or continue upon completion of this offering
or that the market price of our common shares will not decline
below the initial public offering price. The initial public
offering price per common share will be determined by agreement
among us and the representatives of the underwriters and may not
be indicative of the market price of our common shares after our
initial public offering.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Future sales of common shares may affect the market price
    of our common shares.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Sales of substantial amounts of our common shares in the public
market following our initial public offering, or the perception
that such sales could occur, could adversely affect the market
price of our common shares and may make it more difficult for
shareholders to sell common shares at a time and price which
they deem appropriate. We cannot predict what effect, if any,
future sales of our common shares, or the availability of common
shares for future sale, will have on the market price of our
common shares. We, certain of our principal shareholders, all of
our executive officers and all members of our board of directors
will agree not to offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to
purchase, lend or otherwise transfer or dispose of, directly or
indirectly, any common shares, or any securities convertible
into or exercisable for any common shares or any right to
acquire our common shares, or enter into any swap or other
arrangement that transfers to another, in whole or in part,
directly or indirectly, any of the economic consequences of
ownership of the common shares, whether any such transaction is
to be settled by delivery of common shares or other securities,
in cash or otherwise for a period of 180&nbsp;days following the
closing of this offering, subject to certain exceptions.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Investors of common shares in this offering will suffer
    immediate and substantial dilution.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If investors purchase common shares in this offering, they will
suffer immediate and substantial dilution of their investment,
as the initial offering price per common share is significantly
higher than our net book value per share. Based upon the
issuance and sale
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common
shares at a share price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
shareholders will incur immediate dilution of approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;in
the net book value per common share if they purchase common
shares in this offering. We may issue additional common shares
or debt convertible into our common shares in the future to
raise capital in connection with our business strategy or for
other reasons. These issuances may cause further dilution to our
shareholders.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>There are provisions in our bye-laws that may reduce or
    increase the voting rights of our common shares.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In general, and except as provided below, shareholders have one
vote for each common share held by them and are entitled to vote
at all meetings of shareholders. However, if, and so long as,
the shares of a shareholder are treated as &#147;controlled
shares&#148; of any U.S.&nbsp;Person (as defined in &#147;Risks
Related to Taxation&nbsp;&#151; Holders of 10% or more of our
shares may be subject to U.S.&nbsp;federal income taxation under
the controlled foreign corporation rules&#148;) other than PMI,
and such controlled shares constitute more than 9.9% of the
votes conferred by our issued shares, the voting rights with
respect to the controlled shares of such U.S.&nbsp;Person (that
is, a &#147;9.9% U.S.&nbsp;Shareholder&#148;) shall be limited,
in the aggregate, to a voting power of 9.9%, under a procedure
specified in our bye-laws. The procedure is applied repeatedly
until the voting power of all 9.9% U.S.&nbsp;Shareholders has
been reduced to 9.9%. In addition, our board of directors may
limit a shareholder&#146;s voting rights where it deems
appropriate to do so to (i)&nbsp;avoid the existence of any 9.9%
U.S.&nbsp;Shareholders or 24.5% U.S.&nbsp;Shareholders, and
(ii)&nbsp;avoid non-de minimis adverse tax, legal or regulatory
consequences to us, any direct or indirect holder of our shares
or its affiliates. &#147;Controlled shares&#148; include, among
other things, all of our shares that a U.S.&nbsp;Person is
deemed to own directly, indirectly or constructively (within the
meaning of sections 957 and 958 of the Internal Revenue Code of
1986, as amended, which we refer to as the Code). In addition,
at any time that the controlled shares of
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
PMI constitute (i)&nbsp;more than 9.9% of the voting power
conferred by our issued shares and (ii)&nbsp;24.5% or more of
either the voting power or value of our issued shares, the
voting rights with respect to the controlled shares owned by PMI
will be limited to a voting power of 9.9%.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For example, the voting power of shares owned by an investor may
be reduced or in certain cases eliminated, if, pursuant to
certain constructive ownership rules, shares owned or deemed to
be owned by the investor are attributed to another investor or
shares owned or deemed owned by another investor are attributed
to the investor or the investor is invested in an entity in
which another investor invests.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event the above voting limitations must be applied as
described above, the voting limitation shall apply to PMI only
after the limitation has been applied to all other shareholders
whose votes are subject to reduction and the voting power held
by PMI shall not be reduced to below 9.9% by operation of these
provisions. This would likely have the effect of eliminating the
voting power of all other shareholders whose votes are subject
to reduction.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under these provisions, certain shareholders may have their
voting rights limited to less than one vote per share, while
other shareholders may have voting rights in excess of one vote
per share. See &#147;Description of Share Capital&nbsp;&#151;
Voting Rights.&#148; Moreover, these provisions could have the
effect of reducing the votes of certain shareholders who would
not otherwise be subject to the 9.9% limitation by virtue of
their direct share ownership. Our bye-laws provide that we will
endeavor to notify shareholders of their voting interests prior
to any vote taken by them. See &#147;Description of Share
Capital&nbsp;&#151; Voting Rights.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also have the authority under our bye-laws to request
specified information from any shareholder for the purpose of
determining whether a shareholder&#146;s voting rights are to be
reallocated under the bye-laws. If a shareholder fails to
respond to our request for information or submits incomplete or
inaccurate information in response to a request by us, we may,
in our sole discretion, eliminate such shareholder&#146;s voting
rights.
</DIV>

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    <TD>
    <B><I>Our board of directors may be more likely to exercise
    their right under our bye-laws to decline to approve a transfer
    of common shares because of potential adverse tax, legal or
    regulatory consequences, and that may require shareholders to
    sell their common shares.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our board of directors may decline to approve or register a
transfer of any common shares (1)&nbsp;if it appears to the
board of directors, after taking into account the limitations on
voting rights contained in our bye-laws, that a non-de minimis
adverse tax, regulatory or legal consequence to us, any direct
or indirect holder of our shares or its affiliates may occur as
a result of such transfer, or (2)&nbsp;subject to any applicable
requirements of or commitments to any exchange or trading system
for our common shares, if a written opinion from counsel
supporting the legality of the transaction under
U.S.&nbsp;securities laws has not been provided or if any
required governmental approvals have not been obtained.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD>
    <B><I>Our board of directors may be more likely to exercise
    their right under our bye-laws to decline to approve a
    repurchase of our own shares and an issuance of any of our
    unissued shares because of potential adverse tax, legal or
    regulatory consequences.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under our bye-laws and subject to Bermuda law, our board of
directors may decline to approve a repurchase of our shares or
an issuance of any of our unissued shares (including the
issuance of any shares or class of shares with preferred,
deferred or other special rights) if the board of directors
determines that it may result in a non-de minimis adverse tax,
legal or regulatory consequence to us, any direct or indirect
holder of our shares or its affiliates. See &#147;Description of
Share Capital.&#148;
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Risks Related to Our Status as a Bermuda Company</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD>
    <B><I>Risks of operating as a foreign corporation could
    adversely affect our ability to conduct business in the United
    States.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We do not maintain an office or solicit, advertise, settle
claims or conduct other insurance activities in any jurisdiction
other than Bermuda where the conduct of such activities would
require us to be so authorized or admitted. We believe we
conduct our U.S.&nbsp;business in a manner similar to that
employed by other non-admitted reinsurers that provide
reinsurance to U.S.&nbsp;primary insurers. We believe that, to
the extent that these operating guidelines are followed, our
activities comply with applicable insurance laws and
regulations. While we are not admitted to do business in any
jurisdiction except Bermuda, insurance departments in the United
States or elsewhere might take the position that our activities
violate the prohibitions on the transaction of insurance by a
non-admitted insurer. The insurance laws of each state of the
United States and of many
<FONT style="white-space: nowrap">non-U.S.&nbsp;</FONT>jurisdictions
regulate the sale of insurance and reinsurance within that
jurisdiction by alien insurers and reinsurers, such as us, which
are not authorized or admitted to do business within such
jurisdiction. If a state insurance department were to raise this
issue and prevail, it could argue further that we are
transacting insurance in that state without appropriate licenses
or approvals. In that event, the insurance department could
attempt to take any of several actions, including imposing fines
or penalties on us. There can be no assurance that our location,
regulatory status or restrictions on our activities resulting
therefrom would not adversely affect our ability to conduct our
business. In the event such issues or disputes arise, we may be
required to consider various alternatives to our operations,
including modifying or restricting the manner of conducting our
business or, with respect to cessions by primary insurers in the
United States, applying to conduct business as an admitted or
approved reinsurer, establishing trust funds to secure our
reinsurance performance or having to comply with the various
financial and other requirements necessary to operate on an
admitted or approved basis, either directly or by subjecting us
to U.S.&nbsp;taxation.
</DIV>

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    <TD>
    <B><I>Bermuda insurance regulations may adversely affect our
    ability to write reinsurance policies.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are registered and licensed to conduct insurance and
reinsurance from within Bermuda, and the statutes, regulations
and policies of Bermuda may affect our ability to write
reinsurance policies and to make certain investments or
distributions. Bermuda statutes and regulations applicable to us
require that we, among other things: maintain minimum levels of
capital and surplus, satisfy solvency standards, restrict
dividends and distributions (including returns of capital), and
cooperate with certain periodic and other examinations by the
BMA of our financial condition. We are unable to predict what
additional government regulations, if any, affecting our
business may be promulgated in Bermuda in the future or how such
regulations may be interpreted. In addition, no assurances can
be given that, if we were to become subject to any insurance
laws of the U.S.&nbsp;or any state thereof or of any other
country at any time in the future, we would be in compliance
with such laws.
</DIV>

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    <TD>
    <B><I>Our ability to pay dividends may be limited by Bermuda
    law.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any dividends paid on our common shares are subject to
limitations imposed on dividends under Bermuda law and
regulations. Under the Bermuda Insurance Act 1978, which we
refer to as the Bermuda Insurance Act, and related regulations,
RAM Re will be required to maintain certain minimum solvency
levels and RAM Re will be prohibited from declaring or paying
dividends that would result in noncompliance with such
requirement. Further, RAM Re may not reduce its total statutory
capital by 15% or more, as set out in its previous year&#146;s
financial statements, without the prior approval of the BMA. In
addition, under the Bermuda Companies Act, we may only declare
or pay a dividend if, among other matters, there are reasonable
grounds for believing that we are, and will be after any such
payment, able to pay our liabilities as they become due and that
the realizable value of our assets will not thereby be less than
the sum of the issued share capital and share premium accounts.
These restrictions may limit the amount of funds available for
distribution to holders of our common shares. See &#147;Dividend
Policy.&#148;
</DIV>

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    <TD></TD>
    <TD>
    <B><I>U.S.&nbsp;Persons who own our common shares may have more
    difficulty in protecting their interests than if they held
    shares of a U.S.&nbsp;corporation.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Bermuda Companies Act, which applies to us, differs in
certain material respects from laws generally applicable to
U.S.&nbsp;corporations and their shareholders. Set forth below
is a summary of certain significant provisions of the Bermuda
Companies Act which includes, where relevant, information on
modifications thereto adopted pursuant to our bye-laws,
applicable to us, which differ in certain respects from
provisions of Delaware corporate law. Because the following
statements are summaries, they do not discuss all aspects of
Bermuda law that may be relevant to us and our shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Interested Directors.</I> Bermuda law and our bye-laws
provide that we cannot void any transaction we enter into in
which a director has an interest, nor can such director be
liable to us for any profit realized pursuant to such
transaction, provided the nature of the interest is disclosed at
the first opportunity at a meeting of directors, or in writing,
to the directors. Under Delaware law such transaction would not
be voidable if: (i)&nbsp;the material facts as to such
interested director&#146;s relationship or interests were
disclosed or were known to the board of directors and the board
had in good faith authorized the transaction by the affirmative
vote of a majority of the disinterested directors,
(ii)&nbsp;such material facts were disclosed or were known to
the stockholders entitled to vote on such transaction and the
transaction was specifically approved in good faith by vote of
the majority of shares entitled to vote thereon, or
(iii)&nbsp;the transaction was fair as to the corporation as of
the time it was authorized, approved or ratified. Under Delaware
law, the interested director could be held liable for a
transaction in which the director derived an improper personal
benefit.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Business Combinations with Large Shareholders or
Affiliates.</I> As a Bermuda company, we may enter into business
combinations with our large shareholders or affiliates,
including asset sales and other transactions in which a large
shareholder or affiliate receives, or could receive, a financial
benefit that is greater than that received, or to be received,
by other shareholders, with prior approval from our board of
directors but without obtaining prior approval from our
shareholders. Amalgamations require the approval of the board of
directors and, except in the case of certain types of
amalgamations, a resolution of the shareholders approved by at
least 66% of the votes cast. If we were a Delaware corporation,
we would need prior approval from our board of directors or a
supermajority of our shareholders to enter into a business
combination with an interested shareholder for a period of three
years from the time the person became an interested shareholder,
unless we opted out of the relevant Delaware statute.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Shareholders&#146; Suits.</I> The rights of shareholders
under Bermuda law are not as extensive as the rights of
shareholders in many U.S.&nbsp;jurisdictions. Class actions and
derivative actions are generally not available to shareholders
under the laws of Bermuda. However, the Bermuda courts
ordinarily would be expected to follow English case law
precedent, which would permit a shareholder to commence an
action in the name of the company to remedy a wrong done to the
company where an act is alleged to be beyond the corporate power
of the company, is illegal or would result in the violation of
our memorandum of association or bye-laws. Furthermore,
consideration would be given by the court to acts that are
alleged to constitute a fraud against the minority shareholders
or where an act requires the approval of a greater percentage of
our shareholders than actually approved it. The winning party in
such an action generally would be able to recover a portion of
attorneys&#146; fees incurred in connection with such action.
When the affairs of a company are being conducted in a manner
which is oppressive or prejudicial to the interests of some part
of the shareholders, one or more shareholders may apply to the
Supreme Court of Bermuda, which may make such order as it sees
fit, including an order regulating the conduct of the
company&#146;s affairs in the future or ordering the purchase of
the shares of any shareholders by other shareholders or by the
company. Our bye-laws provide that shareholders waive all claims
or rights of action that they might have, individually or in the
right of the company, against any director or officer for any
act or failure to act in the performance of such director&#146;s
or officer&#146;s duties, except with respect to any fraud or
dishonesty of such director or officer. Class actions and
derivative actions generally are available to stockholders under
Delaware law for, among other things, breach of fiduciary duty,
corporate waste and actions not taken in accordance with
applicable law. In such actions, the court has discretion to
permit the winning party to recover attorneys&#146; fees
incurred in connection with such action.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Indemnification of Directors and Officers.</I> We will
indemnify our directors or officers or any person appointed to
any committee by the board of directors acting in their capacity
as such in relation to any of our affairs for any loss arising
or liability attaching to them by virtue of any rule of law in
respect of any negligence, default, breach of duty or breach of
trust of which such person may be guilty in relation to the
company other than in respect of his own fraud or dishonesty.
Under Delaware law, a corporation may indemnify a director or
officer of the corporation against expenses (including
attorneys&#146; fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred in defense of an
action, suit or proceeding by reason of such position if such
director or officer acted in good faith and in a manner he or
she reasonably believed to be in or not be opposed to the best
interests of the corporation and, with respect to any criminal
action or proceeding, such director or officer had no reasonable
cause to believe his or her conduct was unlawful.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD></TD>
    <TD>
    <B><I>Because we are a Bermuda company, it may be difficult to
    enforce judgments against us or against our directors and
    executive officers.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Because we are organized under the laws of Bermuda, it may not
be possible to enforce court judgments obtained in the
U.S.&nbsp;against us based on the civil liability provisions of
the federal or state securities laws of the U.S.&nbsp;in Bermuda
or in countries other than the U.S.&nbsp;where we have assets.
In addition, there is some doubt as to whether the courts of
Bermuda and other countries would recognize or enforce judgments
of U.S.&nbsp;courts obtained against us or our directors or
officers based on the civil liabilities provisions of the
federal or state securities laws of the U.S., or would hear
actions against us or those persons based on those laws. We have
been advised by our legal advisors in Bermuda that the U.S. and
Bermuda do not currently have a treaty providing for the
reciprocal recognition and enforcement of judgments in civil and
commercial matters. Therefore, a final judgment for the payment
of money rendered by any federal or state court in the
U.S.&nbsp;based on civil liability, whether or not based solely
on U.S.&nbsp;federal or state securities law, would not
automatically be enforceable in Bermuda. There are grounds upon
which a Bermuda court may not enforce the judgments of
U.S.&nbsp;courts and some remedies available under the laws of
U.S.&nbsp;jurisdictions, including some remedies available under
U.S.&nbsp;federal securities laws, may not be permitted under
Bermuda courts as contrary to public policy in Bermuda.
Similarly, those judgments may not be enforceable in countries
other than the U.S.&nbsp;where we have assets. Further, no claim
may be brought in Bermuda by or against us or our directors and
officers in the first instance for violation of
U.S.&nbsp;federal securities laws because these laws have no
extraterritorial application under Bermuda law and do not have
force of law in Bermuda; however, a Bermuda court may impose
civil liability, including the possibility of monetary damages,
on us or our directors and officers if the facts alleged in a
complaint constitute or give rise to a cause of action under
Bermuda law.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Risks Related to Taxation</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD>
    <B><I>We may become subject to taxes in Bermuda after 2016,
    which may have a material adverse effect on our financial
    condition and operating results and on an investment in our
    shares.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Bermuda Minister of Finance, under the Exempted Undertakings
Tax Protection Act 1966, as amended, of Bermuda, has given each
of RAM Holdings and RAM Re an assurance that if any legislation
is enacted in Bermuda that would impose tax computed on profits
or income, or computed on any capital asset, gain or
appreciation, or any tax in the nature of estate duty or
inheritance tax, then the imposition of any such tax will not be
applicable to RAM Holdings, RAM Re or any of their respective
operations or their respective shares, debentures or other
obligations (except insofar as such tax applies to persons
ordinarily resident in Bermuda or to any taxes payable by them
in respect of real property or leasehold interests in Bermuda
held by them) until March&nbsp;28, 2016. See &#147;Material Tax
Considerations&nbsp;&#151; Taxation of RAM Holdings and RAM
Re&nbsp;&#151; Bermuda.&#148; Given the limited duration of the
Minister of Finance&#146;s assurance, we cannot be certain that
we will not be subject to any Bermuda tax after March&nbsp;28,
2016. Since we are incorporated in Bermuda, we will be subject
to changes of law or regulation in Bermuda that may have an
adverse impact on our operations, including imposition of tax
liability. See &#147;Material Tax Considerations&nbsp;&#151;
Taxation of RAM Holdings and RAM Re&nbsp;&#151; Bermuda.&#148;
</DIV>

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    <TD></TD>
    <TD>
    <B><I>The impact of Bermuda&#146;s letter of commitment to the
    Organization for Economic Cooperation and Development, or the
    OECD, to eliminate harmful tax practices is uncertain and could
    adversely affect our tax status in Bermuda.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The OECD, has published reports and launched a global dialogue
among member and non-member countries on measures to limit
harmful tax competition. These measures are largely directed at
counteracting the effects of tax havens and preferential tax
regimes in countries around the world. In the OECD&#146;s report
dated April&nbsp;18, 2002 and updated as of June 2004, Bermuda
was not listed as an &#147;uncooperative tax haven.&#148;
Bermuda has signed a letter committing itself to eliminate
harmful tax practices and to embrace international tax standards
for transparency, exchange of information and the elimination of
any aspects of the regimes for financial and other services that
attract business with no substantial domestic activity. We are
not able to predict what changes will arise from the commitment
or whether such changes will subject us to additional taxes.
</DIV>

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    <TD></TD>
    <TD>
    <B><I>We may be subject to U.S.&nbsp;federal income tax, which
    would have an adverse effect on our financial condition and
    results of operations and on an investment in our shares.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If either RAM Holdings or RAM Re were considered to be engaged
in a trade or business in the United States, it could be subject
to U.S.&nbsp;federal income and additional branch profits taxes
on the portion of its earnings that are effectively connected to
such U.S.&nbsp;business or in the case of RAM Re, if it is
entitled to benefits under the United States income tax treaty
with Bermuda and if RAM Re were considered engaged in a trade or
business in the United States through a permanent establishment,
RAM Re could be subject to U.S.&nbsp;federal income tax on the
portion of its earnings that are attributable to its permanent
establishment in the United States, in which case its results of
operations could be materially adversely affected. RAM Holdings
and RAM Re are Bermuda companies. We intend to manage our
business so that each of these companies should operate in such
a manner that neither of these companies should be treated as
engaged in a U.S.&nbsp;trade or business and, thus, should not
be subject to U.S.&nbsp;federal taxation (other than
U.S.&nbsp;federal excise tax on insurance and reinsurance
premium income attributable to insuring or reinsuring
U.S.&nbsp;risks and U.S.&nbsp;federal withholding tax on certain
U.S.&nbsp;source investment income). However, because there is
considerable uncertainty as to the activities which constitute
being engaged in a trade or business within the United States,
we cannot be certain that the IRS will not contend successfully
that we are engaged in a trade or business in the U.S.&nbsp;See
&#147;Material Tax Considerations&nbsp;&#151; Taxation of RAM
Holdings and RAM Re&nbsp;&#151; United States.&#148;
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Holders of 10% or more of our shares may be subject to
    U.S.&nbsp;income taxation under the controlled foreign
    corporation rules.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If you are a &#147;10% U.S.&nbsp;Shareholder&#148; of a foreign
corporation (defined as a U.S.&nbsp;Person who owns (directly,
indirectly through foreign entities or constructively (as
defined below) at least 10% of the total combined voting power
of all classes of stock entitled to vote) that is a controlled
foreign corporation, which we refer to as a CFC, for an
uninterrupted period of 30&nbsp;days or more during a taxable
year, and you own shares in the CFC directly or indirectly
through foreign entities on the last day of the CFC&#146;s
taxable year, you must include in your gross income for
U.S.&nbsp;federal income tax purposes your <I>pro rata </I>share
of the CFC&#146;s &#147;subpart F income,&#148; even if the
subpart F income is not distributed. &#147;Subpart F
income&#148; of a foreign insurance corporation typically
includes foreign personal holding company income (such as
interest, dividends and other types of passive income), as well
as insurance and reinsurance income (including underwriting and
investment income). A foreign corporation is considered a CFC if
10% U.S.&nbsp;Shareholders own (directly, indirectly through
foreign entities or by attribution by application of the
constructive ownership rules of section&nbsp;958(b) of the Code)
(that is, &#147;constructively&#148;) more than 50% of the total
combined voting power of all classes of voting stock of that
foreign corporation or the total value of all stock of that
corporation. For purposes of taking into account insurance
income, a CFC also includes a foreign insurance company in which
more than 25% of the total combined voting power of all classes
of stock (or more than 25% of the total value of the stock) is
owned (directly, indirectly through
<FONT style="white-space: nowrap">non-U.S.&nbsp;</FONT>entities
or constructively) by 10% U.S.&nbsp;Shareholders on any day
during the taxable year of such corporation. For purposes of
this discussion, the term &#147;U.S.&nbsp;Person&#148; means:
(i)&nbsp;an individual citizen or
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
resident of the United States, (ii)&nbsp;a partnership or
corporation created or organized in or under the laws of the
United States, or under the laws of any State thereof (including
the District of Columbia), (iii)&nbsp;an estate, the income of
which is subject to U.S.&nbsp;federal income taxation regardless
of its source, (iv)&nbsp;a trust if either (x)&nbsp;a court
within the United States is able to exercise primary supervision
over the administration of such trust and one or more
U.S.&nbsp;Persons have the authority to control all substantial
decisions of such trust or (y)&nbsp;the trust has a valid
election in effect to be treated as a U.S.&nbsp;Person for
U.S.&nbsp;federal income tax purposes or (v)&nbsp;any other
person or entity that is treated for U.S.&nbsp;federal income
tax purposes as if it were one of the foregoing. We believe,
subject to the discussion below, that because of the anticipated
dispersion of our share ownership, provisions in our
organizational documents that limit voting power (these
provisions are described under &#147;Description of Share
Capital&#148;) and other factors, no U.S.&nbsp;Person other than
PMI who owns our common shares directly or indirectly through
one or more foreign entities should be treated as owning
(directly, indirectly through foreign entities or
constructively) 10% or more of the total voting power of all
classes of RAM Holdings&#146; or RAM Re&#146;s shares. The
provisions in our organizational documents that limit voting
power could reduce or eliminate an investor&#146;s voting power
in circumstances in which, pursuant to certain constructive
ownership rules, shares owned or deemed owned by the investor
are attributed to another investor or shares owned or deemed
owned by another investor are attributed to the investor or the
investor is invested in an entity in which another investor
invests. However, neither we nor investors may be aware of
circumstances in which shares may be so attributed in order to
timely effectuate these provisions. In addition, the IRS could
challenge the effectiveness of the provisions in our
organizational documents and a court could sustain such a
challenge. Accordingly, no assurance can be given that a
U.S.&nbsp;Person who acquires common shares in this offering
will not be characterized as a 10% U.S.&nbsp;Shareholder. See
&#147;Material Tax Considerations&nbsp;&#151; Taxation of
Shareholders&nbsp;&#151; United States Taxation&nbsp;&#151;
Classification of RAM Holdings or RAM Re a CFCs.&#148;
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>U.S.&nbsp;Persons who hold our shares may be subject to
    U.S.&nbsp;federal income taxation at ordinary income rates on
    their proportionate share of RAM Re&#146;s related person
    insurance income.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If the related person insurance income, or RPII (determined on a
gross basis) of RAM Re were to equal or exceed 20% of RAM
Re&#146;s gross insurance income in any taxable year and direct
or indirect insureds (and persons related to those insureds) own
directly or indirectly through entities 20% or more of the
voting power or value of our shares, then a U.S.&nbsp;Person who
owns any shares of RAM Re (directly or indirectly through
foreign entities) on the last day of the taxable year would be
required to include in its income for U.S.&nbsp;federal income
tax purposes such person&#146;s <I>pro rata </I>share of RAM
Re&#146;s RPII for the entire taxable year, determined as if
such RPII were distributed proportionately only to
U.S.&nbsp;Persons at that date, regardless of whether such
income is distributed. In addition, any RPII that is includible
in the income of a U.S.&nbsp;tax-exempt organization may be
treated as unrelated business taxable income. The amount of RPII
earned by RAM Re (generally, premium and related investment
income from the direct or indirect insurance or reinsurance of
any direct or indirect U.S.&nbsp;holder of common shares or any
person related to such holder) will depend on a number of
factors, including the identity of persons directly or
indirectly insured or reinsured by RAM Re. Although RAM
Re&#146;s gross RPII generally exceeded 20% of RAM Re&#146;s
gross insurance income in recent taxable years, we believe that
the direct or indirect insureds of RAM Re (and related persons)
did not directly or indirectly own 20% or more of either the
voting power or value of our shares in those prior years and we
do not expect this ownership threshold to be exceeded in the
foreseeable future. However, we cannot be certain that this will
be the case because some of the factors which determine the
extent of RPII may be beyond our control. See &#147;Material Tax
Considerations&nbsp;&#151; Taxation of Shareholders&nbsp;&#151;
United States Taxation&nbsp;&#151; The RPII CFC Provisions.&#148;
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>U.S.&nbsp;Persons who dispose of our shares may be subject
    to U.S.&nbsp;federal income taxation at the rates applicable to
    dividends on a portion of their gains if any.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The RPII rules provide that if a U.S.&nbsp;Person disposes of
shares in a foreign insurance corporation in which
U.S.&nbsp;Persons own 25% or more of the shares (even if the
amount of gross RPII is less than 20% of the corporation&#146;s
gross insurance income and the ownership of its shares by direct
or indirect insureds and related persons is less than the 20%
threshold), any gain from the disposition will generally be
treated as a
</DIV>

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dividend to the extent of the holder&#146;s share of the
corporation&#146;s undistributed earnings and profits that were
accumulated during the period that the holder owned the shares
(whether or not such earnings and profits are attributable to
RPII). In addition, such a holder will be required to comply
with certain reporting requirements, regardless of the amount of
shares owned by the holder. These RPII rules should not apply to
dispositions of our common shares because RAM Holdings will not
be directly engaged in the insurance business. The RPII
provisions, however, have never been interpreted by the courts
or the U.S.&nbsp;Treasury Department in final regulations, and
regulations interpreting the RPII provisions of the Code exist
only in proposed form. It is not certain whether these
regulations will be adopted in their proposed form or what
changes or clarifications might ultimately be made thereto or
whether any such changes, as well as any interpretation or
application of the RPII rules by the IRS, the courts, or
otherwise, might have retroactive effect. The U.S.&nbsp;Treasury
Department has authority to impose, among other things,
additional reporting requirements with respect to RPII.
Accordingly, the meaning of the RPII provisions and the
application thereof to RAM Holdings and RAM Re is uncertain. See
&#147;Material Tax Considerations&nbsp;&#151; Taxation of
Shareholders&nbsp;&#151; United States Taxation&nbsp;&#151; The
RPII CFC Provisions.&#148;
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>U.S.&nbsp;Persons who hold our shares will be subject to
    adverse U.S.&nbsp;federal income tax consequences if RAM
    Holdings is considered to be a passive foreign investment
    company.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If RAM Holdings is considered a passive foreign investment
company, or a PFIC, for U.S.&nbsp;federal income tax purposes, a
U.S.&nbsp;Person who owns directly or, in some cases, indirectly
(e.g. through a foreign partnership) any of our shares will be
subject to adverse U.S.&nbsp;federal income tax consequences,
including subjecting the investor to a greater tax liability
than might otherwise apply and subjecting the investor to a tax
on amounts in advance of when such tax would otherwise be
imposed, in which case your investment could be materially
adversely affected. In addition, if RAM Holdings were considered
a PFIC, upon the death of any U.S.&nbsp;individual owning common
shares, such individual&#146;s heirs or estate would not be
entitled to a
<FONT style="white-space: nowrap">&#147;step-up&#148;</FONT> in
the basis of the common shares which might otherwise be
available under U.S.&nbsp;federal income tax laws. We believe
that we are not, and we currently do not expect to become, a
PFIC for U.S.&nbsp;federal income tax purposes; however, we
cannot assure you that we will not be deemed a PFIC by the IRS.
There are currently no regulations regarding the application of
the PFIC provisions to an insurance company. New regulations or
pronouncements interpreting or clarifying these rules may be
forthcoming. We cannot predict what impact, if any, such
guidance would have on an investor that is subject to
U.S.&nbsp;federal income taxation. See &#147;Material Tax
Considerations&nbsp;&#151; Taxation of Shareholders&nbsp;&#151;
United States Taxation&nbsp;&#151; Passive Foreign Investment
Companies.&#148;
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>U.S.&nbsp;tax-exempt organizations that own our common
    shares may recognize unrelated business taxable income.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A U.S.&nbsp;tax-exempt organization may recognize unrelated
business taxable income if a portion of our insurance income is
allocated to the organization. In general, insurance income will
be allocated to a U.S.&nbsp;tax-exempt organization if either we
are a CFC and the tax-exempt shareholder is a U.S.&nbsp;10%
Shareholder or there is RPII and certain exceptions do not
apply. Although we do not believe that any U.S.&nbsp;Persons
should be allocated such insurance income, we cannot be certain
that this will be the case. See &#147;Material Tax
Considerations&nbsp;&#151; Taxation of Shareholders&nbsp;&#151;
United States Taxation&nbsp;&#151; Controlled Foreign
Corporations&#148; and &#147;Material Tax
Considerations&nbsp;&#151; Taxation of Shareholders&nbsp;&#151;
United States Taxation&nbsp;&#151; The RPII CFC
Provisions.&#148; Potential U.S.&nbsp;tax-exempt investors are
advised to consult their own tax advisers.
</DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Changes in U.S.&nbsp;federal income tax law could
    materially adversely affect an investment in our common
    shares.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Legislation has been introduced in the U.S.&nbsp;Congress
intended to eliminate certain perceived tax advantages of
companies (including insurance companies) that have legal
domiciles outside the United States but have certain
U.S.&nbsp;connections. While there are no currently pending
legislative proposals which, if enacted, would have a material
adverse effect on us or our shareholders, it is possible that
broader-based
</DIV>

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legislative proposals could emerge in the future that could have
an adverse effect on us, or our shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Additionally, the U.S.&nbsp;federal income tax laws and
interpretations regarding whether a company is engaged in a
trade or business within the United States, or is a PFIC or
whether U.S.&nbsp;Persons would be required to include in their
gross income the &#147;subpart F income&#148; or the RPII of a
CFC are subject to change, possibly on a retroactive basis.
There are currently no regulations regarding the application of
the PFIC rules to insurance companies and the regulations
regarding RPII are still in proposed form. New regulations or
pronouncements interpreting or clarifying such rules may be
forthcoming. We cannot be certain if, when or in what form such
regulations or pronouncements may be provided and whether such
guidance will have a retroactive effect.
</DIV>

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<A name='103'></A>
</DIV>

<!-- link1 "FORWARD-LOOKING STATEMENTS" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>FORWARD-LOOKING STATEMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Some of the statements under &#147;Summary,&#148; &#147;Risk
Factors,&#148; &#147;Management&#146;s Discussion and Analysis
of Financial Condition and Results of Operations,&#148;
&#147;Business&#148; and elsewhere in this prospectus include
forward-looking statements which reflect our current views with
respect to future events and financial performance. These
statements include forward-looking statements both with respect
to us specifically and the insurance and reinsurance industries
in general. Statements which include the words
&#147;expect,&#148; &#147;intend,&#148; &#147;plan,&#148;
&#147;believe,&#148; &#147;project,&#148;
&#147;anticipate,&#148; &#147;should,&#148; &#147;could,&#148;
&#147;may,&#148; &#147;will&#148; and similar words or
statements of a future or forward-looking nature identify
forward-looking statements for purposes of the federal
securities laws or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All forward-looking statements address matters that involve
risks and uncertainties. Accordingly, there are or will be
important factors that could cause our actual results to differ
materially from those indicated in these statements. We believe
that these factors include but are not limited to those
described under &#147;Risk Factors&#148; above and the following:
</DIV>

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    <TD width="96%"></TD>
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    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the loss of significant customers with whom we have a
    concentration of our reinsurance in force;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    projected market capacity (including with respect to existing
    and potential future market entrants);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    more severe losses or more frequent losses associated with our
    products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    income taxes, including our ability to write reinsurance
    business through Bermuda or other similarly tax efficient
    jurisdictions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the timing of cash flows (including, principally, receipt of
    premium and timing of loss payments);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    developments in the world&#146;s financial and capital markets
    that adversely affect the performance of our investments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    a downgrade of the financial strength ratings of RAM Re by
    Standard&nbsp;&#38; Poor&#146;s or Moody&#146;s;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    losses in our investment portfolio;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    losses on credit derivatives;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    changes in regulation or tax laws applicable to us, our
    subsidiaries or customers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    decreased demand for our reinsurance products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our ability to identify, hire and retain qualified management
    and other personnel;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the effects of mergers, acquisitions, amalgamations and
    divestitures;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    changes in accounting policies or practices;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    changes in general economic conditions, including inflation,
    foreign currency exchange rates, interest rates and other
    factors.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
The foregoing review of important factors should not be
construed as exhaustive, and should be read in conjunction with
the other cautionary statements that are included in this
prospectus. We undertake no obligation publicly to update or
review any forward-looking statement, whether as a result of new
information, future developments or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If one or more of these or other risks or uncertainties
materialize, or if our underlying assumptions prove to be
incorrect, actual results may vary materially from those we
projected. Any forward-looking statements you read in this
prospectus reflect our current views with respect to future
events and are subject to these and other risks, uncertainties
and assumptions relating to our operations, results of
operations, growth strategy and liquidity. All subsequent
written and oral forward-looking statements attributable to us
or to individuals acting on our behalf are expressly qualified
in their entirety by this paragraph. You should specifically
consider the factors identified in this prospectus which could
cause actual results to differ before making an investment
decision.
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='104'></A>
</DIV>

<!-- link1 "REORGANIZATION TRANSACTIONS" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>REORGANIZATION TRANSACTIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
RAM Holdings, Holdings&nbsp;II and RAM Re were incorporated on
January&nbsp;28, 1998 under the laws of Bermuda. RAM Holdings
and Holdings&nbsp;II, the owners of all of the voting and
non-voting common shares of RAM Re, will enter into an
amalgamation agreement (merger agreement) pursuant to which the
two companies will amalgamate effective immediately prior to the
consummation of this offering. The shareholders of RAM Holdings
and Holdings&nbsp;II will approve the amalgamation agreement to
be effective shortly before the completion of this offering.
Upon consummation of the amalgamation, all of the shares of RAM
Re will be held by RAM Holdings as the surviving entity and RAM
Holdings will effect
a &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for
1&nbsp;subdivision of our common shares and the issuance of
bonus shares on
a &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for
1&nbsp;basis. The memorandum of association and bye-laws of RAM
Holdings in effect immediately prior to the amalgamation will
become the memorandum of association and bye-laws of the
amalgamated company, and the amalgamated company, by operation
of law, will succeed to the assets and liabilities of RAM
Holdings and Holdings&nbsp;II. The amalgamated company will
adopt the name RAM Holdings Ltd.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='105'></A>
</DIV>

<!-- link1 "USE OF PROCEEDS" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>USE OF PROCEEDS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We estimate that our net proceeds from the initial public
offering of our common shares (at an assumed initial public
offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
common share, the midpoint of the range set forth on the cover
page of the prospectus and after deducting the estimated
underwriting discount and estimated offering expenses payable by
us) will be approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million.
We estimate that our net proceeds will continue to be
approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
if the underwriters exercise their over-allotment option in
full. We presently intend to contribute substantially all of the
net proceeds of this offering to RAM Re to increase its capital
and surplus in order to increase its underwriting capacity. We
will not receive any proceeds from the sale of our common shares
by the selling shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='106'></A>
</DIV>

<!-- link1 "DIVIDEND POLICY" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>DIVIDEND POLICY</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have never declared or paid, and do not currently intend to
pay, any cash dividends on our common shares. Any determination
to pay cash dividends will be at the discretion of our board of
directors and will depend upon our results of operations and
cash flows, our financial position and capital requirements,
general business conditions, legal, tax, regulatory and any
contractual restrictions on the payment of dividends and any
other factors our board of directors deems relevant.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are a holding company and have no direct operations. Our
ability to pay dividends depends in large part on the ability of
RAM Re to pay dividends to us. RAM Re is subject to significant
regulatory restrictions limiting its ability to declare and pay
dividends.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
RAM Re is subject to Bermuda laws and regulatory constraints
which affect its ability to pay dividends to RAM Holdings. Under
the Bermuda Insurance Act and related regulations, RAM Re must
maintain a minimum solvency margin and minimum liquidity ratio
and is prohibited from declaring or paying dividends if it does
not comply, or such action would result in noncompliance, with
the Bermuda Insurance Act. Under the Bermuda Insurance Act, RAM
Re must obtain the approval of the BMA before reducing its total
statutory capital by 15% or more, as set out in its previous
year&#146;s financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, under the Bermuda Companies Act, RAM Holdings and
RAM Re may each only declare or pay a dividend if, among other
matters, there are reasonable grounds for believing that RAM
Holdings and RAM Re each are, or would after the payment be,
able to pay its respective liabilities as they become due and if
the realizable value of its assets would thereafter not be less
than the aggregate of its liabilities and issued share capital
and share premium accounts. Payments of interest and principal
to the holder of our $40.0&nbsp;million aggregate principal
amount of 6.875%&nbsp;Senior Notes due 2024 will receive
priority over any payment of dividends on our common shares.
Accordingly, we cannot assure you that we will declare or pay
dividends in the future.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">27
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='107'></A>
</DIV>

<!-- link1 "CAPITALIZATION" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CAPITALIZATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The table below shows our combined capitalization as of
September&nbsp;30, 2005 on an actual basis and as adjusted to
give effect to the sale
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common
shares offered by us in this offering (at an assumed initial
offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
common share, and after deducting the estimated underwriting
discount and estimated offering expenses payable by us and
assuming the underwriters&#146; do not exercise their
over-allotment option) and assumes the completion of the
transactions described in &#147;Reorganization Transactions, and
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for
1 subdivision of our common shares and the issuance of bonus
shares on
a &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for
1 basis has occurred. You should read this table in conjunction
with &#147;Selected Combined Financial Information&#148; and
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#148; and the combined
financial statements and related notes that are included
elsewhere in this prospectus.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="63%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of September&nbsp;30, 2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Actual</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As Adjusted</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(Dollars in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Long-Term Debt</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    6.875%&nbsp;Senior notes due 2024</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>40,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>40,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Long-Term Debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>40,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>40,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Shareholders&#146; Equity</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common shares</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>211,817</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,954</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Retained earnings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>108,448</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Shareholders&#146; Equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>319,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total Capitalization</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>359,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Ratio of Long-Term Debt to Total Capitalization</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<!-- /TOC -->
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">28

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='108'></A>
</DIV>

<!-- link1 "DILUTION" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>DILUTION</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of September&nbsp;30, 2005, our net book value was
$319.3&nbsp;million, or $160.00&nbsp;per common share. As used
below, our net book value per common share represents
shareholders&#146; equity divided by the number of common shares
outstanding. After giving effect to (i)&nbsp;the issuance of our
common shares (at an assumed initial offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
common share, and after deducting the estimated underwriting
discount and estimated offering expenses payable by us and
assuming that the underwriters&#146; do not exercise their
over-allotment option), (ii)&nbsp;the application of the
estimated net proceeds therefrom, and (iii)&nbsp;the completion
of transactions described in &#147;Reorganization Transactions,
and
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for
1 subdivision of our common shares and the issuance of bonus
shares on
a &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for
1 basis, our net book value as of September&nbsp;30, 2005 would
have been
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
or
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
common share. This amount represents an immediate increase of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
common share to the existing shareholders and an immediate
dilution of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
common share issued to the new investors purchasing shares
offered hereby at the assumed offering price. The following
table illustrates this per share dilution:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="83%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Assumed initial offering price per common share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net book value per common share before this offering</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase attributable to this offering</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net book value per common share after this offering</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dilution per common share to new investors(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    If the underwriters&#146; exercise their over-allotment option
    in full, dilution per share to new investors will be
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth the number of our common shares
issued, the total consideration paid and the average price per
common share paid by all of our existing shareholders and new
investors, after giving effect to the issuance of common shares
in this offering at an assumed initial offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share (before deducting the estimated underwriting discount and
estimated offering expenses payable by us and assuming that the
underwriters&#146; do not exercise their over-allotment option).
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="32%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Shares Issued</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Total Consideration</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average Price Per</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amount</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Share</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Existing shareholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New investors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">29

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='109'></A>
</DIV>

<!-- link1 "SELECTED COMBINED FINANCIAL INFORMATION" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>SELECTED COMBINED FINANCIAL INFORMATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>The following tables present our historical financial and
operating data as of the dates and for the periods indicated. We
derived the selected combined data as of and for each of the
three years in the period ended December&nbsp;31, 2004, from our
audited combined financial statements, which have been prepared
in accordance with U.S.&nbsp;GAAP and appear elsewhere in this
prospectus. We derived the selected combined data as of and for
each of the two years in the period ended December&nbsp;31,
2001, from our audited combined financial statements, which have
been prepared in accordance with U.S. GAAP and which are not
included in this prospectus. We derived the selected combined
data as of and for the nine months ended September&nbsp;30, 2005
from our unaudited combined financial statements. Our historical
results of operations are not necessarily indicative of the
results to be expected for any future periods and the results
for the nine months ended September&nbsp;30, 2005, should not be
considered indicative of results expected for the full year. You
should read this summary in conjunction with
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#148; and the financial
statements and related notes appearing elsewhere in this
prospectus.</I>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of and for the</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Nine Months Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="19">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>As of and for the Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(Unaudited)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B>(Dollars in thousands, except as indicated otherwise)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Statement of Operations Data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross written premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>55,220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>48,212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>66,057</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>67,880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>36,205</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26,544</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,346</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net earned premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,425</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,721</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,543</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,561</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,898</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,327</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net investment income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,864</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,824</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,121</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,021</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net realized investment (losses) gains</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,137</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>560</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>536</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,097</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,927</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>252</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net unrealized (losses) gains on credit derivatives</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,544</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,757</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>456</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(613</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,608</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,469</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,600</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss and loss adjustment expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,579</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,994</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>910</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>653</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acquisition expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,571</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,223</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,927</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,032</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,042</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,926</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,087</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,057</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,278</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,259</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,524</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,667</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,486</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,829</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,734</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,252</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,933</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance Sheet Data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investments and cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>465,193</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>428,671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>440,992</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>356,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>226,161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>195,141</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>166,755</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred acquisition costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65,777</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55,881</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58,653</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,017</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,712</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,976</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>540,749</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>542,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>510,798</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>426,260</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>277,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>234,646</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>201,253</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Losses and loss expense reserve</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,274</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,493</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,821</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,401</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,382</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,529</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unearned premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>163,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>129,567</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>140,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>120,182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59,201</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,555</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>221,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>235,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>199,293</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>137,005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91,537</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65,604</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,977</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive (loss) income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,954</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,507</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,787</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,733</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>998</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shareholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>319,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>307,507</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>311,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>289,255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>185,490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>169,042</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>150,276</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="30">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Selected Ratios (Based on U.S.&nbsp;GAAP Income Statement
    Data)(1):</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss and loss adjustment expense ratio(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.9</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expense ratio(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75.21</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Combined ratio</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>80.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>97.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>82.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD colspan="30">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Other Data&nbsp;&#151; Financial Guaranty:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Par outstanding (in millions)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26,702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20,708</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22,154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19,773</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,888</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S.&nbsp;Basis Statutory Capital (in millions)(4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>277.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>277.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>274.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>230.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>135.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>131.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>123.0</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    These ratios are used by management in order to compare our
    performance to benchmarks commonly used by rating agencies and
    analysts that monitor the insurance industry.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Calculated by dividing loss and loss adjustment expenses by net
    earned premiums.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Calculated by dividing the sum of acquisition expenses and
    operating expenses by net earned premiums.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Our estimate of the sum of U.S.&nbsp;basis policyholder surplus
    and contingency reserve, as RAM Re files Bermuda statutory
    financial statements.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">30

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='110'></A>
</DIV>

<!-- link1 "MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>The following discussion and analysis of our financial
condition and results of operations should be read in
conjunction with our combined financial statements and
accompanying notes which appear elsewhere in this prospectus. It
contains forward-looking statements that involve risks and
uncertainties. Please see &#147;Forward-Looking Statements&#148;
for more information. Our actual results could differ materially
from those anticipated in these forward-looking statements as a
result of various factors, including those discussed below and
elsewhere in this prospectus, particularly under the headings
&#147;Risk Factors&#148; and &#147;Forward-Looking
Statements.&#148;</I>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Overview</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are a Bermuda-based provider of financial guaranty
reinsurance, conducting substantially all of our operations
through our wholly owned subsidiary, RAM Re. Our business
consists of a single operating segment, financial guaranty
reinsurance, the purpose of which is to indemnify a primary
financial guarantor, referred to as the primary insurer, against
the portion of any loss it may sustain under financial guaranty
policies it has ceded to us. We reinsure policies covering both
U.S. and international exposures. We market our reinsurance
directly through the execution of treaty and facultative
contracts with seven primary insurers, with approximately 85% of
our gross written premiums ceded from three companies for the
nine months ending September&nbsp;30, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Treaty reinsurance requires primary insurers to cede and us to
assume financial guarantees underwritten by the primary insurer
for specific types of obligations as determined by the treaty
terms. Facultative reinsurance requires us as the reinsurer to
assume, and the primary insurer to cede, part or all of one or
more individual financial guarantees, and is subject to separate
negotiation for each reinsurance cession. The initial
underwriting of insured risks and the reporting of underwriting
results to us are the responsibility of the primary insurers. As
a result, we are highly dependent on the underwriting, operating
and reporting standards of our primary insurers. The monitoring
and oversight of primary insurers are integral parts of our
business. These activities include reviews of their
underwriting, risk management, surveillance and reporting
practices.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We provide reinsurance in two product lines: public finance and
structured finance. Public finance obligations consist primarily
of debt obligations issued by or on behalf of states or other
governmental entities or their political subdivisions (counties,
cities, towns and villages, utility districts, public housing
and transportation authorities), other public and quasi-public
entities (including public universities and not-for-profit
hospitals, and
<FONT style="white-space: nowrap">non-U.S.&nbsp;</FONT>sovereigns
and their political subdivisions), private universities and
hospitals and investor-owned utilities. Structured finance
obligations are generally securities backed by pools of assets
such as residential mortgage loans, consumer or trade
receivables, securities, short-term bank deposits or other
assets having a specified cash flow or market value which are
generally held by a special purpose issuing entity.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our revenues are derived principally from:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    written premiums from our reinsurance activities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    net investment income generated by our investment portfolio;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    net realized investment gains (losses) from the sale of
    securities in our investment portfolio;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    unrealized gains (losses) in our credit derivatives portfolio.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The written premiums we receive are directly related to the
amount and type of business assumed from primary insurers under
treaty and facultative reinsurance contracts as well as to
prevailing market prices at the time of reinsurance cessions.
Written premiums are usually received on an upfront basis for
public finance transactions and earned over the life of a
policy, while premiums for structured finance transactions are
typically written on an installment basis and earned ratably
over the installment period. Investment income is primarily a
function of invested assets and the market interest rates
prevailing at the
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">31

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
time of investments, as well as the type, credit quality and
maturity of the securities purchased. In addition, net realized
investment gains (losses) arise from capital gains or losses
realized from the sale of securities in our investment portfolio
as a result of changing market conditions, including changes in
market interest rates and the credit quality of our invested
assets. Unrealized gains (losses) on credit derivatives are a
function of changes in estimated fair value of our assumed
credit derivative contracts (primarily credit default swaps).
U.S.&nbsp;GAAP requires us to recognize gains and losses on
credit derivative contracts to the extent that the estimated
fair value of these contracts changes from the beginning to the
end of each reporting period, which we refer to as
<FONT style="white-space: nowrap">&#147;mark-to</FONT>-market&#148;
accounting. We expect these unrealized gains or losses to
fluctuate primarily based on changes in credit spreads and
credit quality of the contracts reinsured by us. Because such
contracts are held to maturity, unless actual losses are
incurred on this business due to defaults, the cumulative
unrealized gains and losses will net to zero at the end of the
contract.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our expenses consist of:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    losses and loss adjustment expenses;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    acquisition costs;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    operating costs;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    interest expense.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Losses and loss adjustment expenses are a function of the amount
and types of business we write and are based in part upon
estimates of the case basis and ultimate aggregate losses
inherent in the portfolio as determined by the primary insurer,
which are reviewed and revised by us as deemed appropriate, and
by related estimates by management of losses inherent in our
portfolio. Acquisition costs are costs that vary with and are
directly related to the production of new business. Certain
acquisition costs are deferred and recognized over the period in
which the related premiums are earned. Operating costs consist
of general and administrative costs, which are primarily
salaries and other employee-related costs. Operating costs are
fixed in nature, and do not generally vary with premium
production. Interest expense is a function of outstanding debt
and the contractual interest rate related to that debt.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that the financial guaranty business is significantly
affected by economic cycles. For example, a robust economic
environment featuring a good or improving credit environment is
beneficial to the in-force financial guaranty portfolios of
financial guaranty insurers and reinsurers. If such conditions
persist for an extended period, however, credit spreads tend to
narrow and pricing and/or demand for financial guaranty
insurance and, consequently, reinsurance declines. A
deteriorating economic and credit environment, in contrast, is
typically accompanied by widening credit spreads and improved
pricing for financial guaranty products. However, a prolonged
period of a weak or deteriorating economic activity could stress
in-force financial guaranty portfolios and could result in
claims payments or could adversely impact capital adequacy due
to deterioration in the credit quality of in-force portfolios.
During the most recent couple of years, credit spreads have
generally narrowed and new business production of primary
insurers in aggregate slowed.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Countervailing to some extent the recent trend in primary
insurers&#146; new business production are developments that
have provided growth opportunities for us in our financial
guaranty reinsurance business. Underwriting capacity for
reinsurance, meaning the U.S.&nbsp;based statutory capital
available for financial guaranty reinsurance, is more limited
now than it was in 2002, and we believe such capacity is not
likely to increase in the immediate future. Many of the large
multi-line insurance companies that participated in the
financial guaranty reinsurance market in the 1990&#146;s have
left the market in order to refocus on their traditional lines
of business; the exit strategy of multi-line insurance companies
has been driven by favorable operating developments in their
core property-casualty insurance markets and by rating agency
downgrades which preclude multi-line companies from serving as
an economic source of financial guaranty reinsurance. The rating
agency criteria for financial guaranty reinsurance companies
have also become more stringent, making it more difficult for
new entrants.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Two recent events are noteworthy in that they may have an impact
in the financial guaranty industry and on the financial results
of RAM Re. First, the devastation resulting from Hurricane
Katrina may affect the ability of certain entities to meet their
obligations to make payments on insured obligations. As of
June&nbsp;30, 2005, our par outstanding on public finance
exposures in counties designated by FEMA for individual and
public assistance in the States of Louisiana, Mississippi and
Alabama totals approximately $119&nbsp;million, of which
approximately $36&nbsp;million is in Greater New Orleans
(comprised of Orleans, St. Charles, St. Bernard, Plaquemines and
Jefferson parishes). Within the affected areas, we are closely
monitoring 23 specific obligations with net par outstanding of
approximately $40&nbsp;million. As of September&nbsp;30, 2005,
no case reserves have been reported to us by any primary insurer
and we have not recorded case reserves for this event. Four
claims have been paid, amounting to $13,000, for which a full
reimbursement has been received. Uncertainty exists regarding
both the probability of defaults and loss severities associated
with any such defaults. Our risk management staff is actively
monitoring the specific obligations and developments in concert
with primary insurers and continues to assess the impact of
Hurricane Katrina on the credit quality of our portfolio.
Second, recent bankruptcies in the commercial airline business
present a threat to the ability and willingness of these
carriers to continue to meet obligations due under EETCs. We
have reinsured EETCs with net par outstanding as of
September&nbsp;30, 2005 of $130&nbsp;million, of which
$127&nbsp;million is on our watch list. We are actively
monitoring our EETC exposure and developments concerning this
exposure. Because there is significant uncertainty regarding the
ability of certain obligors to meet their EETC obligations, RAM
Re could incur losses.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Critical Accounting Policies</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our combined financial statements include amounts that, either
by their nature or due to requirements of U.S.&nbsp;GAAP, are
determined using estimates and assumptions. The actual amounts
realized could ultimately be materially different from the
amounts currently provided for in our combined financial
statements. We believe that loss and loss adjustment expense
reserves, valuation of derivative financial instruments,
valuation of the investment portfolio including other than
temporary impairments of investments, determination of deferred
acquisition costs and premium revenue recognition to be
inherently complex and subjective, and therefore an
understanding of the accounting policies pertaining to these
items is critically important. These policies are summarized
below, and described in further detail in the notes to our
combined financial statements contained elsewhere in this
prospectus, and the discussion that follows should be read in
conjunction with our combined financial statements and notes.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Losses and Loss Expense Reserves.</I> The liability for
losses and loss adjustment expenses consists of case reserves
and unallocated reserves. Case reserves are established by the
primary insurer and our proportionate share of these reserves
are reported to us at least quarterly. Case reserves are
established in an amount that is sufficient to cover the present
value of the anticipated defaulted debt service payments over
the expected period of default and estimated expenses associated
with settling the claims, less estimated recoveries under
collateral and subrogation rights. Case reserves are discounted
in accordance with discount rates prescribed or permitted by
state regulatory authorities. We review and assess the ceded
case reserves and our evaluation may result in increasing the
case reserve recorded by us above the amount reported to us by
the primary insurer. Consistent with industry practice, we also
establish an unallocated reserve because we believe that
additional losses are inherent in our portfolio of reinsured
risks. We base our unallocated reserves on the unallocated
reserve amounts established by primary insurers for their
portfolios and the relative size and credit risk of our in-force
portfolio, taking into account the rating agencies&#146; views
of credit quality as well as management judgment. Estimates of
our loss and loss adjustment expense reserves are substantially
dependent on the surveillance activities and reserving policies
of our primary insurers and such estimates are subjective and
are based on the judgment of both the primary insurer and our
senior risk and finance personnel and, therefore, the final
liability may materially differ from amounts estimated and
reserved.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Valuation of Derivative Financial Instruments.</I>
FAS&nbsp;133, &#147;Accounting for Derivative Instruments and
Hedging Activities,&#148; establishes accounting and reporting
standards for derivative instruments and requires recognition of
all derivatives on the balance sheet at fair value. We are not a
direct writer of
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
derivative contracts, however, as part of our financial guaranty
reinsurance business, we reinsure guarantees of credit
derivative contracts issued by primary insurers. These contracts
are held to maturity and are generally highly rated baskets of
credit default swaps. We do not reinsure single name credit
default swaps. We report revenues arising from such reinsurance
as earned premiums; we record estimates of losses and loss
adjustment expenses due to specific credit events as incurred;
and we record changes in fair value as incurred. Credit default
swap contracts require primary insurers to make payments upon
the occurrence of certain defined credit events relating to
underlying obligations (generally a fixed-income obligation). If
credit spreads of the underlying obligations change, the market
value of the related credit derivative contract generally
changes accordingly. Changes in credit spreads are typically
caused by changes in the market&#146;s perception of the credit
quality of the underlying obligations.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
FAS&nbsp;133 requires us to
<FONT style="white-space: nowrap">mark-to</FONT>-market gains or
losses on those credit derivative contracts reinsured by us.
Because the primary insurer generally structures its credit
default swap contracts with first loss protection from various
financial institutions, the price volatility of these
instruments on account of credit spread changes is reduced, and
our risk of loss is mitigated. Changes in fair value due to
market conditions are reported as unrealized gains and losses on
derivative financial instruments in our income statement. These
unrealized gains and losses cumulatively will net to zero if no
credit defaults occur on these contracts. Should actual claim
losses be incurred as a result of credit defaults, the primary
insurer will be required to either purchase the security in
default at par, or pay to the counterparty to a credit default
swap the difference between par and market value. As a reinsurer
we would be obligated to reimburse the primary insurer for our
proportional share of the loss. In this respect, credit
derivative contracts differ from traditional financial guarantee
contracts since financial guarantee contracts require the
insurer to make payments of principal and interest only on
scheduled debt service dates, whereas defaults in our credit
derivatives portfolio may cause immediate payments of
outstanding par, net of market value.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We use a model to estimate the fair value of the derivatives
exposures assumed by us in the course of business. The valuation
model includes the use of management estimates and market
information, including factors such as current prices for
similar agreements, changes in credit spreads and interest
rates, and the duration of the credit derivative exposure. As a
result, the fair value of credit derivatives recorded by us may
materially differ from the value that might be realized in the
sale of the credit derivative portfolio. For a discussion of
changes to our model used to estimate the fair value of the
derivatives exposures assumed by us, see
&#147;&#151;&nbsp;Results of Operation&nbsp;&#151; Nine Months
Ended September&nbsp;30, 2005 Compared to Nine Months Ended
September&nbsp;30, 2004&nbsp;&#151; Net Unrealized Gains
(Losses) on Credit Derivatives.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Valuation of Investment Portfolio.</I> Our investment
securities are designated as available for sale in accordance
with FAS&nbsp;115, &#147;Accounting for Certain Investments in
Debt and Equity Securities.&#148; Changes in the fair value of
our securities are reported in &#147;Accumulated other
comprehensive income&#148; in shareholders&#146; equity. We have
a formal review process for all securities in our investment
portfolio, including a review for impairment losses. Factors
considered when assessing impairment include:
(i)&nbsp;securities with market values having declined by 20% or
more below amortized cost for a continuous period of at least
six months; (ii)&nbsp;recent credit downgrades by rating
agencies; (iii)&nbsp;the financial condition of the issuer;
(iv)&nbsp;whether scheduled interest payments are past due; and
(v)&nbsp;whether we have the ability and intent to hold the
security for a sufficient period of time to allow for
anticipated recoveries in fair value. If we believe a decline in
the value of a particular investment is temporary, we record the
decline as an unrealized loss in &#147;Accumulated other
comprehensive income&#148; on our balance sheet. If we believe
the decline is &#147;other than temporary,&#148; we write-down
the carrying value of the investment and record a loss on our
income statement. Our assessment of a decline in value includes
our current judgment of the factors noted above. If that
judgment changes in the future, we may ultimately record a loss
after having originally concluded that the decline in value was
temporary.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Determination of Deferred Acquisition Costs.</I> We defer
certain costs that vary with and are directly related to the
production of new business, including direct expenses such as
ceding commissions and underwriting salaries, as well as
allocated costs attributable to the production of new business.
Deferred costs are amortized over the period in which the
related premiums are earned. Acquisition costs in the
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
income statement represent gross policy acquisition costs, less
the deferral of expenses to future periods, plus the
amortization of previously deferred expenses. The amount of
expenses that qualify for deferral is determined on the basis of
periodic analysis, and is dependent on new business production,
ceding commissions negotiated with primary insurers,
management&#146;s judgment as to what costs and percentage
thereof are deferrable, and the level of normal and refunded
earned premiums. We periodically conduct a study to determine
the deferability of expenses and in recent years a lesser
percentage of our expenses have been deferred than was the case
in our initial years of operation.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Premium Revenue Recognition.</I> Written premiums are
received either as upfront premiums or in installments. Upfront
premiums are recorded as written at policy inception and earned
ratably over the life of the issue. Unearned premium reserves
represent that portion of written premiums applicable to the
outstanding amount at risk with respect to the obligations
reinsured. Public finance premiums are customarily paid upfront
and earned over the life of an issue which may extend to
30&nbsp;years or more. Upfront premiums have relatively little
effect on earnings in the year written, but cumulatively affect
future years&#146; earned premiums. When an issue reinsured by
us is retired early, has been called by the issuer, or is paid
in advance through refunding, any remaining unearned premium is
earned at that time, since there is no longer any risk
outstanding in connection with the issue. Refunding levels vary
depending upon a number of conditions, primarily the
relationship between current interest rates and interest rates
on outstanding debt. Installment premiums are received in
accordance with contractual terms, recorded as written at each
installment due date and earned over the installment period.
Structured finance premiums are customarily paid in installments
and earned over installment periods that generally range from
three months to one year in duration. We do not record a
provision for doubtful accounts because historically we have not
experienced any material issues related to the collectibility of
assumed premiums.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In January and February of 2005, the SEC discussed with
financial guaranty industry participants the diversity in
practice with respect to their accounting policies for loss
reserves. In June 2005, the FASB added a project to its agenda
to consider the accounting by financial guaranty insurers for
claims liability recognition, premium recognition and deferred
acquisition costs. The proposed and final documents are expected
to be issued in 2006. When the FASB or the SEC reaches a
conclusion on this issue, we and the rest of the financial
guaranty industry may be required to change some aspects of our
loss reserving policies and the potential changes could extend
to premium and expense recognition. We cannot predict how the
FASB or the SEC will resolve this issue and the resulting impact
on our financial statements. Until the issue is resolved, we
intend to continue to apply our existing policy with respect to
the establishment of both case and general reserves. We
anticipate that the FASB will conclude its project during 2006.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Results of Operations</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Nine Months Ended September&nbsp;30, 2005 Compared to Nine
    Months Ended September&nbsp;30, 2004</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Net Income.</I> Net income for the first nine months of 2005
was $14.5&nbsp;million, a 26.8% decrease from the comparable
2004 period. The decrease in net income as compared to the first
nine months of 2004 was primarily due to the combination of
realized investment losses of $1.1&nbsp;million, unrealized
losses on credit derivatives of $2.5&nbsp;million, and a
non-recurring expense of $2.5&nbsp;million associated with the
termination of a liquidity feature of equity incentives
previously granted to three executives. In the comparable period
of 2004, net income includes $0.6&nbsp;million of realized
investment gains and $2.2&nbsp;million of unrealized gains on
credit derivatives.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Gross Written Premiums.</I> Gross written premiums for the
first nine months of 2005 were $55.2&nbsp;million, a 14.5%
increase from the comparable 2004 period. Gross written premiums
increased despite no growth in aggregate direct written premiums
at primary insurers for the first nine months of 2005. RAM
Re&#146;s increase in written premiums was due primarily to a
slight overall increase in our share of the reinsurance treaties
in which we participate and a greater amount of reinsurance
written on a facultative basis relative to the comparable prior
period.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth the amounts of gross written
premiums by product lines:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="63%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Nine Months Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Gross Written Premiums</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(Dollars in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Public Finance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>36.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>33.0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Structured Finance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15.2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>55.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>48.2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Earned Premiums.</I> Earned premiums of $31.4&nbsp;million
during the first nine months of 2005 were 14.5% above the
comparable period of 2004, primarily reflecting the substantial
increases in business reinsured in prior years for which
premiums are earned in relation to the amortization of exposure
or over the course of installment periods. Earned premiums for
the first three quarters of 2005 include $1.8&nbsp;million of
refundings or accelerated earned premium, compared to
$2.4&nbsp;million during the comparable 2004 period. As a result
of business written with upfront premiums during the first nine
months of 2005, primarily public finance business, our unearned
premiums were $163.8&nbsp;million at the end of the first nine
months of 2005, a 26.4% increase over the level at the end of
first nine months of 2004 and a 17.0% increase over the
$140.0&nbsp;million unearned premiums at year-end 2004. As noted
under &#147;Premium Revenue Recognition Critical Accounting
Policies,&#148; the premiums for most public finance business
are paid upfront and a relatively small amount of such premiums
are earned in the year written. In contrast, premiums for most
structured finance business are paid in installments and the
majority of structured finance premiums are earned in the year
written.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth earned premiums by product lines:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="69%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Nine Months Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Earned Premiums</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(Dollars in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Public Finance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12.3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Structured Finance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total earned premiums</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>31.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>27.4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Investment Income.</I> Investment income was
$12.9&nbsp;million for the first nine months of 2005, a 7.5%
improvement over the comparable 2004 period. Investment income
growth was driven primarily by the growth in invested assets and
to a lesser degree by an increase in available yields at which
cash flow can be invested.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Net Realized Investment (Losses) Gains.</I> Net realized
investment losses were $1.1&nbsp;million during the first nine
months of 2005, compared to net realized investment gains of
$0.6&nbsp;million in the comparable 2004 period. Investment
losses realized in 2005 and investment gains realized in 2004
are the result of repositioning within our portfolio of fixed
income securities and are primarily due to sales of securities
at prevailing interest rates that were higher in 2005 and lower
in 2004 than at the time a security was purchased.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Net Unrealized (Losses) Gains on Credit Derivatives.</I> For
the first nine months of 2005, we recorded net unrealized losses
on credit derivatives of $2.5&nbsp;million, compared with net
unrealized gains of $2.2&nbsp;million in the comparable period
of 2004. Our net unrealized losses during the first nine months
of 2005 reflect a change in estimated fair value that is
primarily due to modifications and refinement of certain
elements of the model used to estimate the fair value of our
assumed credit default swaps exposure. We modified certain
assumptions and inputs to our model in order to provide what we
believe to be more rigorous fair value estimates after extensive
research and an assessment of our practices and industry
approaches. We believe that the revised model provides a better
fair value estimate than our former approach and that periodic
estimates will be less volatile because the model is more
tailored to the
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">36

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
very high credit quality of our assumed portfolio and better
captures the duration of our assumed contracts. From the
inception of the Company through September&nbsp;30, 2005, no
losses had been incurred or paid by us on credit derivatives
contracts.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Loss and loss adjustment expenses.</I> Loss and loss
adjustment expenses through the first nine months of 2005
increased by $0.6&nbsp;million relative to the comparable period
of 2004, to $3.1&nbsp;million from $2.5&nbsp;million. The loss
and loss adjustment expense ratio, calculated by dividing loss
and loss expenses by earned premiums, was 9.9% for the nine
months of 2005 compared to the ratio of 9.0% in the comparable
2004 period. During 2005, RAM Re made its largest claim payment
since its inception relating to indemnification of a primary
insurer for a $6.0&nbsp;million loss. A $4.1&nbsp;million case
reserve had been established for this claim during the fourth
quarter of 2004.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Acquisition Expenses.</I> Acquisition expenses for the first
nine months of 2005 were $11.6&nbsp;million, a $1.3&nbsp;million
increase over the comparable 2004 period. Acquisition expenses
are reflective of the increase in earned premiums for the first
nine months of 2005, as the acquisition expense ratio
(acquisition expenses divided by earned premiums) is 37% for
both the 2005 and 2004 nine month periods.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Operating expenses.</I> Operating expenses for the first nine
months of 2005 were $9.4&nbsp;million, $1.2&nbsp;million higher
than the $8.2&nbsp;million incurred for the first nine months of
2004. Operating expenses in 2005 included a $2.5&nbsp;million
charge recorded in connection with the termination of a
liquidity feature of equity incentives previously granted to
three executives. During the corresponding nine months of 2004,
expenses included approximately $2.1&nbsp;million of
non-recurring items including $0.9&nbsp;million in compensation
expense related to settlement of an employment matter,
$0.9&nbsp;million in non-recurring legal expenses and
$0.3&nbsp;million in financially-related consulting fees,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Interest expense.</I> Our interest expense was
$2.1&nbsp;million through the first nine months of 2005 compared
to $1.4&nbsp;million in the comparable 2004 period. The increase
during 2005 reflects a full three quarters of interest on
$40&nbsp;million aggregate principal amount of senior notes
issued on March&nbsp;26, 2004, compared to the 2004 nine month
period which included only approximately two quarters of
interest expense.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Year Ended December&nbsp;31, 2004 Compared to
    December&nbsp;31, 2003 and Year Ended December&nbsp;31, 2003
    Compared to December&nbsp;31, 2002</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Net Income.</I> Net income was $24.7&nbsp;million in 2004,
compared to $21.2&nbsp;million in 2003. The increase in net
income of $3.5&nbsp;million, or 16.5%, resulted mainly from
increased earned premiums and investment income. Our net income
in 2003 of $21.2&nbsp;million represents a 48.3% increase over
net income of $14.3&nbsp;million in 2002, again primarily due to
an increase in earned premiums and investment income. Net income
in 2004 includes realized investment gains of $0.5&nbsp;million
and unrealized gains on credit derivatives of $2.8&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Gross Written Premiums.</I> Gross written premiums in 2004
were $66.1&nbsp;million, a decrease of 2.7% from
$67.9&nbsp;million of gross written premiums in 2003. This
decrease in gross written premiums is primarily due to lower
ceded reinsurance premiums by the primary insurers as a result
of declines in their business written in 2004 relative to 2003.
Gross written premiums in 2003 increased 87.6% from
$36.2&nbsp;million of gross written premiums in 2002. This large
percentage increase in written premiums from 2002 to 2003
reflects growth in the volume of business written by primary
insurers in 2003 versus 2002 and also partly reflects our
increased capacity resulting from a significant capital infusion
of $87.9&nbsp;million in equity during 2003. The capital
infusion allowed RAM Re to underwrite a larger amount of
business and to increase capacity-constrained business due to
its larger capital base. We were also able to increase our
treaty participations in 2003 with two primary insurers, which
more than offset loss of business from the expiration of a
treaty with a third primary insurer.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Public finance gross written premiums in 2004 were
$45.2&nbsp;million, a decrease of 13.4% from $52.2&nbsp;million
in 2003. The decrease in public finance written premiums in 2004
relative to 2003 followed a 115.7% increase in 2003 relative to
2002, when written premiums were $24.2&nbsp;million. Structured
finance
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">37

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
gross written premiums in 2004 were $20.9&nbsp;million, an
increase of 33.1% from $15.7&nbsp;million in 2003, while this
2003 level of written premiums was 30.8% greater than the
$12.0&nbsp;million written premiums in 2002.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth the amounts of gross written
premiums by product line:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>For the Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Gross Written Premiums</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(Dollars in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Public Finance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>45.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>52.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24.2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Structured Finance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12.0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>66.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>67.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>36.2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our premiums are highly dependent upon the amount of business
ceded by the primary insurers which, in turn, is related to the
volume of business they underwrite and the premium rates such
primary insureds charge, and the size and type of obligations
insured by the primary insurers. In general, a growing volume of
insured business, a stable or growing usage of reinsurance and
higher premium rates will benefit our gross written premiums.
During 2004, the aggregate premium volume written by primary
insurers declined relative to 2003 and primary insurers ceded
less premium to reinsurers than in 2003. Within the
U.S.&nbsp;public finance market, historically high new issuance
volume in 2004 fell slightly below 2003 levels (which were a
record high); the percentage of new issues insured by the
primary insurers was slightly greater in 2004 than in 2003; and
average premium rates for public finance business assumed during
2004&nbsp;year were down somewhat from those of 2003. Compared
to 2002, new issues of public finance obligations in 2003 were
up; the percentage of new issues insured was about the same; and
the average premium rates of business assumed were above the
2002 levels. In the structured finance markets, new issuance
volumes experienced double digit percentage growth both from
2003 to 2004 and from 2002 to 2003; the volume of insured
structure finance obligations was up substantially in 2004
relative to 2003, after a decline from 2002 to 2003; and average
premium rates for assumed structured finance business in 2004
were below the 2003 level, while 2003 average premium rates were
above those of 2002.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Earned Premiums.</I> Earned premiums in 2004 were
$34.7&nbsp;million, an increase of 36.1% from $25.5&nbsp;million
of earned premiums in 2003. The significant increases in upfront
premiums from the public finance business in past years, as
indicated by growth in unearned premiums on the balance sheet,
and in installment premiums from the structured finance business
in the prior years contributed to this growth, as did higher
refundings during the year. Premiums resulting from refundings
totaled $3.3&nbsp;million in 2004 compared to $2.5&nbsp;million
in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Earned premiums in 2003 were $25.5&nbsp;million, an increase of
44.9% from $17.6&nbsp;million of earned premiums in 2002. The
significant increases in upfront premiums from the public
finance business in past years, and in installment premiums from
the structured finance business contributed to this growth, as
did higher refundings during the 2003&nbsp;year compared to the
2002 level of $1.1&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth earned premiums by product line:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="69%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>For the Year Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Earned Premiums</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(Dollars in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Public Finance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6.8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Structured Finance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total earned premiums</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>34.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>25.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17.6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Net Investment Income.</I> Net investment income in 2004 was
$16.8&nbsp;million, an increase of 25.4% from $13.4&nbsp;million
in 2003. The increase was attributable to the growth of the
investment portfolio resulting from increased reinsurance
premiums and the full year impact of the capital raised during
2003 which provided $87.7&nbsp;million to our investment
portfolio, partially offset by a lower investment rate due to
decreases in the interest rate environment. Our portfolio is
comprised predominantly of taxable securities,
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
and had an average yield of 4.2% at December&nbsp;31, 2004,
compared with 4.5% and 5.5% at December&nbsp;31, 2003 and 2002,
respectively. Net investment income in 2003 of
$13.4&nbsp;million increased by 16.5% from net investment income
of $11.5&nbsp;million in 2002. The increase was attributable to
proceeds from our common share issuance during the second
quarter of 2003 and the growth of the investment portfolio
resulting from increased reinsurance premiums, partially offset
by a lower investment rate due to decreases in the interest rate
environment.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Net Realized Investment Gains (Losses).</I> Net realized
investment gains in 2004 were $0.5&nbsp;million compared to
$1.1&nbsp;million and $2.9&nbsp;million in 2003 and 2002,
respectively. Net gains on securities sold are generated as a
result of the ongoing management of the investment portfolio and
are generally the result of repositioning within the portfolio
achieved by selling securities and purchasing securities
believed to provide improved investment characteristics.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Net Unrealized Gains (Losses) on Credit Derivatives.</I> Net
unrealized gains on credit derivative contracts in 2004 were
$2.8&nbsp;million, compared to net unrealized gains on credit
derivative contracts of $0.5&nbsp;million and net unrealized
losses of $0.6&nbsp;million in 2003 and 2002, respectively. The
change in estimated fair value of credit derivative contracts in
2004 and 2003 reflects growth in the in-force portfolio and net
<FONT style="white-space: nowrap">mark-to</FONT>-market gains
due to tightening credit spreads on the underlying obligations.
Unrealized losses in 2002 were a result of widening credit
spreads, which resulted in a decrease in the estimated fair
value of the credit derivative contracts. As of
December&nbsp;31, 2004, no losses had been incurred or paid by
us on credit derivatives contracts.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Losses and Loss Adjustment Expenses.</I> Losses and loss
adjustment expenses in 2004 were $3.6&nbsp;million, compared to
$4.0&nbsp;million in 2003 and $6.4&nbsp;million in 2002. In
2004, losses and loss adjustment expenses decreased by 10.0%
relative to 2003, and losses and loss adjustment expenses
decreased by 38% versus 2002. The loss ratio was 10.3% in 2004,
15.6% in 2003, and 36.7% in 2002. The greater 2002 loss activity
was driven primarily by case reserve activity associated with
defaulted credits within our structured finance portfolio. Loss
and loss adjustment expenses are generally affected by changes
in the mix, size, and credit quality of our portfolio, as well
as specific credit events within reinsured obligations and
trends in the reserving practices of our ceding insurers.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Acquisition Expenses.</I> Acquisition expenses were
$13.4&nbsp;million in 2004, compared to $10.2&nbsp;million and
$7.4&nbsp;million in 2003 and 2002, respectively. The net change
in acquisition expenses was a $3.2&nbsp;million increase, or
31.4%, in 2004 over 2003, and a $2.8&nbsp;million increase, or
37.8%, in 2003 over 2002, with these increases primarily as a
result of amortization of acquisition expenses in concert with
higher earned premiums. Our acquisition expense ratio declined
in each year from 2002-2004, from 41.9% to 40.0% to 38.6%,
respectively, reflecting some improvement (decreases)&nbsp;in
ceding commissions paid to primary insurers and a lesser share
of direct expenses allocated to acquisition as a result of an
update of our analysis of expenses that qualify for deferral.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Operating Expenses.</I> Operating expenses were
$11.0&nbsp;million in 2004, an increase of 120.0% compared to
$5.0&nbsp;million in 2003, due to higher compensation costs as a
result of increase in staff during the year, allocating a lesser
portion of operating costs to deferred acquisition costs and
$2.7&nbsp;million of non-recurring items including
$0.9&nbsp;million in compensation expenses related to settlement
of an employment matter, $1.5&nbsp;million in legal expenses and
$0.9&nbsp;million in consulting fees,. Operating expenses were
$5.0&nbsp;million in 2003, an increase of 47.1% from
$3.4&nbsp;million in 2002, due primarily to increased staffing
and a $0.3&nbsp;million expense relating to our stock option
plan. As a result of increases in operating expenses, the ratio
of operating expenses to earned premiums grew from 19.1% in 2002
to 19.7% in 2003 and to 31.8% in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Liquidity and Capital Resources</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Liquidity.</I> RAM Holdings is a holding company and
therefore our liquidity, both on a short-term basis (for the
next twelve months) and a long-term basis (beyond the next
twelve months), is largely dependent upon (1)&nbsp;the ability
of RAM Re to pay dividends or make other payments to us and
(2)&nbsp;our ability to access debt and equity markets. Our
principal uses of liquidity are for payment of interest on our
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
senior notes and capital investments in RAM Re. In 2004 we
issued unsecured senior notes of $40.0&nbsp;million to a
qualified institutional buyer, with the proceeds used to
purchase preferred shares in RAM Re. In 2003, we contributed
$89.7&nbsp;million to RAM Re from net proceeds of an equity
offering. Based on the amount of dividends that we expect to
receive from RAM Re for the remainder of 2005 and in 2006, we
believe that we will have sufficient liquidity to satisfy our
needs over the next twelve months. RAM Re&#146;s ability to
declare and pay dividends to us may be influenced by a variety
of factors such as adverse market changes, insurance regulatory
changes and changes in general economic conditions, beyond the
next twelve months and Bermuda law as described below.
Consequently, although we believe that we will continue to have
sufficient liquidity to meet our obligations over the long term,
we cannot guarantee that RAM Re will be able to dividend amounts
sufficient to satisfy all our obligations, and there can be no
assurance that dividends will be declared or paid in the future.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The principal sources of RAM Re&#146;s liquidity are gross
written premiums, scheduled investment maturities, capital
contributions from RAM Holdings and net investment income. The
principal uses of RAM Re&#146;s liquidity are for the payment of
operating expenses, claims, ceding commissions, dividends to RAM
Holdings and for purchases of new investments. We believe that
RAM Re&#146;s expected operating liquidity needs can be funded
exclusively from its operating cash flow.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
RAM Re may declare dividends, provided that, after giving effect
to the distribution, it would not violate certain statutory
equity, solvency and asset tests. The Bermuda Insurance Act
requires RAM Re to meet a minimum solvency margin equal to the
greater of (i)&nbsp;$1.0&nbsp;million, (ii)&nbsp;20% of net
premiums written up to $6&nbsp;million plus 15% of net premiums
written over $6&nbsp;million, and (iii)&nbsp;15% of loss and
other insurance reserves. To satisfy these requirements, RAM Re
was required to maintain a minimum level of statutory capital
and surplus of $10.2&nbsp;million at December&nbsp;31, 2004. RAM
Re&#146;s statutory capital and surplus was $286.4&nbsp;million
at December&nbsp;31, 2004, of which $212.6&nbsp;million was
fully paid up share capital. In addition to the foregoing
solvency criteria, Bermuda law limits the maximum amount of
annual dividends or distributions payable and in certain
instances requires the prior notification to, or approval of,
the BMA. Based upon these tests, without regulatory approval,
the maximum amount that would have been available during 2004
for payment by RAM Re was approximately $37.8&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Cash Flows.</I> During the first nine months of 2005, net
operating cash flow was $32&nbsp;million compared to
$34.6&nbsp;million for the first nine months of 2004. We
generated an operating net cash flow of $49.0&nbsp;million,
$49.7&nbsp;million, and $24.5&nbsp;million during the years
ended December&nbsp;31, 2004, 2003, and 2002 respectively. Our
operating cash flows are primarily the result of the excess of
net premiums received and investment income over operating
expenses, claims payments and interest expenses. For the years
2004, 2003 and 2002, net cash flows from financing activities of
$39.3&nbsp;million, $88.5&nbsp;million and ($2.3)&nbsp;million,
respectively, relate primarily to net proceeds from the 2004
issuance of $40&nbsp;million of senior notes and a 2003
contribution of $89.7&nbsp;million to RAM Re from the net
proceeds of a private placement of our common shares and a
redemption of shares offset by repayment of shareholder loans.
Net cash used in investment activities amounted to
$63.3&nbsp;million, $134.0&nbsp;million, and $21.6&nbsp;million
in the years ending December&nbsp;31, 2004, 2003 and 2002,
respectively, relate to the investment of additional financing
cash flows and net cash flow from operations less financing
expenses.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Capital Resources.</I> RAM Re maintains a $90.0&nbsp;million
contingent capital facility with a group of highly rated
commercial banks as lenders. The facility is specifically
designed to provide rating-agency qualified capital to support
RAM Re claims paying resources and may not be drawn upon except
for the payment of catastrophic losses where losses exceed
minimum thresholds in respect of certain obligations reinsured
by RAM Re. Loan obligations under this facility have limited
recourse and are repayable from, and collateralized by, a pledge
of recoveries realized on defaulted reinsured obligations
covered by the facility, including certain installment premiums
and other collateral. The facility, which contains an annual
renewal provision subject to bank approval, has a ten-year term
ending on May&nbsp;11, 2015. As of the date of this prospectus,
no amounts were outstanding under this facility.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On February&nbsp;3, 2006, RAM Re closed a $40.0&nbsp;million
contingent capital facility with two highly rated commercial
banks. This facility is essentially the same as the
$90.0&nbsp;million contingent capital facility
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
described above although it may be drawn upon only to cover
catastrophic losses, exceeding the minimum threshold, from
municipal obligations reinsured by RAM Re. Loan obligations
under this facility also have limited recourse and are repayable
from, and collateralized by, a pledge of recoveries realized on
defaulted reinsured obligations covered by this facility,
including certain installment premiums and other collateral, on
a subordinate basis to the pledge made to secure the
$90.0&nbsp;million facility described above. The
$40.0&nbsp;million facility has a seven-year term and has an
annual renewal feature, subject to approval of the lenders. As
of the date of this prospectus, no amounts were outstanding
under this facility.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On December&nbsp;23, 2003, RAM Re entered into a
$50.0&nbsp;million soft capital facility whereby it was granted
the right to exercise perpetual put options in respect of its
Class&nbsp;B preference shares against the counterparty to the
option agreement, in return for which it pays the counterparty a
floating put option fee. The counterparty is a trust established
by Lehman Brothers Inc. The trust was created as a vehicle for
providing capital support to RAM Re by allowing it to obtain, at
its discretion and following the procedures of the option
agreement, access to new capital through the exercise of a put
option and the subsequent purchase by the trust of RAM Re
preference shares. The option agreement has no scheduled
termination date or maturity, but will be terminated if RAM Re
takes certain actions as specified in the operative facility
documents. RAM Re has the option to redeem the Class&nbsp;B
preference shares issued upon exercise of its put option,
subject to certain specified terms and conditions. If the put
option is exercised in full, RAM Re would receive up to
$50&nbsp;million in connection with the issuance of the
preference shares, the proceeds of which may be used for any
purpose including the payment of claims. To fund the purchase of
preference shares upon exercise of the put option by RAM Re, the
trust issued $50.0&nbsp;million of its own auction market
perpetual preferred securities which are rated &#147;A+&#148; by
Standard&nbsp;&#38; Poor&#146;s and &#147;A2&#148; by
Moody&#146;s. The proceeds of this issuance are held by the
trust in certain high-quality, short-term commercial paper
investments.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;26, 2004, we issued $40.0&nbsp;million aggregate
principal amount of senior unsecured debt. The net proceeds of
this issuance were contributed to RAM Re to be used for general
corporate purposes. The senior notes bear interest at a rate of
6.875%, payable semi-annually in arrears on April&nbsp;1 and
October&nbsp;1 of each year, beginning on October&nbsp;1, 2004.
Unless previously redeemed, the senior notes will mature on
April&nbsp;1, 2024. We may redeem the senior notes at any time
and from time to time, in whole or in part, at a
&#147;make-whole&#148; redemption price. The senior notes
contain certain covenants regarding limitations on liens and
delivery of financial information, but do not contain any
covenants regarding financial ratios or specified levels of net
worth or liquidity to which we must adhere. We were in
compliance with all covenants at September&nbsp;30, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Investment Portfolio.</I> At September&nbsp;30, 2005, our
investment portfolio consisted of $461.8&nbsp;million of fixed
income securities and $3.4&nbsp;million of short-term
investments. Our fixed income securities are designated as
available for sale in accordance with FAS&nbsp;115
&#147;Accounting for Certain Investments in Debt and Equity
Securities.&#148; Short-term investments consist primarily of
money market funds, domestic time deposits and discount notes.
We report changes in fair value as part of &#147;Accumulated
other comprehensive income&#148; in shareholders&#146; equity.
Our portfolio is managed by an outside professional asset
management firm in accordance with specific investment policies
approved by our board of directors. These policies establish
liquidity requirements, portfolio duration, single-risk
concentration limits and minimum credit quality and investment
eligibilities. Fair values of fixed income securities are based
on quoted market prices by either independent pricing services,
or when such quoted prices are unavailable, by reference to
broker quotes. Our investment objectives include preservation of
principal, maintaining a high credit quality, liquid investment
portfolio within a prescribed duration range and achieving
stable net investment income. The effective duration of our
portfolio at September&nbsp;30, 2005 is 4.23&nbsp;years and our
investment policy and guidelines require the minimum portfolio
weighted credit quality to be at least &#147;Aa2&#148; rating by
Moody&#146;s. The yield to maturity of the portfolio is 4.91%
and the book yield of the portfolio is 4.56% at
September&nbsp;30, 2005. At September&nbsp;30, 2005, we had
$250.2&nbsp;million of our invested assets in trust accounts for
the benefit of primary insurers (out of $465.2&nbsp;million of
total cash and investments). Under its reinsurance agreements
with primary insurers, RAM Re is required to secure its
obligations and may not withdraw funds from the trust accounts
without their express permission.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our finance personnel monitor the portfolio on a monthly basis
(or more frequently as required) for performance and adherence
to policies, including market valuation, credit quality,
portfolio duration and liquidity. We have a formal review
process for all securities in our investment portfolio,
including a review for impairment losses based on the factors
described above under &#147;Critical Accounting
Policies&nbsp;&#151; Valuation of Investment Portfolio.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table summarizes our investment portfolio by bond
type, fair value and amortized cost thereof at
September&nbsp;30, 2005 and December&nbsp;31, 2004:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of September&nbsp;30, 2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Fixed Income Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amortized Cost</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fair Value</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Agencies</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>67,069,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>66,060,403</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S.&nbsp;government obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,507,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,158,540</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Corporate debt securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>130,880,989</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>130,354,640</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Municipal securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,727,815</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,702,741</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mortgage and asset-backed securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>217,518,664</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>215,474,909</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>464,704,855</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>461,751,233</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="62%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of December&nbsp;31, 2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Fixed Income Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amortized Cost</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fair Value</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Agencies</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>51,964,943</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>51,642,461</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S.&nbsp;government obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,995,766</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,132,074</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Corporate debt securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>146,049,031</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>146,688,989</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Municipal securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,736,705</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,841,960</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mortgage and asset-backed securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161,373,122</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>162,600,614</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>402,119,567</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>404,906,098</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The amortized cost and estimated fair value of fixed income
securities available for sale as of September&nbsp;30, 2005 and
December&nbsp;31, 2004 by contractual maturity are shown below.
Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay
obligations.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="62%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of September&nbsp;30, 2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Fixed Income Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amortized Cost</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fair Value</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less than one year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,351,677</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,332,105</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Due after one year through five years</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>156,882,197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>154,434,235</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Due after five years through ten years</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>90,271,329</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>89,119,256</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Due after ten years</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>215,199,652</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>215,865,637</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>464,704,855</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>461,751,233</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="62%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of December&nbsp;31, 2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Fixed Income Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amortized Cost</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fair Value</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less than one year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Due after one year through five years</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>182,156,316</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>181,709,468</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Due after five years through ten years</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60,387,309</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60,519,395</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Due after ten years</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>159,575,942</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>162,677,235</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>402,119,567</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>404,906,098</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">42

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table provides the ratings distribution of our
investment portfolio at each of September&nbsp;30, 2005 and
December&nbsp;31, 2004:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="69%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As of September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Rating(1)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    AAA(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    AA</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    A</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As of December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Rating(1)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    AAA(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    AA</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    A</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Ratings represent Standard&nbsp;&#38; Poor&#146;s
    classifications. If unavailable, Moody&#146;s ratings are used.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Includes U.S.&nbsp;Treasury and agency obligations, which
    comprised approximately 22.0% of the investment portfolio as of
    September&nbsp;30, 2005 and December&nbsp;31, 2004.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Contractual Obligations</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have various contractual obligations as of December&nbsp;31,
2004 that are summarized in the following table:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="42%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Less Than</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>More than</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>1&nbsp;Year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>1-3&nbsp;Years</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>4-5&nbsp;Years</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>5&nbsp;Years</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>(Dollars in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>40.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>40.0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating lease commitments(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>0.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Losses and loss expense reserve(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8.5</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Principal only.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Lease payments are subject to escalation in building operating
    costs.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    We have estimated the timing of these payments on an
    undiscounted basis and note that actual payments may vary
    significantly from these estimates.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Off-Balance Sheet Arrangements</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, we did not have off-balance sheet
arrangements that were not accounted for or disclosed in the
combined financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Risk Management</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the ordinary course of business, we manage a variety of
risks, primarily credit, market, liquidity and legal. These
risks are identified, measured and monitored through a variety
of control mechanisms, which are in place at different levels
throughout the organization.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Credit Risk.</I> We are exposed to credit risk as a reinsurer
of financial guarantees and as a holder of fixed income
investment securities. We employ various procedures and controls
to monitor and manage
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">43

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
credit risk. Our senior risk management personnel focus on risk
limits and measurement, concentration and correlation of risk,
and the allocation of rating agency capital in a portfolio
context.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our underwriting procedures differ, depending on whether we are
conducting facultative or treaty-based reinsurance activities.
Our facultative reinsurance activities are subject to a formal
underwriting process on a transaction-by-transaction basis,
whereas our treaty underwriting is based upon an evaluation of
the portfolio of transactions ceded to us by a particular
primary insurer as well as the history of each primary
insurer&#146;s own underwriting activities.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For facultative transactions, various factors affecting the
credit worthiness of the underlying obligations are evaluated
during the underwriting process. Our underwriting committee,
comprised of our CEO, CFO, Chief Risk Manager and General
Counsel, approves all treaties and facultative transactions
prior to committing any of our reinsurance capacity. Following
the issuance of a financial guarantee on a facultative basis, we
periodically update the performance of our existing exposures
using information provided by the ceding primary as well as
independent resources. Such reviews are performed independently
of transaction execution, and periodically results are reviewed
by senior finance and risk management personnel. Our management
committee determines the adequacy of our loss reserves and makes
any necessary adjustments following such assessment. Proactive
credit remediation by the primary insurer can help secure rights
and remedies, which mitigate losses in the event of default.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We, like other reinsurers, rely heavily in both our facultative
and treaty-based business on the surveillance activities of the
primary insurers to provide us with updated information on the
performance of the transactions in our reinsured portfolio. The
surveillance information provided to us by the primary insurers
is supplemented by our own independent evaluations of the
analysis and underlying performance data provided by the ceding
primary with regard to watch list transactions and verification
(where possible) of ratings information provided by the primary
insurers on large exposures and on transactions where
significant discrepancies are evident between a ceding
primary&#146;s internal rating and the reported ratings of
Standard&nbsp;&#38; Poor&#146;s or Moody&#146;s.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also conduct <FONT style="white-space: nowrap">on-site</FONT>
due diligence reviews of the companies with whom we have treaty
arrangements, which include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    discussions with our underwriting and risk management personnel
    to determine if there have been any changes in underwriting
    approach or emphasis;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reviews of individual underwriting, surveillance and legal files
    for selected treaty transactions to determine whether cessions
    conform with treaty eligibility criteria and to ensure that the
    primary insurer&#146;s underwriting approach and implementation
    are consistent with our own risk tolerance;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reviews of watch list transactions to determine the propriety
    and prognosis of the credits placed on the watch list and any
    case reserves that may have been established;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    reviews of controls over ceded reinsurance reporting.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, we also review rating agency releases and other
publicly available information on the credits reinsured by us to
further refine our loss estimation and reserving process.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our investment portfolio is managed by the professional asset
management firm, MBIA Capital, a wholly-owned subsidiary of one
of our shareholders. Our investment policies are designed to
require the portfolio to be managed in a manner that preserves
principal, provides long term predictable growth while
maximizing income, meets statutory requirements, provides
adequate liquidity to meet claims and other cash needs and
maintains high credit quality. Our operating guidelines specify
eligible investments and establish a portfolio duration target,
high liquidity, minimum credit ratings, single risk limits,
diversification and asset allocation standards. Our finance
personnel review our portfolio monthly for compliance with
investment policies and procedures; and the investment committee
of our board of directors meets with our portfolio managers
periodically to review investment activity and results,
compliance with investment guidelines, as well as to review and
update investment policy and strategy in light of business
developments.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">44

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Quantitative and Qualitative Information about Market
Risk.</I> Market risk represents the potential for losses that
may result from changes in the value of a financial instrument
as a result of changes in market conditions. The primary market
risks that would impact the value of our financial instruments
are interest rate risk and credit spread risk. An estimation of
potential losses arising from adverse changes in market
conditions is a key element in managing market risk. Senior
finance personnel are responsible for risk measurement and
monitoring procedures which include periodic analyses of shifts
in the yield curve and changes in credit spreads. The valuation
results from these analyses could differ materially from amounts
that would actually be realized in the market.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Changes in interest rates may adversely affect the value of
fixed income investment securities. The following table
summarizes the estimated change in fair value (based primarily
on the valuation models discussed above) on the net balance of
our investment securities, assuming immediate changes in
interest rates at specified levels at September&nbsp;30, 2005:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Estimated</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Estimated Net</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(Decrease)/Increase</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Change in Interest Rates</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fair Value</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>in Net Fair Value</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(Dollars in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    300&nbsp;basis point rise</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>399.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(61.3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    200&nbsp;basis point rise</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>418.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(42.5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    100&nbsp;basis point rise</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>438.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21.9</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Base scenario</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>460.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    100&nbsp;basis point decline</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>480.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    200&nbsp;basis point decline</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>497.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36.8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    300&nbsp;basis point decline</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>516.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55.8</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Financial instruments that may be adversely affected by changes
in credit spreads include our outstanding exposure to structured
credit derivative contracts. The primary insurer enters into
these types of contracts, which require the insurer to make
payments upon the occurrence of certain defined credit events
relating to underlying obligations. If credit spreads relating
to the underlying obligations change, the market value of the
related structured credit derivative changes accordingly.
Changes in credit spreads are generally caused by changes in the
market&#146;s perception of the credit quality of the underlying
obligations. As credit spreads change, we experience unrealized
or <FONT style="white-space: nowrap">mark-to</FONT>-market gains
or losses on credit derivative contracts reinsured by us.
However, as the primary insurer generally structures its
contracts with first loss protection from various financial
institutions, the price volatility of these instruments is
reduced and our risk of loss is mitigated. We estimate the
potential impact of credit spread changes on the value of our
contracts and the following table summarizes the estimated
changes in the fair value of our portfolio assuming immediate
changes in credit spreads at specified levels at
September&nbsp;30, 2005:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="67%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Estimated Net</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Estimated</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Change in Credit Spreads</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fair Value</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Gain/(Loss)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    75&nbsp;basis point narrowing</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>351,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>294,453</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    50&nbsp;basis point narrowing</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>252,989</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>196,302</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    25&nbsp;basis point narrowing</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>154,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>98,151</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Base scenario</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    25&nbsp;basis point widening</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(41,465</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(98,151</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    50&nbsp;basis point widening</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(139,616</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(196,302</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    75&nbsp;basis point widening</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(237,767</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(294,453</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Liquidity Risk.</I> Liquidity risk relates to the possible
inability to satisfy contractual obligations when due. This risk
is most present in financial guarantee contracts reinsured by us
in that we are required to make loss payments to primary
insurers in the event they pay losses as a result of defaults in
their ceded insured obligations. We manage our liquidity risk by
analysis of projected cash flows and by maintaining a
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">45

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
minimum level of cash and short-term investments which are at
all times sufficient to fulfill our contractual obligations, and
by maintaining a highly liquid investment portfolio.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Legal Risk.</I> Legal risks include uncertainty with respect
to the enforceability of rights under our contractual agreements
and with respect to the enforceability of rights under the
financial guaranty policies which we reinsure. We seek to remove
or minimize such uncertainties through consultation with
internal and external legal advisers to analyze and understand
the nature of legal risk, to improve documentation and to
understand transaction structure.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>New Accounting Pronouncements</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In January and February of 2005, the SEC discussed with
financial guaranty industry participants the diversity in
practice with respect to their accounting policies for loss
reserves. In June 2005, the FASB added a project to its agenda
to consider the accounting by financial guaranty insurers for
claims liability recognition, premium recognition and deferred
acquisition costs. The proposed and final documents are expected
to be issued in 2006. When the FASB or the SEC reaches a
conclusion on this issue, we and the rest of the financial
guaranty industry may be required to change some aspects of our
loss reserving policies and the potential changes could extend
to premium and expense recognition. We cannot predict how the
FASB or the SEC will resolve this issue and the resulting impact
on our financial statements. Until the issue is resolved, we
intend to continue to apply our existing policy with respect to
the establishment of both case and general reserves. We
anticipate that the FASB will conclude its project during 2006.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the FASB issued a revision of FASB Statement
No.&nbsp;123, Accounting for Stock Based Compensation. Under
FAS&nbsp;123(R), companies will be required to expense the fair
vale of employee stock options and other forms of stock-based
compensation and to provide associated financial statement
disclosures. We currently account for stock-based compensation
under APB&nbsp;25 and do not generally recognize compensation
expense for stock-based compensation. For non-public companies,
FAS&nbsp;123(R) is effective for annual reporting periods
beginning after December&nbsp;15, 2005. We will apply this
statement prospectively to new awards and to awards modified,
repurchased, or cancelled after the effective date. We are
currently evaluating the new standard and completing our
assessment of the impact of FAS&nbsp;123(R) and pending
completion of that activity we are unable to estimate the effect
of adoption on our results of operations and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In January 2003, the FASB, issued FASB Interpretation
No.&nbsp;46, &#147;Consolidation of Variable Interest
Entities,&#148; or FIN&nbsp;46, as an interpretation of
Accounting Research Bulletin&nbsp;No.&nbsp;51,
&#147;Consolidated Financial Statements.&#148; FIN&nbsp;46
addresses consolidation of variable interest entities, or VIEs,
by business enterprises. An entity is considered a VIE subject
to consolidation if the equity investment at risk is not
sufficient to permit the entity to finance its activities
without additional subordinated financial support or if the
equity investors lack one of three characteristics of a
controlling financial interest. First, the equity investors lack
the ability to make decisions about the entity&#146;s activities
through voting rights or similar rights. Second, they do not
bear the obligation to absorb the expected losses of the entity
if they occur. Lastly, they do not claim the right to receive
expected returns of the entity if they occur, which are the
compensation for the risk of absorbing the expected losses.
FIN&nbsp;46 requires that VIEs be consolidated by the entity
that maintains the majority of the risks and rewards of
ownership. This interpretation applies immediately to VIEs
created after January&nbsp;31, 2003 and to VIEs in which an
enterprise obtains an interest after that date. The adoption of
FIN&nbsp;46 did not have a material impact on our financial
statements.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2003, the FASB revised FIN&nbsp;46 with FASB
Interpretation No.&nbsp;46R, which we refer to as FIN&nbsp;46R.
The primary objectives of FIN&nbsp;46R are to provide guidance
on the identification of entities for which control is achieved
through means other than through voting rights (which we refer
to as VIEs) and how to determine when and which business
enterprise (which we refer to as the primary beneficiary) should
consolidate the VIE. In addition, FIN&nbsp;46R requires both the
primary beneficiary and all other enterprises with a significant
variable interest in a VIE to make additional disclosures. We
have determined that we are not a primary beneficiary nor do we
have a significant variable interest in a VIE.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">46

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='111'></A>
</DIV>

<!-- link1 "INDUSTRY OVERVIEW" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>INDUSTRY OVERVIEW</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Financial Guaranty Insurance</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
RAM Re is a reinsurer of primary companies that issue financial
guaranty insurance policies. Financial guaranty insurance
provides an unconditional and irrevocable guarantee that
protects the holder of a financial obligation against
non-payment of principal and interest when due. Financial
guaranty insurance may be issued at inception of the insured
obligations or may be issued in the secondary market, mainly to
institutional holders of such obligations. Both issuers and
investors may benefit from financial guaranty insurance. Issuers
benefit when the insurance has the effect of lowering an
issuer&#146;s cost of borrowing because the insurance premium is
less than the value of the spread between the yield on the
obligation with insurance and the yield on the obligation
without insurance. Financial guaranty insurance also increases
the marketability of obligations issued by infrequent or unknown
issuers or obligations with complex structures. Investors
benefit from increased liquidity in the secondary market,
reduced exposure to price volatility caused by changes in the
credit quality of the underlying insured issue, and added
protection against loss in the event of the obligor&#146;s
default on its obligation.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Unlike most other forms of insurance, financial guarantees are
underwritten to a remote-loss standard, meaning that risks are
insured only if an insurer expects that no loss will occur
during the term of the policy. If an issuer of an insured
obligation cannot make the scheduled debt service payment, the
primary financial guarantor would assume this responsibility as
and when due. Payment by the financial guarantor does not
extinguish the underlying obligation of the issuer of an insured
obligation and such payments are recoverable from the issuer, if
the issuer resumes debt service payments. If the issuer does not
resume such payments or becomes insolvent, the financial
guarantor may not be able to recover the payments it has made.
The financial guarantor is subrogated to the rights of the
holders of the insured obligations and would, in the event of
payment under the policy, have rights in the underlying
collateral, if any.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our customers are the seven primary monoline financial guaranty
insurers, who we refer to as the primary insurers. The four
largest primary insurers are MBIA, FSA, FGIC, and Ambac, who
comprise the majority of the financial guaranty industry&#146;s
capitalization and insurance in force. Other primary insurers
include CIFG, XLCA and Assured Guaranty, who compete directly
with the four major primary insurers.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The global bond insurance market is frequently categorized into
two main sectors, Public Finance and Structured Finance, divided
geographically between the United States and International. The
table below sets forth the growth in adjusted gross written
premiums by key business sector for the four major primary
insurers (Ambac, MBIA, FGIC and FSA) who collectively accounted
for over 85% of the total adjusted gross written premiums in
2004:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>As of December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4" align="left" nowrap><B>Adjusted Gross Written Premiums(1),(2)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>(Dollars in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Public Finance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    United States</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,763</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,066</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,173</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>827</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    International</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>524</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>393</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Subtotal</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,097</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>938</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Structured Finance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    United States</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>994</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>961</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>977</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>951</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>759</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    International</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>431</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>481</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>362</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>333</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Subtotal</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,425</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,459</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,092</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,712</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,556</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,030</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">47

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    A non-GAAP measure of business production commonly used by
    analysts and rating agencies, defined as the sum of upfront and
    present value of estimated installment premiums to be collected,
    related to business written in the current period.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Data from Standard&nbsp;&#38; Poor&#146;s Bond Insurance Book
    2005 and individual primary operating supplements.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As indicated in the table above, after growing in excess of 32%
on an annual basis between 2002 and 2003, the primary
insurers&#146; adjusted written premiums declined by
approximately 13% in 2004. Adjusted gross written premiums
experienced modest growth for the first nine months of 2005. We
believe the decline in 2004 was the result of the cyclical
narrowing of interest rate spreads between insured and uninsured
obligations (reflecting reduced investor concern about credit)
following heightened concern in 2002 when corporate credit
defaults reached historically unprecedented levels. We believe
that business growth in 2005 has been modest because of the
tight credit spread environment.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Against this market backdrop, increased competition from the
relatively recent market entrants such as Channel Reinsurance
Ltd., or Channel Re, and BluePoint Re Limited, or BluePoint Re,
and the decision by one of the major primary insurers to expand
its strategy to include insuring additional sectors in both the
public and structured finance product lines, has caused premium
rates to decline since 2002-2003. Management believes that
premium rates have stabilized in many of the product lines that
we reinsure.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
By some measures, the primary insurance industry is currently in
an excess capital position caused by growth in capital following
several years of robust business and earnings growth and the
slower growth in business volume since 2003. Standard&nbsp;&#38;
Poor&#146;s estimates that the new issue volume insured by the
&#147;AAA&#148;-rated primary insurers in 2004 would have
required a capital position $1&nbsp;billion lower than the
capital employed at year end 2004, based on the average
relationship between par written to capital employed between
1998 and 2003. The strength of the capital position of primaries
relative to their insured portfolios is believed to be a
significant factor influencing their decisions to cede or retain
insured business.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>United States Public Finance Obligations</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Public finance obligations consist primarily of debt obligations
issued by or on behalf of states or other governmental entities
or their political subdivisions (counties, cities, towns and
villages, utility districts, public housing and transportation
authorities) and other public and quasi-public entities
(including public universities and not-for-profit hospitals, and
<FONT style="white-space: nowrap">non-U.S.&nbsp;</FONT>sovereigns
and their political subdivisions), private universities and
hospitals and investor-owned utilities. These obligations
generally are supported by the taxing authority of the issuer,
or the issuer&#146;s or underlying obligor&#146;s ability to
collect fees or assessments for certain projects or public
services.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>United States Structured Finance</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Structured finance obligations are generally backed by pools of
assets such as residential mortgage loans, consumer or trade
receivables, securities or other assets having a specified cash
flow or market value which are generally held by a special
purpose issuing entity. Structured finance obligations include
funded and synthetic transactions. Funded structured finance
obligations are typically payable from cash flow generated by a
pool of assets and take the form of either
&#147;pass-through&#148; obligations, which represent interests
in the related assets, or &#147;pay-through&#148; obligations,
which generally are debt obligations collateralized by the
related assets. Synthetic structured finance transactions are
typically credit default swap contracts in which one party sells
credit protection on a reference obligation (generally a
fixed-income obligation) in return for a premium payment from
another party. As part of our financial guaranty reinsurance
business, we reinsure financial guaranty policies issued by
primary insurers that guaranty the obligations of their
subsidiaries, who act as the credit protection sellers under
these credit derivative contracts. These contracts require
primary insurers&#146; subsidiaries to make payments upon the
occurrence of certain defined credit events relating to the
underlying reference obligation.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">48

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>International</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Over the past five years, the primary insurers have
significantly increased their
<FONT style="white-space: nowrap">non-U.S.&nbsp;</FONT>business.
These activities have occurred primarily in Western Europe,
Australia, Canada, Japan and South Korea, and have focused
primarily on (i)&nbsp;asset-backed securities similar to those
insured by them in the U.S., (ii)&nbsp;public/private
partnership transactions modeled after the U.K. Private Finance
Initiative, and (iii)&nbsp;investor-owned utilities, in areas
where the regulatory framework is supportive of that industry.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Financial Guaranty Reinsurance</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Monoline financial guaranty reinsurers provide reinsurance
capacity to the primary financial guaranty companies. When a
primary company cedes a portion of a particular transaction to a
reinsurer, that reinsurer becomes obligated to pay its
proportionate share of any losses should the reinsured
transaction default. The primary insurers use such reinsurance
for a variety of reasons, including to increase their capacity
to write business, assist in meeting applicable regulatory and
rating agency requirements, in particular those applying to
single risk and risk concentration limits, manage single risks
and risk aggregations among servicers on asset backed
transactions as well as for broader risk management purposes
(such as addressing sector or geographic concentrations).
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under the terms of a reinsurance agreement, a reinsurer agrees
to indemnify the primary insurer against part or all of the loss
which a primary insurer may incur under a policy which it has
issued. In the event of a loss, the reinsurer pays its share of
the loss upon receipt of notice from the primary insurer. If
there is a dispute regarding the reinsurer&#146;s liability, the
dispute is resolved following payment. This practice is
generally different than other types of reinsurance, where the
reinsurer pays its portion of the loss following its
investigation and confirmation of its liability.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Reinsurance agreements take two major forms, &#147;treaty&#148;
and &#147;facultative.&#148; Treaty reinsurance requires the
primary insurer to cede, and the reinsurer to assume, specific
obligations underwritten by the primary insurer over a period of
time, typically one year. Facultative reinsurance is the
reinsurance of specific obligations and is subject to separate
negotiation for each cession.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Customers choose financial guaranty reinsurers based upon
several factors, including overall financial strength, financial
strength ratings by the major rating agencies, single risk
capacity, level of service quality and in some cases whether or
not the reinsurer competes with the primary company. Maintaining
strong financial strength ratings increases the capital benefit
that reinsurers provide to their customers and increases the
demand and the pricing for their capacity. See
&#147;Business&nbsp;&#151; Competition in the Financial Guaranty
Reinsurance Market.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The size and growth of the financial guaranty reinsurance market
depends on the size of the primary insurance market and the
percentage of aggregate risk that the primary insurers cede to
the reinsurers. The ceded percentage can vary due to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the availability of capacity from qualified reinsurers, as
    determined by the primary insurers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    regulatory, rating agency and other external risk retention
    limitations imposed on the primary insurers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the credit given to primary insurers by their regulators and
    rating agencies for assumed reinsurance;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the price and availability of substitute highly-rated capital
    markets facilities and facilities provided by highly-rated
    banks; and risk management practices of the primary insurers.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">49
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The table below sets forth management&#146;s estimate of
business ceded by the &#147;AAA&#148;-rated primary insurers for
the periods indicated:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="33%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="9">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="9" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="9" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Ceded Business(1)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>2002</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>2001</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>2000</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="13" align="center" nowrap><B>(Dollars in millions)</B></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ceded Par</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>43,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    $51,560</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    $46,030</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    $70,760</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    $54,120</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    $45,730</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Data from Standard&nbsp;&#38; Poor&#146;s Bond Insurance Book
    2005 and individual primary operating supplements. The data has
    been adjusted for recaptured reinsurance cessions relating to
    the cancellation of certain reinsurance contracts and estimates
    of cession volume for primary insurers with affiliated
    reinsurance companies.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The reinsurance market experienced solid growth in ceded par and
premium, largely attributable to the growth in the primary
market and the increase in available capacity provided by
multiline insurance companies, over several years until 2002.
However, deteriorating market conditions, including adverse
selection which resulted in reinsurers&#146; portfolios taking
on marginally greater risk than those of the primary insurers,
ultimately led Standard&nbsp;&#38; Poor&#146;s to place many of
the reinsurance providers on negative credit watch. The
reinsurance market then underwent significant restructuring
beginning when two significant reinsurance providers, AXA Re and
American Re exited the market. Par ceded by the primary
insurers, in turn, declined significantly that year. MBIA, one
of the four major primary insurers, invested in RAM Re in 2003.
In early 2004, MBIA and several institutional investors formed
Channel Re as a dedicated &#147;AAA&#148; reinsurer to the
founding primary insurer. Channel Re assumed a portfolio of
business that had been recaptured from reinsurers whose ratings
had been downgraded. In November 2004, a new monoline financial
guaranty reinsurer, BluePoint Re was formed and this reinsurer
also assumed exposures that had been recaptured from reinsurers
that had been downgraded and are no longer active in the
financial guaranty reinsurance business. BluePoint Re is rated
&#147;AA&#148; by Standard&nbsp;&#38; Poor&#146;s. Finally,
during this period, Assured Guaranty Corp. and Radian Assurance,
two of the largest financial guaranty reinsurance companies,
announced their intention to prioritize their primary insurance
strategies over reinsurance activities. Par ceded volume by the
primary insurers recovered in 2004, following the increase in
capacity provided by Channel Re, BluePoint Re and RAM Re and
increased again for the nine months ended September&nbsp;30,
2005, but has not returned to 2002 levels.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">50

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='112'></A>
</DIV>

<!-- link1 "BUSINESS" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>BUSINESS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Our Company</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We were founded in 1998 as a Bermuda-based provider of financial
guaranty reinsurance and conduct substantially all of our
operations through our wholly-owned subsidiary, RAM Re. We are
one of only three reinsurers dedicated solely to the financial
guaranty market. Among reinsurers, we are the only company rated
&#147;AAA&#148; by Standard&nbsp;&#38; Poor&#146;s that is
focused solely on providing financial guaranty reinsurance to
third parties.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Overview of Our Business</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We provide financial guaranty reinsurance for public finance and
structured finance obligations, covering risks in both the
United States and international markets. We believe our business
is characterized by low loss experience and relatively
predictable and stable earned premiums. We have low loss
experience because we operate in an industry in which financial
guaranty insurance is underwritten to a remote-loss standard. We
have relatively predictable earned premiums because our business
model allows us to build a large unearned premium reserve that
is gradually earned as revenue over a relatively long time
period that for some exposures can extend to 20&nbsp;years or
more. Our business model is predicated on specialization, in
that our financial resources are dedicated exclusively to the
financial guaranty reinsurance business. We do not use our
capital to compete with our customers in the primary market. Key
factors supporting our business model include: we are focused on
the well-established municipal bond and asset securitization
markets, we underwrite reinsurance that is believed to have a
remote risk of loss, and we derive a significant percentage of
revenues from net investment income on high-quality investments.
We believe that our customer-focused strategy and our
demonstrated successes, as well as the limited number of
highly-rated competitors, provide us with a competitive
advantage that will allow us to continue to grow our business.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In order to continue growing, we believe we need to maintain
strong financial strength ratings, which maximizes the value of
our reinsurance products by providing our customers with a
significant amount of capital credit from rating agencies. In
order to offer greater reinsurance capacity and increased single
risk capacity to our customers, we have raised capital twice
since we began operations.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
With our focused business strategy, we have improved our
operating results over time. Our new business production (gross
written premiums) has increased at a compound annual growth rate
of nearly 33% from 2000 through year-end 2004, and has grown
over 15% for the nine months ended on September&nbsp;30, 2005
over the comparable 2004 period. Our unearned premium reserve
has increased from $45.6&nbsp;million at year-end 2000 to
$140.0&nbsp;million at year-end 2004, representing a 32%
compound annual growth rate, and was $163.8&nbsp;million as of
September&nbsp;30, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe the historic success of our business can be measured
by our growth relative to the primary industry as well as our
market share growth, as indicated in the following tables
showing net written premiums by us and by the
&#147;AAA&#148;-rated primary insurers, and the par value of
business ceded by the &#147;AAA&#148;-rated primary insurers and
the par value of business assumed by us.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Nine Months Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="19">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Net Premiums Written(1)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B>Dollars in millions</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    RAM Re</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>55.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>48.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>66.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>67.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>36.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21.3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Change from prior period</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><I>15</I></TD>
    <TD align="left" valign="bottom" nowrap><I>%</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><I>n/a</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><I>(3</I></TD>
    <TD align="left" valign="bottom" nowrap><I>)%</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><I>88</I></TD>
    <TD align="left" valign="bottom" nowrap><I>%</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><I>37</I></TD>
    <TD align="left" valign="bottom" nowrap><I>%</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><I>24</I></TD>
    <TD align="left" valign="bottom" nowrap><I>%</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><I>n/a</I></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    AAA Primary Insurers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,229.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,296.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,102.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,113.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,346.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,860.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,232.8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>Change from prior period</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><I>(3</I></TD>
    <TD align="left" valign="bottom" nowrap><I>)%</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><I>n/a</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><I>0</I></TD>
    <TD align="left" valign="bottom" nowrap><I>%</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><I>33</I></TD>
    <TD align="left" valign="bottom" nowrap><I>%</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><I>26</I></TD>
    <TD align="left" valign="bottom" nowrap><I>%</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><I>51</I></TD>
    <TD align="left" valign="bottom" nowrap><I>%</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><I>n/a</I></TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">51
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Net premiums written and gross premiums written are identical
    for RAM Re.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Data from Standard&nbsp;&#38; Poor&#146;s Bond Insurance Book
    2005 and individual primary company operating supplements.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Since 2000, we have grown net written premiums each year but one
(2003)&nbsp;and at an annual rate of 32.7% through 2004 while
the &#147;AAA&#148; primary market has grown at an annual rate
of 25.9%. We increased net written premiums by 87.6% in 2003
even though the gross par ceded by the &#147;AAA&#148;-rated
primary insurers declined by more than 35.0%. Through the nine
months ended September&nbsp;30, 2005 we increased our net
premiums written by almost 15% over the comparable period in
2004, while the AAA-rate primary insurers as a group experienced
flat growth.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="43%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="19">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Industry Ceded Business(1)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005(2)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap><B>(Dollars in billions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    AAA Gross Par Ceded</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>43.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>51.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>46.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>70.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>54.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>45.7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    RAM Re Assumed Par</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    RAM Market Share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Data from Standard&nbsp;&#38; Poor&#146;s Bond Insurance Book
    2005 and individual primary operating supplements. The data has
    been adjusted for recaptured reinsurance cessions relating to
    the cancellation of certain reinsurance contracts and estimates
    of cession volume for primary insurers with affiliated
    reinsurance companies. RAM Re assumed par is based on a one
    quarter reporting lag.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Gross par ceded by Assured Guaranty Corp. for nine months ended
    September&nbsp;30, 2005 is an estimate based on 2004 ceded
    percentage. RAM Re assumed par is based on a one quarter
    reporting lag.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
After raising capital in 2003, we have significantly increased
our market share. The capital raise helped increase market share
because it expanded our underwriting capacity. We estimate that
our market share in 2004 represented approximately 15.6% of the
total par ceded. For the nine months ended September&nbsp;30,
2005, we estimate that market share has continued to grow
modestly.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Our Competitive Strengths</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe certain characteristics distinguish us from our
competitors and provide opportunities for growth, including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Strong Financial Strength Ratings.</I> Our operating
    subsidiary, RAM Re, has financial strength ratings of
    &#147;AAA&#148; from Standard&nbsp;&#38; Poor&#146;s and
    &#147;Aa3&#148; from Moody&#146;s. We believe these ratings are
    highly attractive relative to other non-&#147;AAA&#148;-rated
    reinsurance sources and provide important capital benefits to
    primary insurers. By ceding business to a highly-rated
    reinsurer, primary insurers are able to reduce the amount of
    capital that is required of them by the rating agencies and are
    able to increase their profitability.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Unique Business Model.</I> We are currently the only
    &#147;AAA&#148;-rated financial guaranty reinsurer focused
    solely on providing financial guaranty reinsurance to third
    parties. By providing dedicated reinsurance capacity, we believe
    we have established a leading market presence in the sector. As
    a result, we have increased par outstanding by a compound annual
    growth rate of 22.4% since 2000 through year-end 2004. In the
    future, we believe we will continue to be a unique and important
    reinsurance partner for primary insurers in the financial
    guaranty market.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Capacity for Operating Efficiencies.</I> We have decreased
    our operating expense ratio from 33.1% in 2000 to 29.9% for the
    nine months ended September&nbsp;30, 2005. In the future, we
    believe we can continue to enhance our operating margins by
    continuing to increase our revenue base without significantly
    increasing our infrastructure and staffing. We expect to
    increase revenues without</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">52
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    materially increasing operating expenses because we do not
    expect an increase in revenues to require a commensurate
    increase in employee headcount.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Focused Treaty-based Business Mix.</I> For the nine months
    ended September&nbsp;30, 2005, approximately 85% of our gross
    written premiums were sourced from treaty business that was
    derived from three ceding companies with whom we have had
    treaties in place for more than four years. Our emphasis on
    treaties represents a stable source of business that can be
    conducted efficiently by our skilled and experienced employees
    and that reinforces our relationships with key primary insurers
    in the financial guaranty market.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Experienced Management Team.</I> Our management team has an
    average of 11.5&nbsp;years of experience in the financial
    guaranty industry. Additionally, our management has broad
    experience in the industry, with most having previously worked
    for the primary insurers in the financial guaranty industry.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Bermuda Domicile.</I> As a Bermuda company, we are not
    subject currently to corporate income tax. We believe that our
    Bermuda domicile provides advantages over our non-Bermuda
    domiciled competitors that are subject to corporate income tax.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Our Business Strategy</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our corporate objective is to build shareholder value by
increasing shareholders&#146; equity through stable and
high-quality earnings growth. We intend to achieve this
objective with the following strategies:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Maintaining our Financial Strength Ratings.</I> We intend to
    underwrite business and invest our portfolio in a manner
    consistent with maintaining our current ratings in order to
    maximize the benefits of our reinsurance products for our
    customers. We believe financial strength ratings are an
    important factor in establishing our competitive position in the
    financial guaranty reinsurance market.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Achieving Attractive Risk-Adjusted Returns on Capital.</I> We
    strive to maintain an efficient capital base and to use a
    disciplined underwriting approach to achieve high, risk-adjusted
    returns on capital and to promote optimal diversification. We
    pursue return and diversification targets by limiting product
    line exposure under our treaties, by adding specific issuers,
    product lines and countries to treaty exclusion lists and by
    selecting facultative transactions on a risk-adjusted
    profitability basis. In addition, we promote diversification by
    offering reinsurance to all &#147;AAA&#148;-rated primary
    insurers and by providing reinsurance for all major product
    lines.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Enhancing Operating Margins.</I> We intend to continue to
    grow our treaty-based revenue without significantly increasing
    our infrastructure and staffing, which we believe will reduce
    our expense ratio over time. We believe treaty-based revenues
    will continue to provide efficient growth opportunities because
    we do not expect an increase in treaty-based revenues to require
    a commensurate increase in employee headcount.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Expanding Market Share.</I> We plan to continue to increase
    our share of existing treaties, establish new treaties and
    selectively increase our facultative underwriting for the
    &#147;AAA&#148;-rated primary insurers in order to selectively
    expand our market share.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Managing Risk of our Investment Portfolio.</I> We plan to
    continue to manage invested assets with the goal of preserving
    principal while providing a stable stream of investment income
    and controlling market risk. We intend to achieve this by
    maintaining the duration of our assets within a prescribed
    target range, maintaining an average credit rating of at least
    &#147;Aa2/ AA&#148; for our investments, and seeking appropriate
    diversification within the portfolio.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">53

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Our Product Lines</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Financial guaranty primary and reinsurance exposures are often
grouped into two broad categories, Public Finance and Structured
Finance, divided geographically between the United States and
International. The following table sets forth par outstanding by
product line geographically for RAM Re compared to the
&#147;AAA&#148; insurers&#146; weighted average. Beginning in
2005, we began reporting exposure data at a one quarter lag, as
is consistent with practices of other financial guaranty
reinsurers, because we receive detailed exposure data from
primary insurers generally 45&nbsp;days following the end of a
quarter.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="32%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Gross Par Outstanding of RAM Re as of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Industry Average</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>as of(1)</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30, 2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31, 2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4" align="left" nowrap><B>Worldwide Financial Guaranty</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Volume</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>%(2)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Volume</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>%(2)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>%(2)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>(Dollars in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Public Finance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    United States</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15,049</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60.8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    International</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,912</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Subtotal</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,961</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,951</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Structured Finance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    United States</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24.5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    International(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,536</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Subtotal</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,741</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35.9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26,702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22,154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Source: Standard&nbsp;&#38; Poor&#146;s Bond Insurance Book,
    2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Par volume expressed as a percentage of total par in-force. Due
    to rounding, the numbers in the above table may not add up to
    the total percentages reflected above.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Includes Standard&nbsp;&#38; Poor&#146;s &#147;Other&#148;
    International category.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Public Finance Reinsurance</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2004 and in 2003, in the public finance sector we reinsured
net par of $3.7&nbsp;billion and $3.1&nbsp;billion,
respectively, and reported $45.2&nbsp;million and
$52.2&nbsp;million of gross written premiums, respectively.
Through September&nbsp;30, 2005, we reinsured net par of
$3.1&nbsp;billion and reported $36.7&nbsp;million of gross
premium written. Substantially all of the transactions in the
public finance sector are investment grade. Our market
opportunity is a function of the total insured public finance
issuance and the amount of business ceded by the primary
companies.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We reinsure a number of different sectors of public finance
obligations, which include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>General Obligations:</I> Transactions in this sector are
    primarily backed by the full faith and credit of state and local
    governments. Also included in this sector are lease obligations
    of state and local governments.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Utilities:</I> Transactions in this sector are typically
    secured by a pledge of revenues from the operations of
    municipal-owned water, sewer or electric utilities.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Tax-backed Obligations:</I> Transactions in this sector are
    primarily secured by sales, gas, motor vehicle registration and
    other miscellaneous excise taxes.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Hospitals:</I> Transactions in this sector are backed by the
    revenues of either stand-alone hospitals or healthcare systems
    and are also frequently secured by mortgages on the assets of
    such entities.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">54

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Transportation:</I> Transactions in this sector are secured
    by airport revenues, parking fees, highway tolls and port
    charges.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Colleges and Universities:</I> Transactions in this sector
    are secured by the general obligation pledge of a college or
    university, by student fees or by the revenues of a particular
    segment of an educational institution&#146;s operations.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Investor-Owned Utilities:</I> Transactions in this sector
    comprise the debt obligations of IOUs in the United States with
    the majority comprised of electric utilities. The majority of
    our exposure in this sector is either to secured debt or debt
    subject to negative pledge covenants.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Other:</I> This category represents transactions secured by
    miscellaneous state or local government revenues.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>International:</I> Our international public finance sector
    includes obligations of sovereigns and sub-sovereigns (such as
    Canadian provinces) as well as project finance transactions
    financed via public/private partnerships, typically patterned
    after the U.K. Private Finance Initiative. This sector also
    includes <FONT style="white-space: nowrap">non-U.S.&nbsp;</FONT>
    IOUs.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth our worldwide public finance par
outstanding by obligor type, as of the dates indicated:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="29%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Gross Par Outstanding of RAM Re as of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Industry Average as of(1)</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="left" nowrap><B>Worldwide Public Finance</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Volume</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>%(2)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Volume</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>%(2)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>%(2)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>(Dollars in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    United States:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    General Obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,316</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,738</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21.5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Utility</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,646</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,486</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tax-backed Obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Hospitals</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,743</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Transportation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,316</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,096</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Colleges&nbsp;&#38; Universities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>318</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investor-Owned Utilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>441</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    International</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,912</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,961</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,951</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Source: Standard&nbsp;&#38; Poor&#146;s Bond Insurance Book,
    2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Par volume expressed as percentage of total par in-force.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Structured Finance Reinsurance</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2004 and in 2003, in the structured finance sector we
reinsured net par of $4.4&nbsp;billion and $3.1&nbsp;billion,
respectively, and reported $20.9&nbsp;million and
$15.7&nbsp;million of gross written premiums, respectively.
Through September&nbsp;30, 2005 we reinsured net par of
$3.9&nbsp;billion and reported $18.5&nbsp;million of gross
premiums written. We reinsure a number of different sectors of
structured finance obligations, including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Mortgage-Backed Securities:</I> Transactions in the
    mortgage-backed securities sector include transactions secured
    by first priority prime and sub-prime mortgage loans, and
    manufactured housing transactions.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">55

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Home Equity Loan:</I> Transactions in this sector are secured
    by both prime and sub-prime home equity loans.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Auto Loan:</I> The majority of our auto loan portfolio is
    composed of transactions secured by sub-prime and non-prime auto
    loans.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Other Consumer Asset-Backed Securities:</I> This sector of
    other consumer asset-backed securities, or ABS, includes
    transactions secured by credit card receivables and student
    loans.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Commercial Asset-Backed Securities:</I> The largest component
    of this sector are collateralized debt obligations, with the
    sector also including transactions secured by equipment leases,
    small business loans and other securitizations of corporate
    assets.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    <I>Bank/ Financial Institutions and Other Corporate:</I> The
    majority of our exposure in this sector is guarantees on
    short-term bank deposits of investment grade banks. In addition,
    we have a small amount of insurance company and broker/ dealer
    exposures that are in run-off.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth our worldwide structured finance
par outstanding by obligor type, as of the dates indicated:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Gross Par Outstanding of RAM Re as of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Industry Average</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>as of(1)</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31, 2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Worldwide Structured Finance</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Volume</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>%(2)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Volume</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>%(2)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>%(2)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>(Dollars in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mortgage-Backed Securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>684</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Home Equity Loan</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,047</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Auto Loan</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>716</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>449</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other Consumer ABS</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>473</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>531</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Commercial ABS</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,867</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bank/ Financial Inst and Other Corporate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    International(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,536</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,741</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35.9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Source: Standard&nbsp;&#38; Poor&#146;s Bond Insurance Book,
    2005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Par volume expressed as percentage of total par in-force.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Includes Standard&nbsp;&#38; Poor&#146;s &#147;Other&#148;
    International category.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">56

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Reinsurance Portfolio</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Portfolio by Underwriting Rating</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We enter into treaties and provide facultative reinsurance for
only those securities that we consider to be investment grade
credit quality. The following table sets forth our in-force
portfolio of reinsurance as of September&nbsp;30, 2005, based on
par value, by underwriting rating assigned by RAM Re:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Gross Par</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Outstanding as of</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30, 2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Ratings Distribution(1)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Volume</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>%</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(Dollars in</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    AAA</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,605</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17.2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    AA</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,773</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25.4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    A</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    BBB</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Below investment grade</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>330</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26,702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Based upon the underlying ratings of the securities as assigned
    by RAM Re, and taking into consideration ratings assigned by
    Moody&#146;s, Standard&nbsp;&#38; Poor&#146;s and the primary
    insurer, as provided to us by the primary insurer. Due to
    rounding, the numbers in the above table may not add up to the
    total percentages or amounts reflected above.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Portfolio by Geographic Distribution</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe that we maintain a geographically balanced portfolio.
As of September&nbsp;30, 2005, our largest state concentration,
California, represented less than 8% of our portfolio. In
addition, most structured finance transactions are, by nature,
geographically diversified. With respect to
<FONT style="white-space: nowrap">non-U.S.&nbsp;</FONT>transactions,
our underwriting guidelines currently limit concentration to a
maximum of 25% of the total portfolio.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth our in force portfolio of
reinsurance as September&nbsp;30, 2005, based on par value, by
geographic distribution:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Gross Par</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Outstanding as of</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30, 2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Geography</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Volume</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>%</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(Dollars in</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    United States</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    California</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,987</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New York</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,471</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Florida</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,091</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Texas</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>965</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Illinois</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other states</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,237</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30.8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Multi-State</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,926</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25.9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    International</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26,702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Due to rounding, the numbers in the above table may not add up
to the total percentages reflected above.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">57

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Portfolio by Type of Reinsurance</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We primarily write treaty reinsurance agreements that require
our customer to cede, and us to assume, specific obligations
underwritten by our customer over a period of time, typically
one year. The following table sets forth our reinsurance
business written, based on par value by type (facultative versus
treaty) for the periods indicated:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="28%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months Ending</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>For the Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Gross Par Written</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30, 2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2000</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="22" align="center" nowrap><B>(Dollars in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Transaction Type Public Finance</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Facultative</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>524</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>668</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>558</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Treaty</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,587</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,205</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,884</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,903</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,634</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>924</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,652</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,302</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,482</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>% Treaty</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>83.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>87.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>93.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>81.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Structured Finance</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Facultative</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>543</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>259</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>296</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>518</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>975</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Treaty</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,518</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>509</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,409</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,062</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,412</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,484</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>% Treaty</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85.9</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>79.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>87.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>69.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>All Transactions</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Facultative</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,337</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>477</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>726</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,533</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Treaty</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,904</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,805</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,433</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,971</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,061</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,164</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,745</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,965</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>% Treaty</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>84.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>83.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>92.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>84.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Pricing</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Ceding Commissions.</I> We pay ceding commissions to the
primary insurers for ceded business. Commission rates paid to
the same primary insurer may vary by sector and may vary for
treaty or facultative business. In 2003 ceding commission rates
declined materially when our &#147;AAA&#148; ratings were
reaffirmed by Standard&nbsp;&#38; Poor&#146;s and remained
stable. Ceding commission rates remained stable in 2004 and
through September&nbsp;30, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Premium Rates and Capital Charges.</I> Premium rates on
reinsured policies are set by the major primary insurers. Under
our treaties we are obligated to accept ceded business under
terms, including premium rates, already established by the
primary insurer. On facultative business where we have the
ability to accept or reject the reinsurance submissions we focus
on measuring premium rates on a risk-adjusted basis.
Accordingly, when evaluating premiums as a component of our
profitability, we compare the average level of our premiums to
our average capital charges.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Risk Management</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our risk management objective is to obtain a high quality and
diverse portfolio while maximizing risk- adjusted returns. Our
strategy is to assemble a portfolio of obligations which is
comparable in composition (sectors and bond types) to the
&#147;AAA&#148;-rated primary companies. Accordingly, we
consider all types of investment grade public finance and
structured finance securities for reinsurance, as well as
limited types of corporate obligations (primarily obligations of
secured investor-owned utilities and short-term bank deposits).
We concentrate on selecting those credit sectors and obligations
that we believe are fundamentally sound and that provide the
most potential for profitability from within the total pool of
available obligations in compliance with our underwriting and
pricing guidelines, rather than limiting
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">58

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
reinsurance activity to specific types of obligations. In
addition, we focus on those primary insurers which, in our
opinion, adhere to stringent underwriting guidelines and which,
with one exception, are rated &#147;AAA&#148; and
&#147;Aaa&#148; by Standard&nbsp;&#38; Poor&#146;s and
Moody&#146;s, respectively. We seek to avoid any substantial
concentration of exposure by specific type of bond, geographic
area, issuer or maturity.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Underwriting</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Overview.</I> We maintain conservative underwriting standards
both in terms of the types of risks we reinsure as well as the
risk limits that we have established. Our reinsurance is
underwritten to a remote-loss standard, which means that at the
time a policy on any particular transaction is issued (and when
we reinsure it), no losses are expected for the entire term of
the policy. In addition to our own views on the quality of the
risks we assume, such investment grade quality standard is
independently established by Moody&#146;s and
Standard&nbsp;&#38; Poor&#146;s for the overwhelming majority of
the transactions reinsured. In rare instances, the investment
grade standard may only be available from one of these two
rating agencies or, if the primary insurer deems the credit to
be of high investment grade, from neither rating agency.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our underwriting process is organized to provide multiple levels
of credit review and approval. Prior to assuming reinsurance
exposures from any new primary insurer, we will review the
operations of the primary insurer to determine adherence by the
primary to a remote-loss underwriting standard. Our underwriting
guidelines are based on those aspects of credit quality that we
deem important for the category of bond being considered for
reinsurance. In addition, our underwriting guidelines take into
consideration primary insurer and rating agency criteria
established for the category. Such guidelines are updated
periodically as appropriate to reflect changes in risk profiles,
additional knowledge obtained and changes in the structure of
the transactions being reinsured. Our underwriting is performed
by a team of experienced analysts. The process that is in place
provides that all treaties and facultative transactions are
approved by the underwriting committee. In addition, all
treaties are approved by our board of directors.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Single Risk Limits.</I> We seek to limit our exposures to
single risks based upon an evaluation of the relative level of
risk present in the particular reinsured transaction. Our single
risk guidelines therefore apply to the type of transaction being
ceded as well as to a transaction&#146;s uninsured rating.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We base our single risk guidelines for public finance
transactions on Standard&nbsp;&#38; Poor&#146;s limits, with the
highest limits for the lowest risk product lines, such as
general obligation bonds and water and sewer transactions.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For structured finance transactions our single risk guidelines
are based upon the Standard&nbsp;&#38; Poor&#146;s capital
charge and credit gap methodology, with such capital charges and
related credit gaps being further adjusted for bond sector and
underlying transaction rating. Our application of that
methodology for structured finance transactions, however,
typically results in our having retentions that are
significantly below the figures that the Standard&nbsp;&#38;
Poor&#146;s methodology would allow without adjustment. In
addition to limiting single risks for structured finance
transactions, we also seek to limit our aggregate risk to
particular originators/ servicers. We do this by aggregating our
total exposure to originators/ servicers and discounting this
aggregate exposure by an assumed correlation factor. The result
of this calculation is then compared to an aggregate originator/
servicer risk limit that is sensitive to the ceded
transactions&#146; underlying ratings.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The majority of our transactions are reinsured through treaty
cessions which do not permit the scaling down of a particular
cession based upon a transaction&#146;s underlying rating. To
mitigate the risk that we would exceed our single risk limits
(which are scaled based on uninsured rating), we establish lower
single risk cession limits in each treaty. We also use our
ability to exclude in our treaties further cessions of a
particular obligation once we have determined that we are
approaching our single-risk guideline limit for that particular
single risk. The fact that the majority of our business is ceded
through treaties that are not ratings-sensitive in their ceding
methodology, however, can sometimes result in treaty cessions
that exceed our ratings-sensitive single risk guidelines in
certain sectors. Furthermore, our single risk limits are applied
on a &#147;when ceded&#148; basis, so our exposure to a
particular single risk could exceed our guidelines as a result
of a subsequent downgrade.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">59

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
To manage our exposure to risks in large public finance
transactions, we maintain a retrocessional facility with a
reinsurer under which we are able to cede certain public finance
risks that exceed our internal single risk limits subject to
limits by risk categories. As of September&nbsp;30, 2005, we
have not retroceded any of our business under this
retrocessional facility.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Treaty</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the process of entering into a treaty, our participation
percentage in that treaty is negotiated. After the treaty is
entered into, all transactions that meet the treaty&#146;s
inclusion parameters are automatically ceded (according to that
participation percentage) to us. Individual transactions that
are &#147;treaty eligible&#148; may not be rejected by us for so
long as the reinsurance treaty is in place, other than by adding
specific transactions or classes of transactions to the treaty
exclusion list, which is typically done for exposure management.
As a result, we have limited ability to control the individual
obligations ceded to us.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The treaties that we enter into generally have a one-year term
and are typically renewed annually by the primary insurers,
usually with only minor changes being made to their terms. In
addition, the business ceded by each primary insurer during the
prior year via the reinsurance treaty is evaluated to examine
the attractiveness of the business that was ceded through the
particular treaty. Pricing, capital charges, risk levels,
ratings, product line and geographic location of the obligations
are among the parameters we consider. Based upon that review and
evaluation, we will decide whether or not to seek changes in the
treaty structure as well as the level of participation in the
treaty that is desired for the upcoming year.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of September&nbsp;30, 2005, we had quota share reinsurance
treaties in place with three primary insurers (Ambac, FSA and
MBIA).
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Facultative</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also reinsure facultative transactions with each of our
treaty customers, other &#147;AAA&#148;-rated primary insurers
and, on occasion, with other financial guaranty reinsurance
companies. Similar to our treaty reinsurance business, our
facultative transactions are assumed by us on a proportional or
quota share basis under which our customers retain a portion of
the risk. Unlike treaty reinsurance, however, each facultative
transaction is individually evaluated. The nature and extent of
that evaluation depends upon the transaction&#146;s product
line, size, underlying credit ratings and whether or not it is a
repeat transaction that has been reviewed in the past. In all
instances, the primary insurer will have provided us with its
own internal underwriting report that assesses the
creditworthiness of the transaction, provides pricing and
capital charge information and proposes any recommendations
regarding changes in the transaction terms that the primary
insurer is seeking prior to offering to insure it. For more
complex transactions the underlying transaction documents,
feasibility studies, database search results and rating agency
reports are also provided as applicable.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to evaluating the particular transaction for
creditworthiness and appropriate pricing, we also evaluate the
extent to which participating in a particular facultative
transaction will assist in attaining our diversification
objectives. On occasion, otherwise acceptable transactions are
not reinsured because they would be detrimental to those
diversification objectives.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Surveillance Process</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our underwriters and risk management staff perform periodic
reviews of our reinsured portfolio in order to ensure continued
compliance with our general risk diversification guidelines,
which include limits on bond sector, originator/ servicer and
geographic concentrations. In addition, during these reviews our
portfolio profile is also compared to those of our competitors
and to the ceding primary companies to verify that our
underwriting standards are effectively maintaining the credit
quality of our portfolio compared to the industry as a whole.
Surveillance reviews are also used to identify trends or issues
in particular industries or sectors that may serve to alter or
limit our reinsurance activities in those sectors.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">60

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In terms of reviews on individual transactions, we rely heavily
upon the substantial surveillance activities of the primary
insurers, and supplement these reviews with rating agency and
general market information. Each of the primary insurers
maintains a watch list for credits that have been identified as
requiring greater than the usual level of ongoing scrutiny
and/or intervention. The primary insurer is required to notify
us when any transaction it has reinsured has been placed on such
a watch list.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Watch List</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We maintain our own watch list, typically with only minor
differences from the watch lists of the primary insurers. The
purpose of our watch list is to identify those transactions
requiring increased monitoring. Transactions on our watch list
are divided into four categories. Category 1 includes
transactions for which performance of the issue or that of an
issuance participant is sufficiently below expectations that
increased monitoring is required; however, the risk of loss
remains remote. Category 2 transactions include those for which
performance of an issue or that of an issuance participant is
sufficiently below expectations that increased monitoring is
required and remedial intervention by the primary insurer is
either planned or already in progress. If performance has
deteriorated to the point where concerns about the issuer&#146;s
continued ability to meet debt service requirements on a timely
basis are substantial, such transaction would be classified as a
Category 3 transaction. Category 4 transactions include those
for which claims or loss adjustment expense payments are likely.
Designation of a transaction as Category 4 generally coincides
with the establishment of a case basis loss reserve.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of September&nbsp;30, 2005, our watch list consisted of 125
credits, comprising aggregate par amount outstanding of
$338.8&nbsp;million. The number and par amount of the credits in
each category is shown in the table below:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="28%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Par as of(1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Transactions on</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Watch List as of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Watch List</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30, 2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Change in Par</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>



<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>(Dollars in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>ABS&nbsp;&#38; Non-IOU Corporate</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Category 1</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>72.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>160.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(87.8</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-54.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Category 2</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>120.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>94.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Category 3</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(41.4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-69.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Category 4</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Subtotal</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>272.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>355.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(82.6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-23.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Public Finance&nbsp;&#38; IOU</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Category 1</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>97.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Category 2</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-2.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Category 3</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>535.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Category 4</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Subtotal</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>66.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>42.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>23.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total Watch List</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>338.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>398.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(59.3</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>-14.9</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Gross par outstanding.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All of our Category 4 transactions as of September&nbsp;30, 2005
were related to ABS transactions. Historical loss experience in
the financial guaranty industry on ABS transactions indicates
that losses on ABS transactions are typically low relative to
the net par outstanding at the time of loss recognition. Each of
the transactions in Category 4 has been examined individually to
determine the likelihood, timing and severity of expected
losses. Although there can be no assurance that actual
experience will not vary from our loss expectation, our existing
case reserves represent our best estimate of likely future
losses on our Category 4 transactions, with such estimates
updated quarterly. All of our current Category 4 transactions
include losses that are estimable.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">61
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The chart above does not include 23 obligations with net par
outstanding of approximately $40&nbsp;million that we are
closely monitoring related to Hurricane Katrina. As of
September&nbsp;30, 2005, RAM Re has not recorded any portfolio
reserves or case reserves for this event; and no case reserves
have been reported to us by any of our primary insurer clients.
In addition, only four claims have been paid, in the amount of
$13,000, for which a full reimbursement has been received.
Uncertainty exists with regard to both the probability of
defaults occurring and the loss severities that will apply to
any defaults that do occur. Our risk management staff is
actively monitoring the specific obligations in coordination
with the primary insurers and will continue to assess the impact
of Hurricane Katrina on the credit quality of our portfolio.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The chart above includes $127&nbsp;million of our total
$130&nbsp;million of net par outstanding on EETCs as of
September&nbsp;30, 2005. Recent bankruptcies in the commercial
airline industry present a threat to the ability and willingness
of these carriers to continue to meet obligations due under
EETCs. We are actively monitoring our EETC exposure. Since there
is significant uncertainty regarding the ability of certain
obligors to meet their obligations, RAM Re could incur a loss.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Losses and Reserves</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our liability for losses and loss adjustment expenses consists
of case basis reserves and an unallocated or general reserve.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Case basis reserves are established based on primary insurer
reports and internal review and evaluation of obligations that
either have already defaulted or have a high probability of
default. Case basis reserves are established based on the
present value of the expected ultimate losses and loss
adjustment expense that we expect to pay less estimated
recoveries. Our current case basis reserves consist of the
estimatable losses on our Category 4 transactions. We maintain
an unallocated or general reserve based on the unallocated
reserve amounts established by primary insurers for their
portfolios and the relative size and credit risk of our in-force
portfolio, taking into account the rating agencies&#146; views
of credit quality, as well as management judgment. General
reserves include our estimate of highly probable losses on our
Category 4 transactions that cannot be estimated currently.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Problem credits are identified initially by the primary insurers
at least on a quarterly basis. Our risk management staff uses
this input to identify and assess the status of individual
credits. Quarterly, the management committee formally reviews
case and general reserves. The committee establishes reserves
that it believes are adequate to cover the present value of the
ultimate liability for losses and loss adjustment expenses.
These reserves are necessarily based on estimates and may vary
materially from actual results. Adjustments based on actual loss
experience will be recorded in the periods in which they become
known.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of September&nbsp;30, 2005, our losses and loss expense
reserves were $12.3&nbsp;million compared to total reserves of
$15.5&nbsp;million at December&nbsp;31, 2004 and
$13.8&nbsp;million as of December&nbsp;31, 2003. The following
table sets forth the balances for the previous three years of
losses and loss expense reserves, including case basis reserves
and general reserves:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>As of December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Losses and Loss Expense Reserves</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>(Dollars in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Case Reserves</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,312</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,149</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,967</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,261</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unallocated/ General Loss Reserves</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,962</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,140</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,274</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15,492</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,821</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,401</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Ratings</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of the date of this prospectus, RAM Re has been assigned a
&#147;AAA&#148; (Extremely Strong) rating from
Standard&nbsp;&#38; Poor&#146;s and a &#147;Aa3&#148;
(Excellent) rating from Moody&#146;s. Both ratings are stable.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">62

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The major rating agencies have developed and published rating
guidelines for rating financial guaranty reinsurers. The
financial strength ratings assigned by the rating agencies are
based upon factors relevant to primary insurers, and are not
directed toward the protection of investors in our common
shares. The rating criteria used by the rating agencies in
establishing these ratings include consideration of the
sufficiency of capital resources to meet projected growth (as
well as access to such additional capital as may be necessary to
continue to meet applicable capital adequacy standards), our
overall financial strength, and demonstrated management
expertise in financial guaranty and traditional reinsurance,
credit analysis, systems development and investment operations.
These ratings reflect only the views of the respective rating
agencies and are not recommendations to buy, sell or hold
securities, and are subject to revision or withdrawal at any
time.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The ratings agencies will grant credit against a primary
insurer&#146;s capital requirements and single risk limits for
insurance ceded to a reinsurer in an amount that is a function
of the financial strength rating of the reinsurer. The rating
agencies currently allow the greatest credit to a primary
insurer&#146;s capital requirements and single risk limits for
reinsurance ceded to a monoline reinsurer with a financial
strength rating of &#147;AAA.&#148; We have a financial strength
rating of &#147;AAA&#148; from Standard&nbsp;&#38; Poor&#146;s.
For example, Standard&nbsp;&#38; Poor&#146;s has established the
following reinsurance credit for business ceded to a monoline
reinsurer:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Monoline Reinsurer Rating</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Primary Insurer Rating</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>AAA</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>AA</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>A</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>BBB</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    AAA</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>no credit</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    AA</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    A</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>80</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2003, Standard&nbsp;&#38; Poor&#146;s re-examined its
methodology for the determination of credit for reinsurance
ceded to a multiline reinsurer. In the course of their
examination, Standard&nbsp;&#38; Poor&#146;s considered the
effect of having both monoline and multiline companies in the
industry, determining that multiline reinsurers had not
demonstrated sufficient commitment to participation in the
industry and occasionally handle claims for financial guaranty
reinsurance as they would claims in their other business lines.
Standard&nbsp;&#38; Poor&#146;s therefore determined that no
rating agency reinsurance credit would be accorded cessions to
multiline reinsurance companies that had not demonstrated their
willingness and ability to make timely payment, which
willingness and ability is measured by a financial enhancement
rating, or FER, from Standard&nbsp;&#38; Poor&#146;s. FERs are
assigned by Standard&nbsp;&#38; Poor&#146;s to multiline
insurers requesting the rating who meet stringent criteria
identifying our capacity and willingness to pay claims on a
timely basis. Standard&nbsp;&#38; Poor&#146;s has established
the following reinsurance credit for business ceded to a
multiline reinsurer carrying an FER.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Multiline Reinsurer Rating</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Primary Insurer Rating</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>AAA</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>AA</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>A</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>BBB</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    AAA</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>95</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>no credit</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    AA</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>95</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    A</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>95</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Investments</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our investment objectives are to ensure our financial strength
and stability while providing long term predictable growth and
optimizing income. Our investment objectives include
preservation of principal, maintaining a high quality, liquid
investment portfolio within a prescribed duration range, and
achieving stable net investment income. As of September&nbsp;30,
2005, the duration of our portfolio is 4.23&nbsp;years and the
weighted portfolio credit quality is an &#147;Aaa&#148; rating
by Moody&#146;s.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our invested assets are managed by the professional asset
management firm, MBIA Capital, a
<FONT style="white-space: nowrap">wholly-owned</FONT> subsidiary
of one of our shareholders, whose investment decisions are
constrained by investment policy and guidelines developed by RAM
Re and adopted by our board of directors. Our
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">63

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
investment portfolio consists of fixed maturities and short-term
investments. The investment services agreement between us and
the asset manager may be terminated by either party without
cause upon 30&nbsp;days&#146; prior written notice. The
portfolio is reported at fair value based upon quoted market
prices provided by either independent pricing services or, when
such prices are not available, by reference to broker or
underwriter bid indications.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table summarizes our investment portfolio by
security type:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="52%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>As of September&nbsp;30, 2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Fixed Income Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Book Yield</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amortized Cost</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fair Value</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Agencies</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>67,069,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>66,060,403</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S.&nbsp;government obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,507,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,158,540</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Corporate debt securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>130,880,989</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>130,354,640</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Municipal securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,727,815</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,702,741</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mortgage and asset-backed securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>217,518,664</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>215,474,909</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>464,704,855</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>461,751,233</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table summarizes our investment portfolio by
ratings:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="79%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As of</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Rating Profile(1)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    AAA(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    AA</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    A</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Ratings represent Standard&nbsp;&#38; Poor&#146;s
    classifications. If unavailable, Moody&#146;s ratings are used.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Includes U.S.&nbsp;Treasury and agency obligations, which
    comprised approximately 22.0% of the investment portfolio as of
    September&nbsp;30, 2005 and December&nbsp;31, 2004.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table summarizes our investment portfolio by
maturity category:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of December&nbsp;31, 2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Fixed Income Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amortized Cost</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fair Value</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less than one year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Due after one year through five years</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>182,156,316</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>181,709,468</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Due after five years through ten years</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60,387,309</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60,519,395</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Due after ten years</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>159,575,942</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>162,677,235</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>402,119,567</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>404,906,098</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Competition in the Financial Guaranty Reinsurance Market</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Primary financial guaranty companies choose reinsurance
providers based upon several factors, including overall
financial strength, financial strength ratings by the major
rating agencies, single risk capacity, level of service quality
and in some cases whether or not the reinsurer competes with the
primary company. We are currently among the smallest of the
financial guaranty reinsurers as measured by equity capital, but
are the only &#147;AAA&#148;-rated financial guaranty insurance
company with dedicated capacity that does business with third
parties.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our competitors include Assured Guaranty Re, XL Financial
Assurance, Channel Re, BluePoint Re, Radian Assurance, as well
as several multiline insurance companies. We also compete
directly and
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
indirectly with certain credit default swaps and other
alternative transaction structures that may be a more attractive
alternative to traditional financial guaranty reinsurance. In
addition, issuers may choose to divide large transactions among
several primary insurers reducing or eliminating the need for
reinsurance. Primary insurers may also choose to reinsure
transactions with other primary insurers directly also reducing
or eliminating the need for reinsurance.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Employees and Property</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2005, we had 15 employees. All of our
employees are employed by us or RAM Re. See &#147;Risk
Factors&nbsp;&#151; Risks Related to Our Company&nbsp;&#151; We
could be adversely affected by the loss of one or more principal
employees or by an inability to attract and retain staff.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We maintain our executive office at RAM Re House, 46&nbsp;Reid
Street, Hamilton HM&nbsp;12&nbsp;Bermuda. Pursuant to a Lease
Agreement, dated January&nbsp;1, 2005, we lease the third floor
and penthouse of this premises from Field Real Estate (Holdings)
Limited. The term of the lease is three years, starting
January&nbsp;1, 2005. The basic rent is $21,420&nbsp;per month
payable monthly in advance on the first day of each month, plus
a monthly maintenance service charge.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Legal Proceedings</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are not currently involved in any material legal proceedings.
</DIV>

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<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>REGULATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Bermuda</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a holding company, we are not subject to Bermuda insurance
regulations. The Bermuda Insurance Act, which regulates the
insurance business of RAM&nbsp;Re, provides that no person shall
carry on an insurance business in or from within Bermuda unless
registered as an insurer under the Bermuda Insurance Act by the
BMA. Under the Bermuda Insurance Act insurance business includes
reinsurance. The BMA, in deciding whether to grant registration,
has broad discretion to act as it believes is in the public
interest. The BMA is required by the Bermuda Insurance Act to
determine whether the applicant is a fit and proper body to be
engaged in the insurance business and, in particular, whether it
has, or has available to it, adequate knowledge and expertise.
The registration of an applicant as an insurer is subject to its
complying with the terms of its registration and such other
conditions as the BMA may impose at any time.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An Insurance Advisory Committee appointed by the Bermuda
Minister of Finance advises the BMA on matters connected with
the discharge of the BMA&#146;s functions, and subcommittees
thereof supervise and review the law and practice of insurance
in Bermuda, including reviews of accounting and administrative
procedures.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Bermuda Insurance Act imposes on Bermuda insurance companies
solvency and liquidity standards, as well as auditing and
reporting requirements. The
<FONT style="white-space: nowrap">day-to</FONT>-day supervision
of insurers is the responsibility of the BMA. The Bermuda
Insurance Act also grants to the BMA powers to supervise,
investigate and intervene in the affairs of insurance companies.
Certain significant aspects of the Bermuda insurance regulatory
framework are set forth below:
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Classification of Insurers.</I> The Bermuda Insurance Act
distinguishes between insurers carrying on long-term business
and insurers carrying on general business. There are four
classifications of insurers carrying on general business, with
Class&nbsp;4 insurers subject to the strictest regulation and
Class&nbsp;3 insurers subject to the next strictest regulation.
RAM&nbsp;Re is registered as a Class&nbsp;3 insurer and is
regulated as such under the Bermuda Insurance Act.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Cancellation of Insurer&#146;s Registration.</I> The BMA, on
certain grounds specified in the Bermuda Insurance Act, may
cancel an insurer&#146;s registration. Failure of the insurer to
comply with its obligations under the Bermuda Insurance Act or,
if the BMA believes that the insurer has not been carrying on
business in accordance with sound insurance principles, would be
such grounds.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Principal Representative.</I> An insurer is required to
maintain a principal office in Bermuda and to appoint and
maintain a principal representative in Bermuda. For the purpose
of the Bermuda Insurance Act, the principal office of
RAM&nbsp;Re is at RAM&nbsp;Re House, 46&nbsp;Reid Street,
Hamilton&nbsp;HM12 Bermuda, and Vernon Endo is the principal
representative of RAM&nbsp;Re. Without a reason acceptable to
the BMA, an insurer may not terminate the appointment of its
principal representative, and the principal representative may
not cease to act as such unless 30&nbsp;days&#146; notice in
writing to the BMA is given of the intention to do so. It is the
duty of the principal representative to immediately notify the
BMA and to make a written report to the BMA within 14&nbsp;days
where the principal representative believes there is a
likelihood of the insurer (for which the principal
representative acts) becoming insolvent or where a reportable
&#147;event&#148; has, to the principal representative&#146;s
knowledge, occurred or believed to have occurred. Examples of
such a reportable &#147;event&#148; include failure by the
insurer to comply substantially with a condition imposed upon
the insurer by the BMA relating to a solvency margin or a
liquidity or other ratio, or the insurer&#146;s ceasing to carry
on insurance business in or from within Bermuda. The written
report must set out all the particulars of the case that are
available to the principal representative.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Independent Approved Auditor.</I> Every registered insurer
must appoint an independent auditor who will annually audit and
report on the statutory financial statements and the statutory
financial return of the insurer. RAM&nbsp;Re&#146;s statements,
as a Class&nbsp;3 insurer, must be filed annually with the BMA.
The independent auditor of the insurer must be approved by the
BMA and may be the same person or firm
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
that audits the insurer&#146;s financial statements and reports
for presentation to its shareholders. Our independent auditor is
PricewaterhouseCoopers (Bermuda).
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Loss Reserve Specialist.</I> As a Class&nbsp;3 insurer,
RAM&nbsp;Re is required to submit an opinion of its approved
loss reserve specialist with its statutory financial return in
respect of its loss and loss expense provisions. The loss
reserve specialist will normally be a qualified casualty actuary
and must be approved by the BMA. Simon Lambert FIA&nbsp;MAAA is
RAM&nbsp;Re&#146;s loss reserve specialist and an employee of
PricewaterhouseCoopers (Bermuda).
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Annual Statutory Financial Statements.</I> An insurer must
prepare annual statutory financial statements. The Bermuda
Insurance Act prescribes rules for the preparation and substance
of such statutory financial statements, which include, in
statutory form, a balance sheet, income statement, a statement
of capital and surplus and notes thereto. The insurer is
required to give detailed information and analysis regarding
premiums, claims, reinsurance and investments. The statutory
financial statements are not prepared in accordance with
U.S.&nbsp;GAAP. They are distinct from the financial statements
prepared for presentation to the insurer&#146;s shareholders
under the Bermuda Companies Act, which may be prepared in
accordance with U.S.&nbsp;GAAP. RAM&nbsp;Re is required to
submit the annual statutory financial statements as part of its
annual statutory financial return. The statutory financial
statements and the statutory financial return do not form part
of the public records maintained by the BMA or the Registrar of
Companies of Bermuda.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Annual Statutory Financial Return.</I> RAM&nbsp;Re, as a
Class&nbsp;3 insurer, is required to file with the BMA a
statutory financial return no later than four months after its
financial year-end, unless specifically extended. The statutory
financial return includes, among other matters, a report of the
approved independent auditor on the statutory financial
statements of the insurer, a general business solvency
certificate, the statutory financial statements themselves and
the opinion of the loss reserve specialist. The principal
representative and at least two directors of the insurer must
sign the return and the solvency certificate (certifying, among
other matters, whether the minimum solvency margin has been met
and the independent approved auditor is required to state
whether in its opinion it was reasonable for the directors to so
certify). Where an insurer&#146;s accounts have been audited for
any purpose other than compliance with the Bermuda Insurance
Act, a statement to that effect must be filed with the statutory
financial return.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Minimum Solvency Margin and Restrictions on Dividends and
Distributions.</I> Under the Bermuda Insurance Act, the value of
general business assets of a Class&nbsp;3 insurer must exceed
its general business liabilities by an amount greater than the
prescribed minimum solvency margin, or the general business
solvency margin.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a Class&nbsp;3 insurer: (1)&nbsp;RAM&nbsp;Re is required to
maintain the general business solvency margin being a minimum
solvency margin equal to the greatest of: (A)&nbsp;$1,000,000;
(B)&nbsp;20% of net written premiums up to $6,000,000 plus 15%
of net written premiums over $6,000,000; or (C)&nbsp;15% of loss
and other insurance reserves; (2)&nbsp;at any time RAM&nbsp;Re
fails to meet its general business solvency margin it must,
within 30&nbsp;days after becoming aware of that failure or
having reason to believe that such failure has occurred, file
with the BMA a written report containing particulars of the
circumstances leading to the failure and of the manner and time
within which the insurer intends to rectify the failure;
(3)&nbsp;RAM&nbsp;Re is prohibited from declaring or paying any
dividends at any time it is in breach of its general business
solvency margin or the required minimum liquidity ratio, or if
the declaration or payment of such dividends would cause it to
fail to meet such margin or ratio; (4)&nbsp;if RAM&nbsp;Re has
failed to meet its minimum solvency margin or minimum liquidity
ratio on the last day of any financial year, RAM&nbsp;Re will be
prohibited, without the approval of the BMA, from declaring or
paying any dividends during the next financial year; and
(5)&nbsp;RAM&nbsp;Re is prohibited, without the prior approval
of the BMA, from reducing by 15% or more its total statutory
capital as set out in its previous year&#146;s statutory
financial statements. Total statutory capital includes
<FONT style="white-space: nowrap">paid-up</FONT> share capital,
and a redemption or repurchase of shares will be a reduction in
total statutory capital.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Minimum Liquidity Ratio.</I> The Bermuda Insurance Act
provides a minimum liquidity ratio for general business
insurers. An insurer engaged in general business (as is the case
for us) is required to
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
maintain the value of its relevant assets at not less than 75%
of the amount of its relevant liabilities. Relevant assets
include, cash and time deposits, quoted investments, unquoted
bonds and debentures, first liens on real estate, investment
income due and accrued, accounts and premiums receivable, and
reinsurance balances receivable. There are certain categories of
assets, which, unless specifically permitted by the BMA, do not
qualify as relevant assets, such as, unquoted equity securities,
investments in and advances to affiliates, and real estate and
collateral loans. The relevant liabilities are total general
business insurance reserves and total other liabilities less
deferred income tax and sundry liabilities (by interpretation,
those not specifically defined).
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Supervision, Investigation and Intervention.</I> The BMA may
appoint an inspector with extensive powers to investigate the
affairs of an insurer if the BMA believes that an investigation
is required in the interest of the insurer&#146;s policyholders
or potential policyholders. In order to verify or supplement
information otherwise provided to the BMA, the BMA may direct an
insurer to produce documents or information relating to matters
connected with the insurer&#146;s business. If it appears to the
BMA that there is a risk of the insurer becoming insolvent, or
that it is in breach of the Bermuda Insurance Act or any
conditions imposed upon its registration, the BMA may, among
other things, direct the insurer (1)&nbsp;not to take on any new
insurance business, (2)&nbsp;not to vary any insurance contract
if the effect would be to increase the insurer&#146;s
liabilities, (3)&nbsp;not to make certain investments,
(4)&nbsp;to realize certain investments, (5)&nbsp;to maintain
in, or transfer to the custody of a specified bank, certain
assets, and (6)&nbsp;not to declare or pay any dividends or
other distributions or to restrict the making of such payments,
and/or to limit its premium income.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Disclosure of Information.</I> In addition to powers under
the Bermuda Insurance Act to investigate the affairs of an
insurer, the BMA may require certain information from an insurer
or certain other persons to be produced to the BMA. Further, the
BMA has been given powers to assist other regulatory authorities
with their investigations involving insurance and reinsurance
companies in Bermuda, subject to restrictions. For example, the
BMA must be satisfied that the assistance being requested is in
connection with the discharge of regulatory responsibilities of
the foreign regulatory authority. Further, the BMA must consider
whether to cooperate is in the public interest. The grounds for
disclosure are limited and the Bermuda Insurance Act provides
sanctions for breach of the statutory duty of confidentiality.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Certain Other Bermuda Law Considerations.</I> We have been
designated as non-resident for exchange control purposes by the
BMA. We are required to obtain the prior permission of the BMA
for the issuance and transfer of the common shares. It is
expected that the BMA will give its consent for the issuance and
transfer to persons not resident in Bermuda for exchange control
purposes.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have been incorporated in Bermuda as an &#147;exempted
company.&#148; Under Bermuda law, exempted companies are
companies formed for the purpose of conducting business outside
Bermuda from a principal place in Bermuda. As a result, they are
exempt from Bermuda laws restricting the percentage of share
capital that may be held by non-Bermudians, but they may not
participate in certain business transactions, including
(1)&nbsp;the acquisition or holding of land in Bermuda (except
as may be required for their business and held by way of lease
or tenancy for terms of not more than 50&nbsp;years) without the
express authorization of the Bermuda legislature, (2)&nbsp;the
taking of mortgages on land in Bermuda to secure an amount in
excess of BD$50,000 without the consent of the Bermuda Minister
of Finance, (3)&nbsp;the acquisition of any bonds or debentures
secured by any land in Bermuda, other than certain types of
Bermuda government securities or (4)&nbsp;the carrying on of
business of any kind in Bermuda, except in furtherance of their
business carried on outside Bermuda or under license granted by
the Minister of Finance. While an insurer is permitted to
reinsure risks undertaken by any company incorporated in Bermuda
and permitted to engage in the insurance and reinsurance
business, generally it is not permitted without a special
license granted by the Minister of Finance, to insure Bermuda
domestic risks or risks of persons of, in or based in Bermuda.
RAM&nbsp;Re does not have such a special license.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We must comply with the provisions of the Bermuda Companies Act
regulating the payment of dividends, and making distributions
from contributed surplus, redemptions and repurchases of shares.
A company shall not declare or pay a dividend, or make a
distribution out of contributed surplus, if there are
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
reasonable grounds for believing that: (a)&nbsp;the company is,
or would after the payment be, unable to pay its liabilities as
they become due; or (b)&nbsp;the realizable value of the
company&#146;s assets would thereby be less than the aggregate
of its liabilities and its issued share capital and share
premium accounts. Under the Bermuda Companies Act, when a
Bermuda company issues shares at a premium (that is for a price
above the par value), whether for cash or otherwise, a sum equal
to the aggregate amount or value of the premium on those shares
must be transferred to an account called &#147;the share premium
account&#148;. The provisions of the Bermuda Companies Act
relating to the reduction of the share capital of a company
apply as if the share premium account were
<FONT style="white-space: nowrap">paid-up</FONT> share capital
of that company, except for certain matters such as premium
arising on a particular class of shares which may be used in
paying up unissued shares to be issued to shareholders as fully
paid bonus shares. The
<FONT style="white-space: nowrap">paid-up</FONT> share capital
may not be reduced if on the date the reduction is to be
effected there are reasonable grounds for believing that the
company is, or after the reduction would be, unable to pay its
liabilities as they become due. Similarly, no redemption or
purchase by a company of its own shares may be effected if, on
the date on which the purchase is to be effected, there are
reasonable grounds for believing that the company is, or after
the purchase would be, unable to pay its liabilities as they
become due.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Exempted companies, such as us, must comply with Bermuda
resident representation provisions under the Bermuda Companies
Act. Under Bermuda law, non-Bermudians (other than spouses of
Bermudians, or holders of a permanent resident&#146;s
certificate, or holders of a working resident&#146;s
certificate) may not engage in any gainful occupation in Bermuda
without an appropriate governmental work permit. A work permit
may be granted or extended upon showing that, after proper
public advertisement, no Bermudian (or spouse of a Bermudian, or
holder of a permanent resident&#146;s certificate, or holder of
a working resident&#146;s certificate) is available who meets
the minimum standards reasonably required by the employer. The
current policy of the Bermuda government is to place a six-year
term limit on individuals with work permits, subject to certain
exemptions for key employees. There are employee protection laws
and social security laws in Bermuda that apply to our employees
based in Bermuda.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Regulation&nbsp;Outside Bermuda</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
RAM&nbsp;Re is registered as an insurer in Bermuda and permitted
to write reinsurance. We are not admitted to conduct business in
any jurisdiction in the United States, or in any other country.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The insurance laws of each state of the United States and of
many
<FONT style="white-space: nowrap">non-U.S.&nbsp;</FONT>jurisdictions
regulate the sale of insurance and reinsurance therein by alien
insurers, such as us, which are not authorized or admitted to do
business within such jurisdiction. We do not maintain an office,
solicit business, advertise, settle claims or conduct other
insurance activities in any jurisdiction other than Bermuda
where the conduct of such activities would require that we be so
authorized or admitted. We conduct our U.S.&nbsp;business in a
manner similar to that employed by other non-admitted reinsurers
that provide reinsurance to U.S.&nbsp;primary insurers.
Moreover, we have developed operating guidelines to assist our
personnel in conducting business in conformity with the laws of
U.S.&nbsp;jurisdictions. Accordingly, we do not believe that our
operations would result in any violation of the insurance laws
of any U.S.&nbsp;or
<FONT style="white-space: nowrap">non-U.S.&nbsp;</FONT>jurisdiction.
There can be no assurance, however, that insurance regulators in
the U.S.&nbsp;or elsewhere will not raise inquiries or
challenges relating to our activities, or claim that we are
subject to such jurisdiction&#146;s licensing requirements, or
that our location, regulatory status or restrictions on our
activities resulting therefrom will not adversely affect our
ability to conduct our business. In the event such inquiries or
disputes arise, we may be required to consider various
alternatives to our operations, including modifying or
restricting the manner of conducting our business or, with
respect to cessions by primary insurers in the U.S., applying to
conduct business as an admitted or approved reinsurer, or
establishing trust funds to secure our reinsurance performance.
There can be no assurance that we would be able to comply with
the various financial and other requirements necessary to
operate on an admitted or approved basis. Having to comply with
such requirements could materially and adversely affect our
results of operations, whether directly or by subjecting us to
U.S.&nbsp;taxation.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An unlicensed reinsurer&#146;s business operations may also be
affected by regulatory requirements governing &#147;credit for
reinsurance&#148; which are imposed on its primary insurers.
Where a primary insurer has
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
obtained reinsurance from a reinsurer that is licensed,
accredited or approved by the jurisdiction or state in which a
U.S.&nbsp;primary insurer files statutory financial statements,
it is permitted to reflect in its statutory financial statement
a credit in an aggregate amount equal to the liability for
unearned premiums and loss reserves and LAE reserves ceded to
the reinsurer. Although we are an unlicensed reinsurer for
U.S.&nbsp;regulatory purposes and therefore are not licensed,
accredited or approved by any U.S.&nbsp;jurisdiction or state,
our U.S.&nbsp;primary insurers will generally be permitted a
credit to their statutory financial statements for reinsurance
provided by us where we provide a qualifying letter of credit, a
deposit of assets in trust or other acceptable security
arrangement and meet certain other financial and regulatory
requirements. There can be no assurance that we will be able to
make such arrangements or meet those requirements on terms and
at costs that are acceptable. In addition, a U.S.&nbsp;primary
insurer is required to establish and maintain a contingency
reserve pursuant to the California, Connecticut, Florida, Iowa
and New York insurance laws and to make contributions to its
contingency reserve equal to the greater of 50% of written
premiums for the relevant category of insurance or a percentage
of the principal guaranteed or outstanding, depending upon the
type of obligation. A U.S.&nbsp;primary insurer is permitted to
reduce its contingency reserves by an amount of the contingency
reserve that a reinsurer is required to establish and maintain
pursuant to a reinsurance agreement between the parties.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Recently, the insurance and reinsurance regulatory framework has
been subject to increased scrutiny in many jurisdictions,
including the United States and various states within the United
States and elsewhere. It is not possible to predict the future
impact of changing law or regulation on our operations. Such
changes could have a material adverse effect on us or the
insurance industry in general.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In general, the Bermuda statutes and regulations applicable to
us are less restrictive than those that would be applicable to
us were we subject to the insurance laws of any state in the
United States. We are unable to predict, however, what
additional government regulations, if any, affecting our
business may be promulgated in Bermuda in the future or how such
regulations may be interpreted. Furthermore, no assurances can
be given that if we were to become subject to any insurance laws
of the United States or any state thereof or any other country
at any time in the future, we would be in compliance with such
laws.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='113'></A>
</DIV>

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<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>MANAGEMENT</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Directors and Executive Officers</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Set forth below are the names, ages and positions of our
directors and members of management of RAM&nbsp;Re as of
January&nbsp;31, 2006.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Age</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Position(s)</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Steven J. Tynan</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Chairman of the Board of Directors</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Vernon M. Endo</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    President and Chief Executive Officer and Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Richard Lutenski</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Chief Financial Officer</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    David K. Steel</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Chief Risk Manager</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mary Ellen Pavlovsky</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Managing Director for Asset-Backed Securities</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James P. Gerry</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Managing Director for Municipal&nbsp;&#38; Infrastructure Finance</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Marie L. Martineau</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    General Counsel and Secretary</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Keith W. Abell</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Edward F. Bader</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Victor J. Bacigalupi</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    David L. Boyle</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Daniel C. Lukas</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Michael J. Miller</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Arthur P. Slepian</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Steven S. Skalicky</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dirk A. Stuurop</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Director and Deputy Chairman of the Board of Directors</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Steven J. Tynan </I>has been a Director since 1998 and has
served as Chairman of the Board of Directors since 2001.
Mr.&nbsp;Tynan co-founded High Ridge Capital LLC, a private
equity firm that specializes in the insurance sector, in 1995
and has served as a member of the firm since that time. He has
also been a member of Northaven Associates LLC, the General
Partner of several financial services hedge funds, since 2005.
In his capacity with High Ridge and Northaven, Mr.&nbsp;Tynan
has served on the boards of numerous private insurance,
reinsurance and related entities. Mr.&nbsp;Tynan also founded
Constitution Partners LLC in 1987 and remains its Managing
Member. Constitution Partners provides regulatory consulting
services to Lloyd&#146;s of London and a number of European
reinsurance companies.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Vernon M. Endo </I>is the President and Chief Executive
Officer and Director. Mr.&nbsp;Endo joined the Company in 2003
from GFGC LLC, a startup venture formed to establish a
European-based financial guaranty company, where he was CEO and
co-founder. Mr.&nbsp;Endo was a managing director and member of
the corporate leadership team and board of directors at FGIC
from 1991 to 2001. During his tenure at FGIC, he was responsible
for various business segments including structured finance, bond
insurance underwriting (including public finance and
international), capital markets and new products. Between 1988
and 1991, Mr.&nbsp;Endo was also a managing director responsible
for the mortgage finance unit and was later a member of the
financial institutions group at Prudential Securities. He began
his career at Citibank in 1976. He is Vice Chairman and a
director of the Association of Financial Guaranty Insurers.
Mr.&nbsp;Endo attended Williams College where he graduated with
a B.A. in political science.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Richard Lutenski</I>, Chief Financial Officer, is primarily
responsible for financial and investment management, information
technology, banking relationships and capital planning policies,
including financial reporting, budgets and forecasting, pricing,
accounting practices and controls. Prior to joining RAM&nbsp;Re
in 2004, he served as Chief Operating Officer for
RISC&nbsp;Ventures LLC, a Boston-based firm engaged in the
development of businesses involving the specification, modeling,
structuring and placement
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
of complex financial risk. For two years prior to that he was an
independent consultant providing financial and risk management
services to insurance and investment firms. Mr.&nbsp;Lutenski
served as Executive Vice President and Chief Financial Officer
of Enhance Financial Services Group, Inc., a company engaged in
the financial guaranty reinsurance and direct financial guaranty
business, as well as having significant interests in specialty
finance businesses, from 1999 through the sale of that company
in 2001. Prior to joining Enhance, he served five years as
Managing Director and Chief Financial Officer of Crum&nbsp;&#38;
Forster Insurance Group and for five years preceding that as
Chief Financial Officer of Amerisure Insurance Group. He has
extensive experience in financial and investment management,
planning, and strategic development and transactions. His early
career includes serving in officer level positions with
General&nbsp;Re and NAC&nbsp;Re, and as a senior insurance
regulator in the State of Minnesota. Mr.&nbsp;Lutenski received
his undergraduate degree from the University of Michigan and
graduate degree from Michigan State University, where he also
completed doctoral coursework and exams. He is a Chartered
Financial Analyst and serves as is a director of
PMA&nbsp;Capital Corporation.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>David K. Steel</I>, Chief Risk Manager, is responsible for
credit policy and approval, portfolio surveillance, risk
reporting, loss reserving and treaty negotiations.
Mr.&nbsp;Steel joined RAM&nbsp;Re in August&nbsp;2005 from
Hanover Capital Mortgage Holdings, Inc. where he was a Managing
Director and Portfolio Manager. Prior to Hanover, Mr.&nbsp;Steel
served as head of the Domestic Mortgage Insurance and
Reinsurance business at ACE&nbsp;Capital&nbsp;Re, Inc. from 2002
to 2004. Prior to ACE, Mr.&nbsp;Steel worked at FGIC from 1990
to 2002 where he was a member of the corporate leadership team
and headed the Mortgage-Backed Securities and Investments
business. He began his career at Lehman Brothers in 1984.
Mr.&nbsp;Steel holds an M.B.A. from the University of
California, Los&nbsp;Angeles and a B.S. from California State
University, Sacramento.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Mary Ellen Pavlovsky</I>, Managing Director,
Structured&nbsp;&#38; Asset-Backed Finance, is responsible for
underwriting transactions involving asset-backed securities and
other structured financings, as well as corporate, financial
institution and sovereign risks. Prior to joining the Company in
1998, Ms.&nbsp;Pavlovsky served for three years as FGIC&#146;s
U.K.&nbsp;country manager, with responsibility for the insurance
company&#146;s London branch activities, which included credit
enhancement of public infrastructure, asset-backed and other
structured transactions. Before moving to London,
Ms.&nbsp;Pavlovsky underwrote a broad range of insured
transactions for FGIC in their New&nbsp;York office, including
financial institutions and foreign country risks. She joined
FGIC in New&nbsp;York in 1987, after eight years with the
Federal Reserve Bank of Philadelphia, where her responsibilities
included the supervision and regulation of foreign activities of
numerous major U.S.&nbsp;banks, as well as analysis and review
of bank international lending, investment and trading activity.
Ms.&nbsp;Pavlovsky has a B.A. in economics and international
relations from Brown University.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>James P. Gerry</I>, Managing Director, Municipal&nbsp;&#38;
Infrastructure Finance, is responsible for underwriting in
domestic and international public finance and investor owned
utility transactions. He has worked for the Company since its
inception in February 1998. Prior to joining the Company,
Mr.&nbsp;Gerry was underwriting manager for MBIA&#146;s southern
region with responsibility for all analysis, underwriting and
marketing of tax-backed deals in the southern U.S.&nbsp;Later,
he also analyzed utility, transportation and higher-education
bonds. Before joining MBIA, Mr.&nbsp;Gerry analyzed and
underwrote all tax-backed and non-health care related revenue
bonds originating in the western U.S.&nbsp;for Bond Investors
Guaranty Insurance Company, which we refer to as BIG, in their
San&nbsp;Francisco office. Previously at BIG, he specialized in
the underwriting of utility, transportation and special revenue
bonds for new and secondary market issues. Mr.&nbsp;Gerry
attended Syracuse University where he received a B.A. in
economics and political science and an M.P.A. from the Maxwell
School of Public Affairs.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Marie L. Martineau</I>, General Counsel, has responsibility
for overseeing all legal matters at the Company. She joined the
Company in January&nbsp;2004 from GFGC&nbsp;LLC, a startup
venture formed to establish a European-based financial guaranty
company, where she was General Counsel. Prior to that,
Ms.&nbsp;Martineau worked for five years for Prudential
Financial, Inc., as Vice President and Corporate Counsel for its
Prudential Real Estate Investors, or PREI, division. In this
capacity she was responsible for legal oversight for all of
PREI&#146;s international real estate investment activities.
Before joining Prudential, she was a corporate partner at
O&#146;Melveny&nbsp;&#38; Myers LLP, where she began her legal
career in 1983.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
During her tenure at O&#146;Melveny&nbsp;&#38; Myers, she worked
on various types of public and private offerings with special
emphasis on offerings of public finance and asset backed
securities. Ms.&nbsp;Martineau has a J.D. from Boston University
School of Law and a B.A. in humanities from Providence College.
Ms.&nbsp;Martineau is scheduled to leave the Company in
February&nbsp;2006. A successor to Ms.&nbsp;Martineau as General
Counsel has commenced employment, but the terms of such
successor&#146;s employment agreement have not been finalized.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Keith W. Abell </I>has been a director since 1998. He is Vice
Chairman and Co-Founder of GSC&nbsp;Partners and Co-Chairman of
Tishman Speyer GSC. He
<FONT style="white-space: nowrap">co-founded</FONT> GSC Partners
in 1994 and has served in a variety of senior management roles
at GSC. He was previously a Managing Director of The Blackstone
Group, based in Hong Kong and Tokyo from 1990-1994. Prior
thereto, he worked at Goldman, Sachs &#38; Co. from
<FONT style="white-space: nowrap">1986-1990.</FONT>
Mr.&nbsp;Abell serves on the Board of Directors of the National
Committee on United States-China Relations and the Board of
Governors of The New School for Social Research and is a member
of the Council on Foreign Relations. He serves as a director of
Telex Communications Inc., Duke&#146;s Place Holdings, Ltd., and
China Interactive Media Group. Mr.&nbsp;Abell graduated with
Honors from Brown University with a B.A. in 1979, and from The
Wharton School with a M.B.A. in 1986, and from the University of
Pennsylvania with a M.A. in International Studies in 1986.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Edward F. Bader </I>has been a director since 2004. Prior to
that, he was a partner in the Insurance Services Practice of
Arthur Andersen LLP with more than 37&nbsp;years of experience
in accounting and auditing concentrating in the insurance
industry. He served as the head of Andersen&#146;s World Wide
Insurance Practice Group.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Victor J. Bacigalupi </I>has been a director since 1998.
Mr.&nbsp;Bacigalupi has worked for PMI since 1996 and currently
serves as Executive Vice President, Chief Administrative
Officer, General Counsel and Secretary. He is a director of
PMI&#146;s U.S., European and Australian mortgage insurance
subsidiaries. He is also a member of the Board of Regents of
John F. Kennedy University in Pleasant Hill, California.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>David L. Boyle </I>has been a director since
August&nbsp;2005. Mr.&nbsp;Boyle recently retired as Vice
Chairman and Head of Portfolio Risk Management of Ambac
Financial Group, Inc., and had served in many different
capacities at Ambac for the last eight years. Mr.&nbsp;Boyle
worked at Citibank, N.A. from 1974 to 1996, most recently as
Managing Director of Worldwide Securities Services. He is the
former chairman of the Association of Financial Guaranty
Insurers and a member of the board of trustees of Wittenberg
University.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Daniel C. Lukas </I>has been a director since 2004.
Mr.&nbsp;Lukas is a Managing Director of GSC Partners, where he
has been employed since 2003. He was previously with Thomas
Weisel Partners, where he served as Vice President in the
private equity and distressed debt funds. Prior to that he was
with Consolidated Press Holdings Limited, the private investment
vehicle of Kerry Packer in Sydney, Australia. Earlier,
Mr.&nbsp;Lukas was at Hellman&nbsp;&#38; Friedman after
beginning his career at Goldman, Sachs&nbsp;&#38; Co. He is also
a director of Iron Age&nbsp;Corporation and Precision Partners,
Inc. Mr.&nbsp;Lukas is a Phi&nbsp;Beta Kappa graduate of
Dartmouth College.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Michael J. Miller </I>has been a director since 2002.
Mr.&nbsp;Miller is currently a principal at CIVC Partners.
Mr.&nbsp;Miller is a director of AF&#38;L, Inc., and Partners
Equity Capital Company LLC. Prior to joining CIVC in 1999, he
worked in the Investment Banking Division at Merrill
Lynch&nbsp;&#38; Co., Inc. from 1996 through 1999.
Mr.&nbsp;Miller received a B.S. in Business from Miami
University and an M.B.A. from the J.L.&nbsp;Kellogg Graduate
School of Management at Northwestern University.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Steven S. Skalicky </I>has been a director since 1998.
Mr.&nbsp;Skalicky is Chief Financial Officer, Chief Accounting
Officer and Executive Vice President of Transatlantic
Reinsurance Co., and Transatlantic Holdings, Inc. He is a
director of Transatlantic Reinsurance Co., Putnam Reinsurance
Co. and TransRe Zurich.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Arthur P. Slepian </I>has been a director since 2003.
Mr.&nbsp;Slepian is Senior Vice President and Managing Director,
Financial Guaranty of PMI, and has served in many different
capacities for PMI for the last 21&nbsp;years. He is currently
accountable for development and oversight of PMI&#146;s
strategic investments in the
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
financial guaranty industry. He served from 2000 to 2002 as Vice
President of Corporate Development in PMI&#146;s International
and Strategic Investments Group and prior to that directing the
establishment of, and serving as Vice President/General Manager
for, CMG&nbsp;Mortgage Insurance Company, or CMG, a joint
venture that is now the leading provider of mortgage insurance
to credit unions throughout the United States. Mr.&nbsp;Slepian
continues to serve on the board of directors of CMG.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Dirk A. Stuurop </I>has been a director since 2004.
Mr.&nbsp;Stuurop retired as Chairman Global Financial
Institutions at Merrill Lynch where he worked from 1982 to 1999.
Mr.&nbsp;Stuurop served as Chairman of Worldinsure Ltd., a
privately owned provider of solutions to the Life Insurance
Industry, from 2000 to 2002. He also served as Senior Executive
Director to Banc of America Securities in 2003. He is a Director
of Philadelphia Consolidated Holding Corp. (PHLY) where he is
the Chairman of the Investment Committee and a member of the
Nominating Committee.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Board of Directors</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
There are currently eleven directors on the boards of RAM
Holdings and RAM Re. The total number of directors who serve on
the board at any given time is set at eleven, but this number
may increase up to a maximum of fifteen board members, subject
to the following exception: pursuant to the certificate of
designation, preferences and rights, which sets forth the terms
relating to RAM&nbsp;Re&#146;s Class&nbsp;B preference shares,
the size of the board may automatically be expanded by two
members (subject to the consent of RAM&nbsp;Re&#146;s
shareholders) upon a failure by us to pay dividends to holders
of RAM&nbsp;Re&#146;s Class&nbsp;B preference shares for a
period in excess of eighteen consecutive months. RAM&nbsp;Re
does not currently have outstanding any Class&nbsp;B preference
shares.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Board of Directors Committees</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have an audit committee, a compensation committee and a
nominating/governance committee, all of which consist
exclusively of members who we believe would qualify as
independent directors under the applicable requirements of the
New York Stock Exchange.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Audit Committee</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The audit committee was established to assist the board of
directors in its oversight of the integrity of our financial
reporting process, the system of internal controls, the audit
process, and the performance, qualification and independence of
our independent auditors. We believe each member of the audit
committee would be &#147;independent&#148; within the meaning of
the rules of the New York Stock Exchange and has the attributes
of an &#147;audit committee financial expert&#148; as defined by
the SEC. Current members of the audit committee are: Edward F.
Bader (chairman), Steven S. Skalicky and Dirk A. Stuurop.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The duties and responsibilities of the audit committee are set
forth in the committee&#146;s charter, a copy of which has been
filed as an exhibit to the registration statement of which this
prospectus is a part, and include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    recommend, through the board, to the shareholders on their
    appointment and termination (subject to Bermuda law) of our
    independent auditors and actuaries;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    review and approve the independent auditors&#146; proposed audit
    scope, approach, staffing and, subject to our shareholders
    authorizing our board of directors acting by the audit
    committee, fees;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    pre-approve all audit and, unless applicable law permits
    otherwise, permitted non-audit services to be performed by the
    independent auditors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    meet regularly with the chief executive officer, the chief
    financial officer and the general counsel and the independent
    auditors in separate executive sessions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    review policies with respect to risk assessment and risk
    management;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    review the adequacy of our internal control structure;</TD>
</TR>

</TABLE>

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    review any proposed public disclosures regarding an assessment
    or evaluation of our internal controls and procedures for
    financial reporting every quarter;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    review our loss and loss expense reserves, including any reports
    of actuaries;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    review and discuss with management and the independent auditors,
    our annual audited financial statements and Management&#146;s
    Discussion and Analysis of Financial Condition and Results of
    Operations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    discuss with management our earnings press releases, including
    the use of &#147;pro forma&#148; or &#147;adjusted&#148;
    <FONT style="white-space: nowrap">non-U.S.&nbsp;</FONT>GAAP
    information, as well as financial information and earnings
    guidance provided to analysts and rating agencies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    discuss with management and the independent auditors significant
    financial reporting issues and judgments made in connection with
    the preparation of our financial statements, including any
    significant changes in our selection or application of
    accounting principles (which shall be communicated to the
    committee by our chief financial officer as soon as reasonably
    practicable), the selection and disclosure of critical
    accounting estimates, and the effect of alternative assumptions,
    estimates or accounting principles on our financial
    statements;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    review and approve procedures for the receipt, retention and
    treatment of complaints regarding accounting, internal
    accounting controls or auditing matters and for the
    confidential, anonymous submission by employees of concerns
    regarding questionable accounting or auditing matters.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Compensation Committee</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The compensation committee was established to discharge the
board of directors&#146; responsibilities relating to
compensation of our employees. We believe each member of the
compensation committee would be &#147;independent&#148; within
the meaning of the rules of the New&nbsp;York Stock Exchange.
Current members of the compensation committee are: Keith W.
Abell (chairman), Michael J. Miller and Arthur P. Slepian.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The duties and responsibilities of the compensation committee
are set forth in the committee&#146;s charter, a copy of which
has been filed as an exhibit to the registration statement of
which this prospectus is a part, and include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    establish and oversee our executive compensation policies,
    including issues relating to pay and performance, targeted pay
    positioning (median, percentile etc.), comparison companies, pay
    mix, and stock ownership;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    establish a formal evaluation process for and determine the
    compensation for the chief executive officer and as part of such
    process, to review and approve corporate goals and objectives
    relevant to chief executive officer compensation and evaluate
    the chief executive officer&#146;s performance in light of those
    goals and objectives;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    review recommendations regarding the compensation of our other
    senior officers and determine appropriate compensation levels,
    which review may, depending on the number of senior officers, be
    restricted to reviewing and approving the compensation of the
    senior officers who are the chief executive officer&#146;s
    direct reports;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    make recommendations to the board of directors with respect to
    new incentive and benefit plans, or amendments to any such
    existing plans, other than plans covering solely outside
    directors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    approve and ratify awards under incentive compensation and
    equity-based plans, including amendments to the awards made
    under any such plans;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    consult with the chief executive officer on any decisions to
    retain or terminate any senior executive officer (except
    termination under exigent circumstances) and approve any
    retention or severance terms for the chief executive officer or
    any senior executive officer;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    oversee development and evaluation of succession planning for
    other key senior officers.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">75

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<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Nominating and Governance Committee</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The nominating and governance committee was established by the
board of directors to assist the board of directors in
(1)&nbsp;identifying individuals qualified to become board of
directors members, and recommending to the board of directors
director nominees for the next annual general meeting of
shareholders or to fill vacancies; and (2)&nbsp;developing and
recommending to the board of directors appropriate corporate
governance guidelines. We believe each member of the nominating
and governance committee would be &#147;independent&#148; within
the meaning of the rules of the New&nbsp;York Stock Exchange.
Current members of the nominating and governance committee are:
Dirk A. Stuurop (chairman), Victor J. Bacigalupi and Daniel C.
Lukas.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The duties and responsibilities of the nominating and governance
committee are set forth in the committee&#146;s charter, a copy
of which has been filed as an exhibit to the registration
statement of which this prospectus is a part, and include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    develop qualification criteria for board of directors members,
    and actively seek, interview and screen individuals qualified to
    become board of directors members for recommendation to the
    board of directors in accordance with our Corporate Governance
    Guidelines;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    recommend to the board of directors potential nominees to the
    board of directors, and the renomination of incumbent directors
    as appropriate;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    consider potential nominees recommended by shareholders;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    review the compensation of directors and make recommendations to
    the board of directors on any recommended changes;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    review the directors who are members (including qualifications
    and requirements), structure (including authority to delegate)
    and performance, of committees of the board of directors
    (including reporting to the board of directors), and make
    recommendations to the board of directors, as appropriate;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    review the qualification of directors as &#147;independent&#148;
    within the meaning of SEC and New York Stock Exchange rules;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    prepare and assist the board of directors and each committee
    thereof in its self-evaluation to determine whether the board of
    directors and such committees are functioning effectively;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    serve in an advisory capacity to the board of directors and
    Chairman of the board of directors on matters of our
    organizational and governance structure and the conduct of the
    board of directors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    review and reassess the adequacy of our Corporate Governance
    Guidelines and recommend any proposed changes thereto;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    receive comments from all directors and report to the board of
    directors with an assessment of the board of directors&#146;
    performance.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Director Compensation</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of the date of this prospectus, we have three directors that
are not affiliated with or employed by a current institutional
shareholder. Each such &#147;unaffiliated director,&#148;
currently Edward F. Bader, Dirk A. Stuurop and David L. Boyle,
receives $30,000&nbsp;per year. Unaffiliated directors also
receive $1,500&nbsp;per board meeting attended and $800&nbsp;per
committee (on which such unaffiliated director serves as a
member) meeting attended. Unaffiliated directors also receive
$1,500 for each committee meeting attended as the chair of that
committee. In addition, the audit committee chair receives
$10,000&nbsp;per year. Each unaffiliated director received an
award of 1,000 stock options upon his appointment to the board
and is eligible for annual grants of 200 stock options if he
remains on the board. The annual stock option awards are
generally made at the third quarter board meeting each year.
These stock option awards will be adjusted pro rata based on
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for&nbsp;1 subdivision of our
common shares and the issuance of bonus shares
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">76

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
to be effective immediately prior to the closing of this
offering, and based on any future subdivision of our shares.
Each stock option award vests quarterly over a three year
period. Directors who are employed by a shareholder or by us do
not receive compensation for their service as directors, except
for the chairman of the board who receives $150,000&nbsp;per
year for his services as chair. We reimburse all directors for
their reasonable travel and related expenses in connection with
attending board and committee meetings.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Executive Compensation</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth the compensation earned during
the years indicated by our executive officers as of
December&nbsp;31, 2005. All information set forth in this table
reflects compensation earned by the named individuals for
services with us.
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Summary Compensation Table</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="26%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Long Term</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>Annual Compensation</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Compensation</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Awards</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other Annual</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Underlying</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>All Other</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Name and Principal Position</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Salary(1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Bonus</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Compensation(2)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Options/SARs</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Compensation(3)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR bgcolor="#CCEEFF">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Vernon M. Endo</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>350,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>301,964</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>73,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR bgcolor="#CCEEFF">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    President and Chief</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>350,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>385,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>323,308</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,789</TD>
    <TD>&nbsp;</TD>
</TR>

<TR bgcolor="#CCEEFF">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Executive Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,885</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,885</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68,224</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,833</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Richard Lutenski(4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>177,132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chief Financial Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>188,077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>159,471</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,710</TD>
    <TD>&nbsp;</TD>
</TR>

<TR bgcolor="#CCEEFF">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    David K. Steel(5)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114,231</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>124,599</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,458</TD>
    <TD>&nbsp;</TD>
</TR>

<TR bgcolor="#CCEEFF">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chief Risk Manager</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mary Ellen Pavlovsky</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>287,432</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>183,344</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Managing Director for</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>269,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>269,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>169,034</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>70,612</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Asset-Backed Securities</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>275,337</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>331,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>170,022</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,675</TD>
    <TD>&nbsp;</TD>
</TR>

<TR bgcolor="#CCEEFF">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James P. Gerry</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>225,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>175,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR bgcolor="#CCEEFF">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Managing Director for</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>225,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>225,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>172,962</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51,765</TD>
    <TD>&nbsp;</TD>
</TR>

<TR bgcolor="#CCEEFF">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Municipal&nbsp;&#38; Infrastructure</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>230,654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>247,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>171,115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44,825</TD>
    <TD>&nbsp;</TD>
</TR>

<TR bgcolor="#CCEEFF">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Finance</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Marie L. Martineau(6)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>177,112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    General Counsel</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>243,269</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>239,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>179,791</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,261</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="4%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD align="left">
    Not yet determined.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    The numbers presented reflect earned salary.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Other Annual Compensation for the year 2005 includes:
    (i)&nbsp;housing allowance paid to Mr.&nbsp;Endo in the amount
    of $216,000; (ii)&nbsp;housing allowance paid to
    Mr.&nbsp;Lutenski in the amount of $120,000; (iii)&nbsp;housing
    allowance paid to Mr.&nbsp;Steel in the amount of $49,486;
    (iv)&nbsp;housing allowance paid to Ms.&nbsp;Pavlovsky in the
    amount of $130,118; (v)&nbsp;housing allowance paid to
    Mr.&nbsp;Gerry in the amount of $122,000; and (vi)&nbsp;housing
    allowance paid to Ms.&nbsp;Martineau in the amount of $120,000.
    Other Annual Compensation for the year 2004 includes:
    (i)&nbsp;housing allowance paid to Mr.&nbsp;Endo in the amount
    of $216,000; (ii)&nbsp;housing allowance paid to
    Mr.&nbsp;Lutenski in the amount of $75,231; (iii)&nbsp;housing
    allowance paid to Ms.&nbsp;Pavlovsky in the amount of $122,000;
    (iv)&nbsp;housing allowance paid to Mr.&nbsp;Gerry in the amount
    of $122,000; and (v)&nbsp;housing allowance paid to
    Ms.&nbsp;Martineau in the amount of $116,769. Other Annual
    Compensation for the year 2003 includes: (i)&nbsp;housing
    allowance paid to Mr.&nbsp;Endo in the amount of $35,723;
    (ii)&nbsp;relocation reimbursement expense paid to Mr.&nbsp;Endo
    in the amount of $21,774; (iii)&nbsp;housing allowance paid to
    Ms.&nbsp;Pavlovsky in the amount of $124,892; and
    (iv)&nbsp;housing allowance paid to Mr.&nbsp;Gerry in the amount
    of $124,892. The reported amount of Other Annual Compensation
    also includes the amount we paid for health insurance and health
    flexible spending accounts, social insurance and taxes, home
    computers, travel allowances, and relocation, legal and tax
    preparation reimbursement expenses on behalf of the named
    individuals.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">77

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Includes amounts paid under our supplemental retirement plan.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;Lutenski joined us in 2004, and accordingly has no
    salary to report for 2003.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;Steel joined us in 2005, and accordingly has no salary
    to report for 2004 and 2003.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(6)&nbsp;</TD>
    <TD align="left">
    Ms.&nbsp;Martineau joined us in 2004, and accordingly has no
    salary to report for 2003.</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Options/SAR Grants in 2005</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table presents information concerning stock
options granted to the named individuals during the year ended
December&nbsp;31, 2005.
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Options/SAR Grants</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="24%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percent of Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Securities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Options/SARs</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Underlying</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Granted to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Grant Date</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Options/SARs</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Employees in</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercise or</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Present Value</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Granted</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fiscal Year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Base Price</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Expiration Date</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(1)</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Vernon M. Endo</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Richard Lutenski</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    David K. Steel</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>156.41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>June&nbsp;30, 2015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>300,239</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mary Ellen Pavlovsky</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James P. Gerry</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Marie L. Martineau</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    There was no public market for our common shares as of
    December&nbsp;31, 2005. The fair market value of each option
    grant is estimated on the date of grant using the minimum value
    method with the following weighted average assumptions used for
    grants in 2005: risk free interest rates of 3.7%, expected life
    of 6.5&nbsp;years, volatility of 0 and a dividend yield of 0.</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Option Values as of December&nbsp;31, 2005</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table presents information concerning the number
of unexercised stock options outstanding as of December&nbsp;31,
2005, and the value of any unexercised
<FONT style="white-space: nowrap">in-the</FONT>-money stock
options outstanding at such time, held by the named individual.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="42%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Value of Unexercised</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of Securities</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>In-The-Money</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Underlying Unexercised</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Options/SARs at</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Options/SARs at Fiscal Year-</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fiscal Year-End ($)</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>End Exercisable/Unexercisable</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Exercisable/Unexercisable</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Vernon M. Endo</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,250/13,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>256,388/313,363</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Richard Lutenski</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,200/7,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71,232/132,288</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    David K. Steel</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,150/10,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,486/58,374</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mary Ellen Pavlovsky</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James P. Gerry</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Marie L. Martineau</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,400/3,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,928/62,892</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">78

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Employment and Related Agreements</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following information summarizes the employment agreements
for our Chief Executive Officer and our other named executive
officers.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Chief Executive Officer</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Vernon M. Endo.</I> Under Mr.&nbsp;Endo&#146;s employment
agreement, dated as of November&nbsp;1, 2003 and amended as of
August&nbsp;10, 2005, Mr.&nbsp;Endo has agreed to serve as our
President and Chief Executive Officer and a member of our board
of directors. Mr.&nbsp;Endo&#146;s term of service under this
agreement currently continues until October&nbsp;27, 2006
followed by automatic additional one-year terms unless notice of
termination of Mr.&nbsp;Endo&#146;s employment is provided by us
or Mr.&nbsp;Endo prior to the end of the term. Prior to the
completion of this offering, we expect to enter into an
amendment to Mr.&nbsp;Endo&#146;s employment agreement to extend
his term of employment to March 2009. Mr.&nbsp;Endo receives an
annual base salary of $350,000 and an annual incentive bonus to
be determined by the board of directors. The target annual
incentive bonus amount for each year is an amount equal to 100%
of Mr.&nbsp;Endo&#146;s annual base salary. Mr.&nbsp;Endo&#146;s
salary is subject to review by the board of directors at least
annually but may not be decreased during Mr.&nbsp;Endo&#146;s
term of employment without his consent. Mr.&nbsp;Endo has also
been granted stock options as an inducement to accept such
position and as a performance incentive.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If Mr.&nbsp;Endo&#146;s employment terminates as a result of
death, Mr.&nbsp;Endo&#146;s estate or his beneficiaries are
entitled to (i)&nbsp;Mr.&nbsp;Endo&#146;s base salary through
the date that is 90&nbsp;days after the date of his death;
(ii)&nbsp;an annual incentive award prorated based on the target
annual bonus and the number of days worked in such year, payable
in a lump sum promptly after his death; (iii)&nbsp;immediate
vesting of all stock options, with such options to remain
exercisable for the remainder of their stated terms;
(iv)&nbsp;any accrued benefits under our plans, programs or
agreements; (v)&nbsp;continued participation for one year for
each of Mr.&nbsp;Endo&#146;s dependents in all medical, dental,
hospitalization or other employee welfare benefit plans, program
and arrangements and (vi)&nbsp;payment of a monthly cost of
living allowance for three months.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If Mr.&nbsp;Endo&#146;s employment ends as a result of
disability, the agreement provides that Mr.&nbsp;Endo is
entitled to (i)&nbsp;his base salary until commencement of
long-term disability payments, but in no event for more than one
year following the last day of his employment; (ii)&nbsp;an
annual incentive award prorated based on the target annual bonus
and the number of days worked in such year, payable in a lump
sum promptly following the last day of his employment;
(iii)&nbsp;immediate vesting of all stock options, with such
options to remain exercisable for the remainder of their stated
terms; (iv)&nbsp;any accrued benefits under our plans, programs
or agreements; (v)&nbsp;continued participation for one year for
each of Mr.&nbsp;Endo&#146;s dependents in all medical, dental,
hospitalization or other employee welfare benefit plans, program
and arrangements and (vi)&nbsp;payment of a monthly cost of
living allowance for three months.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If we terminate Mr.&nbsp;Endo&#146;s employment for cause (as
defined in the agreement), Mr.&nbsp;Endo is entitled to his base
salary through the last day of his employment and any accrued
benefits under our plans, programs or agreements. If we
terminate Mr.&nbsp;Endo&#146;s employment without cause, or if
Mr.&nbsp;Endo terminates his employment for good reason (as
defined in the agreement), Mr.&nbsp;Endo is entitled to
(i)&nbsp;his base salary for two years following the last day of
Mr.&nbsp;Endo&#146;s employment (with a duty by Mr.&nbsp;Endo to
mitigate or reduce the amount due to him during the last twelve
months of such two year period by seeking other employment,
which we refer to as the Mitigation Period); (ii)&nbsp;an annual
incentive award based on the target annual bonus;
(iii)&nbsp;continued participation for one year for each of
Mr.&nbsp;Endo&#146;s dependents in all medical, dental,
hospitalization or other employee welfare benefit plans, program
and arrangements (with a duty by Mr.&nbsp;Endo to mitigate or
reduce the amount due to him during the Mitigation Period);
(iv)&nbsp;payment of a monthly cost of living allowance for
three months and (v)&nbsp;any accrued benefits under our plans,
programs or agreements. If Mr.&nbsp;Endo becomes employed during
the Mitigation Period, he must notify us within 10&nbsp;days of
his date of hire and we may offset any payments to which he is
entitled against any comparable payments from his new employer.
If Mr.&nbsp;Endo fails to seek other employment in good faith or
fails to notify us of his new employment, our obligation to
provide severance benefits to him shall cease.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">79

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Mr.&nbsp;Endo is also subject to non-competition and
non-solicitation provisions for a period of one year after
termination of the employment agreement along with ongoing
confidentiality and non-disparagement requirements.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Executive Officers</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Richard Lutenski.</I> Under Mr.&nbsp;Lutenski&#146;s
employment agreement, dated as of May&nbsp;1, 2004 and amended
as of August&nbsp;10, 2005, Mr.&nbsp;Lutenski has agreed to
serve as our Chief Financial Officer. Mr.&nbsp;Lutenski&#146;s
term of service under this agreement currently continues until
May&nbsp;26, 2007, followed by automatic additional one-year
terms unless notice of termination of Mr.&nbsp;Lutenski&#146;s
employment is provided by us or Mr.&nbsp;Lutenski prior to the
end of the term. Prior to the completion of this offering, we
expect to enter into an amendment to Mr.&nbsp;Lutenski&#146;s
employment agreement to extend his term of employment to
September 2008. Mr.&nbsp;Lutenski receives an annual base salary
of $300,000 and an annual incentive bonus to be determined by
the board of directors. The target annual incentive bonus amount
for each year is an amount equal to 80% of
Mr.&nbsp;Lutenski&#146;s annual base salary.
Mr.&nbsp;Lutenski&#146;s salary is subject to review by the
board of directors at least annually but may not be decreased
during Mr.&nbsp;Lutenski&#146;s term of employment without his
consent. Mr.&nbsp;Lutenski has also been granted stock options
as an inducement to accept such position and as a performance
incentive.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If Mr.&nbsp;Lutenski&#146;s employment terminates as a result of
death, Mr.&nbsp;Lutenski&#146;s estate or his beneficiaries are
entitled to (i)&nbsp;Mr.&nbsp;Lutenski&#146;s base salary
through the date that is 90&nbsp;days after the date of his
death; (ii)&nbsp;an annual incentive award prorated based on the
target annual bonus and the number of days worked in such year,
payable in a lump sum promptly after his death;
(iii)&nbsp;immediate vesting of all stock options, with such
options to remain exercisable for the remainder of their stated
terms; (iv)&nbsp;any accrued benefits under our plans, programs
or agreements; (v)&nbsp;continued participation for one year for
each of Mr.&nbsp;Lutenski&#146;s dependents in all medical,
dental, hospitalization or other employee welfare benefit plans,
program and arrangements and (vi)&nbsp;payment of a monthly cost
of living allowance for three months.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If Mr.&nbsp;Lutenski&#146;s employment ends as a result of
disability, the agreement provides that Mr.&nbsp;Lutenski is
entitled to (i)&nbsp;his base salary until commencement of
long-term disability payments, but in no event for more than one
year following the last day of his employment; (ii)&nbsp;an
annual incentive award prorated based on the target annual bonus
and the number of days worked in such year, payable in a lump
sum promptly following the last day of his employment;
(iii)&nbsp;immediate vesting of all stock options, with such
options to remain exercisable for the remainder of their stated
terms; (iv)&nbsp;any accrued benefits under our plans, programs
or agreements; (v)&nbsp;continued participation for one year for
each of Mr.&nbsp;Lutenski&#146;s dependents in all medical,
dental, hospitalization or other employee welfare benefit plans,
program and arrangements and (vi)&nbsp;payment of a monthly cost
of living allowance for three months.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If we terminate Mr.&nbsp;Lutenski&#146;s employment for cause
(as defined in the agreement), Mr.&nbsp;Lutenski is entitled to
his base salary through the last day of his employment and any
accrued benefits under our plans, programs or agreements. If we
terminate Mr.&nbsp;Lutenski&#146;s employment without cause, or
if Mr.&nbsp;Lutenski terminates his employment for good reason
(as defined in the agreement), Mr.&nbsp;Lutenski is entitled to
(i)&nbsp;his base salary for one year following the last day of
Mr.&nbsp;Lutenski&#146;s employment; (ii)&nbsp;an annual
incentive award based on the target annual bonus;
(iii)&nbsp;continued participation for one year for each of
Mr.&nbsp;Lutenski&#146;s dependents in all medical, dental,
hospitalization or other employee welfare benefit plans, program
and arrangements (with a duty by Mr.&nbsp;Lutenski to mitigate
or reduce the amount due to him during the one year period
following his last day of employment by seeking other
employment); (iv)&nbsp;payment of a monthly cost of living
allowance for three months and (v)&nbsp;any accrued benefits
under our plans, programs or agreements. If Mr.&nbsp;Lutenski
becomes employed by another employer during the year following
his last day of employment, he must notify us within
10&nbsp;days of his date of hire and we may offset any payments
to which he is entitled against any comparable payments from his
new employer. If Mr.&nbsp;Lutenski fails to seek other
employment in good faith or fails to notify us of his new
employment, our obligation to provide severance benefits to him
shall cease.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">80

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Mr.&nbsp;Lutenski is also subject to non-competition and
non-solicitation provisions for a period of one year after
termination of the employment agreement along with ongoing
confidentiality and non-disparagement requirements.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>David K. Steel.</I> Under Mr.&nbsp;Steel&#146;s employment
agreement, dated as of June&nbsp;30, 2005, Mr.&nbsp;Steel has
agreed to serve as our Chief Risk Manager. Mr.&nbsp;Steel&#146;s
term of service under this agreement continues until
August&nbsp;1, 2008, followed by automatic additional one-year
terms unless earlier terminated in accordance with the
employment agreement. Mr.&nbsp;Steel receives an annual base
salary of $275,000 and an annual incentive bonus to be
determined by the board of directors. The target annual
incentive bonus amount for each year is an amount equal to 100%
of Mr.&nbsp;Steel&#146;s annual base salary.
Mr.&nbsp;Steel&#146;s salary is subject to review by the board
of directors at least annually but may not be decreased during
Mr.&nbsp;Steel&#146;s term of employment without his consent.
Mr.&nbsp;Steel has also been granted stock options as an
inducement to accept such position and as a performance
incentive.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If Mr.&nbsp;Steel&#146;s employment terminates as a result of
death, Mr.&nbsp;Steel&#146;s estate or his beneficiaries are
entitled to (i)&nbsp;Mr.&nbsp;Steel&#146;s base salary through
the date that is 90&nbsp;days after the date of his death;
(ii)&nbsp;an annual incentive award prorated based on the target
annual bonus and the number of days worked in such year, payable
in a lump sum promptly after his death; (iii)&nbsp;immediate
vesting of all stock options, with such options to remain
exercisable for the remainder of their stated terms;
(iv)&nbsp;any accrued benefits under our plans, programs or
agreements; (v)&nbsp;continued participation for three months
for each of Mr.&nbsp;Steel&#146;s dependents in all medical,
dental, hospitalization or other employee welfare benefit plans,
program and arrangements and (vi)&nbsp;payment of a monthly cost
of living allowance for three months.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If Mr.&nbsp;Steel&#146;s employment ends as a result of
disability, the agreement provides that Mr.&nbsp;Steel is
entitled to (i)&nbsp;his base salary until commencement of
long-term disability payments, but in no event for more than one
year following the last day of his employment; (ii)&nbsp;an
annual incentive award prorated based on the target annual bonus
and the number of days worked in such year, payable in a lump
sum promptly following the last day of his employment;
(iii)&nbsp;immediate vesting of all stock options, with such
options to remain exercisable for the remainder of their stated
terms; (iv)&nbsp;any accrued benefits under our plans, programs
or agreements; (v)&nbsp;continued participation for three months
for each of Mr.&nbsp;Steel&#146;s dependents in all medical,
dental, hospitalization or other employee welfare benefit plans,
program and arrangements and (vi)&nbsp;payment of a monthly cost
of living allowance for three months.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If we terminate Mr.&nbsp;Steel&#146;s employment for cause (as
defined in the agreement), Mr.&nbsp;Steel is entitled to his
base salary and cost of living allowance through the last day of
his employment and any accrued benefits under our plans,
programs or agreements. If we terminate Mr.&nbsp;Steel&#146;s
employment without cause, or if Mr.&nbsp;Steel terminates his
employment for good reason (as defined in the agreement),
Mr.&nbsp;Steel is entitled to (i)&nbsp;his base salary for one
year following the last day of Mr.&nbsp;Steel&#146;s employment;
(ii)&nbsp;an annual incentive award based on the target annual
bonus; (iii)&nbsp;continued participation for three months for
each of Mr.&nbsp;Steel&#146;s dependents in all medical, dental,
hospitalization or other employee welfare benefit plans, program
and arrangements; (iv)&nbsp;payment of a monthly cost of living
allowance for three months and (v)&nbsp;any accrued benefits
under our plans, programs or agreements. Any payments to be made
following termination without cause or for good reason will be
reduced to the extent Mr.&nbsp;Steel obtains other employment
and any such payments will cease if Mr.&nbsp;Steel violates the
terms of the non-competition and confidentiality provisions of
his employment agreement.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Following any termination by Mr.&nbsp;Steel other than for good
reason, Mr.&nbsp;Steel is subject to non-competition provisions
during the term of the agreement and further during any period
which he is being paid the base salary and cost of living
allowance following termination without cause or for good
reason. Mr.&nbsp;Steel is also subject to ongoing
confidentiality and non-disparagement requirements.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Mary Ellen Pavlovsky.</I> Under Ms.&nbsp;Pavlovsky&#146;s
employment agreement, dated as of May&nbsp;1, 2005,
Ms.&nbsp;Pavlovsky has agreed to serve as our Managing Director
for Asset-backed Securities. Ms.&nbsp;Pavlovsky&#146;s term of
service under this agreement continues until April&nbsp;30,
2006, unless earlier terminated in accordance with the
employment agreement. We and Ms.&nbsp;Pavlovsky expect to extend
her term of service as our Managing Director for Asset-backed
Securities until December&nbsp;31, 2006. Ms.&nbsp;Pavlovsky
receives an
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
annual base salary of $296,450 and an annual incentive bonus to
be determined by the board of directors. The target annual
incentive bonus amount for each year is an amount equal to 100%
of Ms.&nbsp;Pavlovsky&#146;s annual base salary.
Ms.&nbsp;Pavlovsky is also subject to non-competition provisions
during the term of the agreement and further during any period
which she is being paid the base salary and cost of living
allowance following termination without cause or for good
reason, along with ongoing confidentiality and non-disparagement
requirements.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The remaining terms of Ms.&nbsp;Pavlovsky&#146;s agreement are
substantially identical to Mr.&nbsp;Steel&#146;s agreement.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>James P. Gerry.</I> Under Mr.&nbsp;Gerry&#146;s second
amended and restated employment agreement, dated as of
February&nbsp;11, 2003, as amended, Mr.&nbsp;Gerry has agreed to
serve as our Managing Director, Municipal/ Infrastructure
Finance. Mr.&nbsp;Gerry&#146;s term of service under this
agreement continues until March&nbsp;11, 2006. During the
120&nbsp;days preceding such date, we will attempt in good faith
to negotiate a new employment agreement or an extension of the
term with Mr.&nbsp;Gerry on mutually agreeable terms. Prior to
the completion of this offering, we expect to enter into an
amendment to Mr.&nbsp;Gerry&#146;s employment agreement to
extend his term of employment
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2008. Mr.&nbsp;Gerry receives an annual base salary of $225,000
and an annual housing allowance of $122,000. He is entitled to a
minimum annual bonus of 90% of his base salary and based on
certain factors described in the agreement, may be entitled to
an additional bonus of up to 20% of his base salary.
Mr.&nbsp;Gerry has also been granted stock options as an
inducement to accept such position and as a performance
incentive.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If Mr.&nbsp;Gerry&#146;s employment is terminated due to death
or disability, or by us without cause (as defined in the
agreement) or by Mr.&nbsp;Gerry for good reason (as defined in
the agreement), he (or, in the event of his death, his surviving
spouse or his estate) will be paid (i)&nbsp;any combined base
salary and housing allowance earned but unpaid on or prior to
the date of termination; (ii)&nbsp;any vested benefits under our
plans, programs or agreements; (iii)&nbsp;a prorated annual
incentive bonus determined by the board of directors; and
(iv)&nbsp;reimbursement for certain relocation expenses up to
$63,000. If Mr.&nbsp;Gerry&#146;s employment is terminated by us
for cause, he will be entitled to the same benefits, except any
accrued bonus or reimbursement of relocation expenses.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Mr.&nbsp;Gerry is also subject to non-competition provisions
during the term of the agreement (except upon a termination by
us without cause or by Mr.&nbsp;Gerry for good reason), a
one-year post-employment covenant not to solicit employees or
customers and ongoing confidentiality requirements.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Marie L. Martineau.</I> Ms.&nbsp;Martineau currently serves
as our General Counsel. Under the terms of
Ms.&nbsp;Martineau&#146;s employment agreement dated as of
January&nbsp;12, 2004, Ms.&nbsp;Martineau&#146;s term of service
continued until January&nbsp;12, 2006, unless earlier terminated
in accordance with the employment agreement, subject to a one
year extension unless either party gave 6&nbsp;months&#146;
notice of non-renewal. In July 2005, Ms.&nbsp;Martineau
delivered a notice of non-renewal of her employment agreement at
its expiration on January&nbsp;12, 2006. Ms.&nbsp;Martineau and
the Company subsequently mutually agreed to extend her term of
service to February&nbsp;15, 2006. Ms.&nbsp;Martineau receives
an annual base salary of $250,000 and an annual incentive bonus
to be determined by the board of directors. The target annual
incentive bonus amount for each year is an amount equal to 80%
of Ms.&nbsp;Martineau&#146;s annual base salary.
Ms.&nbsp;Martineau&#146;s salary is subject to review by the
board of directors at least annually but may not be decreased
during Ms.&nbsp;Martineau&#146;s term of employment without her
consent. Ms.&nbsp;Martineau has also been granted stock options
as an inducement to accept such position and as a performance
incentive.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If Ms.&nbsp;Martineau&#146;s employment terminates as a result
of death, Ms.&nbsp;Martineau&#146;s estate or her beneficiaries
are entitled to (i)&nbsp;Ms.&nbsp;Martineau&#146;s base salary
through the date that is 90&nbsp;days after the date of her
death; (ii)&nbsp;an annual incentive award prorated based on the
target annual bonus and the number of days worked in such year,
payable in a lump sum promptly after her death;
(iii)&nbsp;immediate vesting of all stock options, with such
options to remain exercisable for the remainder of their stated
terms; (iv)&nbsp;any accrued benefits under our plans, programs
or agreements; (v)&nbsp;continued participation for one year for
each of Ms.&nbsp;Martineau&#146;s dependents in all medical,
dental, hospitalization or other employee welfare
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
benefit plans, program and arrangements and (vi)&nbsp;payment of
a monthly cost of living allowance for three months.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If Ms.&nbsp;Martineau&#146;s employment ends as a result of
disability, the agreement provides that Ms.&nbsp;Martineau is
entitled to (i)&nbsp;her base salary until commencement of
long-term disability payments, but in no event for more than one
year following the last day of her employment; (ii)&nbsp;an
annual incentive award prorated based on the target annual bonus
and the number of days worked in such year, payable in a lump
sum promptly following the last day of her employment;
(iii)&nbsp;immediate vesting of all stock options, with such
options to remain exercisable for the remainder of their stated
terms; (iv)&nbsp;any accrued benefits under our plans, programs
or agreements; (v)&nbsp;continued participation for one year for
each of Ms.&nbsp;Martineau&#146;s dependents in all medical,
dental, hospitalization or other employee welfare benefit plans,
program and arrangements and (vi)&nbsp;payment of a monthly cost
of living allowance for three months.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If we terminate Ms.&nbsp;Martineau&#146;s employment for cause
(as defined in the agreement), Ms.&nbsp;Martineau is entitled to
her base salary through the last day of her employment and any
accrued benefits under our plans, programs or agreements. If we
terminate Ms.&nbsp;Martineau&#146;s employment without cause, or
if Ms.&nbsp;Martineau terminates her employment for good reason
(as defined in the agreement), Ms.&nbsp;Martineau is entitled to
(i)&nbsp;her base salary for one year following the last day of
Ms.&nbsp;Martineau&#146;s employment; (ii)&nbsp;an annual
incentive award based on the target annual bonus;
(iii)&nbsp;continued participation for one year for each of
Ms.&nbsp;Martineau&#146;s dependents in all medical, dental,
hospitalization or other employee welfare benefit plans, program
and arrangements; (iv)&nbsp;payment of a monthly cost of living
allowance for three months and (v)&nbsp;any accrued benefits
under our plans, programs or agreements.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Ms.&nbsp;Martineau is also subject to non-competition provisions
for one year following any termination, along with ongoing
confidentiality and non-disparagement requirements.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Indemnification Agreements.</I> We expect to enter into
indemnification agreements with each of our directors and
certain officers. Under those agreements, we agree to indemnify
each of these individuals against claims arising out of events
or occurrences related to that individual&#146;s service as
director, officer, employee, agent or fiduciary of us or, at our
request, any other entity, to the fullest extent permitted by
applicable law.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Long-Term Employment Benefits</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;13, 2001, we adopted a Stock Option Plan for
Management Employees to enable key employees to acquire common
shares of Holdings&nbsp;II. Stock options granted under the plan
have a per share exercise price of not less than the estimated
fair value of the underlying common shares as determined at the
time of grant and a term not to exceed 10&nbsp;years from
March&nbsp;13, 2001. Our board of directors has authorized the
granting of a maximum of 122,503 common shares of
Holdings&nbsp;II under the plan. As of December&nbsp;31, 2005,
there were 57,900 stock options outstanding under this plan. In
connection with the amalgamation, each outstanding stock option
will be converted into an option to acquire common shares of the
amalgamated company and, after giving effect to the subdivision
of our common shares and the issuance of bonus shares described
in &#147;Reorganization Transactions,&#148; immediately prior to
the closing of this offering, we anticipate there will
be &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stock
options outstanding under this plan with a weighted average
exercise price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We also maintain the RAM Reinsurance Company Ltd. Supplemental
Retirement Plan for our key employees. Under our Supplemental
Retirement Plan, we contribute an amount equal to 10% of a
participant&#146;s annual salary and bonus to an account
maintained for the participant in which the participant is
vested after one year of service. In addition, a participant may
elect to defer all or a portion of annual salary and bonus and
have the amounts so deferred deposited in the participant&#146;s
account. A participant may elect to have the funds in the
account invested in one or more investment options offered
through a third party investment management company. A
participant&#146;s account is distributed in accordance with his
or her election made under the Supplemental Retirement Plan.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">83
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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Payment Agreements</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On June&nbsp;28, 2005, each of James P. Gerry and Mary Ellen
Pavlovsky entered into payment agreements with RAM Holdings, RAM
Re and Holdings&nbsp;II, which replaced existing option and
contingent share agreements entered into by such senior
executives. Subject to certain terms set forth therein, and
provided that the senior executive&#146;s employment is not
terminated by us for cause (as defined in the agreement) or by
the senior executive without good reason (as defined in the
agreement) on or before the earliest to occur of June&nbsp;30,
2006 or the date of a change in control, the senior executive is
entitled to receive a cash payment in accordance with the
formula set forth in the payment agreement. In anticipation of
the June&nbsp;30, 2006 payout date, as of September&nbsp;30,
2005 we accrued $829,798 for payment to Mr.&nbsp;Gerry and
$805,318 for payment to Ms.&nbsp;Pavlovsky. We do not believe
that the restructuring transactions or this offering will result
in an earlier payout under these agreements.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='114'></A>
</DIV>

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<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>PRINCIPAL AND SELLING SHAREHOLDERS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth information as of
January&nbsp;31, 2006 regarding beneficial ownership of our
common shares by:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    each person known by us to beneficially own 5% or more of our
    common shares;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    each selling shareholder;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    each of our directors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    each of our named executive officers;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    all of our executive officers and directors as a group.</TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Beneficial Ownership of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Beneficial Ownership of</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Principal</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Principal</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>and Selling</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>and Selling</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Shareholders Prior to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Shareholders After</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>This Offering(1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>This Offering(1)</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares Offered</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Name of Beneficial Owner(2)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percentage</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>in This Offering</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percentage</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>The PMI Group, Inc.(3)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>496,415</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24.9</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Transatlantic Reinsurance Company(4)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>451,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Greenwich Street Capital Partners(5)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Greenwich Street Capital Partners&nbsp;II, L.P.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>227,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Greenwich Fund, L.P.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Greenwich Street Employees Fund, L.P.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    TRV Executive Fund, L.P.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>MBIA Insurance Corporation(6)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>227,715</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>High Ridge Capital Partners Limited Partnership(7)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>188,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>BankAmerica International Investment Corporation, or
    BAIIC(8)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>120,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>CIVC Sidecar Fund, L.P.(9)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>109,751</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Canaan Partners(10)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Canaan Equity L.P.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Canaan Ventures&nbsp;II Limited Partnership</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Canaan Ventures&nbsp;II Offshore C.V.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>CIVC Partners IV</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Bermuda International Finance Limited</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Western General Insurance Company(11)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,956</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>James P. Gerry</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Mary Ellen Pavlovsky</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Steven J. Tynan(12)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Vernon M. Endo(13)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Richard Lutenski(14)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>David K. Steel(15)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,725</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Marie L. Martineau(16)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Keith W. Abell(17)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>250,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Edward F. Bader(18)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Victor J. Bacigalupi(19)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>David L. Boyle(20)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>252</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">85
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="39%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Beneficial Ownership of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Beneficial Ownership of</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Principal</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Principal</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>and Selling</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>and Selling</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Shareholders Prior to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Shareholders After</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>This Offering(1)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>This Offering(1)</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares Offered</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Name of Beneficial Owner(2)</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percentage</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>in This Offering</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Percentage</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Daniel C. Lukas</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Michael J. Miller(21)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,637</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Arthur P. Slepian(22)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Steven S. Skalicky(23)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Dirk A. Stuurop(24)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>All directors and executive officers as a group</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>285,592</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="4%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD align="left">
    Less than 1%.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="4%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Includes outstanding common shares and assumes exercise of all
    outstanding options currently exercisable or exercisable within
    60&nbsp;days of January&nbsp;31, 2006. Common shares subject to
    options or warrants currently exercisable, or exercisable within
    60&nbsp;days of January&nbsp;31, 2006, are deemed outstanding
    for the purpose of computing the percentage ownership of the
    person holding such options, but are not deemed outstanding for
    computing the percentage ownership of any other person.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Unless otherwise stated, the address for each beneficial owner
    is RAM Re House, 46&nbsp;Reid Street, Hamilton HM12 Bermuda.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    The address of the beneficial owner is PMI Plaza, 3003&nbsp;Oak
    Road, Walnut Creek, California 94597.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    The address of the beneficial owner is 80&nbsp;Pine Street, New
    York, New York 10005.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    The address of the beneficial owner is 12&nbsp;East
    49th&nbsp;Street, Suite&nbsp;3200, New York, New York 10017.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(6)&nbsp;</TD>
    <TD align="left">
    The address of the beneficial owner is 113&nbsp;King Street,
    Armonk, New York, 10504.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(7)&nbsp;</TD>
    <TD align="left">
    The address of the beneficial owner is 5405 2&nbsp;Morgan Hill
    Road, South Woodstock, Vermont 05071.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(8)&nbsp;</TD>
    <TD align="left">
    The address of the beneficial owner is Bank of America Corporate
    Center, 100&nbsp;North Tryon St., Charlotte, North Carolina
    28255. These common shares are managed by CIVC Partners, LLC, or
    CIVC Partners, pursuant to a management agreement. The voting of
    such common shares is directed by CIVC Partners and the
    disposition of such shares is also directed by CIVC Partners,
    with the consent of BAIIC.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(9)&nbsp;</TD>
    <TD align="left">
    BAIIC owns a 95.5% limited partnership interest in CIVC Sidecar
    Fund, L.P., or CIVC Sidecar Fund. The general partner of CIVC
    Sidecar Fund is CIVC GP Sidecar Fund, L.P., which has sole
    voting and dispositive power over BAIIC&#146;s limited
    partnership interest in CIVC Sidecar Fund.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>(10)&nbsp;</TD>
    <TD align="left">
    The address of the beneficial owner is 105 Rowayton Avenue,
    Rowayton, Connecticut 06853.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(11)&nbsp;</TD>
    <TD align="left">
    Western General Insurance Company&#146;s wholly owned
    subsidiary, Westgen High Ridge Holdings has a 25% interest in
    High Ridge Capital Partners Limited. The address of the
    beneficial owner is Swan Building, 26&nbsp;Victoria Street,
    Hamilton, Bermuda.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(12)&nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;Tynan, one of our directors, is a Managing Member of
    High Ridge Capital LLC, an entity which is a general partner of
    High Ridge Capital Partners Limited Partnership. Mr.&nbsp;Tynan
    disclaims beneficial ownership of any of the common shares owned
    by High Ridge Capital Partners Limited Partnership.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(13)&nbsp;</TD>
    <TD align="left">
    Consists of options exercisable for 12,500&nbsp;common shares.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(14)&nbsp;</TD>
    <TD align="left">
    Consists of options exercisable for 4,800&nbsp;common shares.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(15)&nbsp;</TD>
    <TD align="left">
    Consists of options exercisable for 1,725&nbsp;common shares.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(16)&nbsp;</TD>
    <TD align="left">
    Consists of options exercisable for 2,400&nbsp;common shares.</TD>
</TR>

</TABLE>

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<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>(17)&nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;Abell, one of our directors, is the Vice Chairman of
    Greenwich Street Capital Partners, Inc., a limited partner of
    Greenwich Street Capital Partners, L.P. and a managing member of
    Greenwich Street Investments&nbsp;II, L.L.C. Mr.&nbsp;Abell has
    voting and investment power over the securities beneficially
    owned by Greenwich Street Capital Partners. Mr.&nbsp;Abell
    disclaims beneficial ownership of any of the common shares owned
    by Greenwich Street Capital Partners other than to the extent of
    his pecuniary interest therein.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(18)&nbsp;</TD>
    <TD align="left">
    Consists of options exercisable for 555&nbsp;common shares.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(19)&nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;Bacigalupi, one of our directors, is the Executive Vice
    President, Chief Administrative Officer, General Counsel and
    Secretary of The PMI&nbsp;Group, Inc. Mr.&nbsp;Bacigalupi
    disclaims beneficial ownership of any of the common shares owned
    by The PMI&nbsp;Group, Inc.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(20)&nbsp;</TD>
    <TD align="left">
    Consists of options exercisable for 252&nbsp;common shares.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(21)&nbsp;</TD>
    <TD align="left">
    Represents 6,982&nbsp;common shares beneficially owned by BAIIC,
    1,746&nbsp;common shares beneficially owned by CIVC
    Partners&nbsp;IV and 1,909&nbsp;common shares beneficially owned
    by CIVC Sidecar Fund, L.P. Mr.&nbsp;Miller, one of our
    directors, is a member of CIVC Partners&nbsp;IV and CIVC
    Partners LLC, which contractually manages the shares of RAM
    Holdings beneficially owned by BankAmerica International
    Investment Corporation. As a member of CIVC Partners&nbsp;IV and
    CIVC Partners LLC, Mr.&nbsp;Miller has voting and investment
    power with respect to the 6,982&nbsp;voting shares beneficially
    owned by BankAmerica International Investment Corporation and
    the 1,746&nbsp;common shares beneficially owned by CIVC Partners
    IV. Mr.&nbsp;Miller may also be deemed to share voting and
    investment power with respect to the 1,909&nbsp;shares
    beneficially owned by CIVC Sidecar Fund. He disclaims beneficial
    ownership of any of the common shares owned by CIVC&nbsp;Sidecar
    Fund, L.P. other than to the extent of his pecuniary interest
    therein.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(22)&nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;Slepian, one of our directors, is the Senior Vice
    President and Managing Director, Financial Guaranty of The
    PMI&nbsp;Group, Inc. Mr.&nbsp;Slepian disclaims beneficial
    ownership of any of the common shares owned by The PMI Group,
    Inc.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(23)&nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;Skalicky, one of our directors, is the Executive Vice
    President and Chief Financial Officer of Transatlantic
    Reinsurance Company. Mr.&nbsp;Skalicky disclaims beneficial
    ownership of any of the common shares owned by Transatlantic
    Reinsurance Company.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(24)&nbsp;</TD>
    <TD align="left">
    Consists of options exercisable for 723&nbsp;common shares.</TD>
</TR>

</TABLE>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='115'></A>
</DIV>

<!-- link1 "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We describe below some of the transactions we have entered into
with parties that are related to us.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Transactions and Relationships with Investors</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
MBIA, one of the four major primary insurers, invested
$25.4&nbsp;million in our April&nbsp;3, 2003 private offering of
common shares of RAM Holdings and Holdings&nbsp;II. As of
September&nbsp;30, 2005, MBIA owned 11.4% of our aggregate
issued and outstanding common shares. We have engaged MBIA
Capital, a wholly-owned subsidiary of the parent company to
MBIA, to provide us with investment advisory and management
services. We have agreed to pay an annual investment management
fee payable quarterly in arrears based on the average market
value of the assets under management for each quarter. In
addition, we have agreed to reimburse custodian fees, transfer
agent fees and brokerage costs, fees and commissions and certain
other <FONT style="white-space: nowrap">out-of</FONT>-pocket
expenses. An amount of $195,122 was payable as of
December&nbsp;31, 2004 to MBIA Capital for these services in
2004. In the ordinary course of business, we have also entered
into reinsurance agreements with MBIA. For the nine months
ending September&nbsp;30, 2005 and the year ended
December&nbsp;31, 2004, MBIA treaties accounted for 31% and 39%
of our gross written premiums, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2003, two shareholders, PMI and the CIVC Partners
group, who together own approximately 38% (with only PMI owning
in excess of 10%) of the aggregate issued and outstanding common
shares of RAM Holdings and Holdings&nbsp;II, became investors in
FGIC Corporation, an insurance holding company whose subsidiary
FGIC is one of the four largest United States based primary
financial guaranty insurance companies. In the ordinary course
of business, we have entered into reinsurance agreements with
FGIC. In 2004 and 2003, gross written premiums ceded from FGIC
accounted for 1% and 2% of total gross premiums written by us,
respectively. Amounts due from FGIC as of December&nbsp;31, 2004
and 2003 were $5,318 and $32,438, respectively, and have been
included in premiums receivable.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='116'></A>
</DIV>

<!-- link1 "MATERIAL TAX CONSIDERATIONS" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>MATERIAL TAX CONSIDERATIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following summary of our taxation and the taxation of our
shareholders is based upon current law and is for general
information only. Legislative, judicial or administrative
changes may be forthcoming that could affect this summary.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following legal discussion (including and subject to the
matters and qualifications set forth in such summary) of the
material tax considerations under (i)&nbsp;&#147;Taxation of RAM
Holdings and RAM Re&nbsp;&#151; Bermuda&#148; and &#147;Taxation
of Shareholders&nbsp;&#151; Bermuda Taxation&#148; is based upon
the advice of Conyers, Dill&nbsp;&#38; Pearman, Hamilton,
Bermuda, our Bermuda counsel and (ii)&nbsp;&#147;Taxation of RAM
Holdings and RAM Re&nbsp;&#151; United States&#148; and
&#147;Taxation of Shareholders&nbsp;&#151; United States
Taxation&#148; is based upon the advice of LeBoeuf, Lamb,
Greene&nbsp;&#38; MacRae LLP, New York, New York. The advice of
such firms does not include any factual or accounting matters,
determinations or conclusions including amounts and computations
of RPII and amounts or components thereof or facts relating to
our business or activities. The discussion is based upon current
law. Legislative, judicial or administrative changes or
interpretations may be forthcoming that could be retroactive and
could affect the tax consequences to holders of common shares.
The tax treatment of a holder of common shares, or of a person
treated as a holder of common shares for U.S.&nbsp;federal
income, state, local or
<FONT style="white-space: nowrap">non-U.S.&nbsp;</FONT>tax
purposes, may vary depending on the holder&#146;s particular tax
situation. Statements contained herein as to the beliefs,
expectations and conditions of RAM Holdings and RAM Re as to the
application of such tax laws or facts represent the view of
management as to the application of such laws and do not
represent the opinions of counsel. PROSPECTIVE INVESTORS SHOULD
CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THEIR PARTICULAR
CIRCUMSTANCES CONCERNING THE U.S.&nbsp;FEDERAL, STATE, LOCAL AND
<FONT style="white-space: nowrap">NON-U.S.&nbsp;</FONT>TAX
CONSEQUENCES OF OWNING OUR COMMON SHARES.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Taxation of RAM Holdings and RAM Re</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Bermuda</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under current Bermuda law, there is no income, corporate or
profits tax or withholding tax, capital gains tax or capital
transfer tax, estate or inheritance tax payable by us or our
shareholders, other than shareholders ordinarily resident in
Bermuda, if any. RAM Holdings and RAM Re have each obtained from
the Minister of Finance under The Exempted Undertaking Tax
Protection Act 1966, as amended, an assurance that, in the event
that Bermuda enacts legislation imposing tax computed on
profits, income, any capital asset, gain or appreciation, or any
tax in the nature of estate duty or inheritance, then the
imposition of any such tax shall not be applicable to RAM
Holdings and RAM Re or to any of their operations or their
shares, debentures or other obligations, until March&nbsp;28,
2016. RAM Holdings and RAM Re could be subject to taxes in
Bermuda after that date. This assurance is subject to the
proviso that it is not to be construed so as to prevent the
application of any tax or duty to such persons as are ordinarily
resident in Bermuda or to prevent the application of any tax
payable in accordance with the provisions of the Land Tax Act
1967 or otherwise payable in relation to any property leased to
RAM Holdings and RAM Re. RAM Holdings and RAM Re each pay annual
Bermuda government fees, and RAM Re pays annual insurance
license fees. In addition, all entities employing individuals in
Bermuda are required to pay a payroll tax and there are other
sundry taxes payable, directly or indirectly, to the Bermuda
government.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>United States</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following discussion is a summary of all material
U.S.&nbsp;tax considerations relating to our operations. A
foreign corporation that is engaged in the conduct of a
U.S.&nbsp;trade or business will be subject to U.S.&nbsp;federal
income tax as described below, unless entitled to the benefits
of an applicable tax treaty. Whether business is being conducted
in the United States is an inherently factual determination.
Because the Code, regulations and court decisions fail to
definitively identify activities that constitute being engaged
in a trade or business in the United States, we cannot be
certain that the IRS will not contend successfully that RAM
Holdings and/or RAM Re are or will be engaged in a trade or
business in the
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
United States for U.S.&nbsp;federal income tax purposes. A
foreign corporation deemed to be so engaged would be subject to
U.S.&nbsp;federal income tax at regular corporate rates, as well
as the branch profits tax, on its income which is treated as
effectively connected with the conduct of that trade or business
unless the corporation is entitled to relief under the permanent
establishment provision of an applicable tax treaty, as
discussed below. Such income tax, if imposed, would be based on
effectively connected income computed in a manner generally
analogous to that applied to the income of a
U.S.&nbsp;corporation, except that a foreign corporation is
generally entitled to deductions and credits only if it files a
U.S.&nbsp;federal income tax return. RAM Re does not intend to
file protective U.S.&nbsp;federal income tax returns. The
highest marginal federal income tax rates currently are 35% for
a corporation&#146;s effectively connected income and 30% for
the additional &#147;branch profits&#148; tax.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If RAM Re is entitled to benefits under the income tax treaty
between the United States and Bermuda, which we refer to as the
Bermuda Treaty, RAM Re would not be subject to U.S.&nbsp;federal
income tax on any income found to be effectively connected with
a U.S.&nbsp;trade or business unless that trade or business is
conducted through a permanent establishment in the United
States. No regulations interpreting the Bermuda Treaty have been
issued. RAM Re currently intends to conduct its activities so
that it does not have a permanent establishment in the United
States, although we cannot be certain that we will achieve this
result.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
An insurance enterprise resident in Bermuda generally will be
entitled to the benefits of the Bermuda Treaty if (i)&nbsp;more
than 50% of its shares are owned beneficially, directly or
indirectly, by individual residents of the United States or
Bermuda or U.S.&nbsp;citizens and (ii)&nbsp;its income is not
used in substantial part, directly or indirectly, to make
disproportionate distributions to, or to meet certain
liabilities of, persons who are neither residents of either the
United States or Bermuda nor U.S.&nbsp;citizens. We cannot be
certain that RAM Re will be eligible for Bermuda Treaty benefits
immediately following this offering or in the future because of
factual and legal uncertainties regarding the residency and
citizenship of RAM Holdings&#146; shareholders. RAM Holdings
would not be eligible for treaty benefits because it is not an
insurance company. Accordingly, RAM Holdings and RAM Re have
conducted and intend to conduct substantially all of their
operations outside the United States and to limit their
U.S.&nbsp;contacts so that neither RAM Holdings nor RAM Re
should be treated as engaged in the conduct of a trade or
business in the United States.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Foreign insurance companies carrying on an insurance business
within the United States have a certain minimum amount of
effectively connected net investment income, determined in
accordance with a formula that depends, in part, on the amount
of U.S.&nbsp;risk insured or reinsured by such companies. If RAM
Re is considered to be engaged in the conduct of an insurance
business in the United States and it is not entitled to the
benefits of the Bermuda Treaty in general (because it fails to
satisfy one of the limitations on treaty benefits discussed
above), the Code could subject a significant portion of RAM
Re&#146;s investment income to U.S.&nbsp;federal income tax. In
addition, while the Bermuda Treaty clearly applies to premium
income, it is uncertain whether the Bermuda Treaty applies to
other income such as investment income. If RAM Re is considered
engaged in the conduct of an insurance business in the United
States and is entitled to the benefits of the Bermuda Treaty in
general, but the Bermuda Treaty is interpreted to not apply to
investment income, a significant portion of RAM Re&#146;s
investment income could be subject to U.S.&nbsp;federal income
tax.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Foreign corporations not engaged in a trade or business in the
United States are nonetheless subject to a U.S.&nbsp;income tax
imposed by withholding on certain &#147;fixed or determinable
annual or periodic gains, profits and income&#148; derived from
sources within the United States (such as dividends and certain
interest on investments), subject to exemption under the Code or
reduction by applicable treaties. The Bermuda Treaty does not
reduce the U.S.&nbsp;federal withholding rate on
<FONT style="white-space: nowrap">U.S.-sourced</FONT> investment
income.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The United States also imposes an excise tax on insurance and
reinsurance premiums paid to foreign insurers or reinsurers with
respect to risks located in the United States. The rates of tax
applicable to premiums paid to RAM Re are 4% for casualty
insurance premiums and 1% for reinsurance premiums.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Taxation of Shareholders</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Bermuda Taxation</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Currently, there is no Bermuda income, corporate or profits tax
or withholding tax, capital gains tax or capital transfer tax,
estate or inheritance tax or other tax payable by holders of the
common shares, other than shareholders ordinarily resident in
Bermuda, if any.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>United States Taxation</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following summary sets forth the material U.S.&nbsp;federal
income tax considerations related to the purchase, ownership and
disposition of common shares. Unless otherwise stated, this
summary deals only with shareholders that are U.S.&nbsp;Persons
(as defined below) who purchase their common shares in this
offering, who do not own (directly, indirectly through foreign
entities or &#147;constructively&#148;) shares of RAM Holdings
or RAM Re prior to this offering and who hold their common
shares as capital assets within the meaning of section&nbsp;1221
of the Code. The following discussion is only a discussion of
the material U.S.&nbsp;federal income tax matters as described
herein and does not purport to address all of the
U.S.&nbsp;federal income tax consequences that may be relevant
to a particular shareholder in light of such shareholder&#146;s
specific circumstances. In addition, except as disclosed below,
the following summary does not address the U.S.&nbsp;federal
income tax consequences that may be relevant to special classes
of shareholders, such as financial institutions, insurance
companies, regulated investment companies, real estate
investment trusts, dealers or traders in securities, tax exempt
organizations, expatriates, investors in pass through entities,
persons who are considered with respect to any of us as
&#147;United States shareholders&#148; for purposes of the CFC
rules of the Code (generally, a U.S.&nbsp;Person, as defined
below, who owns or is deemed to own 10% or more of the total
combined voting power of all classes of RAM Holdings or RAM Re
shares entitled to vote (that is, 10% U.S.&nbsp;Shareholders)),
or persons who hold their shares as part of a hedging or
conversion transaction or as part of a short-sale or straddle,
who may be subject to special rules or treatment under the Code.
This discussion is based upon the Code, the Treasury Regulations
promulgated thereunder and any relevant administrative rulings
or pronouncements or judicial decisions, all as in effect on the
date hereof and as currently interpreted, and does not take into
account possible changes in such tax laws or interpretations
thereof, which may apply retroactively. This discussion does not
include any description of the tax laws of any state or local
governments within the United States or of any foreign
government. Persons considering making an investment in our
shares should consult their own tax advisors concerning the
application of the U.S.&nbsp;federal tax laws to their
particular situations as well as any tax consequences arising
under the laws of any state, local or foreign taxing
jurisdiction prior to making such investment.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If a partnership holds our common shares, the tax treatment of
the partners will generally depend on the status of the partner
and the activities of the partnership. If you are a partner of a
partnership holding our shares, you should consult your tax
advisor.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For purposes of this discussion, the term
&#147;U.S.&nbsp;Person&#148; means: (i)&nbsp;an individual
citizen or resident of the United States, (ii)&nbsp;a
partnership or corporation created or organized in or under the
laws of the United States, or under the laws of any State
thereof (including the District of Columbia), (iii)&nbsp;an
estate the income of which is subject to U.S.&nbsp;federal
income taxation regardless of its source, (iv)&nbsp;a trust if
either (x)&nbsp;a court within the United States is able to
exercise primary supervision over the administration of such
trust and one or more U.S.&nbsp;Persons have the authority to
control all substantial decisions of such trust or (y)&nbsp;the
trust has a valid election in effect to be treated as a
U.S.&nbsp;Person for U.S.&nbsp;federal income tax purposes or
(v)&nbsp;any other person or entity that is treated for
U.S.&nbsp;federal income tax purposes as if it were one of the
foregoing.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Taxation of Dividends.</I> Subject to the discussions below
relating to the potential application of the CFC, RPII and PFIC
rules, cash distributions, if any, made with respect to the
common shares will constitute dividends for U.S.&nbsp;federal
income tax purposes to the extent paid out of current or
accumulated earnings and profits of RAM Holdings (as computed
using U.S.&nbsp;tax principles). We believe that dividends paid
by us to non-corporate holders on our common shares before 2009
should be eligible for reduced rates
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
of tax up to a maximum of 15% as &#147;qualified dividend
income,&#148; because our common shares should be treated as
readily tradable on an established securities market in the
United States. Qualified dividend income is subject to tax at
capital gain rates. Dividends paid by us to corporate holders
will not be eligible for the dividends received deduction. To
the extent such distributions exceed RAM Holdings&#146; earnings
and profits, they will be treated first as a return of the
shareholder&#146;s basis in their shares to the extent thereof,
and then as gain from the sale of a capital asset.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Classification of RAM Holdings or RAM Re as CFCs.</I> Each
10% U.S.&nbsp;Shareholder of a foreign corporation that is a CFC
for an uninterrupted period of 30&nbsp;days or more during a
taxable year, and who owns shares in the CFC, directly or
indirectly through foreign entities, on the last day of the
CFC&#146;s taxable year, must include in its gross income for
U.S.&nbsp;federal income tax purposes its pro rata share of the
CFC&#146;s &#147;subpart F income,&#148; even if the subpart F
income is not distributed. &#147;Subpart F income&#148; of a
foreign insurance corporation typically includes foreign
personal holding company income (such as interest, dividends and
other types of passive income), as well as insurance and
reinsurance income (including underwriting and investment
income). A foreign corporation is considered a CFC if 10%
U.S.&nbsp;Shareholders own (directly, indirectly through foreign
entities or by attribution by application of the constructive
ownership rules of section&nbsp;958(b) of the Code (that is,
&#147;constructively&#148;)) more than 50% of the total combined
voting power of all classes of voting stock of such foreign
corporation, or more than 50% of the total value of all stock of
such corporation on any day of the taxable year of such
corporation, which we refer to as the 50% CFC Test. For purposes
of taking into account insurance income, a CFC also includes a
foreign insurance company in which more than 25% of the total
combined voting power of all classes of stock or more than 25%
of the total value of all stock is owned (directly, indirectly
through foreign entities or constructively) by 10%
U.S.&nbsp;Shareholders on any day of the taxable year of such
corporation, which we refer to as the 25% CFC Test, if the gross
amount of premiums or other consideration for the reinsurance or
the issuing of insurance or annuity contracts (other than
certain insurance or reinsurance related to same country risks
written by certain insurance companies not applicable here),
exceeds 75% of the gross amount of all premiums or other
consideration in respect of all risks. Moreover, RAM Re may be
characterized as a CFC even if, based on the nominal voting
power attributable to its shares, it avoids CFC characterization
under the 50% CFC Test in the case of RAM Holdings and the 25%
CFC Test in the case of RAM Re if, based on the facts and
circumstances, U.S.&nbsp;Persons who are not 10%
U.S.&nbsp;Shareholders based on the nominal voting power
attributable to the shares of RAM Holdings or RAM Re owned by
such U.S.&nbsp;Persons exercise control over RAM Holdings or RAM
Re disproportionate to their nominal voting power in such a
manner that RAM Holdings or RAM Re should be considered a CFC
under the 50% CFC Test or 25% CFC Test, as applicable.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We believe, subject to the discussion below, that because of the
anticipated dispersion of our share ownership, provisions in our
organizational documents that limit voting power (these
provisions are described in &#147;Description of Share
Capital&#148;) and other factors, no U.S.&nbsp;Person who
acquires common shares in this offering directly or indirectly
through foreign entities and that did not own (directly,
indirectly through foreign entities, or
&#147;constructively&#148;) shares of RAM Holdings or RAM Re
prior to this offering should be treated as owning (directly,
indirectly through foreign entities or
&#147;constructively&#148;) 10% or more of the total voting
power of all classes of shares of RAM Holdings or RAM Re. We
note that the provisions in our organizational documents that
limit voting power could reduce or eliminate an investor&#146;s
voting power in circumstances in which, pursuant to certain
constructive ownership rules, shares owned or deemed owned by
the investor are attributed to another investor or shares owned
or deemed owned by another investor are attributed to the
investor or the investor is invested in an entity in which
another investor invests. However, neither we nor investors may
be aware of circumstances in which shares may be so attributed
in order to timely effectuate these provisions. In addition, the
IRS could challenge the effectiveness of the provisions in our
organizational documents and a court could sustain such a
challenge. Accordingly, no assurance can be given that a
U.S.&nbsp;Person who acquires common shares in this offering
will not be characterized as a 10% U.S.&nbsp;Shareholder.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>The RPII CFC Provisions.</I> The following discussion
generally is applicable only if the RPII of RAM Re, determined
on a gross basis, is 20% or more of its gross insurance income
for the taxable year and the
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
20% Ownership Exception (as defined below) is not met. The
following discussion generally would not apply for any fiscal
year in which RAM Re&#146;s RPII falls below the 20% threshold
or the 20% Ownership Exception is met. Although we cannot be
certain, we believe that RAM Re met the 20% Ownership Exception
in prior years of operation and will meet the 20% Ownership
Exception for each tax year for the foreseeable future.
Additionally, as RAM Holdings is not licensed as an insurance
company we do not anticipate that RAM Holdings will have
insurance income, including RPII.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
RPII is any insurance income (as defined below) attributable to
policies of insurance or reinsurance with respect to which the
person (directly or indirectly) insured is an RPII shareholder
(as defined below) or a related person (as defined below) to
such RPII shareholder. In general, and subject to certain
limitations, &#147;insurance income&#148; is income (including
premium and investment income) attributable to the issuing of
any insurance or reinsurance contract which would be taxed under
the portions of the Code relating to insurance companies if the
income were the income of a domestic insurance company. The term
&#147;RPII shareholder&#148; means any U.S.&nbsp;Person who owns
(directly or indirectly through foreign entities) any amount of
RAM Holdings&#146; or RAM Re&#146;s shares. Generally, the term
&#147;related person&#148; for this purpose means someone who
controls or is controlled by the RPII shareholder or someone who
is controlled by the same person or persons which control the
RPII shareholder. Control is measured by either more than 50% in
value or more than 50% in voting power of stock applying certain
constructive ownership principles. A corporation&#146;s pension
plan is ordinarily not a related person with respect to the
corporation unless the pension plan owns, directly or indirectly
through the application of certain constructive ownership rules,
more than 50% measured by vote or value, of the stock of the
corporation. RAM Re will be treated as a CFC under the RPII
provisions if RPII shareholders are treated as owning (directly,
indirectly through foreign entities or constructively) 25% or
more of the shares of RAM Re by vote or value.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
RPII Exceptions. The special RPII rules do not apply to RAM Re
if (i)&nbsp;direct and indirect insureds and persons related to
such insureds, whether or not U.S.&nbsp;Persons, are treated as
owning (directly or indirectly through entities) less than 20%
of the voting power and less than 20% of the value of the shares
of RAM Re, which we refer to as the 20% Ownership Exception,
(ii)&nbsp;RPII, determined on a gross basis, is less than 20% of
the gross insurance income of RAM Re for the taxable year, which
we refer to as the 20% Gross Income Exception, (iii)&nbsp;RAM Re
elects to be taxed on its RPII as if the RPII were effectively
connected with the conduct of a U.S.&nbsp;trade or business and
to waive all treaty benefits with respect to RPII and meet
certain other requirements or (iv)&nbsp;RAM Re elects to be
treated as a U.S.&nbsp;corporation and waives all treaty
benefits and meets certain other requirements. RAM Re does not
intend to make these elections. Where none of these exceptions
applies to RAM Re, each U.S.&nbsp;Person owning directly or
indirectly through foreign entities, any shares in RAM Holdings
(and therefore indirectly, in RAM Re) on the last day of RAM
Re&#146;s taxable year will be required to include in its gross
income for U.S.&nbsp;federal income tax purposes its share of
the RPII of RAM Re for the portion of the taxable year during
which RAM Re was a CFC under the RPII provisions, determined as
if all such RPII were distributed proportionately only to such
U.S.&nbsp;Persons at that date, but limited by each such
U.S.&nbsp;Person&#146;s share of RAM Re&#146;s current-year
earnings and profits as reduced by the U.S.&nbsp;Person&#146;s
share, if any, of certain prior-year deficits in earnings and
profits. RAM Re intends to operate in a manner that is intended
to ensure that it qualifies for the 20% Ownership Exception;
however, it is possible that we will not be successful in
qualifying under this exception. RAM Re has not qualified for
the 20% Gross Income Exception in recent prior years, and it is
unclear whether RAM Re will qualify for the 20% Gross Income
Exception in the future.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Computation of RPII. In order to determine how much RPII RAM Re
has earned in each taxable year (for purposes of providing this
information to RPII shareholders), RAM Re may obtain and rely
upon information from its insureds and reinsureds to determine
whether any of the insureds, reinsureds or persons related
thereto own (directly or indirectly through foreign entities)
shares of RAM Re and are U.S.&nbsp;Persons. RAM Re may not be
able to determine whether any of its underlying direct or
indirect insureds are RPII shareholders or related persons to
such RPII shareholders. Consequently, RAM Re may not be able to
determine accurately the gross amount of RPII it earns in a
given taxable year or whether the 20% Ownership Exception is
met. For any year in which the 20% Ownership Exception does not
apply
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
and the 20% Gross Income Exception is not met, RAM Holdings may
also seek information from its shareholders as to whether
beneficial owners of RAM Re shares at the end of the year are
U.S.&nbsp;Persons so that the RPII may be determined and
apportioned among such persons; to the extent RAM Holdings is
unable to determine whether a beneficial owner of RAM Re shares
is a U.S.&nbsp;Person, RAM Holdings may assume that such owner
is not a U.S.&nbsp;Person, thereby increasing the per share RPII
amount for all known RPII shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If, as expected, for each taxable year RAM Re meets the 20%
Ownership Exception, RPII shareholders will not be required to
include RPII in their taxable income. The amount of RPII
includible in the income of a RPII shareholder is based upon the
net RPII income for the year after deducting related expenses
such as losses, loss reserves and operating expenses.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Apportionment of RPII to U.S.&nbsp;Holders. Every RPII
shareholder who directly or indirectly owns shares of RAM Re on
the last day of any taxable year of RAM Re in which the 20%
Ownership Exception does not apply to RAM Re and the 20% Gross
Income Exception is not met should expect that for such year the
RPII Shareholder will be required to include in gross income its
share of RAM Re&#146;s RPII for the portion of the taxable year
during which RAM Re was a CFC under the RPII provisions, whether
or not distributed, even though such shareholders may not have
owned the shares throughout such period. A RPII shareholder who
owns RAM Re shares during such taxable year but not on the last
day of the taxable year is not required to include in gross
income any part of RAM Re&#146;s RPII.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Basis Adjustments. A RPII shareholder&#146;s tax basis in its
shares will be increased by the amount of any RPII that the
shareholder includes in income. The RPII shareholder may exclude
from income the amount of any distributions by RAM Holdings out
of previously taxed RPII income. The RPII shareholder&#146;s tax
basis in its common shares will be reduced by the amount of such
distributions that are excluded from income.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Uncertainty as to Application of RPII. The RPII provisions have
never been interpreted by the courts or the U.S.&nbsp;Treasury
Department in final regulations, and regulations interpreting
the RPII provisions of the Code exist only in proposed form. It
is not certain whether these regulations will be adopted in
their proposed form or what changes or clarifications might
ultimately be made thereto or whether any such changes, as well
as any interpretation or application of the RPII provisions by
the IRS, the courts or otherwise, might have retroactive effect.
These provisions include the grant of authority to the
U.S.&nbsp;Treasury Department to prescribe &#147;such
regulations as may be necessary to carry out the purpose of this
subsection including ... regulations preventing the avoidance of
this subsection through cross insurance arrangements or
otherwise.&#148; Accordingly, the meaning of the RPII provisions
and the application thereof to RAM Re is uncertain. In addition,
we cannot be certain that the amount of RPII or the amounts of
the RPII inclusions for any particular RPII shareholder, if any,
will not be subject to adjustment based upon subsequent IRS
examination. Any prospective investors considering an investment
in common shares should consult his tax advisor as to the
effects of these uncertainties.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Information Reporting.</I> Under certain circumstances,
U.S.&nbsp;Persons who own (directly or indirectly) shares in a
foreign corporation are required to file IRS Form&nbsp;5471 with
their U.S.&nbsp;federal income tax returns. Generally,
information reporting on IRS Form&nbsp;5471 is required by
(i)&nbsp;a person who is treated as a RPII shareholder,
(ii)&nbsp;a 10% U.S.&nbsp;Shareholder of a foreign corporation
that is a CFC for an uninterrupted period of 30&nbsp;days or
more during any tax year of the foreign corporation, and who
owned the stock on the last day of that year and
(iii)&nbsp;under certain circumstances, a U.S.&nbsp;Person who
acquires stock in a foreign corporation and as a result thereof
owns 10% or more of the voting power or value of such foreign
corporation, whether or not such foreign corporation is a CFC.
For any taxable year in which RAM Holdings determines that the
20% Gross Income Exception is not met and the 20% Ownership
Exception does not apply, RAM Holdings will provide to all
U.S.&nbsp;Persons registered as shareholders of its shares a
completed IRS Form&nbsp;5471 or the relevant information
necessary to complete the form. Failure to file IRS
Form&nbsp;5471 may result in penalties.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Tax-Exempt Shareholders.</I> Tax-exempt entities will be
required to treat certain subpart F insurance income, including
RPII, that is includible in income by the tax-exempt entity as
unrelated business taxable
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
income. Prospective investors that are tax exempt entities are
urged to consult their tax advisors as to the potential impact
of the unrelated business taxable income provisions of the Code.
A tax-exempt organization that is treated as a 10%
U.S.&nbsp;Shareholder or a RPII Shareholder also must file IRS
Form&nbsp;5471 in the circumstances described above.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Dispositions of Common Shares.</I> Subject to the discussions
below relating to the potential application of the Code
section&nbsp;1248 and PFIC rules, U.S.&nbsp;holders of common
shares generally should recognize capital gain or loss for
U.S.&nbsp;federal income tax purposes on the sale, exchange or
other disposition of common shares in the same manner as on the
sale, exchange or other disposition of any other shares held as
capital assets. If the holding period for these common shares
exceeds one year, any gain will be subject to tax at a current
maximum marginal tax rate of 15% for individuals and certain
other non-corporate shareholders and 35% for corporations.
Moreover, gain, if any, generally will be U.S.&nbsp;source gain
and will generally constitute &#147;passive income&#148; for
foreign tax credit limitation purposes.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Code section&nbsp;1248 provides that if a U.S.&nbsp;Person sells
or exchanges stock in a foreign corporation and such person
owned, directly, indirectly through certain foreign entities or
constructively, 10% or more of the voting power of the
corporation at any time during the five-year period ending on
the date of disposition when the corporation was a CFC, any gain
from the sale or exchange of the shares will be treated as a
dividend to the extent of the CFC&#146;s earnings and profits
(determined under U.S.&nbsp;federal income tax principles)
during the period that the shareholder held the shares and while
the corporation was a CFC (with certain adjustments). We believe
that, because of the anticipated dispersion of our share
ownership, provisions in our organizational documents that limit
voting power and other factors, no U.S.&nbsp;shareholder of RAM
Holdings should be treated as owning (directly, indirectly
through foreign entities or constructively) 10% or more of the
total voting power of RAM Holdings; to the extent this is the
case, the application of Code section&nbsp;1248 under the
regular CFC rules should not apply to dispositions of our common
shares. It is possible, however, that the IRS could challenge
the effectiveness of these provisions and that a court could
sustain such a challenge. A 10% U.S.&nbsp;Shareholder may in
certain circumstances be required to report a disposition of
shares of a CFC by attaching IRS Form&nbsp;5471 to the
U.S.&nbsp;federal income tax or information return that it would
normally file for the taxable year in which the disposition
occurs. In the event this is determined necessary, RAM Holdings
will provide a completed IRS Form&nbsp;5471 or the relevant
information necessary to complete the Form.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Code section&nbsp;1248 also applies to the sale or exchange of
shares in a foreign corporation if the foreign corporation would
be treated as a CFC for RPII purposes regardless of whether the
shareholder is a 10% U.S.&nbsp;Shareholder or whether the 20%
Gross Income Exception is met or the 20% Ownership Exception
applies. Existing proposed regulations do not address whether
Code section&nbsp;1248 would apply if a foreign corporation is
not a CFC but the foreign corporation has a subsidiary that is a
CFC and that would be taxed as an insurance company if it were a
domestic corporation. We believe, however, that this application
of Code section&nbsp;1248 under the RPII rules should not apply
to dispositions of common shares because RAM Holdings will not
be directly engaged in the insurance business. We cannot be
certain, however, that the IRS will not interpret the proposed
regulations in a contrary manner or that the U.S.&nbsp;Treasury
Department will not amend the proposed regulations to provide
that these rules will apply to dispositions of common shares.
Prospective investors should consult their tax advisors
regarding the effects of these rules on a disposition of common
shares.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Passive Foreign Investment Companies.</I> In general, a
foreign corporation will be a PFIC during a given year if
(i)&nbsp;75% or more of its gross income constitutes
&#147;passive income&#148;, or the 75% test or (ii)&nbsp;50% or
more of its assets produce (or are held for the production of)
passive income, or the 50% test.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If RAM Holdings were characterized as a PFIC during a given
year, each U.S.&nbsp;Person holding our shares would be subject
to a penalty tax at the time of the sale at a gain of, or
receipt of an &#147;excess distribution&#148; with respect to,
their shares, unless such person is a 10% U.S.&nbsp;Shareholder
or made a &#147;qualified electing fund election,&#148; or a
<FONT style="white-space: nowrap">&#147;mark-to</FONT>-market
election.&#148; It is uncertain that RAM Holdings would be able
to provide its shareholders with the information necessary for a
U.S.&nbsp;Person to make a qualified electing fund election. A
U.S. Person may elect mark-to-market treatment for its shares,
provided
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
the shares, for purposes of the rules, constitute
&#147;marketable stock&#148; as defined in Treasury Regulations.
In general, a U.S. Person electing the mark-to-market regime
would compute gain or loss at the end of each taxable year as if
the shares had been sold at fair market value or on an actual
sale, which gain would generally be ordinary income. A
market-to-market election is generally irrevocable. In addition,
if RAM Holdings were considered a PFIC, upon the death of any
U.S.&nbsp;individual owning shares, such individual&#146;s heirs
or estate would not be entitled to a
<FONT style="white-space: nowrap">&#147;step-up&#148;</FONT> in
the basis of their shares that might otherwise be available
under U.S.&nbsp;federal income tax laws. In general, a
shareholder receives an &#147;excess distribution&#148; if the
amount of the distribution is more than 125% of the average
distribution with respect to the shares during the three
preceding taxable years (or shorter period during which the
taxpayer held the shares). In general, the penalty tax is
equivalent to the generally applicable U.S.&nbsp;federal income
tax and an interest charge on taxes that are deemed due during
the period the shareholder owned the shares, computed by
assuming that the excess distribution or gain (in the case of a
sale) with respect to the shares was taken in equal portion at
the highest applicable tax rate on ordinary income throughout
the shareholder&#146;s period of ownership. In addition, a
distribution paid by a PFIC to U.S.&nbsp;Shareholders that is
characterized as a dividend and is not characterized as an
excess distribution would not be eligible for a reduced rate of
tax as qualified dividend income.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the above purposes, passive income generally includes
interest, dividends, annuities and other investment income. The
PFIC rules provide that income &#147;derived in the active
conduct of an insurance business by a corporation which is
predominantly engaged in an insurance business ... is not
treated as passive income.&#148; The PFIC provisions also
contain a look-through rule under which a foreign corporation
shall be treated as if it &#147;received directly its
proportionate share of the income ...&#148; and as if it
&#147;held its proportionate share of the assets ...&#148; of
any other corporation in which it owns at least 25% of the value
of the stock. Under the look-through rule, RAM Holdings should
be deemed to own its proportionate share of the assets and to
have received its proportionate share of the income of RAM Re
for purposes of the 75% test and the 50% test. We expect that
the income and assets of RAM Holdings other than the income
generated by RAM Re and the assets held by RAM Re will be <I>de
minimis </I>in each year of operations with respect to the
overall income and assets of RAM Holdings and RAM Re.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The insurance income exception is intended to ensure that income
derived by a bona fide insurance company is not treated as
passive income, except to the extent such income is attributable
to financial reserves in excess of the reasonable needs of the
insurance business. We expect, for purposes of the PFIC rules,
that RAM Re will be predominantly engaged in the active conduct
of an insurance business and is unlikely to have financial
reserves in excess of the reasonable needs of its insurance
business in each year of operations. Accordingly, the Insurance
Company Exception should apply to RAM Re, and none of the income
or assets of RAM Re should be treated as passive. As a result,
based upon the look-through rule, we believe that RAM Holdings
was not and should not be treated as a PFIC. We cannot be
certain, however, as there are currently no regulations
regarding the application of the PFIC provisions to an insurance
company and new regulations or pronouncements interpreting or
clarifying these rules may be forthcoming, that the IRS will not
challenge this position and that a court will not sustain such
challenge. Prospective investors should consult their tax
advisor as to the effects of the PFIC rules.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Foreign Tax Credit.</I> Because it is anticipated that
U.S.&nbsp;Persons will own a majority of our shares, only a
portion of the current income inclusions, if any, under the CFC,
RPII and PFIC rules and of dividends paid by us (including any
gain from the sale of common shares that is treated as a
dividend under section&nbsp;1248 of the Code) will be treated as
foreign source income for purposes of computing a
shareholder&#146;s U.S.&nbsp;foreign tax credit limitations. We
will consider providing shareholders with information regarding
the portion of such amounts constituting foreign source income
to the extent such information is reasonably available. It is
also likely that substantially all of the subpart F income, RPII
and dividends that are foreign source income will constitute
either &#147;passive&#148; or &#147;financial services&#148;
income for foreign tax credit limitation purposes (and for
taxable years beginning after December&nbsp;31, 2006 will
constitute either &#147;passive&#148; or &#147;general&#148;
income). Thus, it may not be possible for most shareholders to
utilize excess foreign tax credits to reduce U.S.&nbsp;tax on
such income.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Information Reporting and Backup Withholding on Distributions
and Disposition Proceeds.</I> Information returns may be filed
with the IRS in connection with distributions on the common
shares and the proceeds from a sale or other disposition of the
common shares unless the holder of the common shares establishes
an exemption from the information reporting rules. A holder of
common shares that does not establish such an exemption may be
subject to U.S.&nbsp;backup withholding tax on these payments if
the holder is not a corporation or
<FONT style="white-space: nowrap">non-U.S.&nbsp;</FONT>Person or
fails to provide its taxpayer identification number or otherwise
comply with the backup withholding rules. The amount of any
backup withholding from a payment to a U.S.&nbsp;Person will be
allowed as a credit against the U.S.&nbsp;Person&#146;s
U.S.&nbsp;federal income tax liability and may entitle the
U.S.&nbsp;Person to a refund, provided that the required
information is furnished to the IRS.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Proposed U.S.&nbsp;Tax Legislation.</I> Legislation has been
introduced in the U.S.&nbsp;Congress intended to eliminate
certain perceived tax advantages of companies (including
insurance companies) that have legal domiciles outside the
United States but have certain U.S.&nbsp;connections. While
there are no currently pending legislative proposals which, if
enacted, would have a material adverse effect on us or our
shareholders, it is possible that broader-based legislative
proposals could emerge in the future that could have an adverse
impact on us or our shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Additionally, the U.S.&nbsp;federal income tax laws and
interpretations regarding whether a company is engaged in a
trade or business within the United States or is a PFIC, or
whether U.S.&nbsp;Persons would be required to include in their
gross income the subpart F income or the RPII of a CFC, are
subject to change, possibly on a retroactive basis. There are
currently no regulations regarding the application of the PFIC
rules to insurance companies and the regulations regarding RPII
are still in proposed form. New regulations or pronouncements
interpreting or clarifying such rules may be forthcoming. We
cannot be certain if, when or in what form such regulations or
pronouncements may be provided and whether such guidance will
have a retroactive effect.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='117'></A>
</DIV>

<!-- link1 "ERISA CONSIDERATIONS" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>ERISA CONSIDERATIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following is a summary of certain considerations associated
with an investment in us by employee benefit plans that are
subject to Title&nbsp;I of the Employee Retirement Income
Security Act of 1974, as amended, or ERISA, or Section&nbsp;4975
of the Code (and such plans are referred to as ERISA Plans), and
entities whose underlying assets are considered to include
&#147;plan assets&#148; of such plans within the meaning of U.S.
Department of Labor Regulation 29&nbsp;C.F.R. 2510.101 et seq.,
which we refer to as the Plan Asset Regulations. (which we refer
to, together with ERISA Plans, as the Plans).
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
THE FOLLOWING IS MERELY A SUMMARY, HOWEVER, AND SHOULD NOT BE
CONSTRUED AS LEGAL ADVICE OR AS COMPLETE IN ALL RELEVANT
RESPECTS. ALL INVESTORS ARE URGED TO CONSULT THEIR LEGAL
ADVISORS BEFORE INVESTING ASSETS OF A PLAN IN OUR COMPANY AND TO
MAKE THEIR OWN INDEPENDENT DECISIONS.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A fiduciary considering investing the assets of an ERISA Plan in
us should consult its legal advisor about ERISA, fiduciary and
other legal considerations before making such an investment.
Specifically, before investing in our common shares, any
fiduciary should, after considering the ERISA Plan&#146;s
particular circumstances, determine whether the investment is
appropriate under the fiduciary standards of ERISA or other
applicable law including standards with respect to prudence,
diversification and delegation of control and the prohibited
transaction provisions of ERISA and the Code.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Plan Assets Regulations</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
ERISA and the Code do not define &#147;plan assets.&#148;
However, the Plan Asset Regulations generally provide that when
a Plan acquires an equity interest in an entity that is neither
a &#147;publicly-offered security&#148; nor a security issued by
an investment company registered under the Investment Company
Act of 1940, as amended, which we refer to as the Act, the
Plan&#146;s assets include both the equity interest in the
entity and an undivided interest in each of the underlying
assets of the entity, unless it is established either that
equity participation in the entity by &#147;benefit plan
investors&#148; is not &#147;significant&#148; or that the
entity is an &#147;operating company,&#148; in each case as
defined in the Plan Asset Regulations.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We anticipate that our common shares will meet the criteria for
&#147;publicly-offered securities&#148; under the Plan Asset
Regulations and, accordingly, our underlying assets should not
be considered plan assets of any Plan that purchases our common
shares.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Prohibited Transactions</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The purchase or holding of our common shares by or on behalf of
a Plan could result in a prohibited transaction.
Section&nbsp;406 of ERISA prohibits a &#147;party in
interest&#148; and Section&nbsp;4975 of the Code prohibits a
&#147;disqualified person&#148; with respect to a Plan from
engaging in some transactions, including loans or sales,
involving a Plan and its assets unless a statutory or
administrative exemption applies to the transaction. Therefore,
if you are a fiduciary of an ERISA Plan or a person making
investment decisions for another Plan, you should consider
whether an investment in us might constitute or give rise to a
non-exempt prohibited transaction under ERISA and/or the Code.
Parties in interest or disqualified persons that participate in
a prohibited transaction may be subject to a penalty imposed
under ERISA and/or an excise tax imposed pursuant to
Section&nbsp;4975 of the Code, unless a statutory or
administrative exemption is available.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Governmental plans (as defined in Section&nbsp;3(32) of ERISA),
church plans (as defined in Section&nbsp;3(33) of ERISA), if no
election has been made under Section&nbsp;410(d) of the Code,
and foreign plans (as defined in Section&nbsp;4(b)(4) of ERISA),
while generally not subject to the fiduciary responsibility
provisions of ERISA or the provisions of Section&nbsp;4975 of
the Code, may nevertheless be subject to provisions of any
federal, state, local, non-U.S. or other laws or regulations
that are similar to such provisions of ERISA or the Code
(collectively, Similar Laws). Assets of such plans may be
invested in
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
our common shares without regard to the ERISA considerations
described herein, subject to the provisions of other applicable
Similar Laws.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The sale of our common shares to a Plan investor is in no
respect a representation by us that such an investment meets all
relevant legal requirements with respect to investments by Plans
generally or any particular Plan, or that such an investment is
appropriate for Plans generally or any particular Plan.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='118'></A>
</DIV>

<!-- link1 "DESCRIPTION OF SHARE CAPITAL" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>DESCRIPTION OF SHARE CAPITAL</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following summary of our share capital is qualified by the
provisions of our memorandum of association, our amended and
restated bye-laws and the amended and restated shareholders
agreement among substantially all of our existing shareholders,
copies of which will be filed as exhibits to the registration
statement of which this prospectus is a part. Our amended and
restated bye-laws and the amended and restated shareholders
agreement will each become effective immediately prior to the
completion of this offering. Except as otherwise specifically
stated, all references to &#147;bye-laws&#148; are intended to
refer to our amended and restated bye-laws and all references to
&#147;shareholders agreement&#148; are intended to refer to our
amended and restated shareholders agreement, both as will be in
effect upon the consummation of this offering. In this section,
&#147;we,&#148; &#147;us&#148; and &#147;our&#148; refers to RAM
Holdings and not to RAM Re.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>General</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Immediately prior to the completion of this offering, we will
have authorized share capital of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;comprised
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of par value
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, of
which &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;are
common shares,
and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;are
preference shares. Immediately after completion of this
offering, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common
shares and no preference shares will be issued and outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Common Shares</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Except as described below, our common shares will have no
preemptive rights or other rights to subscribe for additional
common shares, no rights of redemption, conversion or exchange
and no sinking fund rights. In the event of liquidation,
dissolution or winding-up, the holders of our common shares are
entitled to share equally and ratably in our assets, if any,
remaining after the payment of all our debts and liabilities and
the liquidation preference of any outstanding preferred shares.
All of the common shares being sold in this offering will be
fully paid and non-assessable. Holders of our common shares are
entitled to receive such dividends as may be lawfully declared
from time to time by our board of directors.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Preference Shares</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of the date of this prospectus, no preference shares have
been issued. Subject to certain limitations contained in our
bye-laws and any limitations prescribed by applicable law, our
board of directors is authorized to issue preference shares in
one or more series and to fix the designation, powers,
preferences and rights and the qualifications, limitations or
restrictions of such shares, including but not limited to
dividend rates, conversion rights, voting rights, terms of
redemption/repurchase (including sinking fund provisions),
redemption/repurchase prices and liquidation preferences, and
the number of shares constituting and the designation of any
such series, without further vote or action by our shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Voting Rights</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In general, and except as provided below, shareholders have one
vote for each common share held by them and are entitled to vote
at all meetings of shareholders. However, if, and for so long
as, the shares of a shareholder are treated as &#147;controlled
shares&#148; of any U.S.&nbsp;Person other than PMI and such
controlled shares constitute more than 9.9% of the votes
conferred by our issued shares, the voting rights with respect
to the controlled shares owned by such U.S.&nbsp;Person shall be
limited, in the aggregate, to a voting power of less than 9.9%,
under a procedure specified in our bye-laws. The procedure is
applied repeatedly until the voting power of all such
U.S.&nbsp;Persons (that is, 9.9% U.S.&nbsp;Shareholders) has
been reduced to less than 9.9%. Further, except as set forth
below, our board of directors may deviate from the foregoing
principles when it deems it appropriate to do so (i)&nbsp;to
avoid the existence of any 9.9% U.S.&nbsp;Shareholders, or 24.5%
U.S.&nbsp;Shareholders or (ii)&nbsp;to avoid a non-de minimis
adverse tax, legal or regulatory consequence to us, any direct
or indirect holder of our shares or its affiliates.
&#147;Controlled shares&#148; includes, among other things, all
shares of the Company that a person is deemed to own directly,
indirectly or constructively (within the meaning of sections 957
and 958 of the Code). In addition, at any time that the
controlled
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
shares of PMI constitute (i)&nbsp;more than 9.9% of the voting
power conferred by our issued shares and (ii)&nbsp;24.5% or more
of either the voting power or value of our issued shares, the
voting rights with respect to the controlled shares owned by PMI
will be limited to a voting power of 9.9%.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For example, the voting power of shares owned by an investor may
be reduced or in certain cases eliminated, if, pursuant to
certain constructive ownership rules, shares owned or deemed to
be owned by the investor are attributed to another investor or
shares owned or deemed owned by another investor are attributed
to the investor or the investor is invested in an entity in
which another investor invests.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the event the above voting limitations must be applied in
situations as described above, the voting limitation shall apply
to PMI only after the limitation has been applied to all other
shareholders whose votes are subject to reduction and the voting
power held by PMI shall not be reduced to below 9.9% by
operation of these provisions.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under these provisions, certain shareholders may have their
voting rights limited to less than one vote per share, while
other shareholders may have voting rights in excess of one vote
per share. Moreover, these provisions could have the effect of
reducing the votes of certain shareholders who would not
otherwise be subject to the 9.9% limitation by virtue of their
direct ownership of our shares. Our bye-laws provide that our
board of directors will endeavor to inform shareholders of their
voting interests prior to any vote to be taken by them.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our board is authorized to request that any direct or indirect
holder of shares provide information as the board may reasonably
request for the purpose of determining whether any holder&#146;s
voting rights are to be adjusted. If any such holder fails to
respond to this request or submits incomplete or inaccurate
information, our board may determine that such holders&#146;
shares shall carry no voting rights until such time as our board
determines otherwise. All information provided by the
shareholder will be treated by us as confidential information
and shall be used by us solely for the purpose of establishing
whether any 9.9% U.S.&nbsp;Shareholder exists (except as
otherwise required by applicable law or regulation).
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
With respect to the election of directors, shareholders have the
right to cast votes in the election or appointment of directors
on a cumulative basis, meaning they may cast the number of votes
for directors equal to the product of the number of shares owned
by the shareholder and the number of directors to be elected.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Restrictions on Transfer of Common Shares</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each transfer of common shares must comply with current BMA
rules and regulations or have specific permission from the BMA.
Our board of directors may decline to register a transfer of any
common shares under certain circumstances, including if it
appears to the board, after taking into account the effect of
any voting power adjustments under our bye-laws, that a non-de
minimis adverse tax, regulatory or legal consequence to us, any
direct or indirect holder of our shares or its affiliates may
occur as a result of such transfer. Transfers must be made by
instrument (not in electronic or other form) unless otherwise
permitted by the Bermuda Companies Act.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Acquisition of Common Shares by Us</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under our bye-laws and subject to Bermuda law, we may purchase
our own shares, provided, however, that such purchase may not be
made if the board of directors determines that it would result
in a non-de minimis adverse tax, legal or regulatory consequence
to us, any direct or indirect holder of our shares or its
affiliates.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Issuance of Shares</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Subject to our bye-laws and Bermuda law, our board of directors
has the power to issue any of our unissued shares as it
determines, including the issuance of any shares or class of
shares with preferred, deferred or other special rights,
provided, however, we may not issue such shares if the board of
directors
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
determines such issuance may result in a non-de minimis adverse
tax, legal or regulatory consequence to us, any direct or
indirect holder of shares or its affiliates.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Bye-laws</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition to the provisions of our bye-laws described above
under &#147;&#151;&nbsp;Voting Rights,&#148; the following
provisions are a summary of some of the other important
provisions of our bye-laws.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Our Board of Directors and Corporate Action.</I> Subject to
our bye-laws and Bermuda law, the directors shall be elected or
appointed by holders of common shares. Our bye-laws provide that
our board of directors shall consist of between 11 and 15
members, as the board of directors may determine. The current
board of directors consists of 11 persons. Shareholders may only
remove a director for cause at any general meeting and by a vote
of a majority of the voting power of all outstanding voting
shares (after giving effect to any voting power adjustments
under the bye-laws), provided that the notice of any such
meeting convened for the purpose of removing a director shall
contain a statement of the intention to do so and shall be
provided to that director at least two weeks before such
meeting. A vacancy created by removal of a director by the
shareholders may be filled by a vote of the majority of votes
cast (after giving effect to any voting power adjustments under
the bye-laws) by the shareholders at the meeting where the
vacancy is created. Subject to the right of shareholders
mentioned above, any vacancies on the board of directors can be
filled by the vote of a majority of the members of the board of
directors then in office if the vacancy occurs as a result of
death, disability, disqualification, or resignation of a
director or any other proper cause, including removal, provided
that the vacancy is filled within 28&nbsp;days of its occurrence.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Generally, the affirmative votes of a majority of the votes cast
at any meeting at which a quorum is present is required to
authorize a resolution put to vote at a meeting of the board of
directors. Corporate action may also be taken by a unanimous
written resolution of the board of directors without a meeting,
provided, among other things, that the board has not determined
that the use of a resolution in writing would have a non-de
minimis adverse tax, legal or regulatory consequence to us, any
direct or indirect holder of our shares or its affiliates. The
quorum necessary for the transaction of business at a meeting of
the board of directors shall be fixed by the board of directors
and unless so fixed shall be a simple majority of directors then
in office present in person or represented by a duly authorized
representative.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Our bye-laws provide that our board is authorized to appoint a
chairman of the board of directors. In the event that the voting
rights of controlled shares owned by PMI are limited to a voting
power of 9.9% as described above under &#147;&#151;&nbsp;Voting
Rights,&#148; then our bye-laws provide that PMI may appoint the
chairman of the board from among the directors then serving on
the board of directors. However, PMI may only appoint a director
as chairman if PMI voted at least half of the voting power of
common shares it owned at the time of the last general meeting
of our shareholders for the election of directors in favor of
the director it appoints.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Voting of Subsidiary Shares.</I> Our bye-laws provide that if
we are required or entitled to vote at a general meeting of our
direct
<FONT style="white-space: nowrap">non-U.S.&nbsp;</FONT>subsidiaries,
our board of directors shall refer the subject matter of the
vote to our shareholders and seek direction from our
shareholders as to how we should vote on the resolution proposed
by such direct
<FONT style="white-space: nowrap">non-U.S.&nbsp;</FONT>subsidiary.
Substantially similar provisions are or will be contained in the
bye-laws of RAM Re and the organizational documents of any other
of our
<FONT style="white-space: nowrap">non-U.S.&nbsp;</FONT>subsidiaries
that we may form in the future.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Shareholder Action.</I> At the commencement of any general
meeting, two or more persons present in person and representing,
in person or by proxy, more than 50% of the aggregate voting
power of our shares shall constitute a quorum for the
transaction of business. In general, anything that may be done
by resolution of our shareholders in a general meeting may,
without a meeting, be taken by a resolution in writing signed by
all of the shareholders entitled to attend such meeting and vote
on the resolution; provided that, among other things, the board
has not determined that the use of a resolution in writing would
have a non-de minimis adverse tax, legal or regulatory
consequence to us, any direct or indirect holder of our shares
or its affiliates. In general, any questions proposed for the
consideration of the shareholders at any general meeting shall
be decided by the affirmative votes of a majority of the votes
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
cast in accordance with the bye-laws. The following actions
shall be approved by the affirmative vote of at least sixty-six
percent (66%) of the voting power of shares entitled to vote at
a meeting of shareholders (in each case, after taking into
account voting power adjustments under our bye-laws): certain
business combination transactions and amendments to the bye-laws
affecting the provisions on voting power adjustments, election
of directors, terms of office of directors, removal of
directors, business combinations and amendment of the bye-laws.
As noted above, removal of directors from our board requires the
vote of a majority of outstanding voting shares.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Advance Notice of Certain Actions.</I> Our bye-laws provide
that if a shareholder desires to submit a proposal for
consideration at an annual general meeting or special general
meeting, written notice of such shareholder&#146;s intent to
make such a proposal must contain the information required by
the bye-laws and must be given and received by us not later than
(1)&nbsp;with respect to an annual general meeting,
120&nbsp;days prior to the anniversary date of the immediately
preceding annual general meeting and (2)&nbsp;with respect to a
special general meeting, the close of business on the tenth day
following the date on which notice of such meeting is first sent
or given to shareholders. If a shareholder desires to nominate
persons for election as directors at an annual general meeting
or special general meeting, written notice of such
shareholder&#146;s intent to make such nomination, and must be
given and received by us not later than (1)&nbsp;with respect to
an annual general meeting, 90&nbsp;days prior to the anniversary
date of the immediately preceding annual general meeting and
(2)&nbsp;with respect to a special general meeting, the close of
business on the tenth day prior to the meeting at which
directors are to be elected.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Amendment.</I> The bye-laws may only be amended by a
resolution adopted by the board of directors and by resolution
of the shareholders. See &#147;&#151;&nbsp;Shareholder
Action&#148; for a discussion of the vote required for
shareholders to amend the bye-laws. In addition, as long as PMI
remains a shareholder, the following changes to the bye-laws may
only be made with the consent of PMI: (1)&nbsp;amending the
voting power adjustments if a change would adversely affect PMI,
(2)&nbsp;reducing the size of the board of directors,
(3)&nbsp;amending PMI&#146;s right to appoint the chairman of
the board of directors, (4)&nbsp;permitting removal of a
director for other than cause, (5)&nbsp;amending the cumulative
voting provisions and (6)&nbsp;amending the amendment provision.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Anti-Takeover Provisions Concerning Change of Control</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Some of the provisions described above could delay or prevent a
change of control that our shareholders might consider
favorable. Even in the absence of an attempt to effect a change
in management or a takeover attempt, these provisions may
adversely affect the prevailing market price of our common
shares if they are viewed as discouraging changes in management
and takeover attempts in the future. For example, our bye-laws
contain the following provisions that could have such an effect:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    shareholders are required to provide us with advance notice of
    shareholder nominations and proposals to be brought before any
    general meeting of shareholders, which could discourage or deter
    a third party from conducting a solicitation of proxies to elect
    its own slate of directors or to introduce a proposal;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    shareholders have limited rights to remove directors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our board of directors may issue preference shares, without
    shareholder approval, with voting and conversion rights that
    could adversely affect the voting power or other rights of
    holders of our common shares;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    any shareholder owning, directly, indirectly or, in the case of
    any U.S.&nbsp;Person by attribution, more than 9.9%, or in
    certain cases 24.5%, of our common shares will have the voting
    rights attached to such common shares reduced so that it may not
    exercise more than 9.9% of the total voting rights;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our directors may, in their discretion, decline to record the
    transfer of any common shares on our share register, if the
    directors have made a determination that such transfer may
    result in any non-</TD>
</TR>

</TABLE>

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    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    de-minimis tax, legal or regulatory consequences to us, our
    subsidiaries or our shareholders or if they are not satisfied
    that all required regulation approvals for such transfer have
    been obtained.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Differences in Corporate Law</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
You should be aware that the Bermuda Companies Act, which
applies to us, differs in certain material respects from laws
generally applicable to U.S.&nbsp;corporations and their
shareholders. In order to highlight these differences, set forth
below is a summary of certain significant provisions of the
Bermuda Companies Act applicable to us (including modifications
adopted pursuant to our bye-laws) which differ in certain
respects from provisions of the corporate law of the State of
Delaware. Because the following statements are summaries, they
do not address all aspects of Bermuda law that may be relevant
to us and our shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Duties of Directors.</I> Under Bermuda common law, members of
a board of directors owe a fiduciary duty to the company to act
in good faith in their dealings with or on behalf of the
company, and to exercise their powers and fulfill the duties of
their office honestly. This duty has the following essential
elements: (1)&nbsp;a duty to act in good faith in the best
interests of the company; (2)&nbsp;a duty not to make a personal
profit from opportunities that arise from the office of
director; (3)&nbsp;a duty to avoid conflicts of interest; and
(4)&nbsp;a duty to exercise powers for the purpose for which
such powers were intended. The Bermuda Companies Act also
imposes a duty on directors and officers of a Bermuda company,
to act honestly and in good faith, with a view to the best
interests of the company, and to exercise the care, diligence
and skill that a reasonably prudent person would exercise in
comparable circumstances. In addition, the Bermuda Companies Act
imposes various duties on officers of a company with respect to
certain matters of management and administration of the company.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Bermuda Companies Act provides that in any proceedings for
negligence, default, breach of duty or breach of trust against
any officer, if it appears to a court that such officer is or
may be liable in respect of the negligence, default, breach of
duty or breach of trust, but that he has acted honestly and
reasonably, and that, having regard to all the circumstances of
the case, including those connected with his appointment, he
ought fairly to be excused for the negligence, default, breach
of duty or breach of trust, that court may relieve him, either
wholly or partly, from any liability on such terms as the court
may think fit. This provision has been interpreted to apply only
to actions brought by or on behalf of the company against such
officers.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Delaware law, the business and affairs of a corporation
are managed by or under the direction of its board of directors.
In exercising their powers, directors are charged with a
fiduciary duty of care to protect the interests of the
corporation and a fiduciary duty of loyalty to act in the best
interests of its shareholders. The duty of care requires that
directors act in an informed and deliberate manner, and inform
themselves, prior to making a business decision, of all relevant
material information reasonably available to them. The duty of
care also requires that directors exercise care in overseeing
and investigating the conduct of corporate employees. The duty
of loyalty may be summarized as the duty to act in good faith,
not out of self-interest, and in a manner which the director
reasonably believes to be in the best interests of the
shareholders. A party challenging the propriety of a decision of
a board of directors bears the burden of rebutting the
applicability of the presumptions afforded to directors by the
&#147;business judgment rule.&#148; If the presumption is not
rebutted, the business judgment rule attaches to protect the
directors and their decisions. Where, however, the presumption
is rebutted, the directors bear the burden of demonstrating the
fairness of the relevant transaction. Notwithstanding the
foregoing, Delaware courts subject directors&#146; conduct to
enhanced scrutiny in respect of defensive actions taken in
response to a threat to corporate control and approval of a
transaction resulting in a sale of control of the corporation.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Interested Directors.</I> Under Bermuda law and our bye-laws,
a transaction entered into by us, in which a director has an
interest, will not be voidable by us, and such director will not
be liable to us for any profit realized pursuant to such
transaction, provided the nature of the interest is disclosed at
the first opportunity at a meeting of directors, or in writing
to the directors. In addition, our bye-laws allow a director to
be taken into account in determining whether a quorum is present
and to vote on a transaction
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
in which the director has an interest following a declaration of
the interest pursuant to the Bermuda Companies Act, provided
that the director is not disqualified from doing so by the
chairman of the meeting. Under Delaware law, such transaction
would not be voidable if (i)&nbsp;the material facts with
respect to such interested director&#146;s relationship or
interests are disclosed or are known to the board of directors,
and the board of directors in good faith authorizes the
transaction by the affirmative vote of a majority of the
disinterested directors, (ii)&nbsp;such material facts are
disclosed or are known to the shareholders entitled to vote on
such transaction, and the transaction is specifically approved
in good faith by vote of the majority of shares entitled to vote
thereon, or (iii)&nbsp;the transaction is fair to the
corporation as of the time it is authorized, approved or
ratified. Under Delaware law, such interested director could be
held liable for a transaction in which such director derived an
improper personal benefit.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Dividends.</I> Bermuda law does not permit payment of
dividends or distributions of contributed surplus by a company
if there are reasonable grounds for believing that the company,
after the payment is made, would be unable to pay its
liabilities as they become due, or the realizable value of the
company&#146;s assets would be less, as a result of the payment,
than the aggregate of its liabilities and its issued share
capital and share premium accounts. The excess of the
consideration paid on issue of shares over the aggregate par
value of such shares must (except in certain limited
circumstances) be credited to a share premium account. Share
premium may be distributed in certain limited circumstances, for
example to pay up unissued shares which may be distributed to
shareholders in proportion to their holdings, but is otherwise
subject to limitation. In addition, RAM Re&#146;s ability to pay
dividends is subject to Bermuda insurance laws and regulatory
constraints. See &#147;Dividend Policy&#148; and
&#147;Regulation.&#148; Under Delaware law, subject to any
restrictions contained in the company&#146;s certificate of
incorporation, a company may pay dividends out of surplus or, if
there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and for the preceding fiscal
year. Delaware law also provides that dividends may not be paid
out of net profits at any time when capital is less than the
capital represented by the outstanding stock of all classes
having a preference upon the distribution of assets.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Amalgamations, Mergers and Similar Arrangements.</I> We may
acquire the business of another Bermuda exempted company or a
company incorporated outside Bermuda when conducting such
business would benefit us and would be conducive to attaining
our objectives contained within our memorandum of association.
We may, with the approval of at least 66% of the outstanding
voting shares at a general meeting of our shareholders at which
a quorum is present, amalgamate with another Bermuda company or
with a body incorporated outside Bermuda; provided that if our
board of directors has approved the amalgamation, then approval
of a majority of votes cast by our shareholders at a general
meeting at which a quorum is present will authorize the
amalgamation. In the case of an amalgamation, a shareholder may
apply to a Bermuda court for a proper valuation of such
shareholder&#146;s shares if such shareholder is not satisfied
that fair market value has been paid for such shares. The court
ordinarily would not disapprove the transaction on that ground
absent evidence of fraud or bad faith. Under Delaware law, with
certain exceptions, a merger, consolidation or sale of all or
substantially all the assets of a corporation must be approved
by the board of directors and a majority of the outstanding
shares entitled to vote thereon. Under Delaware law, a
shareholder of a corporation participating in certain major
corporate transactions may, under certain circumstances, be
entitled to appraisal rights pursuant to which such shareholder
may receive payment in the amount of the fair market value of
the shares held by such shareholder (as determined by a court)
in lieu of the consideration such shareholder would otherwise
receive in the transaction.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Takeovers.</I> Bermuda law provides that where an offer is
made for shares of a company and, within four months of the
offer, the holders of not less than 90% of the shares which are
the subject of the offer accept, the offeror may by notice
require the non-tendering shareholders to transfer their shares
on the terms of the offer. Dissenting shareholders may apply to
the court within one month of the notice objecting to the
transfer. The burden is on the dissenting shareholders to show
that the court should exercise its discretion to enjoin the
required transfer, which the court will be unlikely to do unless
there is evidence of fraud or bad faith or collusion between the
offeror and the holders of the shares who have accepted the
offer as a means of unfairly forcing out minority shareholders.
Delaware law provides that a parent corporation, by resolution
of its board of directors and without any shareholder vote, may
merge
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
with any subsidiary of which it owns at least 90% of each class
of capital shares. Upon any such merger, dissenting shareholders
of the subsidiary would have appraisal rights.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Certain Transactions with Significant Shareholders.</I> As a
Bermuda company, we may enter into certain business transactions
with our significant shareholders, including asset sales, in
which a significant shareholder receives, or could receive, a
financial benefit that is greater than that received, or to be
received, by other shareholders with prior approval from our
board of directors but without obtaining prior approval from our
shareholders. If we were a Delaware corporation, we would need,
subject to certain exceptions, prior approval from the board of
directors and shareholders holding at least two-thirds of our
outstanding common stock not owned by such interested
shareholder to enter into a business combination (which, for
this purpose, includes asset sales of greater than 10% of our
assets that would otherwise be considered transactions in the
ordinary course of business) with an interested shareholder for
a period of three years from the time the person became an
interested shareholder, unless we opted out of the relevant
Delaware statute.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Shareholders&#146; Suits.</I> The rights of shareholders
under Bermuda law are not as extensive as the rights of
shareholders under legislation or judicial precedent in many
U.S.&nbsp;jurisdictions. Class actions and derivative actions
are generally not available to shareholders under the laws of
Bermuda. However, the Bermuda courts ordinarily would be
expected to follow English case law precedent, which would
permit a shareholder to commence an action in our name to remedy
a wrong done to us where the act complained of is alleged to be
beyond our corporate power or is illegal or would result in the
violation of our memorandum of association or bye-laws.
Furthermore, consideration would be given by the court to acts
that are alleged to constitute a fraud against the minority
shareholders or where an act requires the approval of a greater
percentage of our shareholders than actually approved it. The
winning party in such an action generally would be able to
recover a portion of attorneys&#146; fees incurred in connection
with such action. When the affairs of a company are being
conducted in a manner which is oppressive or prejudicial to the
interests of some part of the shareholders, one or more
shareholders may apply to the Supreme Court of Bermuda, which
may make such order as it sees fit, including an order
regulating the conduct of the company&#146;s affairs in the
future or ordering the purchase of the shares of any
shareholders by other shareholders or by the company. Class
actions and derivative actions generally are available to
shareholders under Delaware law for, among other things, breach
of fiduciary duty, corporate waste and actions not taken in
accordance with applicable law. In such actions, the court
generally has discretion to permit the winning party to recover
attorneys&#146; fees incurred in connection with such action.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Indemnification of Directors and Officers.</I> Under Bermuda
law and our bye-laws, we may indemnify our directors, officers
or any other person appointed to a committee of the board of
directors (and their respective heirs, executors or
administrators) to the full extent permitted by law against all
actions, costs, charges, liabilities, loss, damage or expense
incurred or suffered by such person by reason of any act done,
concurred in or omitted in the conduct of our business or in the
discharge of his/her duties; provided that such indemnification
shall not extend to any matter involving any fraud or dishonesty
(as determined in a final judgment or decree not subject to
appeal) on the part of such director, officer or other person.
Under Delaware law, a corporation may indemnify a director or
officer of the corporation against expenses (including
attorneys&#146; fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred in defense of an
action, suit or proceeding by reason of such position if
(i)&nbsp;such director or officer acted in good faith and in a
manner he reasonably believed to be in or not opposed to the
best interests of the corporation and (ii)&nbsp;with respect to
any criminal action or proceeding, such director or officer had
no reasonable cause to believe his conduct was unlawful.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Inspection of Corporate Records.</I> Members of the general
public have the right to inspect our public documents available
at the office of the Registrar of Companies in Bermuda and our
registered office in Bermuda, which will include our memorandum
of association (including its objects and powers) and any
alteration to our memorandum of association and documents
relating to any increase or reduction of authorized capital. Our
shareholders have the additional right to inspect our bye-laws,
minutes of general meetings and financial statements, which must
be presented to the annual general meeting of shareholders. The
register of our shareholders is also open to inspection by
shareholders without charge, and to members
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
of the public for a fee. We are required to maintain our share
register in Bermuda but may establish a branch register outside
of Bermuda. We are required to keep at our registered office a
register of our directors and officers which is open for
inspection by members of the public without charge. Bermuda law
does not, however, provide a general right for shareholders to
inspect or obtain copies of any other corporate records.
Delaware law permits any shareholder to inspect or obtain copies
of a corporation&#146;s shareholder list and its other books and
records for any purpose reasonably related to such person&#146;s
interest as a shareholder.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Shareholder Proposals.</I> Under Bermuda law, the Bermuda
Companies Act provides that shareholders may, as set forth below
and at their own expense (unless a company otherwise resolves),
require a company to give notice of any resolution that the
shareholders can properly propose at the next annual general
meeting and/or to circulate a statement prepared by the
requesting shareholders in respect of any matter referred to in
a proposed resolution or any business to be conducted at a
general meeting. The number of shareholders necessary for such a
requisition is either that number of shareholders representing
at least 5% of the total voting rights of all shareholders
having a right to vote at the meeting to which the requisition
relates or not less than 100&nbsp;shareholders. Delaware law
does not include a provision restricting the manner in which
nominations for directors may be made by shareholders or the
manner in which business may be brought before a meeting.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Calling of Special Shareholders Meetings; Approval of
Corporate Matters by Written Consent.</I> Under our bye-laws, a
special general meeting may be called by our President or by our
Chairman or by the board of directors. Under Bermuda law, a
special meeting may also be called by the shareholders when
requisitioned by the holders of at least 10% of the paid up
voting share capital of RAM Holdings as provided by the Bermuda
Companies Act. Delaware law permits the board of directors or
any person who is authorized under a corporation&#146;s
certificate of incorporation or bye-laws to call a special
meeting of shareholders. Under Bermuda law, the Bermuda
Companies Act provides that shareholders may take action by
written consent with 100% shareholders consent required.
Delaware law permits shareholders to take action by the consent
in writing by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to
authorize or take such action at a meeting of shareholders at
which all shares entitled to vote thereon were present and voted.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Amendment of Memorandum of Association.</I> Bermuda law
provides that the memorandum of association of a company may be
amended by a resolution passed at a general meeting of
shareholders of which due notice has been given. An amendment to
the memorandum of association that alters a company&#146;s
business objects may require approval of the Bermuda Minister of
Finance, who may grant or withhold approval at his or her
discretion. Under Bermuda law, the holders of an aggregate of
not less than 20% in par value of a company&#146;s issued share
capital have the right to apply to the Bermuda courts for an
annulment of any amendment of the memorandum of association
adopted by shareholders at any general meeting, other than an
amendment which alters or reduces a company&#146;s share capital
as provided in the Bermuda Companies Act. Where such an
application is made, the amendment becomes effective only to the
extent that it is confirmed by the Bermuda court. An application
for an annulment of an amendment of the memorandum of
association must be made within 21&nbsp;days after the date on
which the resolution altering the company&#146;s memorandum of
association is passed and may be made on behalf of persons
entitled to make the application by one or more of their
designees as such holders may appoint in writing for such
purpose. No application may be made by the shareholders voting
in favor of the amendment.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Under Delaware law, amendment of the certificate of
incorporation, which is the equivalent of a memorandum of
association, of a company must be made by a resolution of the
board of directors setting forth the amendment, declaring its
advisability, and either calling a special meeting of the
shareholders entitled to vote or directing that the amendment
proposed be considered at the next annual meeting of the
shareholders. Delaware law requires that, unless a different
percentage is provided for in the certificate of incorporation,
a majority of the outstanding shares entitled to vote thereon is
required to approve the amendment of the certificate of
incorporation at the shareholders meeting. If the amendment
would alter the number of authorized shares or otherwise
adversely affect the rights or preference of any class of a
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
company&#146;s stock, Delaware law provides that the holders of
the outstanding shares of such affected class should be entitled
to vote as a class upon the proposed amendment, regardless of
whether such holders are entitled to vote by the certificate of
incorporation. However, the number of authorized shares of any
class may be increased or decreased, to the extent not falling
below the number of shares then outstanding, by the affirmative
vote of the holders of a majority of the stock entitled to vote,
if so provided in the company&#146;s certificate of
incorporation or any amendment that created such class or was
adopted prior to the issuance of such class or that was
authorized by the affirmative vote of the holders of a majority
of such class of stock.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Amendment of Bye-Laws.</I> Consistent with the Bermuda
Companies Act, RAM Holdings&#146; bye-laws provide that the
bye-laws may only be rescinded, altered or amended, upon
approval by a resolution of our board of directors and by a
resolution of our shareholders. Under Delaware law, holders of a
majority of the voting power of a corporation and, if so
provided in the certificate of incorporation, the directors of
the corporation, have the power to adopt, amend and repeal the
bylaws of a corporation.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Staggered Board of Directors.</I> Under Bermuda law, the
Bermuda Companies Act does not contain statutory provisions
specifically mandating staggered board arrangements for a
Bermuda exempted company. Such provisions, however, may validly
be provided for in the bye-laws governing the affairs of such a
company. Delaware law permits corporations to have a staggered
board of directors.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Shareholders Agreement</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All of the current holders of our common shares are parties to a
Shareholders Agreement. Investors who purchase our shares in
this offering will neither be subject to the requirements of the
Shareholders Agreement nor have any rights under the
Shareholders Agreement. Upon completion of this offering,
certain provisions of the Shareholders Agreement will terminate.
The following is a summary of some of the important provisions
of the Shareholders Agreement that will be in effect following
the closing of this offering:
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Registration Rights.</I> Subject to obtaining all approvals
required by Bermuda governmental authorities and to compliance
with applicable provisions of the Bermuda Companies Act, the
parties to the Shareholders Agreement shall have the right to
require us to register all or part of our common shares held by
such shareholders pursuant to an underwritten public offering,
subject to the following limitations: (i)&nbsp;certain
requirements as to the size of the demand are met for all
shareholders who are party to the Shareholders Agreement except
PMI, (ii)&nbsp;in connection with the demand, the common shares
to be offered must have an aggregate offering price of at least
$25&nbsp;million (based on the then-current market price, or
offering price if there has been no initial public offering of
our common shares), (iii)&nbsp;our right to delay the
registration for a period not to exceed 60&nbsp;days if either
we are proceeding with an offering and in the judgment of the
managing underwriter for our offering, the requested
registration would have an adverse effect on our proposed
offering or we are in possession of material non-public
information that our board has determined would not be in our
best interests to disclose publicly, (iv)&nbsp;we will not be
required to effect a registration under the Shareholders
Agreement to the extent required by a managing underwriter in an
underwritten public offering, during a period not to exceed
180&nbsp;days (in the case of this offering) or 90&nbsp;days (in
the case of all other offerings), from the effectiveness of any
previous registration statement filed by us, (v)&nbsp;we are not
required to give effect to such rights more than four times,
subject to PMI having the right to demand one or two additional
registrations in certain circumstances, and (vi)&nbsp;such
rights will be subject to customary cutback provisions. Our
ability to not file or to delay the filing of a registration
will be, in certain circumstances, limited to twice per any
<FONT style="white-space: nowrap">12-month</FONT> period.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We will pay all expenses (other than underwriting commissions
and discounts and transfer taxes relating to the shares to be
sold by the shareholders), including legal and accounting fees
and expenses, for the registration. Holders of our common shares
also have customary incidental registration rights. Other
customary registration rights provisions apply, including
indemnification and contribution provisions as permitted by
Bermuda law.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If the size of a requested registration of our shares in
accordance with the rights described above exceeds the largest
number of securities which can be sold without having an adverse
effect on this offering (in the view of the managing
underwriter), the number of securities to be registered shall be
allocated on a pro rata basis (subject to adjustment).
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the Shareholders Agreement, the shareholders will
also have certain incidental registration rights in the event
that we at any time propose to register any of our shares or any
options, warrants or other rights to acquire, or securities
convertible into or exchangeable for, our shares, subject to the
exceptions listed therein.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If the registration of shares pursuant to the rights described
shall be in connection with an underwritten public offering:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the shareholders whose shares are to be registered in any given
    offering have agreed that, subject to certain conditions and
    exceptions, they will not effect any sale or distribution of
    their remaining shares or any other of our equity securities or
    any security convertible into or exchangeable or exercisable for
    any of our equity securities for a period of ten days prior to
    the date of the effectiveness of the relevant registration
    statement until 180&nbsp;days (in the case of this offering) or
    90&nbsp;days (in the case of all other offerings) following such
    date;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    we have agreed, subject to certain conditions and exceptions,
    not to effect any public sale or distribution of any of our
    equity securities or of any other security convertible into or
    exchangeable or exercisable for any of our equity securities for
    a period of ten days prior to the date of the effectiveness of
    the relevant registration statement until 180&nbsp;days (in the
    case of an initial public offering) or 90&nbsp;days (in the case
    of all other offerings) following such date.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Pre-emptive Rights of PMI.</I> The Shareholders Agreement
provides that in the event we propose to issue new voting
shares, excluding shares issued in any stock split,
recapitalization or similar transaction where shares are issued
proportionately to all shareholders, we will provide PMI with
notice of the proposed issuance and PMI has the option to
purchase from us new voting shares up to the amount needed to
maintain its then-existing voting percentage ownership after
giving effect to the issuance. If we are issuing new voting
shares for cash, PMI shall pay the same price as we are
receiving in the issuance. If we are issuing new shares for
consideration other than cash, PMI shall pay the fair market
value for such shares. PMI&#146;s preemptive right will
terminate on the first business day following any one-year
period during which PMI&#146;s voting percentage ownership
remained equal to less than 18%.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This summary of the Shareholders Agreement does not purport to
be complete and is subject to, and qualified in its entirety by
reference to, all the provisions of the Shareholders Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Listing</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have applied to have our common shares approved for listing
on the New York Stock Exchange under the trading symbol
&#147;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Transfer Agent and Registrar</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The transfer agent and registrar for the common shares will
be &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
whose principal executive office is located
at &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='119'></A>
</DIV>

<!-- link1 "SHARES ELIGIBLE FOR FUTURE SALE" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>SHARES ELIGIBLE FOR FUTURE SALE</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon completion of this offering and
a &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for
1 subdivision of our common shares and the issuance of bonus
shares on
a &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for
1 basis described in &#147;Reorganization Transactions,&#148; we
will have a total of common shares outstanding. All of
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common
shares sold in this offering (plus an
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;if
the over-allotment option is exercised in full, all of which are
currently outstanding and would be sold by the selling
shareholders) will be freely tradable without restriction or
further registration under the Securities Act by persons other
than our &#147;affiliates.&#148; Under the Securities Act, an
&#147;affiliates&#148; of a company is a person that directly or
indirectly controls, is controlled by or is under common control
with that company.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The
remaining &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;common
shares outstanding will be &#147;restricted securities&#148;
within the meaning of Rule&nbsp;144 under the Securities Act and
may not be sold in the absence of registration under the
Securities Act unless an exemption from registration is
available, including the exemptions contained in Rule&nbsp;144.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We, certain of our principal shareholders, all of our executive
officers and all members of our board of directors will agree
not to offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, lend or
otherwise transfer or dispose of, directly or indirectly, any
common shares, or any securities convertible into or exercisable
for any common shares or any right to acquire our common shares,
or enter into any swap or other arrangement that transfers to
another, in whole or in part, directly or indirectly, any of the
economic consequences of ownership of the common shares, whether
any such transaction is to be settled by delivery of common
shares or other securities, in cash or otherwise for a period of
180&nbsp;days following the closing of this offering, subject to
certain exceptions.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The preceding sentence however does not apply to (i)&nbsp;the
common shares sold in this offering; (ii)&nbsp;any common shares
issued by us upon the exercise of an option outstanding on the
date of the Underwriting Agreement; (iii)&nbsp;certain transfers
by shareholders to affiliates or related persons; or
(iv)&nbsp;such issuances of options or grants of restricted
shares under our stock option and incentive plans as described
herein. The underwriters, at any time, and without notice, may
release all or any portion of the common shares subject to the
foregoing <FONT style="white-space: nowrap">lock-up</FONT>
agreements.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In general, under Rule&nbsp;144, a person (or persons whose
shares are aggregated), including any person who may be deemed
our affiliate, is entitled to sell within any three-month
period, a number of restricted securities that does not exceed
the greater of 1% of the then outstanding common shares and
restricted securities that does not exceed the greater of 1% of
the then outstanding common shares and the average weekly
trading volume in the
<FONT style="white-space: nowrap">over-the</FONT>-counter market
during the four calendar weeks preceding each such sale,
provided that at least one year has elapsed since such shares
were acquired from us or any affiliate of ours and certain
manner of sale, notice requirements and requirements as to
availability of current public information about us are
satisfied. Any person who is deemed to be our affiliated must
comply with the provisions of Rule&nbsp;144 (other than the
one-year holding period requirement) in order to sell common
shares which are not restricted securities (such as shares
acquired by affiliates either in this offering or through
purchases in the open market following this offering). In
addition, under Rule&nbsp;144(k), a person who is not our
affiliate, and who has not been our affiliate at any time during
the 90&nbsp;days preceding any sale, is entitled to sell such
shares without regard to the foregoing limitations, provided
that at least two years have elapsed since the shares were
acquired from us or any affiliate of ours.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have granted options to purchase a total of &nbsp;common
shares (after giving effect to
a &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for
1 subdivision of our common shares and the issuance of bonus
shares on
a &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for
1 basis issuance described in &#147;Reorganization
Transactions&#148;) which remain outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the Shareholders Agreement, the parties thereto
shall have the right to require us to register all or part of
our common shares held by such shareholders pursuant to an
underwritten public offering, subject to the following
limitations: (i)&nbsp;certain requirements as to the size of the
demand are met for all shareholders who are party to the
Shareholders Agreement except PMI, (ii)&nbsp;in connection with
the
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
demand, the common shares to be offered must have an aggregate
offering price of at least $25&nbsp;million (based on the
then-current market price, or offering price if there has been
no initial public offering of our common shares), (iii)&nbsp;our
right to delay the registration for a period not to exceed
60&nbsp;days if either we are proceeding with an offering and in
the judgment of the managing underwriter for our offering, the
requested registration would have an adverse effect on our
proposed offering or we are in possession of material non-public
information that our board has determined would not be in our
best interests to disclose publicly, (iv)&nbsp;to the extent
required by a managing underwriter in an underwritten public
offering, during a period not to exceed 180&nbsp;days (in the
case of an initial public offering) or 90&nbsp;days (in the case
of all other offerings), from the effectiveness of any previous
registration statement filed by us, (v)&nbsp;we are not required
to give effect to such rights more than four times, subject to
PMI having the right to demand one or two additional
registrations in certain circumstances, and (vi)&nbsp;such
rights will be subject to customary cutback provisions. Our
ability to not file or to delay the filing of a registration
will be, in certain circumstances, limited to twice per any
<FONT style="white-space: nowrap">12-month</FONT> period. We are
generally obligated to bear the expenses of all such
registrations, other than underwriting commissions and discounts
and transfer taxes relating to the shares to be sold by the
shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Following the consummation of this offering, we intend to file
one or more registration statements on
Form&nbsp;<FONT style="white-space: nowrap">S-8</FONT> under the
Securities Act to register common shares issued or reserved for
issuance under the 2001 Stock Option Plan. Any such
Form&nbsp;<FONT style="white-space: nowrap">S-8</FONT>
registration statement will automatically become effective upon
filing. Accordingly, shares registered under such registration
statement will be available for sale in the open market, unless
such shares are subject to vesting restrictions with us or the
<FONT style="white-space: nowrap">lock-up</FONT> restrictions
described above.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
No prediction can be made as to the effect, if any, future sales
of shares, or the availability of shares for future sales, will
have on the market price of our common shares prevailing from
time to time. The sale of substantial amounts of our common
shares in the public market, or the perception that such sales
could occur, could harm the prevailing market price of our
common shares.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">111

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<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>UNDERWRITING</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We and the selling shareholders are offering the common shares
described in this prospectus through a number of underwriters.
Banc of America Securities LLC and Merrill Lynch, Pierce,
Fenner&nbsp;&#38; Smith Incorporated are the representatives of
the underwriters. We and the selling shareholders have entered
into a firm commitment underwriting agreement with the
representatives. Subject to the terms and conditions of the
underwriting agreement, we and the selling shareholders have
agreed to sell to the underwriters, and each underwriter has
agreed to purchase, the number of common shares listed next to
its name in the following table:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="76%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Underwriter</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of Shares</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Banc of America Securities LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Merrill Lynch, Pierce, Fenner&nbsp;&#38; Smith<BR>
    Incorporated</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Keefe, Bruyette&nbsp;&#38; Woods</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriting agreement is subject to a number of terms and
conditions and provides that the underwriters must buy all of
the shares if they buy any of them. The underwriters will sell
the shares to the public when and if the underwriters buy the
shares from us and the selling shareholders.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriters initially will offer the shares to the public
at the price specified on the cover page of this prospectus. The
underwriters may allow a concession of not more than
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to selected dealers. The underwriters may also allow, and
those dealers may re-allow, a concession of not more than
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to some other dealers. If all the shares are not sold at
the public offering price, the underwriters may change the
public offering price and the other selling terms. The common
shares are offered subject to a number of conditions, including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    receipt and acceptance of the common shares by the
    underwriters;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the underwriters&#146; right to reject orders in whole or in
    part.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Over-Allotment Option.</I> The selling shareholders have
granted the underwriters an over-allotment option to buy up
to &nbsp;additional common shares, at the same price per share
as they are paying for the shares shown in the table above.
These additional shares would cover sales of shares by the
underwriters which exceed the total number of shares shown in
the table above. The underwriters may exercise this option at
any time within 30&nbsp;days after the date of this prospectus.
To the extent that the underwriters exercise this option, each
underwriter will purchase additional shares from the selling
shareholders in approximately the same proportion as it
purchased the shares shown in the table above. If purchased, the
additional shares will be sold by the underwriters on the same
terms as those on which the other shares are sold. The selling
shareholders will pay the underwriting discounts and commissions
associated with the exercise of this option.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Discount and Commissions.</I> The following table shows the
per share and total underwriting discounts and commissions to be
paid to the underwriters by us and by the selling shareholders.
These amounts are shown assuming no exercise and full exercise
of the underwriters&#146; option to purchase additional shares.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We estimate that the expenses of the offering to be paid by us,
not including underwriting discounts and commissions, will be
approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
The underwriters have agreed to reimburse us for a portion of
these expenses.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Listing.</I> We intend to apply to have our common shares
listed on the New York Stock Exchange, subject to notice of
issuance, under the symbol
&#147;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#148;.
In order to meet one of the requirements for
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
listing our common shares on the New York Stock Exchange, the
underwriters have undertaken to sell 100 or more shares of our
common shares to a minimum of 2,000 beneficial holders.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Paid by the Selling</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Paid by Us</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Shareholders</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>No Exercise</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Full Exercise</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>No Exercise</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Full Exercise</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Per Share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Stabilization.</I> In connection with this offering, the
underwriters may engage in activities that stabilize, maintain
or otherwise affect the price of our common shares, including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    stabilizing transactions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    short sales;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    syndicate covering transactions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    imposition of penalty bids;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    purchases to cover positions created by short sales.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Stabilizing transactions consist of bids or purchases made for
the purpose of preventing or retarding a decline in the market
price of our common shares while this offering is in progress.
Stabilizing transactions may include making short sales of our
common shares, which involve the sale by the underwriters of a
greater number of common shares than they are required to
purchase in this offering, and purchasing common shares from us
or on the open market to cover positions created by short sales.
Short sales may be &#147;covered&#148; shorts, which are short
positions in an amount not greater than the underwriters&#146;
over-allotment option referred to above, or may be
&#147;naked&#148; shorts, which are short positions in excess of
that amount. Syndicate covering transactions involve purchases
of our common shares in the open market after the distribution
has been completed in order to cover syndicate short positions.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The underwriters may close out any covered short position either
by exercising their over-allotment option, in whole or in part,
or by purchasing shares in the open market. In making this
determination, the underwriters will consider, among other
things, the price of shares available for purchase in the open
market compared to the price at which the underwriters may
purchase shares through the over-allotment option.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A naked short position is more likely to be created if the
underwriters are concerned that there may be downward pressure
on the price of the common shares in the open market that could
adversely affect investors who purchased in this offering. To
the extent that the underwriters create a naked short position,
they will purchase shares in the open market to cover the
position.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The representatives also may impose a penalty bid on
underwriters and dealers participating in the offering. This
means that the representatives may reclaim from any syndicate
members or other dealers participating in the offering the
commissions on shares sold by them and purchased by the
representatives in stabilizing or short covering transactions.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In addition, one or more selling shareholders may have covered
short positions in respect of the shares being sold by them in
this offering which will become uncovered as a result of the
sale. After the distribution has been completed, they may close
out these positions through purchases of the common shares in
the open market.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
These activities may have the effect of raising or maintaining
the market price of our common shares or preventing or retarding
a decline in the market price of our common shares. As a result
of these activities, the price of our common shares may be
higher than the price that otherwise might exist in the open
market. If the underwriters and the selling shareholders
commence the activities, they may
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
discontinue them at any time. The underwriters and the selling
shareholders may carry out these transactions on the New York
Stock Exchange, in the
<FONT style="white-space: nowrap">over-the</FONT>-counter market
or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Discretionary Accounts.</I> The underwriters have informed us
that they do not expect to make sales to accounts over which
they exercise discretionary authority in excess of 5% of the
common shares being offered.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>IPO Pricing.</I> Prior to this offering, there has been no
public market for our common shares. The initial public offering
price will be negotiated between us and the representatives of
the underwriters. Among the factors to be considered in these
negotiations are:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the history of, and prospects for, our company and the industry
    in which we compete;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    our past and present financial performance;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    an assessment of our management;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the present state of our development;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the prospects for our future earnings;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    the prevailing conditions of the applicable United States
    securities market at the time of this offering;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    market valuations of publicly traded companies that we and the
    representatives of the underwriters believe to be comparable to
    us;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    other factors deemed relevant.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The estimated initial public offering price range set forth on
the cover of this preliminary prospectus is subject to change as
a result of market conditions and other factors.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Qualified Independent Underwriter.</I> Because affiliates of
Banc of America Securities LLC, an underwriter in this offering
and a member of the National Association of Securities Dealers,
Inc., which we refer to as the NASD, may economically own in
excess of 10% of us, the NASD may view the participation of Banc
of America Securities LLC as an underwriter in this offering as
the public distribution of securities issued by a company with
which Banc of America Securities LLC has a conflict of interest
and/or affiliation, as those terms are defined in Rule&nbsp;2720
of the Conduct Rules of the NASD. Accordingly, this offering
will be made in compliance with the applicable provisions of
Rule&nbsp;2720 of the NASD Conduct Rules. Rule&nbsp;2720
requires that the initial public offering price can be no higher
than that recommended by a &#147;qualified independent
underwriter,&#148; as defined by the NASD, which has
participated in the preparation of the registration statement
and performed its usual standard of due diligence with respect
to that registration statement. Merrill Lynch, Pierce, Fenner
&#38; Smith Incorporated has agreed to act as qualified
independent underwriter for the offering and to perform a due
diligence investigation and review and participate in the
preparation of the registration statement of which this
prospectus forms a part. We have agreed to indemnify Merrill
Lynch, Pierce, Fenner &#38; Smith Incorporated against
liabilities incurred in connection with acting as a qualified
independent underwriter, including liabilities under the
Securities Act. Additionally, no member of the NASD
participating in the offering will execute a transaction in the
common shares in a discretionary account without the prior
specific written approval of the member&#146;s customer.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT style="white-space: nowrap"><I>Lock-up</FONT>
Agreements.</I> We, certain of our principal shareholders, all
of our executive officers and all members of our board of
directors will agree not to offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant
to purchase, lend or otherwise transfer or dispose of, directly
or indirectly, any common shares, or any securities convertible
into or exercisable for any common shares or any right to
acquire our common shares, or enter into any swap or other
arrangement that transfers to another, in whole or in part,
directly or indirectly, any of the economic consequences of
ownership of the common shares, whether any such transaction is
to be settled by delivery of common shares or other securities,
in cash or otherwise for a
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
period of 180&nbsp;days following the closing of this offering,
subject to certain exceptions. The preceding sentence however
does not apply to (i)&nbsp;the common shares sold in this
offering; (ii)&nbsp;any common shares issued by us upon the
exercise of an option outstanding on the date of the
Underwriting Agreement; (iii)&nbsp;certain transfers by
shareholders to affiliates or related persons; or (iv)&nbsp;such
issuances of options or grants of restricted shares under our
stock option and incentive plans as described herein. The
underwriters, at any time, and without notice, may release all
or any portion of the common shares subject to the foregoing
<FONT style="white-space: nowrap">lock-up</FONT> agreements.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Indemnification.</I> We and the selling shareholders will
indemnify the underwriters against some liabilities, including
liabilities under the Securities Act. If we and the selling
shareholders are unable to provide this indemnification, we and
the selling shareholders will contribute to payments the
underwriters may be required to make in respect of those
liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Online Offering.</I> A prospectus in electronic format may be
made available on the web sites maintained by one or more of the
underwriters participating in this offering. Other than the
prospectus in electronic format, the information on any such web
site, or accessible through any such web site, is not part of
the prospectus. The representatives may agree to allocate a
number of shares to underwriters for sale to their online
brokerage account holders. Internet distributions will be
allocated by the underwriters that will make internet
distributions on the same basis as other allocations. In
addition, shares may be sold by the underwriters to securities
dealers who resell shares to online brokerage account holders.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I>Conflicts/ Affiliates.</I> The underwriters and their
affiliates have provided, and may in the future provide, various
investment banking, commercial banking and other financial
services for us and the selling shareholders for which services
they have received, and may in the future receive, customary
fees. In addition, Banc of America Securities LLC and its
affiliates, Merrill Lynch, Pierce, Fenner &#38; Smith
Incorporated and its affiliates, and Keefe, Bruyette &#38; Woods
and its affiliates have owned, currently own or may own, equity
or equity-like securities of us or our affiliates.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Compliance with
<FONT style="white-space: nowrap">Non-U.S.&nbsp;</FONT>Laws and
Regulations</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each underwriter intends to comply with all applicable laws and
regulations in each jurisdiction in which it acquires, offers,
sells or delivers shares of our common stock or has in its
possession or distributes the prospectus.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>European Economic Area</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In relation to each Member State of the European Economic Area
which has implemented the Prospectus Directive (each, a Relevant
Member State), with effect from and including the date on which
the Prospectus Directive is implemented in that Relevant Member
State (the Relevant Implementation Date) an offer of common
shares to the public may not be made in that Relevant Member
State prior to the publication of a prospectus in relation to
the common shares which has been approved by the competent
authority in that Relevant Member State or, where appropriate,
approved in another Relevant Member State and notified to the
competent authority in that Relevant Member State, all in
accordance with the Prospectus Directive, except that it may,
with effect from and including the Relevant Implementation Date,
make an offer of common shares to the public in that Relevant
Member State at any time:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    to legal entities which are authorised or regulated to operate
    in the financial markets or, if not so authorised or regulated,
    whose corporate purpose is solely to invest in securities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    to any legal entity which has two or more of (1)&nbsp;an average
    of at least 250 employees during the last financial year;
    (2)&nbsp;a total balance sheet of more than
    <FONT face="times new roman,times">&#128;</FONT>43,000,000 and
    (3)&nbsp;an annual net turnover of more than
    <FONT face="times new roman,times">&#128;</FONT>50,000,000, as
    shown in its last annual or consolidated accounts;&nbsp;or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>&#149;&nbsp;</TD>
    <TD align="left">
    in any other circumstances which do not require the publication
    by the Issuer of a prospectus pursuant to Article&nbsp;3 of the
    Prospectus Directive.</TD>
</TR>

</TABLE>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
For the purposes of this provision, the expression an
&#147;offer of common shares to the public&#148; in relation to
any common shares in any Relevant Member State means the
communication in any form and by any means of sufficient
information on the terms of the offer and the common shares to
be offered so as to enable an investor to decide to purchase or
subscribe for the common shares, as the same may be varied in
that Member State by any measure implementing the Prospectus
Directive in that Member State and the expression Prospectus
Directive means Directive 2003/71/ EC and includes any relevant
implementing measure in each Relevant Member State.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>France</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
No prospectus (including any amendment, supplement or
replacement thereto) has been prepared in connection with the
offering of the common shares that has been approved by the
Autorit&#233; des march&#233;s financiers or by the competent
authority of another State that is a contracting party to the
Agreement on the European Economic Area and notified to the
Autorit&#233; des march&#233;s financiers; no common shares have
been offered or sold and will be offered or sold, directly or
indirectly, to the public in France except to permitted
investors, which we refer to as Permitted Investors, consisting
of persons licensed to provide the investment service of
portfolio management for the account of third parties, qualified
investors (investisseurs qualifi&#233;s) acting for their own
account and/or investors belonging to a limited circle of
investors (cercle restreint d&#146;investisseurs) acting for
their own account, with &#147;qualified investors&#148; and
&#147;limited circle of investors&#148; having the meaning
ascribed to them in Articles&nbsp;L. 411-2, D. 411-1, D. 411-2,
D. 734-1, D. 744-1, D. 754-1 and D. 764-1 of the French Code
Mon&#233;taire et Financier and applicable regulations
thereunder; none of this prospectus or any other materials
related to the offering or information contained therein
relating to the common shares has been released, issued or
distributed to the public in France except to Permitted
Investors; and the direct or indirect resale to the public in
France of any Securities acquired by any Permitted Investors may
be made only as provided by Articles&nbsp;L. 411-1, L. 411-2, L.
412-1 and L. 621-8 to L. 621-8-3 of the French Code
Mon&#233;taire et Financier and applicable regulations
thereunder.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>United Kingdom</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Each underwriter acknowledges and agrees that:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    (i)&nbsp;(a)&nbsp;it is a person whose ordinary activities
    involve it acquiring, holding, managing or disposing of
    investments (as principal or agent) for the purposes of its
    business and (b)&nbsp;it has not offered or sold and will not
    offer or sell the common shares other than to persons whose
    ordinary activities involve them in acquiring, holding, managing
    or disposing of investments (as principal or as agent) for the
    purposes of their businesses or who it is reasonable to expect
    will acquire, hold, manage or dispose of investments (as
    principal or agent) for the purposes of their businesses where
    the issue of the common shares would otherwise constitute a
    contravention of Section&nbsp;19 of the Financial Services and
    Markets Act 2000, or the FSMA, by the issuer;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    (ii)&nbsp;it has only communicated or caused to be communicated
    and will only communicate or cause to be communicated an
    invitation or inducement to engage in investment activity
    (within the meaning of Section&nbsp;21 of the FSMA) received by
    it in connection with the issue or sale of the common shares in
    circumstances in which Section&nbsp;21(1) of the FSMA does not
    apply to the issuer; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    (iii)&nbsp;it has complied and will comply with all applicable
    provisions of the FSMA with respect to anything done by it in
    relation to the common shares in, from or otherwise involving
    the United Kingdom.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
This document is only being distributed to and is only directed
at (i)&nbsp;persons who are outside the United Kingdom or
(ii)&nbsp;to investment professionals falling within
Article&nbsp;19(5) of the Financial Services and Markets Act
2000 (Financial Promotion) Order 2005, which we refer to as the
Order, or (iii)&nbsp;high net worth entities, and other persons
to whom it may lawfully be communicated, falling within
Article&nbsp;49(2)(a) to (d)&nbsp;of the Order (all such persons
together being referred to as relevant persons).
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
The common shares are only available to, and any invitation,
offer or agreement to subscribe, purchase or otherwise acquire
such common shares will be engaged in only with, relevant
persons. Any person who is not a relevant person should not act
or rely on this document or any of its contents.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I>Italy</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The offering of the common shares has not been cleared by the
Italian Securities Exchange Commission (Commissione Nazionale
per le Societ&#224; e la Borsa, or CONSOB) pursuant to Italian
securities legislation and, accordingly, has represented and
agreed that the common shares may not and will not be offered,
sold or delivered, nor may or will copies of the prospectus or
any other documents relating to the common shares be distributed
in Italy, except (i)&nbsp;to professional investors (operatori
qualificati), as defined in Article&nbsp;31, second paragraph,
of CONSOB Regulation No.&nbsp;11522 of July&nbsp;1, 1998, as
amended, which we refer to as Regulation No.&nbsp;11522, or
(ii)&nbsp;in other circumstances which are exempted from the
rules on solicitation of investments pursuant to
Article&nbsp;100 of Legislative Decree No.&nbsp;58 of
February&nbsp;24, 1998, which we refer to as the Financial
Service Act, and Article&nbsp;33, first paragraph, of CONSOB
Regulation No.&nbsp;11971 of May&nbsp;14, 1999, as amended.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any offer, sale or delivery of the common shares or distribution
of copies of the prospectus or any other document relating to
the common shares in Italy may and will be effected in
accordance with all Italian securities, tax, exchange control
and other applicable laws and regulations, and, in particular,
will be: (i)&nbsp;made by an investment firm, bank or financial
intermediary permitted to conduct such activities in Italy in
accordance with the Financial Services Act, Legislative Decree
No.&nbsp;385 of September&nbsp;1, 1993, as amended, which we
refer to as the Italian Banking Law, Regulation No.&nbsp;11522,
and any other applicable laws and regulations; (ii)&nbsp;in
compliance with Article&nbsp;129 of the Italian Banking Law and
the implementing guidelines of the Bank of Italy; and
(iii)&nbsp;in compliance with any other applicable notification
requirement or limitation which may be imposed by CONSOB or the
Bank of Italy.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Any investor purchasing the common shares in the offering is
solely responsible for ensuring that any offer or resale of the
common shares it purchased in the offering occurs in compliance
with applicable laws and regulations.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The prospectus and the information contained therein are
intended only for the use of its recipient and, unless in
circumstances which are exempted from the rules on solicitation
of investments pursuant to Article&nbsp;100 of the Financial
Service Act and Article&nbsp;33, first paragraph, of CONSOB
Regulation No.&nbsp;11971 of May&nbsp;14, 1999, as amended, is
not to be distributed, for any reason, to any third party
resident or located in Italy. No person resident or located in
Italy other than the original recipients of this document may
rely on it or its content.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Italy has only partially implemented the Prospectus Directive.
The provisions under the heading &#147;European Economic
Area&#148; above shall apply with respect to Italy only to the
extent that the relevant provisions of the Prospectus Directive
have already been implemented in Italy.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Insofar as the requirements above are based on laws which are
superseded at any time pursuant to the implementation of the
Prospectus Directive, such requirements shall be replaced by the
applicable requirements under the Prospectus Directive.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='120'></A>
</DIV>

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<B>LEGAL MATTERS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain matters as to U.S.&nbsp;law in connection with this
offering will be passed upon for us by LeBoeuf, Lamb,
Greene&nbsp;&#38; MacRae LLP, New York, New York. The validity
of the issuance of common shares under Bermuda law will be
passed upon for us by Conyers Dill&nbsp;&#38; Pearman, Hamilton,
Bermuda. Certain legal matters in connection with this offering
will be passed upon for the underwriters by Shearman&nbsp;&#38;
Sterling LLP, New York, New York.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='121'></A>
</DIV>

<!-- link1 "EXPERTS" -->

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<B>EXPERTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The financial statements as of December&nbsp;31, 2004 and
December&nbsp;31, 2003 and for each of the three years in the
period ended December&nbsp;31, 2004 included in this prospectus
have been so included in reliance on the report of
PricewaterhouseCoopers, an independent registered public
accounting firm, given on the authority of said firm as experts
in auditing and accounting.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='122'></A>
</DIV>

<!-- link1 "WHERE YOU CAN FIND MORE INFORMATION" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>WHERE YOU CAN FIND MORE INFORMATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We have filed with the SEC a registration statement on
Form&nbsp;<FONT style="white-space: nowrap">S-1</FONT> under the
Securities Act with respect to the common shares offered in this
prospectus. This prospectus, filed as part of the registration
statement, does not contain all of the information set forth in
the registration statement and its exhibits and schedules,
portions of which have been omitted as permitted by the rules
and regulations of the SEC. For further information about us and
our common shares, we refer you to the registration statement
and to its exhibits and schedules. Statements in this prospectus
about the contents of any contract, agreement or other document
are not necessarily complete and, in each instance, we refer you
to the copy of such contract, agreement or document filed as an
exhibit to the registration statement, with each such statement
being qualified in all respects by reference to the document to
which it refers. Anyone may inspect the registration statement
and its exhibits and schedules without charge at the public
reference facilities the SEC maintains at 100 F Street, N.E.,
Room&nbsp;1580, Washington,&nbsp;D.C. 20549. You may obtain
copies of all or any part of these materials from the SEC upon
the payment of certain fees prescribed by the SEC. You may
obtain further information about the operation of the SEC&#146;s
Public Reference Room by calling the SEC at
<FONT style="white-space: nowrap">1-800-SEC-0330.</FONT> You may
also inspect these reports and other information without charge
at a web site maintained by the SEC. The address of this site is
http://www.sec.gov.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Upon completion of this offering, we will become subject to the
informational requirements of the Securities Exchange Act of
1934 and will be required to file reports, proxy statements and
other information with the SEC. You will be able to inspect and
copy these reports, proxy statements and other information at
the public reference facilities maintained by the SEC at the
address noted above. You also will be able to obtain copies of
this material from the Public Reference Room of the SEC as
described above, or inspect them without charge at the
SEC&#146;s web site. We intend to furnish our shareholders with
annual reports containing combined financial statements audited
by an independent accounting firm.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='123'></A>
</DIV>

<!-- link1 "ENFORCEABILITY OF CIVIL LIABILITIES UNDER UNITED STATES FEDERAL SECURITIES LAWS AND OTHER MATTERS" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>ENFORCEABILITY OF CIVIL LIABILITIES UNDER UNITED STATES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>FEDERAL SECURITIES LAWS AND OTHER MATTERS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We are organized under the laws of Bermuda. In addition, some of
our directors and officers reside outside the United States, and
all or a substantial portion of their assets and our assets are
or may be located in jurisdictions outside the United States.
Therefore, it may be difficult for investors to effect service
of process within the United States upon our
<FONT style="white-space: nowrap">non-U.S.&nbsp;</FONT>directors
and officers or to recover against us, or our
<FONT style="white-space: nowrap">non-U.S.&nbsp;</FONT>directors
and officers on judgments of U.S.&nbsp;courts, including
judgments predicated upon the civil liability provisions of the
U.S.&nbsp;federal securities laws. However, we may be served
with process in the United States with respect to actions
against us arising out of or in connection with violations of
U.S.&nbsp;federal securities laws relating to offers and sales
of common shares made hereby by serving CT Corporation System,
our U.S.&nbsp;agent, irrevocably appointed for that purpose.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Uncertainty exists as to whether courts of Bermuda will enforce
judgments obtained in other jurisdictions (including the U.S.)
against us or our directors or officers under the securities
laws of those jurisdictions or entertain actions in Bermuda
against us or our directors or officers under the securities
laws of other jurisdictions. Further there is no treaty in
effect between the U.S. and Bermuda providing for the
enforcement of judgments of U.S.&nbsp;courts, and there are
grounds upon which Bermuda courts may not enforce judgments of
U.S.&nbsp;courts. Some remedies available under the laws of
U.S.&nbsp;jurisdictions, including some remedies available under
the U.S.&nbsp;federal securities laws, may not be allowed in
Bermuda courts as contrary to that jurisdiction&#146;s public
policy. Because judgments of U.S.&nbsp;courts are not
automatically enforceable in Bermuda, it may be difficult for
you to recover against us based upon such judgments.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We intend to apply to the BMA for its permission for the issue
and subsequent transfer of our common shares being offered
pursuant to this prospectus, as long as the shares are listed on
the NYSE, to and among persons who are resident and non-resident
of Bermuda for exchange control purposes. In addition, we will
deliver a copy of this prospectus to the Registrar of Companies
in Bermuda for filing pursuant to the Bermuda Companies Act.
However, the BMA and Registrar of Companies in Bermuda accept no
responsibility for the financial soundness of any proposal or
for the correctness of any of the statements made or opinions
expressed in this prospectus.
</DIV>

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='124'></A>
</DIV>

<!-- link1 "GLOSSARY OF SELECTED REINSURANCE, INSURANCE, INVESTMENT AND OTHER TERMS" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>GLOSSARY OF SELECTED REINSURANCE,</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>INSURANCE, INVESTMENT AND OTHER TERMS</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
    Acquisition expenses</TD>
    <TD></TD>
    <TD valign="top">
    The aggregate of policy acquisition expenses, including ceding
    commissions and the portion of administrative, general and other
    expenses attributable to underwriting operations.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Adjusted written premiums</TD>
    <TD></TD>
    <TD valign="top">
    All upfront premiums and the present value of all expected
    installment premiums, in each case for business written in a
    given period.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Capacity</TD>
    <TD></TD>
    <TD valign="top">
    The percentage of surplus, or the dollar amount of exposure,
    that an insurer or reinsurer is willing or able to place at
    risk. Capacity may apply to a single risk, a program, a line of
    business or an entire book of business. Capacity may be
    constrained by legal restrictions, corporate restrictions or
    indirect restrictions.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Capital charge</TD>
    <TD></TD>
    <TD valign="top">
    A measure of portfolio risk by a rating agency based on an
    expected loss, considering the expected default frequency
    (relative likelihood of a default in severe economic depression)
    and loss severity (relative duration and magnitude).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Case reserves</TD>
    <TD></TD>
    <TD valign="top">
    Loss reserves, established with respect to specific, individual
    reported claims.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Ceded par</TD>
    <TD></TD>
    <TD valign="top">
    The par value of the obligations that primary financial guaranty
    insurers have reinsured with financial guaranty reinsurers.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Ceding commission</TD>
    <TD></TD>
    <TD valign="top">
    Commission paid to primary insurer by reinsurer based on the
    amount of the premiums ceded, which is intended to reimburse the
    primary insurer for the costs of writing and administering the
    business.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Claim</TD>
    <TD></TD>
    <TD valign="top">
    Request by an insured or reinsured for indemnification by an
    insurance company or a reinsurance company for loss incurred
    from an insured peril or event.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Combined ratio</TD>
    <TD></TD>
    <TD valign="top">
    The sum of the loss ratio and the expense ratio. A combined
    ratio under 100% generally indicates an underwriting profit. A
    combined ratio over 100% generally indicates an underwriting
    loss.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Correlation</TD>
    <TD></TD>
    <TD valign="top">
    The degree to which events or financial results tend to
    correspond to each other.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Direct insurance</TD>
    <TD></TD>
    <TD valign="top">
    Insurance sold by an insurer that contracts with the insured, as
    distinguished from reinsurance.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Distributable reserves</TD>
    <TD></TD>
    <TD valign="top">
    Under the Bermuda Companies Act, a company may declare or pay a
    dividend out of contributed surplus only if it has reasonable
    grounds for believing that it is, and would after the payment
    be, able to pay its liabilities as they become due and if the
    realizable value of its assets would not be less than the
    aggregate of its liabilities and issued share capital and share
    premium accounts as a result of the payment. Such amounts
    permissible for distribution under the Bermuda Companies Act are
    called &#147;distributable reserves.&#148;</TD>
</TR>

</TABLE>

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
    Earned premiums</TD>
    <TD></TD>
    <TD valign="top">
    That portion of written premiums that applies to the expired
    portion of the policy term. Earned premiums are recognized as
    revenues under both standard accounting principles and
    U.S.&nbsp;GAAP.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Expense Ratio</TD>
    <TD></TD>
    <TD valign="top">
    Financial ratio calculated by dividing acquisition expenses and
    general and administrative expenses by net earned premiums.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Exposure</TD>
    <TD></TD>
    <TD valign="top">
    The possibility of loss. A unit of measure of the amount of risk
    a company assumes.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Facultative reinsurance</TD>
    <TD></TD>
    <TD valign="top">
    The reinsurance of all or a portion of the insurance provided by
    a single policy. Each policy reinsured is separately negotiated.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Frequency</TD>
    <TD></TD>
    <TD valign="top">
    The number of claims occurring during a given coverage period.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Gross written premiums</TD>
    <TD></TD>
    <TD valign="top">
    Total premiums for insurance written and reinsurance assumed
    during a given period. See also &#147;Premiums.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Limits</TD>
    <TD></TD>
    <TD valign="top">
    The maximum amounts that an insurer or reinsurer will insure or
    reinsure in a given area of coverage. The term also refers to
    the maximum amount of benefit payable for a given situation or
    occurrence.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Loss; losses</TD>
    <TD></TD>
    <TD valign="top">
    An occurrence that is the basis for submission and/or payment of
    a claim. Losses may be covered, limited or excluded from
    coverage, depending on the terms of the policy.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Losses and loss adjustment expenses</TD>
    <TD></TD>
    <TD valign="top">
    The expenses of settling claims, including legal and other fees
    and the portion of general expenses allocated to claim
    settlement costs.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Loss ratio</TD>
    <TD></TD>
    <TD valign="top">
    Financial ratio calculated by dividing net losses and loss
    expenses by net earned premiums.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Loss reserves</TD>
    <TD></TD>
    <TD valign="top">
    Liabilities established by insurers and reinsurers to reflect
    the estimated cost of claims incurred that the insurer or
    reinsurer will ultimately be required to pay in respect of
    insurance or reinsurance it has written. Reserves are
    established for losses and for loss expenses, and consist of
    case reserves and general reserves. As the term is used in this
    prospectus, &#147;loss reserves&#148; is meant to include
    reserves for both losses and for loss expenses.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Net par</TD>
    <TD></TD>
    <TD valign="top">
    The par value of obligations reinsured, net of amounts that have
    been retroceded.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Net earned premiums</TD>
    <TD></TD>
    <TD valign="top">
    The portion of net written premiums during or prior to a given
    period that was actually recognized as income during such period.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Net written premiums</TD>
    <TD></TD>
    <TD valign="top">
    Direct written premiums plus assumed reinsurance premiums less
    premiums ceded to reinsurers.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Par</TD>
    <TD></TD>
    <TD valign="top">
    The par value of an obligation for which either the primary
    financial guaranty insurers have provided credit support or the
    reinsurer has provided reinsurance.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Premiums</TD>
    <TD></TD>
    <TD valign="top">
    The amount charged during the term on policies and contracts
    issued, renewed or reinsured by an insurance company or
    reinsurance company.</TD>
</TR>

</TABLE>

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
    Premiums ceded</TD>
    <TD></TD>
    <TD valign="top">
    When an insurer reinsures some or all of its liability with
    another reinsurer, the premiums that it &#147;cedes&#148; or
    pays to the reinsurer is called the premiums ceded.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Quota share</TD>
    <TD></TD>
    <TD valign="top">
    Reinsurance arrangement in which the insurer, or primary
    insurer, automatically transfers, and the reinsurer accepts, a
    stated proportion of every risk within a defined type of
    business written by the insurer. For this, the reinsurer
    receives an equal proportion of the premiums less commission.
    The reinsurer is dependent on the primary insurer&#146;s ability
    in underwriting, pricing and claims administration.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Rate</TD>
    <TD></TD>
    <TD valign="top">
    Amount charged per unit of insurance and reinsurance.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Reserves</TD>
    <TD></TD>
    <TD valign="top">
    Liabilities established by insurers and reinsurers to reflect
    the estimated costs of claim payments and the related expenses
    that the insurer or reinsurer will ultimately be required to pay
    in respect of insurance or reinsurance it has written. Reserves
    are established for losses, for loss adjustment expenses and for
    unearned premiums. Loss reserves consist of &#147;case
    reserves,&#148; or reserves established with respect to
    individual reported claims, and &#147;general reserves.&#148;
    Unearned premium reserves constitute the portion of premium paid
    in advance for insurance or reinsurance that has not yet been
    provided. See also &#147;Loss Reserves.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Retention</TD>
    <TD></TD>
    <TD valign="top">
    The amount of exposure a policyholder retains on any one risk or
    group of risks. The term may apply to an insurance policy, where
    the policyholder is an individual, family or business, or a
    reinsurance policy, where the policyholder is an insurance
    company.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Surplus or statutory surplus</TD>
    <TD></TD>
    <TD valign="top">
    As determined under the statutory or regulatory accounting
    practice required by the relevant jurisdictions, the amount
    remaining after all liabilities, including loss reserves, are
    subtracted from all admitted assets. Admitted assets are assets
    of an insurer prescribed or permitted by the respective
    regulators to be recognized on the statutory balance sheet or
    regulatory returns for purposes of calculating solvency margins
    and statutory ratios, as applicable. Statutory surplus is also
    referred to as &#147;surplus&#148; or &#147;surplus as regards
    policyholders&#148; for statutory accounting purposes.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Treaty or treaty reinsurance</TD>
    <TD></TD>
    <TD valign="top">
    The reinsurance of a specified type or category of risks defined
    in a reinsurance agreement between a primary insurer or other
    reinsured and a reinsurer. Typically, in treaty reinsurance, the
    primary insurer or reinsured is obligated to offer and the
    reinsurer is obligated to accept a specified portion of all of
    that type or category of risks originally written by the primary
    insurer or reinsured.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Underwriter</TD>
    <TD></TD>
    <TD valign="top">
    An employee of an insurance or reinsurance company who examines,
    accepts or rejects risks and classifies accepted risks in order
    to charge an appropriate premium for each accepted risk. The
    underwriter is expected to select business that will produce</TD>
</TR>

</TABLE>

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<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    an average risk of loss no greater than that anticipated for the
    class of business.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Underwriting</TD>
    <TD></TD>
    <TD valign="top">
    The insurer&#146;s or reinsurer&#146;s process of reviewing
    applications for insurance coverage, and the decision whether to
    accept all or part of the coverage and determination of the
    applicable premiums; also refers to the acceptance of that
    coverage.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Unearned premium</TD>
    <TD></TD>
    <TD valign="top">
    The portion of written premiums that is allocable to the
    unexpired portion of the policy term.</TD>
</TR>

</TABLE>

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</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<!-- TOC -->
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>RAM RE GROUP OF COMPANIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<A name='125'></A>
</DIV>

<!-- link1 "INDEX TO FINANCIAL STATEMENTS" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>INDEX TO FINANCIAL STATEMENTS</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="75%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Page</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Combined Audited Financial Statements:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#301'>Report of Independent Registered Public
    Accounting Firm (December&nbsp;31, 2004, 2003 and 2002)</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    F-2</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#302'>Combined Balance Sheets as of
    December&nbsp;31, 2004 and 2003</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    F-3</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#303'>Combined Statements of Operations for the
    Years Ended December&nbsp;31, 2004, 2003 and 2002</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    F-4</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#304'>Combined Statements of Comprehensive Income
    for the Years Ended December&nbsp;31, 2004, 2003 and 2002</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    F-5</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#305'>Combined Statements of Shareholders&#146;
    Equity and Retained Earnings for the Years Ended
    December&nbsp;31, 2004, 2003 and 2002</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    F-6</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#306'>Combined Statements of Cash Flows for the
    Years Ended December&nbsp;31, 2004, 2003 and 2002</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    F-7</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#307'>Notes to the Combined Financial
    Statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    F-8</TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Unaudited Condensed Combined Financial Statements</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#308'>Condensed Combined Balance Sheet as of
    September&nbsp;30, 2005 and December&nbsp;31, 2004</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    F-24</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#309'>Condensed Combined Statements of Income for
    the Nine Months Ended September&nbsp;30, 2005 and
    September&nbsp;30, 2004</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    F-25</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#310'>Condensed Combined Statement of
    Stockholders&#146; Equity and Retained Earnings for the Nine
    Months Ended September&nbsp;30, 2005 and September&nbsp;30,
    2004</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    F-26</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#311'>Condensed Combined Statements of Cash Flows
    for the Nine Months Ended September&nbsp;30, 2005 and
    September&nbsp;30, 2004</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    F-27</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#312'>Notes to the Unaudited Condensed Combined
    Financial Statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    F-28</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<!-- /TOC -->
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-1

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
April&nbsp;22, 2005
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='301'></A>
</DIV>

<!-- link1 "Report of Independent Registered Public Accounting Firm" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Report of Independent Registered Public Accounting Firm</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
To the Shareholders and the Board of Directors of RAM Holdings
Ltd., RAM Holdings&nbsp;II Ltd. and RAM Reinsurance Company Ltd.
(collectively, &#147;the Company&#148; or &#147;the RAM Re Group
of Companies&#148;)
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In our opinion, the accompanying combined balance sheets and the
related combined statements of operations, comprehensive income,
shareholders&#146; equity and retained earnings and of cash
flows present fairly, in all material respects, the financial
position of the RAM Re Group of Companies, all of which are
under common ownership and common management, at
December&nbsp;31, 2004 and 2003, and the combined results of
their operations and their combined cash flows for each of the
three years in the period ended December&nbsp;31, 2004 in
conformity with accounting principles generally accepted in the
United States of America. These financial statements are the
responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles
used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
/s/ PricewaterhouseCoopers
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
PricewaterhouseCoopers
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
Hamilton, Bermuda
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-2
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='302'></A>
</DIV>

<!-- link1 "RAM RE GROUP OF COMPANIES" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>RAM RE GROUP OF COMPANIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Combined Balance Sheets</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>December&nbsp;31, 2004 and 2003</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="9" align="center" valign="top">
    <B>ASSETS</B></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investments: Fixed-maturity securities held as available for
    sale, at fair value (amortized cost of $402,119,567 and
    $341,177,876)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>404,906,098</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>345,836,682</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,086,774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,096,199</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued investment income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,002,811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,342,343</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Premiums receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,983,149</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,353,243</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Recoverables on paid losses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,167,575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,641,375</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred policy acquisition costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58,652,627</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,016,534</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fixed assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>188,218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>262,024</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>930,826</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>495,628</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>158,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>216,350</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,721,058</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>510,798,027</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>426,260,378</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="9">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="9" align="center" valign="top">
    <B>LIABILITIES AND SHAREHOLDERS&#146; EQUITY</B></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Losses and loss expense reserve</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15,492,726</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,821,463</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unearned premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>140,042,526</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>120,182,186</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable and accrued liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,995,969</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,844,293</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued interest payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>693,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68,161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>157,168</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>199,292,533</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>137,005,110</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shareholders&#146; equity:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock: $1&nbsp;par value; authorized shares&nbsp;&#151;
    4,500,000; issued and outstanding shares&nbsp;&#151; 1,993,635
    at December&nbsp;31, 2004 and December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,993,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,993,635</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>212,572,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>213,184,291</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,786,531</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,658,806</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Retained earnings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>94,152,681</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>69,418,536</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total shareholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>311,505,494</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>289,255,268</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities and shareholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>510,798,027</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>426,260,378</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
See accompanying Notes to Combined Financial Statements.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-3

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='303'></A>
</DIV>

<!-- link1 "RAM RE GROUP OF COMPANIES" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>RAM RE GROUP OF COMPANIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Combined Statements of Operations</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Years Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenues:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross premiums written</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>66,057,407</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>67,880,078</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>36,205,476</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Change in unearned premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(31,336,119</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(42,336,794</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(18,644,083</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Premiums earned</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>34,721,288</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>25,543,284</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,561,393</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net investment income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,824,087</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,372,949</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,546,320</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net realized gains on sale of investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>535,682</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,097,044</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,927,199</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net unrealized gains (losses) on credit derivatives</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,757,435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>456,113</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(613,281</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,117,204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,926,106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,860,238</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,838,492</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,469,390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,421,631</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expenses:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Losses and loss adjustment expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,579,351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,994,306</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,446,996</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acquisition expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,386,461</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,223,042</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,362,701</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,032,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,041,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,360,336</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,106,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,104,347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,259,034</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,170,033</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income for the year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24,734,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,210,356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,251,598</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income per common share:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Basic</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12.41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11.68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10.97</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Diluted</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.96</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted-average number of common shares outstanding:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,993,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,816,352</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,298,800</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,002,295</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,820,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,300,451</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
See accompanying Notes to Combined Financial Statements.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-4

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='304'></A>
</DIV>

<!-- link1 "RAM RE GROUP OF COMPANIES" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>RAM RE GROUP OF COMPANIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Combined Statements of Comprehensive Income</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Years Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Net income for the year</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24,734,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,210,356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,251,598</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Other comprehensive income (loss)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Change in unrealized appreciation of investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,336,593</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,246,637</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,196,283</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less: Reclassification adjustment for net realized gains
    included in net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(535,682</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,097,044</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,927,199</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other comprehensive income (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,872,275</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,343,681</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,269,084</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Comprehensive income for the year</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,861,870</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,866,675</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,520,682</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
See accompanying Notes to Combined Financial Statements.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-5

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='305'></A>
</DIV>

<!-- link1 "RAM RE GROUP OF COMPANIES" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>RAM RE GROUP OF COMPANIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Combined Statements of Shareholders&#146; Equity and Retained
Earnings</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Accumulated</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Share</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Additional</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Comprehensive</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Retained</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Capital</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Paid-In Capital</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Income</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Earnings</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance, January&nbsp;1, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,318,936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>128,933,232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,733,403</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>33,956,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>168,942,153</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issue of share capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,405</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,172,259</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,187,664</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Redemption of share capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(44,056</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,116,012</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,160,068</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,251,598</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,251,598</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other comprehensive (loss) income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,269,084</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,269,084</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance, December&nbsp;31, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,290,285</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>124,989,479</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,002,487</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,208,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>185,490,431</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="21">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issue of share capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>703,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>90,902,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91,606,203</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expenses related to share issuance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,886,308</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,886,308</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Committed preferred shares expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,184,094</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,184,094</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-cash compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>362,361</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>362,361</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,210,356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,210,356</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other comprehensive (loss) income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,343,681</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,343,681</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance, December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,993,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>213,184,291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,658,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>69,418,536</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>289,255,268</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="21">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expenses related to share issuance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Committed preferred shares expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(611,644</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(611,644</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,734,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,734,145</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other comprehensive (loss) income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,872,275</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,872,275</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance, December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,993,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>212,572,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,786,531</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>94,152,681</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>311,505,494</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
See accompanying Notes to Combined Financial Statements.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-6

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='306'></A>
</DIV>

<!-- link1 "RAM RE GROUP OF COMPANIES" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>RAM RE GROUP OF COMPANIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Combined Statements of Cash Flows</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="52%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Years Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows from operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income for the year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24,734,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,210,356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,251,598</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustments to reconcile net income to net cash provided by
    operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net realized gains on sale of investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(535,682</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,097,044</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,927,199</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>925,775</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>592,751</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of debt discount</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,810</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net unrealized (gains)&nbsp;losses on credit derivatives</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,757,435</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(456,133</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>613,281</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of bond premium and discount</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,736,936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,145,580</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>405,508</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-cash compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>362,361</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Changes in assets and liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued interest receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(660,468</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,197,233</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,065</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Premiums receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,370,094</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,286,611</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,306,381</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Recoverables on paid losses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>473,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,659,515</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred policy acquisition costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,636,093</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14,304,479</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,325,264</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,459</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(121,069</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(184,600</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,156,355</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(353,199</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68,161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>249,035</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>374,002</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Losses and loss adjustment expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,671,263</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,420,737</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,018,681</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unearned premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,860,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,336,794</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,644,083</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable and accrued liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>151,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>166,454</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>657,696</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued interest payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>693,151</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49,001,577</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49,686,460</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,548,825</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows from investing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchases of investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(225,348,133</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(322,768,301</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(154,073,752</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from sales of investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161,609,536</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>148,110,973</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>105,131,731</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds on maturities of investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>595,650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,758,264</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,380,578</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchases of fixed assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(130,811</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(58,227</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(63,273,758</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(133,957,291</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(21,561,443</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash flows from financing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net issuance (redemption)&nbsp;of share capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>89,719,895</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,972,404</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds of issuance of long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,874,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Committed preferred securities expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(611,644</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,184,094</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Repayment of loans to shareholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,653,621</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,262,756</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>88,535,801</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,318,783</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net increase in cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,990,575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,264,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>668,599</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents&nbsp;&#151; Beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,096,199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,831,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,162,630</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents&nbsp;&#151; End of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>36,086,774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,096,199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,831,229</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Supplemental cash flow disclosure:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest paid on long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,106,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
See accompanying Notes to Combined Financial Statements.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-7

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='307'></A>
</DIV>

<!-- link1 "RAM RE GROUP OF COMPANIES Notes to Combined Financial Statements" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>RAM RE GROUP OF COMPANIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Combined Financial Statements</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>1</B></TD>
    <TD>
    <B>BACKGROUND</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
RAM Holdings Ltd. (&#147;Holdings&#148;), RAM Holdings&nbsp;II
Ltd. (&#147;Holdings&nbsp;II&#148;), and RAM Reinsurance Company
Ltd. (&#147;RAM Re&#148;) (collectively &#147;the Company&#148;
or &#147;the RAM Re Group of Companies&#148;) were incorporated
on January&nbsp;28, 1998 under the laws of Bermuda. Holdings
owns 100% of the voting shares of RAM Re and Holdings&nbsp;II
owns 100% of the non-voting shares of RAM Re. There are
overlapping investor interests in the shares of Holdings and
Holdings&nbsp;II and the economic interest of each investor is
determined based on each investor&#146;s combined interest in
both holding companies.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
RAM Re&#146;s principal activity is the reinsurance of financial
guarantees of public finance and asset-backed debt obligations
insured by the triple-A rated monoline financial guaranty
companies. The Company provides reinsurance through treaty and
facultative agreements that it maintains with each of its
customers. Financial guaranty reinsurance written by RAM Re
generally provides for guarantees of scheduled principal and
interest payments on an issuer&#146;s obligation in accordance
with the obligation&#146;s original payment schedule and, in
rare circumstances, such amounts are payable on an accelerated
basis.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>2</B></TD>
    <TD>
    <B>SIGNIFICANT ACCOUNTING POLICIES</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following is a summary of the significant accounting
policies adopted by the Company:
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</I></B></TD>
    <TD>
    <B><I>Basis of preparation</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The combined financial statements have been prepared in
accordance with accounting principles generally accepted in the
United States of America (&#147;US GAAP&#148;). The preparation
of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and
liabilities, as well as disclosure of contingent assets and
liabilities as of the balance sheet date. Estimates also affect
the reported amounts of income and expenses for the reporting
period. Actual results could differ materially from those
estimates.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</I></B></TD>
    <TD>
    <B><I>Basis of combination</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The combined financial statements include the consolidated
accounts of Holdings and the accounts of Holdings&nbsp;II as
this presentation is considered most meaningful to the
shareholders. The consolidated accounts of Holdings include
those of its subsidiary RAM Re. Holdings and Holdings&nbsp;II
have common shareholders and are under common management.
Intercompany balances and transactions have been eliminated in
combination. Results are not consolidated due to the ownership
structure of the Company. There are no significant differences
between financial statements prepared on a combined basis and
those which would be prepared on a consolidated basis.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)</I></B></TD>
    <TD>
    <B><I>Investments</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has classified its fixed-maturity investments as
available for sale as defined by Statement of Financial
Accounting Standards No.&nbsp;115 (&#147;SFAS&nbsp;115&#148;).
Available for sale investments are carried at fair value, with
unrealized appreciation or depreciation reported as a separate
component of accumulated other comprehensive income. The Company
considers all highly liquid debt instruments purchased with
maturities of three months or less to be cash equivalents. All
investment transactions are recorded on a trade date basis.
Realized gains and losses on sales of fixed maturity investments
are determined on the basis of amortized cost. Gains and losses
on sale of investments are included in investment income when
realized. The cost of securities sold is determined using the
specific identification method. All declines in fair value below
cost that are considered other than temporary are recognized in
income. Factors considered when assessing impairment include:
(i)&nbsp;securities whose market values have declined by 20% or
more below amortized cost for a continuous period of at least
six months; (ii)&nbsp;recent
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-8

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>RAM RE GROUP OF COMPANIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
credit downgrades by rating agencies; (iii)&nbsp;the financial
condition of the issuer; (iv)&nbsp;whether scheduled interest
payments are past due; and (v)&nbsp;whether the Company has the
ability and intent to hold the security for a sufficient period
of time to allow for anticipated recoveries in fair value. The
Company&#146;s investment guidelines require the orderly sale of
securities that do not meet investment guidelines due to a
downgrade by rating agencies or other circumstances.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)</I></B></TD>
    <TD>
    <B><I>Premium revenue recognition</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Instalment premiums are recorded as written at each instalment
due date and are earned over the respective instalment period,
which equates to the period of risk. All other premiums written
are recorded as written at the inception of the policy and are
earned rateably over the period of risk. When insured issues are
refunded or called, the remaining unearned premiums are earned
at that time, since there is no longer risk to the Company.
Premiums are recorded on a one month lag due to the timing of
receipt of the information from the ceding companies.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)</I></B></TD>
    <TD>
    <B><I>Deferred policy acquisition costs</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Deferred policy acquisition costs comprise those expenses that
vary with and are primarily related to the production of
business, including ceding commissions paid on reinsurance
assumed, a portion of salaries and related costs of underwriting
personnel, rating agency fees, and certain other underwriting
expenses. Policy acquisition costs are deferred and amortized
over the period in which the related premiums are earned. When
assessing the recoverability of deferred policy acquisition
costs, the Company considers the future earnings of premiums
paid upfront and the estimated present value of net instalment
premiums to be received.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)</I></B></TD>
    <TD>
    <B><I>Losses and loss adjustment expenses</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s liability for losses and loss adjustment
expenses consists of case basis reserves and an unallocated
reserve.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Case basis reserves are established based on ceding company
reports and internal review and evaluation of exposures related
to guaranteed obligations that either have already defaulted or
have a high probability of default. Case reserves are
established based on the present value of the expected ultimate
losses and loss adjustment expense that the Company expects to
pay less estimated recoveries. Changes to the ceding
company&#146;s reserves are reported at regular intervals and
are reviewed by the Chief Underwriting Officer and the
Company&#146;s Management Committee. The Management Committee
may determine a value different than that reported if its
assessment of circumstances leads to such a judgment.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company maintains an unallocated reserve based on its
reinsured net par outstanding and a loss reserve factor. The
loss reserve factor is based on the unallocated loss reserves of
the ceding companies relative to their respective net par
exposures. The loss reserve factor is risk adjusted to reflect
the risk of RAM Re&#146;s outstanding par relative to the ceding
companies. RAM Re&#146;s unallocated reserve is reviewed
periodically by the Management Committee and the estimate may be
modified if industry experience or company specific-developments
are judged to warrant such an adjustment.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Management Committee has two guidelines with respect to the
interaction of unallocated and case reserves. No more than 20%
of the unallocated reserve balance at quarter end can be reduced
to offset a case reserve associated with a single default. No
more than 50% of the unallocated reserve balance at year end can
be reduced to offset aggregate case reserve activity during the
following year.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Underwriting management reviews the portfolio on a continuous
basis to identify problem credits. Quarterly, the Management
Committee formally reviews case and the unallocated reserves.
Management establishes reserves that it believes are adequate to
cover the present value of the ultimate liability for
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-9

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<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>RAM RE GROUP OF COMPANIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
claims. The reserves are necessarily based on estimates and may
vary materially from actual results. Adjustments based on actual
loss experience will be recorded in the periods in which they
become known.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has become aware of the SEC&#146;s recent review of
the loss reserving practices of certain public financial
guarantee companies. The Company recognizes that there is
diversity in practice among financial guarantee insurers and
reinsurers with respect to their accounting policies for loss
reserves. Current accounting literature, specifically FASB
Statement of Financial Accounting Standards No.&nbsp;60
&#147;Accounting and Reporting by Insurance Enterprises&#148;
(FAS&nbsp;60) and FASB Statement of Financial Accounting
Standards No.&nbsp;97 &#147;Accounting and Reporting by
Insurance Enterprises for Certain Long-Duration Contracts and
for Realized Gains and Losses from the Sale of Investments&#148;
(&#147;FAS&nbsp;97&#148;), do not specifically address the
unique characteristics of financial guarantee insurance
contracts. Consequently, the accounting principles applied by
the industry, as well as the Company, have evolved over time and
incorporate the concepts of both short-duration contracts
accounting under the provisions of FAS&nbsp;60 and FAS&nbsp;97,
as well as other accounting literature, such as FASB No.&nbsp;5
&#147;Accounting for Contingencies&#148; and Emerging Issues
Task Force (&#147;EITF&#148;) Issue No.&nbsp;85-20
&#147;Recognition of Fees for Guaranteeing a Loan&#148;. It is
our understanding that the SEC has requested that the FASB
review this matter and provide guidance for the accounting of
financial guarantee insurance contracts. The Company will
continue its loss reserving methodology as noted above until
further guidance is provided by the SEC or FASB. The Company
cannot predict how the FASB or SEC will resolve this issue and
the resulting impact on its financial statement.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

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<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)</I></B></TD>
    <TD>
    <B><I>Derivative instruments</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has reinsured derivative instruments, consisting
primarily of credit default swaps that it intends to reinsure
for the full term of the contract. Management considers these
derivative instruments to be a normal extension of its financial
guaranty reinsurance business. FASB Statement of Financial
Accounting Standards No.&nbsp;133, &#147;Accounting for
Derivative Instruments and Hedging Activities,&#148; establishes
accounting and reporting standards for derivative instruments,
and requires the Company to recognize the derivative instruments
on the balance sheet at their fair value, with changes in fair
value recognized in earnings. In determining the fair value of
derivative instruments, management relies on quoted market
spread data as an input to its internal valuation model. The
valuation model considers among other things, the estimated
remaining premium to be earned, credit and change in credit
quality since inception, and the current market pricing of
credit default swaps in comparison to market pricing that was
applicable at the transaction inception. Different valuation
models may produce materially different results. The Company
reviews its valuation model from time to time and may make
enhancements as best-practices in the industry develop. Upon
occurrence of specific credit events such as default, an
appropriate case reserve is established and the obligation is no
longer marked to market.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)</I></B></TD>
    <TD>
    <B><I>Foreign Currency Translation</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Financial statement accounts expressed in foreign currencies are
translated into U.S.&nbsp;dollars in accordance with
SFAS&nbsp;Statement&nbsp;52, &#147;Foreign Currency
Translation&#148; (&#147;SFAS&nbsp;52&#148;). Monetary assets
and liabilities denominated in foreign currencies are translated
at the rate in effect at the balance sheet date. Non monetary
assets and liabilities are translated at historical rates.
Foreign currency transaction gains and losses, arising primarily
from cash denominated in foreign currencies are reflected in net
income. The Company has recorded gains from such foreign
exchange items of $808,087, $564,135, and $106,328 in 2004,
2003, and 2002 respectively.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-10

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>RAM RE GROUP OF COMPANIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)</I></B></TD>
    <TD>
    <B><I>Stock compensation plans</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company accounts for its stock compensation plans in
accordance with Accounting Principles Board Opinion No.&nbsp;25,
&#147;Accounting for Stock Issued to Employees.&#148;
Accordingly, compensation expense for stock option grants are
recognized to the extent that the fair value of the stock
exceeds the exercise price of the option at the measurement date.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)</I></B></TD>
    <TD>
    <B><I>Recent accounting pronouncements</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the FASB issued a revision of FASB Statement
No.&nbsp;123, Accounting for Stock Based Compensation. Under
FAS&nbsp;123(R), companies will be required to expense the fair
vale of employee stock options and other forms of stock-based
compensation and to provide associated financial statement
disclosures. The Company currently accounts for stock-based
compensation under APB&nbsp;25 and does not generally recognize
compensation expense for stock-based compensation. For
non-public companies, FAS&nbsp;123(R) is effective for annual
reporting periods beginning after December&nbsp;15, 2005. The
Company will apply this statement prospectively to new awards
and to awards modified, repurchased, or cancelled after the
effective date. The Company is currently evaluating the new
standard and completing its assessment of the impact of
FAS&nbsp;123(R) and pending completion of that activity is
unable to estimate the effect of adoption on the Company&#146;s
results of operations and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2003, the FASB revised FASB Interpretation
No.&nbsp;46 (&#147;FIN&nbsp;46&#148;) &#147;Consolidation of
Variable Interest Entities&#148; with FASB Interpretation
No.&nbsp;46R (&#147;FIN&nbsp;46R&#148;). The primary objectives
of FIN&nbsp;46R are to provide guidance on the identification of
entities for which control is achieved through means other than
through voting rights (&#147;variable interest entities&#148; or
&#147;VIEs&#148;) and how to determine when and which business
enterprise (the &#147;primary beneficiary&#148;) should
consolidate the VIE. In addition, FIN&nbsp;46R requires both the
primary beneficiary and all other enterprises with a significant
variable interest in a VIE to make additional disclosures. The
Company has determined that as of December&nbsp;31, 2004 and
2003, it was not a primary beneficiary nor did it have a
significant variable interest in any VIEs.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)</I></B></TD>
    <TD>
    <B><I>Reclassifications</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Certain reclassifications have been made to the prior
year&#146;s amounts to conform to the current year&#146;s
presentation.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="8%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)</I></B></TD>
    <TD>
    <B><I>Segment Information</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has one reportable segment, financial guaranty,
which provides financial guarantees for public finance,
structured finance and other obligations.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)</I></B></TD>
    <TD>
    <B><I>Reinsurance Transactions</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company currently has no retrocession agreements with other
insurance companies.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>3</B></TD>
    <TD>
    <B>PLEDGED ASSETS</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004 and 2003, the Company had
$247,439,158 and $187,160,206, respectively, invested in trust
accounts for the benefit of ceding companies. Pursuant to the
terms of the reinsurance agreements with ceding companies, the
Company is required to secure its obligations with ceding
companies and may not withdraw funds from these trust accounts
without their express permission.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-11

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>RAM RE GROUP OF COMPANIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>4</B></TD>
    <TD>
    <B>DERIVATIVE INSTRUMENTS</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, 2003, and 2002, included in the
Company&#146;s outstanding exposure are $2.2&nbsp;billion,
$2.0&nbsp;billion, and $1.2&nbsp;billion, respectively, in
derivative instruments, primarily credit default swaps, that
have been fair valued under Statement of Financial Accounting
Standards No.&nbsp;133. These derivative instruments have a
weighted average maturity of 10.9&nbsp;years, 13.2&nbsp;years,
and 6.1&nbsp;years as of December&nbsp;31, 2004, 2003, and 2002,
respectively. In accordance with predominant industry practice,
the Company believes that the most meaningful presentation of
the financial statement impact of these derivative instruments
is to record premiums as installments are received and changes
in fair value as incurred. Changes in fair value are recorded in
net unrealized gains (losses) on credit derivatives and in other
assets/liabilities. The estimated income statement impact of
derivative activity, by category, is as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="59%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross premiums written</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,324,752</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,049,368</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,252,436</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Change in unearned premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21,243</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(193,106</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(131,163</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Premiums earned</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,345,995</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,856,262</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,121,273</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acquisition expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(753,302</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(777,875</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(496,439</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net unrealized gains (losses) on credit derivatives</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,757,435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>456,113</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(613,281</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income from derivative instruments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,350,128</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,534,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,553</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>5</B></TD>
    <TD>
    <B>MAJOR CUSTOMERS</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company derives the majority of its business from four
United States based primary financial guaranty insurance
companies namely MBIA Insurance Corp., Financial Security
Assurance Inc., Ambac Assurance Corp. and Financial Guaranty
Insurance Co. The four primary insurers accounted for 39%, 38%,
20%, and 1% in 2004, 35%, 36%, 26%, and 2% in 2003, and 18%,
46%, 28%, 8% in 2002 of gross premiums written. This customer
concentration results from the small number of primary insurance
companies that are licensed to write financial guaranty
insurance. The majority of the Company&#146;s gross premiums
written are derived from treaty agreements that are renewed on
an annual basis. Two of the four United States based primary
financial guaranty insurance companies are also related parties.
Descriptions of the relationships are discussed in Note&nbsp;17
&#147;Related party transactions.&#148;
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>6</B></TD>
    <TD>
    <B>EARNINGS PER SHARE</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Basic earnings per share excludes dilution and is computed by
dividing net income available to common shareholders by the
weighted average number of common shares outstanding during the
period. Diluted earnings per share show the dilutive effect of
all stock options and other items outstanding during the period
that could potentially result in the issuance of common stock.
As of December&nbsp;31, 2004, 2003 and 2002 there were 0, 0, and
16,518 stock options, respectively that were not included in the
diluted earnings per share calculation because they were
antidilutive.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-12

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>RAM RE GROUP OF COMPANIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth the computation of basic and
diluted earnings per share for the years ended December&nbsp;31,
2004, 2003 and 2002:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net Income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>24,734,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>21,210,356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,251,598</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic weighted-average shares</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,993,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,816,352</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,298,800</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effect of stock options</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,660</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,859</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,651</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted weighted-average shares</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,002,295</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,820,211</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,300,451</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Basic EPS</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12.41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.97</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Diluted EPS</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11.65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.96</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>7</B></TD>
    <TD>
    <B>INVESTMENTS</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The amortized cost and fair value of investments at
December&nbsp;31, 2004 and 2003 were as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="41%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Gross</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Gross</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amortized</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Unrealized</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Unrealized</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Estimated Fair</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Cost</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Gains</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Losses</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Value</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>2004:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Fixed interest securities:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Agencies</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>51,964,943</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>31,689</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>354,171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>51,642,461</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S.&nbsp;government obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,995,766</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>244,328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>108,020</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,132,074</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Corporate debt securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>146,049,031</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,615,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,975,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>146,688,989</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Municipal securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,736,705</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,125,583</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,841,960</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mortgage and asset-backed securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>161,373,122</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,908,877</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>681,385</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>162,600,614</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>402,119,567</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,926,410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,139,879</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>404,906,098</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="41%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Gross</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Gross</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amortized</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Unrealized</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Unrealized</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Estimated Fair</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Cost</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Gains</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Losses</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Value</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>2003:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Fixed interest securities:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Agencies</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,901,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>75,793</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,977,646</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S.&nbsp;government obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,404,835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>607,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>103,563</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>47,908,976</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Corporate debt securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>89,712,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,522,010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,530,445</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>90,704,115</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Municipal securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,498,472</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,008,082</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>342,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,164,214</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mortgage and asset-backed securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>174,660,166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,237,751</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>816,186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>177,081,731</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>341,177,876</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,451,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,792,534</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>345,836,682</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As a result of its obligation under a loss indemnity policy
entered into in the normal course of business, the Company
purchased a defaulted corporate debt security which it holds in
its investment portfolio as of December&nbsp;31, 2004 and 2003,
at an amortized cost of $3,703,000. Since the bond also carries
with it a financial guaranty insurance policy issued by a
triple-A guarantor, the fair value of the bond is considered
equal to its amortized cost. The Company did not have an
aggregate investment in a single entity, other than the US
Government securities, in excess of 10% of total investments at
December&nbsp;31, 2004 and 2003.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-13

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>RAM RE GROUP OF COMPANIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The investments that have unrealized loss positions as of
December&nbsp;31, 2004 and 2003, aggregated by investment
category and the length of time they have been in a continued
unrealized loss position, are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Less Than 12 Months</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>12 Months or More</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Unrealized</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Unrealized</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Unrealized</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fair Value</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Loss</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fair Value</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Loss</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fair Value</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Loss</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Temporarily Impaired Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>2004:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Fixed income securities</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Agencies</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>38,238,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>354,171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>38,238,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>354,171</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S.&nbsp;government obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,007,709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>108,020</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,007,709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>108,020</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Corporate debt securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86,184,344</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,358,813</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,369,296</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>617,162</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111,553,640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,975,975</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Municipal securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,379,672</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,379,672</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,328</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mortgage and asset-backed securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,257,649</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>368,654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,926,843</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>312,731</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73,184,492</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>681,385</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total temporarily impaired securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>198,688,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,189,658</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>45,675,811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>950,221</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>244,364,316</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,139,879</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>2003:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Fixed income securities</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Agencies</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    U.S.&nbsp;government obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,085,844</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>103,563</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,085,844</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>103,563</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Corporate debt securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58,500,618</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,530,445</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58,500,618</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,530,445</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Municipal securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,216,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>342,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,216,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>342,340</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mortgage and asset-backed securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74,623,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>813,132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>278,267</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,054</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>74,901,741</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>816,186</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total temporarily impaired securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>155,426,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,789,480</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>278,267</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,054</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>155,705,017</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,792,534</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004 and 2003, 54 out of 114 securities
and 42 out of 105 securities, respectively, were in unrealized
loss positions. As of December&nbsp;31, 2004, 18 securities with
total unrealized losses of $358,401 had continued losses for
6&nbsp;months or less, 20 securities with total unrealized
losses of $1,831,257 had continued losses for 7&nbsp;months to
12&nbsp;months and 16 securities with an unrealized loss of
$950,221 had a continued loss for 12&nbsp;months or more. As of
December&nbsp;31, 2003, all 32 securities with unrealized loss
positions totalling $1,952,794 had continued unrealized loss
positions for 6&nbsp;months or less. 9 securities with total
unrealized losses of $836,686 had continued losses for
7&nbsp;months to 12&nbsp;months and 1 security with an
unrealized loss of $3,054 had a continued loss for
12&nbsp;months or more. The unrealized losses as of
December&nbsp;31, 2004 are attributed to the current interest
rate environment and the Company believes the impairments to be
temporary.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-14

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>RAM RE GROUP OF COMPANIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The amortized cost and estimated fair value of fixed interest
securities classified as available for sale as of
December&nbsp;31, 2004, by contractual maturity, are shown
below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or repay
obligations with or without call or prepayment penalties.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Amortized</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Estimated Fair</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Cost</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Value</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less than one year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Due after one year through five years</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>182,156,316</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>181,709,468</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Due after five years through ten years</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60,387,309</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60,519,395</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Due after ten years</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>159,575,942</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>162,677,235</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>402,119,567</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>404,906,098</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Proceeds from maturities and sales of investments in fixed
interest securities available for sale during 2004, 2003, and
2002 were $162,205,186, $188,869,237, and $132,512,309
respectively. Gross gains of $1,128,642, $4,011,321, and
$3,342,148 in 2004, 2003, and 2002, respectively, and gross
losses of $592,960, $2,914,277, and $414,949 in 2004, 2003, and
2002, respectively, were realized on those sales.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Major categories of net investment income are summarized as
follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest from debt securities and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,846,971</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,508,223</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,940,991</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net foreign exchange gains</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>808,087</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>564,135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>106,328</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income&nbsp;&#151; shareholder loan</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,984</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,324</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investment expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(841,185</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(709,393</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(541,323</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net investment income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,824,087</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,372,949</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,546,320</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>8</B></TD>
    <TD>
    <B>CONTINGENT CAPITAL AND CREDIT FACILITIES</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004 and 2003 the Company maintained a
$90,000,000 credit facility with major commercial banks. The
facility may be drawn upon by the Company if cumulative losses
exceed certain minimum thresholds in respect of public finance
bonds and, in a limited capacity, asset-backed securities
reinsured by the Company. Loan obligations under this facility
have limited recourse and would be repayable from, and
collateralized by, a pledge of recoveries realized on defaulted
reinsured obligations covered by the facility, including certain
instalment premiums and other collateral. The facility, which
contains an annual renewal provision subject to approval by the
banks, has a seven-year term ending on May&nbsp;11, 2011. As of
December&nbsp;31, 2004 and 2003, no amounts were outstanding
under this facility.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On December&nbsp;23, 2003, RAM Re entered into a contingent
capital facility whereby it was granted the right to exercise
perpetual put options in respect of its Class&nbsp;B preference
shares against the counterparty to the option agreement, in
return for which it pays the counterparty a monthly floating put
option fee. The counterparty is a trust established by an
investment bank. The trust was created as a vehicle for
providing capital support to RAM Re by allowing it to obtain, at
its discretion and subject to the terms of the option agreement,
access to new capital through the exercise of a put option and
the subsequent purchase by the trust of RAM Re preference
shares. The rights of the holders of the preference shares are
subordinate to those of ceding companies under reinsurance
contracts. The put agreement has no scheduled termination date
or maturity, but will be terminated if RAM Re takes certain
actions as specified in the operative facility documents. RAM Re
has the option to redeem the Class&nbsp;B preference shares
issued upon exercise of its put option, subject to certain
specified terms and conditions. If the put
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-15

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>RAM RE GROUP OF COMPANIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
option is exercised in full, RAM Re would receive up to
$50,000,000 in connection with the issuance of the preference
shares, the proceeds of which may be used for any purpose
including the payment of claims. To fund the purchase of
preference shares upon exercise of the put option by RAM Re, the
trust issued $50,000,000 of its own auction market perpetual
preferred securities which are rated &#147;A+&#148; by
Standard&nbsp;&#38; Poor&#146;s and &#147;A2&#148; by
Moody&#146;s. The proceeds of this issuance are held by the
trust in certain high quality, short-term commercial paper
investments. As of December&nbsp;31, 2004, the perpetual put
options have not been exercised. Expenses of $611,644 and
$1,184,094 relating to the establishment and operation of the
facility for the years ended December&nbsp;31, 2004 and 2003,
respectively, have been charged directly to additional paid-in
capital.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>9</B></TD>
    <TD>
    <B>FAIR VALUES OF FINANCIAL INSTRUMENTS</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Management has estimated the fair value of certain financial
instruments based upon market information using appropriate
valuation methodologies. The estimates presented herein are not
necessarily indicative of the amounts the Company could realize
in a current market exchange. The fair values of investments are
based on quoted market prices or dealer quotes. The carrying
amounts of cash and cash equivalents, interest and premiums
receivable, other assets, accounts payable and accrued
liabilities and other liabilities are considered reasonable
estimates of their fair values.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-16

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>RAM RE GROUP OF COMPANIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>10</B></TD>
    <TD>
    <B>LOSSES AND LOSS EXPENSE RESERVE</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company&#146;s liability for losses and loss adjustment
expenses consists of case basis loss reserves and an unallocated
reserve. Movement in the provision for losses and loss
adjustment expenses is summarized as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Case basis loss reserves:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance&nbsp;&#151; Beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,967,532</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,260,819</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>84,033</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less: Recoverables on paid losses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,641,375</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,659,515</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net balance&nbsp;&#151; Beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,326,157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>601,304</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>84,033</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Incurred related to:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prior years</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,089,754</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,280,282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,605,101</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total incurred</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,089,754</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,280,282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,605,101</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net losses paid related to:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prior years</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,434,288</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>555,429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,087,830</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,434,288</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>555,429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,087,830</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net balance&nbsp;&#151; End of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,981,623</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,326,157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>601,304</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Add: Recoverables on paid losses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,167,575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,641,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,659,515</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance&nbsp;&#151; End of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,149,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,967,532</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,260,819</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unallocated loss reserve:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance&nbsp;&#151; Beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,853,931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,139,907</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,298,012</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net provision for losses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,075,479</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,420,738</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,841,895</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Transfers to case reserves</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,585,882</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(706,714</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance&nbsp;&#151; End of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,343,528</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,853,931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,139,907</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total losses and loss adjustment expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15,492,726</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,821,463</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,400,726</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Incurred case basis reserves of $4,089,754 in 2004, $1,280,282
in 2003, and $2,605,101 in 2002 represent the Company&#146;s
proportionate share of losses established by ceding companies
and are based on notification by ceding companies and the
judgment of management. The net unallocated reserve increases of
$2,075,479 in 2004, $3,420,738 in 2003, and $3,841,895 in 2002
are due primarily to increased exposures reinsured by the
Company in the ordinary course of business.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, 2003, and 2002, recoverables on
paid losses included $1,025,373, $1,515,827, and $1,652,723,
respectively, in collateral certificates purchased by MBIA (see
Note&nbsp;17 &#147;Related party transactions&#148;) in a
foreclosure on assets underlying certain insured equipment trust
lease obligations reinsured by the Company. The recoverable is
recorded at its estimated fair value based on the estimated
present value of lease payments over an average of
27&nbsp;months, 39&nbsp;months, and 48&nbsp;months as of
December&nbsp;31, 2004, 2003, and 2002, respectively, and the
estimated present value of the recovery value of the underlying
assets. There are no assurances that the ultimate value received
or recovered will not be materially different than the estimated
fair value. As of December&nbsp;31, 2004, the difference between
the paid loss less lease payments received to date of $1,526,606
and the estimated fair value of $1,025,373 is $501,233. As of
December&nbsp;31, 2003, the difference between the paid loss of
$1,697,268 and the estimated fair value of $1,515,827 is
$181,441. As of December&nbsp;31, 2002, the difference between
the paid loss of $1,989,761 and the estimated fair value of
$1,652,723 is $337,038. This change in fair value for the year
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-17

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>RAM RE GROUP OF COMPANIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
ended December&nbsp;31, 2004, 2003, and 2002, respectively, has
been recorded as part of losses and loss adjustment expenses on
the income statement.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2000, the Company entered into a loss indemnity policy with
one of its customers insuring the liquidity risk on a portfolio
of synthetic collateralized bond obligations. Loss exposure
under the indemnity policy is limited to $30&nbsp;million in the
aggregate and $10&nbsp;million per reference obligation once
total losses in the portfolio exceed $30&nbsp;million. The
Company&#146;s exposure under this policy is fully insured by a
triple-A rated financial guarantor. The financial guaranty
insurance policy guarantees the principal and interest payments
on a defaulted reference obligation in accordance with its debt
service schedule. Since the Company is fully insured for all
obligations under the loss indemnity policy and the numbers are
not considered significant to either the balance sheet or the
income statement, gross premiums written, losses and loss
adjustment expenses and net realized gains (losses) on credit
derivatives have been recorded on a net basis in the financial
statements. As of December&nbsp;31, 2004 and 2003, one defaulted
bond had been purchased by the Company pursuant to its
obligation under the loss indemnity policy as total losses in
the portfolio exceeded $30&nbsp;million. The bond has been
classified as an available for sale investment and is disclosed
in Note&nbsp;7 to these financial statements.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>11</B></TD>
    <TD>
    <B>OUTSTANDING EXPOSURE</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Financial guarantees are unconditional commitments that guaranty
the performance of obligations under a debt service schedule.
The Company&#146;s potential liability in the event of
non-performance by the issuer of the reinsured obligation is
represented by its proportionate share of the aggregate
outstanding principal and interest payable on such insured
obligation. As of December&nbsp;31, 2004 and 2003, the
Company&#146;s outstanding principal reinsured was
$22.2&nbsp;billion and $19.8&nbsp;billion, respectively. If a
primary financial guaranty insurance company pays a claim and
has recourse through subrogation rights, the Company would
benefit based on its proportionate share of risk.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Outstanding principal reinsured as of December&nbsp;31, 2004 and
2003 by credit sector was (in billions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="81%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Asset-backed securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6.5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    General obligation and lease</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Transportation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Municipal utilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Healthcare</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sales and excise tax</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investor-owned utilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19.8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-18

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>RAM RE GROUP OF COMPANIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Outstanding principal reinsured at December&nbsp;31, 2004 and
2003 by geographic location was (in billions):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="81%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Multi-state</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3.6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    International</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    California</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New York</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Florida</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Texas</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.9</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other U.S.&nbsp;states</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>22.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19.8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company controls its exposure to credit risk through risk
management guidelines, the objectives of which are to ensure
that the Company maintains a reinsured portfolio that is of high
quality and is sufficiently diversified to protect the Company
from unexpected severe deterioration in any particular credit
sector or geographic location.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>12</B></TD>
    <TD>
    <B>PENSION AND PROFIT PARTICIPATION PLANS</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company maintains qualified and non-qualified,
non-contributory, defined contribution pension plans for the
benefit of eligible employees. These plans are administered by a
third party. The Company&#146;s contributions are based upon a
fixed percentage of employee compensation. Pension expense,
which is funded as accrued, for the years ended
December&nbsp;31, 2004, 2003, and 2002 was $628,921, $356,030,
and $286,456, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company maintains a closed profit participation plan that
provides for awards comprised of a cash payment based on the
Company exceeding minimum performance hurdles preceding a
liquidity event. A liquidity event is defined under the plan to
be a stock or asset sale, an initial public offering, an
incremental dividend or a common stock distribution to an
investor. There is only one participant in this plan. As of
December&nbsp;31, 2004, 2003 and 2002, the Company had not
exceeded the minimum performance hurdles and as a result no
accrual for incentive compensation under this plan has been made.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-19

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>RAM RE GROUP OF COMPANIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>13</B></TD>
    <TD>
    <B>STOCK OPTION PLAN</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;13, 2001, the Company adopted a Stock Option Plan
for Management Employees to enable key employees to acquire
common shares of Holdings&nbsp;II. Options granted under the
plan generally have a per share exercise price not less than the
estimated fair value of the underlying common stock as
determined at the time of grant and a term not to exceed
10&nbsp;years. As of December&nbsp;31, 2004 and 2003, 108,340
and 92,340 options, were granted and unexercised. The options
are exercisable once vested. The typical vesting period is
5&nbsp;years, or 5%&nbsp;per quarter. A summary of the
Company&#146;s stock option plan as of December&nbsp;31, 2004
and 2003 is as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Weighted</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Weighted</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average Exercise</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Average Exercise</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Price Per Share</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Price Per Share</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Options</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Outstanding&nbsp;&#151; Beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>92,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>136.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>135.99</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchased from employee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>130.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Forfeited</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>130.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Granted during the year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>145.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>139.26</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Outstanding&nbsp;&#151; End of year</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>108,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>139.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>92,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>136.88</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Exercisable&nbsp;&#151; End of year</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71,326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>137.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48,040</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>134.24</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average fair value per share of options granted during
    the year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>145.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>139.26</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004, exercise prices range from $126.15
to $154.24 and the weighted average remaining contractual life
of the options is 8&nbsp;years. During 2004 the Company
purchased from employees 3,000 options that were fully vested at
an expense of $87,950.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company applies Accounting Principles Board Opinion
(&#147;APB&#148;) No.&nbsp;25 and related Interpretations in
accounting for its stock-based plans. During 2003, compensation
expense of $362,361 was recognized and has been recorded as a
reduction in additional paid-in capital. The expense was
incurred when 25,000 options were issued with an exercise price
less than the estimated fair value of the Company&#146;s common
stock on the grant date and 16,518 options previously granted
had a reduction in their exercise price. For the remaining
options outstanding, since the fair value of the options on the
grant dates were not less than the estimated fair value of the
Company&#146;s common stock, the Company has not recognized
compensation expense. Under Statement of Financial Accounting
Standards No.&nbsp;123, the Company would have reported
additional compensation expense of $453,928, $164,223, and
$896,034 and pro forma net income of $24,280,217, $21,046,133,
and $13,355,564 for the years ending December&nbsp;31, 2004,
2003, and 2002, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The fair value of each option was determined using the minimum
value method, which is applicable for private companies. This
method excludes the expected volatility of a company&#146;s
stock. In estimating the fair value of options, the Company made
the following assumptions: i)&nbsp;dividend yield was zero; ii)
weighted average risk-free interest rate was 3.8% and 4.0% as of
December&nbsp;31, 2004 and December&nbsp;31, 2003, respectively;
and iii) expected average life was 3.0&nbsp;years and
2.7&nbsp;years as of December&nbsp;31, 2004 and
December&nbsp;31, 2003.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>14</B></TD>
    <TD>
    <B>CONTINGENT SHARE PLAN</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;13, 2001, the Company entered into Contingent
Share Agreements (the &#147;Agreements&#148;) to enable three
management employees to benefit in the event they left the
Company and a liquidity event
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-20

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>RAM RE GROUP OF COMPANIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
occurred. The contingent share plan requires that the employees
let their regular stock options (see note&nbsp;13) expire
unexercised. The employees can exercise either their regular
stock options or the contingent share plan, but not both.
Together the plans are a tandem plan where exercise of one
component cancels the other.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
If the employees leave the Company and let their regular stock
options expire, one year after their termination date
(&#147;Anniversary Date&#148;) and ending no later than
February&nbsp;11, 2007 (subsequently amended February&nbsp;9,
2005 to end no later than February&nbsp;11, 2009), the employees
covered by the Agreements have the right to receive a cash
payment upon the occurrence of certain events specified in the
Agreements. If such certain events do not occur, then the
employees have the right to purchase contingent shares of
Holdings&nbsp;II. Contingent shares purchased under these
Agreements carry liquidity rights in certain situations such as
an initial public offering of common shares of the Company or a
change in control as defined in the Agreements.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The number of contingent shares is based on the number of
exercisable options that terminated under the Company&#146;s
Stock Option Plan (note&nbsp;13) multiplied by the proportionate
growth in adjusted book value from the grant date to the
Anniversary Date. The number of contingent shares granted is
determined on the Anniversary Date. The contingent share price
is determined at the time of grant and may not be less than the
estimated fair value of the Company&#146;s common stock at the
time of grant.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004 and 2003, management was not able
to reasonably estimate the assumptions as to when an employee
might terminate, which plan they would choose to exercise, the
likelihood and timing of certain specified future events, the
ultimate number of contingent shares that may be issued, and
whether there would be a cash payment or the contingent share
options would be exercised.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>15</B></TD>
    <TD>
    <B>COMMITMENTS AND CONTINGENCIES</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During 2004, the Company renewed its agreement to lease office
space for the 2005 calendar year. As of December&nbsp;31, 2004,
the future minimum commitment under the lease, with three years
remaining, is $323,595&nbsp;per year. Rental expense for the
aforementioned lease amounted to $314,415 in 2004, $291,465 in
both 2003 and 2002.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A downgrade of RAM Re&#146;s ratings would have a material
adverse affect on RAM Re&#146;s ability to compete in the
financial guaranty reinsurance industry and significantly
decrease the value of the reinsurance provided. As at
December&nbsp;31, 2004, the Company&#146;s financial strength
and financial enhancement ratings are &#147;Aa3&#148; by
Moody&#146;s and its financial strength rating is
&#147;AAA&#148; by Standard&nbsp;&#38; Poor&#146;s, both with a
stable outlook. A downgrade of these ratings would negatively
affect the value of RAM Re&#146;s reinsurance. Under the current
guidelines for assigning credit to reinsurance, if
Standard&nbsp;&#38; Poor&#146;s were to downgrade RAM Re&#146;s
rating from &#147;AAA&#148; to &#147;AA,&#148; there would be an
immediate 30% decrease in the benefits financial guarantors
receive from ceding business to RAM Re based on
Standard&nbsp;&#38; Poor&#146;s model. In addition to potential
negative effects on future business, a downgrade of RAM
Re&#146;s rating would cause its competitive position in the
reinsurance industry to suffer. If RAM Re experienced a rating
downgrade, the ceding companies would have the ability under the
reinsurance contracts to either reprice existing business via
increases in the ceding commissions charged or recapture
existing business. A downgrade of RAM Re&#146;s ratings, or the
placing of RAM Re&#146;s ratings on credit watch or under review
for a ratings downgrade, would also negatively affect its
ability to negotiate favourable terms with ceding companies on a
going-forward basis.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company settled its dispute with the former President and
CEO of RAM Re. The settlement amount expensed in 2004 was
$843,256 and there is no further liability.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
A discussion of additional contingencies is in Note&nbsp;14
&#147;Contingent Share plan.&#148;
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-21

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<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>RAM RE GROUP OF COMPANIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>16</B></TD>
    <TD>
    <B>LONG-TERM DEBT</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;26, 2004 RAM Holdings Ltd. issued $40,000,000 of
unsecured senior notes (the &#147;Notes&#148;) to a qualified
institutional buyer as defined in Rule&nbsp;144A of the
Securities Act. The term of the Notes is 20&nbsp;years with the
full principal amount due at maturity. RAM Holdings&nbsp;II Ltd.
has provided an unconditional guarantee of all amounts due with
respect to the Notes. The Notes rank pari passu in right of
repayment with RAM Holding Ltd.&#146;s other unsecured senior
debt. The net proceeds from the Notes have been used to provide
capital for RAM Reinsurance Company Ltd.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The applicable interest rate is 6.875% and is payable
semi-annually. The Notes are subject to redemption at the option
of RAM Holdings Ltd., in whole or in part at any time upon
30&nbsp;days advance notice by paying principal, accrued
interest and the Make Whole Amount. There are no financial
covenants in place. As of December&nbsp;31, 2004 interest
expense amounting to $2,106,345 has been recorded.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>17</B></TD>
    <TD>
    <B>RELATED PARTY TRANSACTIONS</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of December&nbsp;31, 2004 and 2003, the Company had a loan to
a shareholder, who is also a current employee, in the amount of
$100,000. The loan is repayable to the Company on the occurrence
of a liquidity event. The note bears interest at the rate of:
(1)&nbsp;prior to April&nbsp;1, 2003, the greater of 8.5%, or
the applicable U.S.&nbsp;federal mid-term rate at the date of
the loan agreement and (2)&nbsp;on and after April&nbsp;1, 2003,
the prime rate plus 2.0%. The loan to shareholder has been
recorded as a reduction to additional paid-in capital.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Interest earned in 2004, 2003, and 2002 from shareholder loans
was $10,214, $9,984, and $40,324, respectively, and has been
included in net investment income.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
MBIA Insurance Corporation (&#147;MBIA&#148;), one of the four
United States based primary financial guaranty insurance
companies ceding business to the Company, invested
$25.4&nbsp;million in the April&nbsp;3, 2003 private offering of
common shares of Holdings and Holdings&nbsp;II. The shares were
issued at $111.41. As of December&nbsp;31, 2004, MBIA owned
11.4% of the aggregate issued and outstanding common shares of
Holdings and Holdings&nbsp;II. The Company has engaged MBIA
Capital Management Corp. (&#147;MBIA Capital&#148;), a wholly
owned subsidiary of the parent company of MBIA, to provide the
Company with investment advisory and management services. An
amount of $751,672 and $452,458 was incurred in fees for the
years ended December&nbsp;31, 2004 and 2003 to MBIA Capital for
these services and had been recorded in net investment income on
the income statement. The amount due to MBIA Capital as of
December&nbsp;31, 2004 and 2003 was $195,122 and $174,924,
respectively, and has been included in accounts payable and
accrued liabilities. In the ordinary course of business, the
Company has also entered into reinsurance agreements with MBIA.
In 2004 and 2003, gross written premiums ceded from MBIA
accounted for 39% and 35% of total gross premiums written,
respectively. Amounts due from MBIA as of December&nbsp;31, 2004
and 2003 were $nil and $4,524,163, respectively, and has been
included in premiums receivable. Case reserves/(recoverables)
established on transactions ceded from MBIA as of
December&nbsp;31, 2004 and 2003 were ($63,157) and $443,242,
respectively. Reinsurance recoverables on paid losses on
transactions ceded from MBIA as of December&nbsp;31, 2004 and
2003 were $1,025,372 and $1,641,374, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2003, two shareholders, who together own 37.93% of
the aggregate issued and outstanding common shares of Holdings
and Holdings&nbsp;II, became investors in FGIC Corporation, an
insurance holding company whose subsidiary Financial Guaranty
Insurance Company (&#147;FGIC&#148;) is one of the four largest
United States based primary financial guaranty insurance
companies. In the ordinary course of business, the Company has
entered into reinsurance agreements with FGIC. In 2004 and 2003,
gross written premiums ceded from FGIC accounted for 1% and 2%
of total gross premiums written by
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-22

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<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>RAM RE GROUP OF COMPANIES</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to Combined Financial
Statements&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
the Company, respectively. Amounts due from FGIC as of
December&nbsp;31, 2004 and 2003 were $5,318 and $32,438,
respectively, and have been included in premiums receivable.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>18</B></TD>
    <TD>
    <B>SHARE CAPITAL</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Holdings is authorized to issue 2,000,000 common shares at a par
value of $1&nbsp;per share, of which 107,448&nbsp;shares were
issued and outstanding as of December&nbsp;31, 2004 and 2003.
Holdings&nbsp;II is authorized to issue 2,500,000 common shares
at a par value of $1&nbsp;per share, of which
1,886,187&nbsp;shares were issued and outstanding as of
December&nbsp;31, 2004 and 2003.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On April&nbsp;3, 2003, 19,258&nbsp;shares of Holdings and
684,092&nbsp;shares of Holdings&nbsp;II were issued in
connection with a private placement of equity for proceeds of
$91,606,203. Shares issued to MBIA (See Note&nbsp;17
&#147;Related party transactions&#148;) were issued at $111.41
and shares issued to certain existing shareholders were issued
at $139.26. In contemplation of the issuance of additional
common shares, the Company increased its authorized shares in
Holdings&nbsp;II to 2,500,000 from 1,500,000 on April&nbsp;2,
2003. Costs incurred of $1,886,308 directly relating to the
issuance of capital have been charged directly to
shareholders&#146; equity upon closing of the transaction.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In January 2002, 8,052&nbsp;shares of Holdings&nbsp;II were
redeemed from a former shareholder for $1,056,221 and
3,506&nbsp;shares of Holdings&nbsp;II were sold by one
shareholder to another in exchange for a promissory note.
Holdings&nbsp;II then redeemed these shares in February 2002 for
$488,806 and the promissory note was cancelled.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In June 2002, 12,818&nbsp;shares of Holdings were redeemed from
two former shareholders for $1,820,284. In connection with the
repurchase, current shareholders of Holdings and
Holdings&nbsp;II redeemed 15,405&nbsp;shares of Holdings&nbsp;II
and purchased 15,405&nbsp;shares of Holdings for $2,187,664 and
4,275&nbsp;shares of Holdings were redeemed for $607,093.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>19</B></TD>
    <TD>
    <B>TAXATION</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has received an undertaking from the Bermuda
government exempting it from all local income, withholding and
capital gains taxes until March&nbsp;28, 2016. At the present
time no such taxes are levied in Bermuda.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>20</B></TD>
    <TD>
    <B>STATUTORY REQUIREMENTS</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
RAM Re is registered under the Bermuda Insurance Act 1978,
amendments thereto and related Regulations (the
&#147;Act&#148;), which require that they maintain minimum
levels of solvency and liquidity. For the years ended
December&nbsp;31, 2004 and 2003 these requirements have been
met. The minimum required statutory capital and surplus was
$10.2&nbsp;million and $10.5&nbsp;million and actual statutory
capital and surplus was $286.4&nbsp;million and
$233.4&nbsp;million as of December&nbsp;31, 2004 and 2003,
respectively. The minimum required level of liquid assets was
$120.5&nbsp;million and $103.1&nbsp;million and actual liquid
assets were $446.9&nbsp;million and $370.8&nbsp;million as of
December&nbsp;31, 2004 and 2003, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Act limits the maximum amount of the annual dividends paid
by RAM Reinsurance without notification to, and in certain cases
the approval of, the Bermuda Monetary Authority of such payment.
The maximum amount of dividends that could be paid by RAM
Reinsurance, without such notification, was $37.8&nbsp;million
and $32.0&nbsp;million as at December&nbsp;31, 2004 and 2003,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Statutory financial statements prepared under the Act differ
from financial statements prepared in accordance with US GAAP
due to the exclusion of non-admitted assets such as deferred
policy acquisition costs, prepaid expenses and the fair value
adjustment of derivative instruments.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-23

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
<A name='308'></A>
</DIV>

<!-- link1 "RAM Re Group of Companies Condensed Combined Balance Sheet" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>RAM Re Group of Companies</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Condensed Combined Balance Sheet</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(Unaudited)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>As of September&nbsp;30, 2005 and December&nbsp;31st, 2004</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="63%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="9" align="center" valign="top">
    <B>Assets</B></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,441,945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>36,086,774</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investments, at fair value (amortized cost: September&nbsp;30,
    2005&nbsp;&#151; $464,704,855; December&nbsp;31,
    2004&nbsp;&#151; $402,119,567)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>461,751,233</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>404,906,098</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued interest receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,424,473</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,002,811</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Premiums receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,588,169</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,983,149</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Recoverable on paid losses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,173,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,167,575</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred policy acquisition costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65,776,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58,652,627</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fixed assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>143,232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>188,218</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>869,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>930,826</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>407,219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>158,891</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>172,784</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,721,058</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total assets</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>540,748,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>510,798,027</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="9">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="9" align="center" valign="top">
    <B>Liabilities and Shareholders&#146; Equity</B></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Losses and loss adjustment expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,273,579</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,492,726</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unearned premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>163,837,242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>140,042,526</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable and accrued liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,534,148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,995,969</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unsecured senior notes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,000,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued interest payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>693,151</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Share based compensation liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,801,535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68,161</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total liabilities</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>221,446,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>199,292,533</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="9" align="center" valign="top">
    <B>Shareholders&#146; Equity</B></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Share capital: $1&nbsp;par value; authorized
    4,500,000&nbsp;shares (September&nbsp;30, 2005&nbsp;&#151;
    4,500,000&nbsp;shares); issued and outstanding 1,991,135
    (December&nbsp;31, 2004&nbsp;&#151; 1,993,635)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,991,135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,993,635</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>211,816,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>212,572,647</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,953,623</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,786,531</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Retained earnings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>108,448,114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>94,152,681</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total shareholders&#146; equity</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>319,302,454</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>311,505,494</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total liabilities and shareholders&#146; equity</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>540,748,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>510,798,027</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
See accompanying Notes to Condensed Combined Financial Statements
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-24

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>RAM Re Group of Companies</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<A name='309'></A>
</DIV>

<!-- link1 "Condensed Combined Statements of Income (Unaudited)" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Condensed Combined Statements of Income</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(Unaudited)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Nine Months Ended September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Revenues</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross premiums written</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>55,219,997</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>48,212,116</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Change in unearned premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(23,794,716</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(20,861,080</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Premiums earned</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,425,281</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,351,036</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net investment income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,863,911</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,006,080</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net realized gains (losses) on sale of investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,137,349</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>560,163</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net unrealized gains (losses) on credit derivatives</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,543,581</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,190,051</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,608,262</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,107,330</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Expenses</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Losses and loss adjustment expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,103,622</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,461,594</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acquisition expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,570,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,229,355</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,391,131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,174,352</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,056,849</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,413,194</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,122,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,278,495</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Net income for the period</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,485,677</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,828,835</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
See accompanying Notes to Condensed Combined Financial Statements
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-25

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>RAM Re Group of Companies</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<A name='310'></A>
</DIV>

<!-- link1 "Condensed Combined Statement of Shareholders&#146; Equity and Retained Earnings" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Condensed Combined Statement of Shareholders&#146; Equity and
Retained Earnings</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(Unaudited)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>For the Nine Months Ended September&nbsp;30, 2005 and 2004</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="28%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Accumulated Other</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Additional Paid-</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Comprehensive</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Retained</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Share Capital</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>In Capital</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Income</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Earnings</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance, December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,993,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>213,184,291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,658,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>69,418,536</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>289,255,268</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Committed preferred shares expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(424,855</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(424,855</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,828,835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,828,835</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other comprehensive income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unrealized gain (loss) on securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,151,872</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,151,872</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance, September&nbsp;30, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,993,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>212,759,436</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,506,934</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>89,247,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>307,507,376</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance, December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,993,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>212,572,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,786,531</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>94,152,681</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>311,505,494</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issue/(redemption) of share capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,500</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(147,500</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(190,244</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(340,244</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Committed preferred shares expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(449,862</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(449,862</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-cash compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(158,457</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(158,457</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,485,677</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,485,677</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other comprehensive income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unrealized gain (loss) on securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,740,154</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,740,154</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Balance, September&nbsp;30, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,991,135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>211,816,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,953,623</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>108,448,114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>319,302,454</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
See accompanying Notes to Condensed Combined Financial Statements
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-26

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>RAM Re Group of Companies</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<A name='311'></A>
</DIV>

<!-- link1 "Condensed Combined Statements of Cash Flows" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Condensed Combined Statements of Cash Flows</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(Unaudited)</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>For the Nine Months Ended September&nbsp;30, 2005 and 2004</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Cash flows from operating activities:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net Income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,485,677</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19,828,835</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustments to reconcile net income to net cash provided by
    operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net realized investment gains</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,137,349</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(560,163</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net unrealized (gains)&nbsp;losses on credit derivatives</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,543,581</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,190,051</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>131,328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>198,352</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of bond premium and discount</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(239,206</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,992,821</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-cash compensation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>178,411</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of debt discount</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,230</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued interest receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>578,338</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>337,564</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(248,328</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(164,295</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Premiums receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,605,020</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,511,529</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Recoverable on paid losses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,844</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>195,785</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred acquisition costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,124,065</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,864,192</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61,034</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,281,078</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(68,161</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss and loss adjustment expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,219,147</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,202,036</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unearned premiums</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23,794,716</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,385,301</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable and accrued liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(461,821</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35,530</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shared based compensation liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,801,535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued interest payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(693,150</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Net cash provided by operating activities</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,051,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,560,144</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Cash flows from investing activities:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds on sales and maturities of investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>113,994,665</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>195,001,063</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchases of investments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(177,875,995</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(254,106,653</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchase of fixed assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25,310</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(102,747</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Net cash used in investing activities</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(63,906,640</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(59,208,337</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Cash flows from financing activities:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from issuance of debt facility</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,874,400</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shares issued (redeemed)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(340,244</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Committed preferred shares expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(449,862</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(424,855</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Net cash used in financing activities</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(790,106</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,449,545</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net (decrease)/increase in cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(32,644,829</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,801,352</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents, beginning of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36,086,774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,096,199</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Cash and cash equivalents, end of period</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,441,945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,897,551</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
See accompanying Notes to Condensed Combined Financial Statements
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-27

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>RAM Re Group of Companies</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<A name='312'></A>
</DIV>

<!-- link1 "Notes to the Unaudited Condensed Combined Financial Statements" -->

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Notes to the Unaudited Condensed Combined Financial
Statements</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>For the nine month periods ended September&nbsp;30, 2005 and
September&nbsp;30, 2004</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>1.</B></TD>
    <TD>
    <B>Background</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
RAM Holdings Ltd. (&#147;Holdings&#148;), RAM Holdings&nbsp;II
Ltd. (&#147;Holdings&nbsp;II&#148;), and RAM Reinsurance Company
Ltd. (&#147;RAM Re&#148;) (collectively &#147;the Company&#148;
or &#147;the RAM Re Group of Companies&#148;) were incorporated
on January&nbsp;28, 1998 under the laws of Bermuda. Holdings
owns 100% of the voting shares of RAM Re and Holdings&nbsp;II
owns 100% of the non-voting shares of RAM Re. There are
overlapping investor interests in the shares of Holdings and
Holdings&nbsp;II and the economic interest of each investor is
determined based on each investor&#146;s combined interest in
both holding companies.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
RAM Re&#146;s principal activity is the reinsurance of financial
guarantees of public finance and asset-backed debt obligations
insured by the triple-A rated monoline financial guaranty
companies. The Company provides reinsurance through treaty and
facultative agreements that it maintains with each of its
customers. Financial guaranty reinsurance written by RAM Re
generally provides for guarantees of scheduled principal and
interest payments on an issuer&#146;s obligation in accordance
with the obligation&#146;s original payment schedule and, in
rare circumstances, such amounts are payable on an accelerated
basis.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>2.</B></TD>
    <TD>
    <B>Basis of Preparation</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The September&nbsp;30, 2005 unaudited condensed combined
financial statements do not include all of the information and
disclosures required by accounting principles generally accepted
in the United States of America (&#147;US GAAP&#148;). These
statements should be read in conjunction with the combined
financial statements and notes for the year ended
December&nbsp;31, 2004 for RAM Re Group of Companies. The
September&nbsp;30, 2005 condensed combined financial statements
are unaudited. In the opinion of management, the financial
statements represent a fair statement of the Company&#146;s
financial position and results of operations. The preparation of
financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements
and the reported revenues and expenses during the reporting
period. Actual results may differ from those estimates. The
results of operations for the nine months ending
September&nbsp;30, 2005 may not be indicative of the results
that may be expected for the year ended December&nbsp;31, 2005.
The December&nbsp;31, 2004 balance sheet, included in these
statements, was derived from audited financial statements, but
does not include all the disclosures required by GAAP.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>3.</B></TD>
    <TD>
    <B>Basis of Combination</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The combined financial statements include the consolidated
accounts of Holdings and the accounts of Holdings&nbsp;II as
this presentation is considered most meaningful to the
shareholders. The consolidated accounts of Holdings include
those of its subsidiary RAM Re. Holdings and Holdings&nbsp;II
have common shareholders and are under common management.
Intercompany balances and transactions have been eliminated in
combination. Results are not consolidated due to the ownership
structure of the Company. There are no significant differences
between financial statements prepared on a combined basis and
those which would be prepared on a consolidated basis.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>4.</B></TD>
    <TD>
    <B>Loss and Loss Adjustment Expenses</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
During the nine months ended September&nbsp;30, 2005, the
Company paid a loss of $6&nbsp;million on a reinsured
obligation. As of December&nbsp;31, 2004, the Company had
established a case reserve of $4.1M, thus the incremental
incurred loss related to this claim was $1.9M for 2005. Based on
available information as of September&nbsp;30, 2005, there are
no further case reserves nor amounts recoverable for this
obligation.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-28

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>RAM Re Group of Companies</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to the Unaudited Condensed Combined Financial
Statements</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>For the nine month periods ended September&nbsp;30, 2005 and
September&nbsp;30, 2004&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has exposures in its insured portfolio related to
regions impacted by hurricanes Katrina, Rita and Wilma. The
Company is continuing to assess its exposure in concert with
ceding companies to evaluate the actual and potential impact
that the hurricanes may have on its insured credits. Based on
available information, the Company does not currently expect
there to be material cases of prolonged non-payment that would
result in unreimbursed losses. As a result, during the third
quarter of 2005, RAM Re did not establish case reserves for its
exposure to the regions impacted. To date, RAM Re has paid $13
thousand in claim payments that are expected to be reimbursed.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In 2000, the Company entered into a loss indemnity policy with
one of its customers insuring the liquidity risk on a portfolio
of synthetic collateralized bond obligations. During August
2005, a default resolution was entered, and the Company received
the full par value of the bond $3,703,000, as well as all
interest accrued to the date of default. Loss exposure under the
indemnity policy was limited to $30&nbsp;million in the
aggregate and $10&nbsp;million per reference obligation. The
Company&#146;s exposure under this policy was fully insured by a
triple-A rated financial guarantor.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>5.</B></TD>
    <TD>
    <B>Derivative instruments</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Company has reinsured derivative instruments, consisting
primarily of credit default swaps that it intends to reinsure
for the full term of the contract. Management considers these
derivative instruments to be a normal extension of its financial
guaranty reinsurance business. All derivative instruments are
recognized on the balance sheet at their fair value, and changes
in fair value are recognized in earnings. In determining the
fair value of derivative instruments, management relies on
quoted market spread data as an input to its internal valuation
model. The valuation model considers among other things, the
estimated remaining premium to be earned, the duration of the
policy, the credit and change in credit quality since inception,
and the current market pricing of credit default swaps in
comparison to market pricing that was applicable at the
transaction inception. Different valuation models may produce
materially different results. The Company reviews its valuation
model from time to time and may make enhancements as
best-practices in the industry develop. Upon occurrence of
specific credit events such as default, an appropriate case
reserve is established and the obligation is no longer marked to
market.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>6.</B></TD>
    <TD>
    <B>Recent Accounting Pronouncements</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)</I></B></TD>
    <TD>
    <B><I>FASB Review</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In January and February of 2005, the SEC discussed with the
financial guaranty industry participants the diversity in
practice with respect to their accounting policies for loss
reserves. In June 2005, the FASB added a project to its agenda
to consider the accounting by financial guaranty insurers for
claims liability recognition, premium recognition and deferred
acquisition costs. The proposed and final documents are expected
to be issued in 2006. When the FASB issues authoritative
guidance on this matter, RAM Re and the rest of the financial
guaranty industry may be required to change some aspects of
their loss reserving policies and the potential changes could
extend to premium and expense recognition. RAM Re cannot predict
how the FASB will resolve this issue and the resulting impact on
the Company&#146;s financial statements. Until the authoritative
guidance is issued, RAM Re intends to continue to apply its
existing policy with respect to the establishment of both case
and general reserves.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)</I></B></TD>
    <TD>
    <B><I>Stock compensation plans</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In December 2004, the FASB issued a revision of FASB Statement
No.&nbsp;123, Accounting for Stock Based Compensation. Under
FAS&nbsp;123(R), companies are required to expense the fair vale
of employee stock options and other forms of stock-based
compensation and to provide associated financial statement
disclosures. For non-public companies, FAS&nbsp;123(R) is
effective for annual reporting periods beginning
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-29

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>RAM Re Group of Companies</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Notes to the Unaudited Condensed Combined Financial
Statements</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>For the nine month periods ended September&nbsp;30, 2005 and
September&nbsp;30, 2004&nbsp;&#151;&nbsp;(Continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
after December&nbsp;15, 2005. The Company will apply this
statement prospectively to new awards and to awards modified,
repurchased, or cancelled after the effective date. RAM Re will
continue to account for awards granted prior to
December&nbsp;15, 2005 under APB No.&nbsp;25, using the minimum
value method.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>7.</B></TD>
    <TD>
    <B>Stock Option Plan</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On June&nbsp;30, 2005, the Company granted 11,500 additional
stock options at a strike price of $156.41 to a management
employee. In August 2005, the Company granted 1,400 additional
options at a strike price of $159.98 to the unaffiliated
directors of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
As of June&nbsp;30, 2005, the Company entered into Payment
Agreements that terminated both the Contingent Share Agreements
(see note&nbsp;8) and 36,340 vested Stock Options (this note) of
three management employees. As the options are vested and the
payment is for past service, the Company has recorded a share
based compensation liability of $2,801,535 as of
September&nbsp;30, 2005 which represents management&#146;s best
estimate of the ultimate liability. In accordance with the terms
of the agreement, the Company will re-evaluate this liability on
its best estimate of June&nbsp;30, 2006 book value and record
any changes in estimate periodically until the payment date of
July&nbsp;1, 2006.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>8.</B></TD>
    <TD>
    <B>Contingent Share Plan</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;13, 2001, the Company entered into Contingent
Share Agreements with three management employees. The contingent
share plan was a tandem plan with the stock option plan. Per
Note&nbsp;7 and as of June&nbsp;30, 2005, the Company entered
into Payment Agreements that terminated both the Contingent
Share Agreements and vested Stock Options of three management
employees. As noted above, the Company has a share based
compensation liability of $2,801,535 as of September&nbsp;30,
2005.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B>9.</B></TD>
    <TD>
    <B>Related Party Transactions</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
MBIA Insurance Corporation (&#147;MBIA&#148;), one of the four
United States based primary financial guaranty insurance
companies ceding business to the Company, invested
$25.4&nbsp;million in the April&nbsp;3, 2003 private offering of
common shares of Holdings and Holdings&nbsp;II. The shares were
issued at $111.41. As of September&nbsp;30, 2005, MBIA owned
11.4% of the aggregate issued and outstanding common shares of
Holdings and Holdings&nbsp;II. In the ordinary course of
business, the Company has entered into reinsurance agreements
with MBIA. For the nine months ending September&nbsp;30, 2005
and the year ended December&nbsp;31, 2004, gross written
premiums ceded from MBIA accounted for 31% and 39% of total
gross premiums written, respectively.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">F-30

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<DIV align="center" style="font-size: 2pt;color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 14pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Shares</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 7pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<IMG src="y17244y1724400.gif" alt="RAMRe LOGO">
</DIV>

<DIV align="center" style="font-size: 24pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>RAM Holdings Ltd.</B>
</DIV>

<DIV align="center" style="font-size: 14pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Common Shares</B>
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 31%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>PROSPECTUS</B>
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 31%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 12pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2006</B>
</DIV>

<DIV align="center" style="font-size: 18pt;color: #000000; background: #ffffff; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Banc of America Securities LLC</B>
</DIV>

<DIV align="center" style="font-size: 18pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Merrill Lynch&nbsp;&#38; Co.</B>
</DIV>

<DIV align="center" style="font-size: 18pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Keefe, Bruyette&nbsp;&#38; Woods</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B>Until &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2006 all dealers that buy, sell or trade the common shares may
be required to deliver a prospectus, regardless of whether they
are participating in this offering. This is in addition to the
dealers&#146; obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.</B>
</DIV>

<DIV align="center" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 11pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 4pt;color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

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<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>PART&nbsp;II</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>INFORMATION NOT REQUIRED IN PROSPECTUS</B>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;13.</B></TD>
    <TD>
    <B><I>Other Expenses of Issuance and Distribution.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following table sets forth the expenses payable by the
Registrant in connection with the issuance and distribution of
the common shares being registered hereby. All of such expenses
are estimates, other than the filing and listing fees payable to
the Securities and Exchange Commission, the New York Stock
Exchange and the National Association of Securities Dealers, Inc.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="84%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Securities and Exchange Commission Filing Fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26,750</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New York Stock Exchange Listing Fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    National Association of Securities Dealers Filing Fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Legal Fees and Expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Printing Expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounting Fees and Expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Blue Sky Fees and Expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Transfer Agent Fees and Expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Miscellaneous Expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;14.</B></TD>
    <TD>
    <B><I>Indemnification of Directors and Officers.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Bye-law 54 of the Registrant&#146;s Amended and Restated
Bye-Laws provides, among other things, that: the directors,
secretary and other officers (including any persons appointed to
a committee of the board of directors) of the Registrant, and
their heirs, executors and administrators, shall be indemnified
and secured harmless out of the assets of the Registrant to the
full extent permitted by law from and against all actions,
costs, charges, liabilities, losses, damages and expenses which
they or any of them, their heirs, executors or administrators,
shall or may incur or sustain by or by reason of any act done,
concurred in or omitted in or about the execution of their duty,
or supposed duty, or in their respective offices or trusts, and
none of them shall be answerable for the acts, receipts,
neglects or defaults of the others of them or for joining in any
receipts for the sake of conformity, or for any bankers or other
persons with whom any moneys or effects belonging to the
Registrant shall or may be lodged or deposited for safe custody,
or for insufficiency or deficiency of any security upon which
any moneys of or belonging to the Registrant shall be placed out
on or invested, or for any other loss, misfortune or damage
which may happen in the execution of their respective offices or
trusts, or in relation thereto; provided, that this indemnity
shall not extend to any matter in respect of any fraud or
dishonesty which may attach to any of the said persons.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Bye-law 54.A of the Registrant&#146;s Amended and Restated
Bye-Laws provides that the Registrant and each shareholder
agrees to waive any claim or right of action it might have,
whether individually or by or in the right of the Registrant,
against any director, secretary or other officer on account of
any action taken by such director or officer, or the failure of
such director or officer to take any action in the performance
of his duties with or for the Registrant, provided that such
waiver shall not extend to any matter in respect of any fraud or
dishonesty which may attach to such director or officer.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Section&nbsp;98 of the Companies Act provides generally that a
Bermuda company may indemnify its directors, officers and
auditors against any liability which by virtue of any rule of
law would otherwise be imposed on them in respect of any
negligence, default, breach of duty or breach of trust, except
in cases where such liability arises from fraud or dishonesty of
which such director, officer or auditor may be guilty in
relation to the company. Section&nbsp;98 further provides that a
Bermuda company may indemnify its directors, officers and
auditors against any liability incurred by them in defending any
proceedings, whether civil or criminal, in which judgment is
awarded in their favour or in which they are acquitted or granted
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">II-1

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<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff;">
relief by the Supreme Court of Bermuda pursuant to
section&nbsp;281 of the Companies Act. Section&nbsp;98 further
provides that any provision, whether contained in the bye-laws
of a company or in any contract or arrangement between the
company and any director exempting or indemnifying him against
any liability which would otherwise attach to him in respect of
any fraud or dishonesty of which he may be guilty in relation to
the company shall be void.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Section&nbsp;98A of the Companies Act permits a Bermuda company
to purchase and maintain insurance for the benefit of any
officer or director in respect of any loss or liability
attaching to him in respect of any negligence, default, breach
of duty or breach of trust, whether or not such Bermuda company
may otherwise indemnify such officer or director.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Registrant has purchased directors and officers liability
insurance policies. Such insurance would be available to the
Registrant&#146;s directors and officers in accordance with its
terms. In addition, certain directors may be covered by
directors and officers liability insurance policies purchased by
their respective employers.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The Registrant intends to enter into indemnification agreements
with each of its directors and executive officers. Under those
agreements, the Registrant will agree to indemnify each of these
individuals against claims arising out of events or occurrences
related to that individual&#146;s service as director, officer,
employee, agent or fiduciary of us or, at our request, any other
entity, to the fullest extent permitted by applicable law.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Reference is made to the form of Underwriting Agreement filed as
Exhibit&nbsp;1.1 hereto for provisions providing that the
Underwriters are obligated, under certain circumstances, to
indemnify the directors, certain officers and the controlling
persons of the Registrant against certain liabilities under the
Securities Act of 1933, as amended.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;15.</B></TD>
    <TD>
    <B><I>Recent Sales of Unregistered Securities.</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
In the three years prior to this filing, the Registrant has
issued unregistered securities as described below. None of the
transactions involved any underwriters, underwriting discounts
or commissions or any public offering, and the Registrant
believes that each transaction, if deemed to be a sale of a
security, was exempt from the registration requirements of the
Securities Act by virtue of Section&nbsp;4(2) thereof,
Regulation&nbsp;D promulgated thereunder, Rule&nbsp;144A
promulgated thereunder, Rule&nbsp;701 pursuant to compensatory
benefit plans and contracts relating to compensation as provided
under Rule&nbsp;701 or Regulation&nbsp;S for offerings of
securities outside of the United States. The recipients of
securities in each such transaction represented their intention
to acquire the securities for investment only and not with a
view to or for sale in connection with any distribution thereof,
such securities were restricted as to transfers and appropriate
legends were affixed to the share certificates and instruments
issued in such transactions.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
On March&nbsp;26, 2004, the Registrant issued $40,000,000
aggregate principal amount of 6.875%&nbsp;Senior Notes dues 2024
to Deutsche Asset Management, as initial purchaser. Banc of
America Securities LLC acted as private placement agent with
respect to the Senior Notes. The Senior Notes were sold pursuant
to the private placement exemption contained in
Section&nbsp;4(2) of the Securities Act and subsequently resold
by the initial purchaser pursuant to Rule&nbsp;144A promulgated
thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
From time to time between March&nbsp;31, 2001 and
December&nbsp;31, 2005, the Registrant issued common shares and
granted options pursuant to its 2001 Stock Option Plan for
Management Employees. These issuances were made in reliance on
Rule&nbsp;701 under the Securities Act. As of December&nbsp;31,
2005, options with respect to 57,900 common shares of the
Registrant were outstanding under this plan. In connection with
the amalgamation, each outstanding stock option will be
converted into an option to acquire common shares of the
amalgamated company and, after giving effect to the subdivision
of the Registrant&#146;s common shares described in
&#147;Reorganization Transactions,&#148; immediately prior to
the closing of this offering, the Registrant anticipates there
will
be &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stock
options outstanding under this plan with a weighted average
exercise price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">II-2

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<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;16.</B></TD>
    <TD>
    <B><I>Exhibits and Financial Statement Schedules.</I></B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(a)&nbsp;</TD>
    <TD align="left">
    <I>Exhibits</I></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description of Document</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Underwriting Agreement*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certificate of Incorporation and Memorandum of Association of
    RAM Holdings Ltd.*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Amended and Restated Bye-laws of RAM Holdings Ltd.*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Specimen Common Share Certificate*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Fiscal Agency Agreement dated as of March&nbsp;26, 2004 between
    RAM Holdings Ltd. and The Bank of New York, as fiscal agent</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    6.875%&nbsp;Senior Note, dated March&nbsp;26, 2004, from RAM
    Holdings Ltd. to Cede&nbsp;&#38; Co., for $40.0&nbsp;million</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Opinion of Conyers Dill&nbsp;&#38; Pearman*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>8</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Opinion of LeBoeuf, Lamb, Greene&nbsp;&#38; MacRae LLP, as to
    U.S.&nbsp;tax matters*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Amended and Restated Shareholders Agreement among the
    Registrant and each of the persons listed on Schedule A thereto*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Amalgamation Agreement between the Registrant and RAM
    Holdings&nbsp;II Ltd. *</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement, as amended as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2006 between the Registrant and Vernon M. Endo*&#134;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement, as amended as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2006 between the Registrant and Richard Lutenski*&#134;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement, dated as of June&nbsp;30, 2005 between the
    Registrant and David K. Steel*&#134;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement, as amended as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2006 between the Registrant and Mary Ellen Pavlovsky*&#134;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.7</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement, dated as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2006 between the Registrant and James P. Gerry*&#134;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.8</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    2000 Supplemental Retirement Plan&#134;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.9</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    2001 Stock Option Plan&#134;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.10</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Reserved</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.11</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Reserved</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.12</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Payment Agreement, dated as of June&nbsp;28, 2005 between the
    Registrant and James P. Gerry&#134;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.13</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Payment Agreement, dated as of June&nbsp;28, 2005 between the
    Registrant and Mary Ellen Pavlovsky&#134;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.14</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Indemnification Agreement entered into by the Registrant
    and its officers and directors*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.15</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Lease Agreement, dated January&nbsp;1, 2005 between Field Real
    Estate (Holdings) Limited and RAM Reinsurance Company Ltd.*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.16</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Credit Agreement, dated as of June&nbsp;22,
    2005, among RAM Reinsurance Company Ltd., various banks and
    Norddeutsche Landesbank Girozentrale, New York Branch, as agent</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.17</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Credit Agreement among RAM Reinsurance Company Ltd., various
    banks and Bayerische Landesbank, New York Branch, as agent</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.18</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Put Option Agreement dated as of December&nbsp;23, 2003 between
    RAM Reinsurance Company Ltd. and Blue Water Trust&nbsp;I</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.19</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certificate of Designation, Preferences and Rights of
    Class&nbsp;B Preference Shares of RAM Reinsurance Company Ltd.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>11</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Statement regarding computation of per share earnings*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>21</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Subsidiaries of the Registrant*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of PricewaterhouseCoopers (Bermuda)</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">II-3
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description of Document</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Conyers Dill&nbsp;&#38; Pearman (included in
    Exhibit&nbsp;5.1)*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of LeBoeuf, Lamb, Greene&nbsp;&#38; MacRae LLP (included
    in Exhibit&nbsp;8.1)*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>24</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Power of Attorney (included as part of the signature pages)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>99</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form&nbsp;F-N*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>99</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Audit Committee Charter</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>99</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Compensation Committee Charter</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>99</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Nominating and Governance Committee Charter</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>*&nbsp;</TD>
    <TD align="left">
    To be filed by amendment.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD>&#134;&nbsp;</TD>
    <TD align="left">
    Indicates management contract or compensatory plan.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B>(b)</B></TD>
    <TD>
    <B>Financial Statement Schedules</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Schedule&nbsp;III&nbsp;&#151; Supplementary Insurance Information
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
Schedule&nbsp;IV&nbsp;&#151; Reinsurance
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;17.</B></TD>
    <TD>
    <B><I>Undertakings</I></B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The undersigned Registrant hereby undertakes that:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    (1)&nbsp;For purposes of determining any liability under the
    Securities Act, the information omitted from the form of
    prospectus filed as part of this Registration Statement in
    reliance upon Rule&nbsp;430A and contained in the form of
    prospectus filed by the Registrant pursuant to
    Rule&nbsp;424(b)(1) or (4)&nbsp;or 497(h) under the Securities
    Act shall be deemed to be part of this Registration Statement as
    of the time it was declared effective.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    (2)&nbsp;For the purpose of determining any liability under the
    Securities Act, each post-effective amendment that contains a
    form of prospectus shall be deemed to be a new registration
    statement relating to the securities offered therein, and the
    offering of such securities at that time shall be deemed to be
    the initial bona fide offering thereof.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The undersigned Registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting
agreement certificates in such denominations and registered in
such names as required by the underwriters to permit prompt
delivery to each purchaser.
</DIV>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">II-4

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>SIGNATURES</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Hamilton, Bermuda, on
the 10th day of February, 2006.
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    RAM Holdings Ltd.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 48pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>By:&nbsp;</TD>
    <TD align="center">
    /s/ Vernon M. Endo</TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 3pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <DIV style="border-top: 1pt solid black; font-size: 1pt; margin-top: 2pt" align="left">&nbsp;</DIV></TD>
</TR>

<TR valign="top"  style="font-size: 10pt;color: #000000; background: #ffffff;">
    <TD>&nbsp;</TD>
    <TD align="left">
    Name:&nbsp;Vernon M. Endo</TD>
</TR>

<TR valign="top"  style="font-size: 10pt;color: #000000; background: #ffffff;">
    <TD>&nbsp;</TD>
    <TD align="left">
    Title:&nbsp;President and Chief Executive Officer</TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>POWER OF ATTORNEY</B>
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
We, the undersigned officers, directors and authorized
representatives of RAM Holdings Ltd., hereby severally
constitute and appoint Vernon M. Endo and Richard Lutenski, and
each of them, our true and lawful
<FONT style="white-space: nowrap">attorneys-in</FONT>-fact, with
full power of substitution and resubstitution, to sign for us
and in our names in the capacities indicated below, the
Registration Statement on
Form&nbsp;<FONT style="white-space: nowrap">S-1</FONT> filed
herewith and any and all pre-effective and post-effective
amendments to said Registration Statement, and any subsequent
Registration Statement for the same offering which may be filed
under Rule&nbsp;462(b), and generally to do all such things in
our names and on our behalf in our capacities as officers and
directors to enable RAM Holdings Ltd. to comply with the
provisions of the Securities Act of 1933, as amended, and all
requirements of the Securities and Exchange Commission, hereby
ratifying and confirming our signatures as they may be signed by
each of said
<FONT style="white-space: nowrap">attorney-in</FONT>-fact, or
his substitute or substitutes, to said Registration Statement
and any and all amendments thereto or to any subsequent
Registration Statement for the same offering which may be filed
under Rule&nbsp;462(b).
</DIV>

<DIV align="left" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the
following persons in the capacities indicated on the dates
indicated.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="17%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Date</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    /s/ Steven J. Tynan<BR>
    <HR size="1" noshade>Name:&nbsp;Steven J. Tynan</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chairman of the Board; Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;10, 2006</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    /s/ Vernon M. Endo<BR>
    <HR size="1" noshade>Name: Vernon M. Endo</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    President and Chief Executive Officer and Director (principal
    executive officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;10, 2006</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    /s/ Richard Lutenski<BR>
    <HR size="1" noshade>Name: Richard Lutenski</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chief Financial Officer (principal financial officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;10, 2006</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    /s/ Dana Williams<BR>
    <HR size="1" noshade>Name: Dana Williams</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Controller (principal accounting officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    January&nbsp;30, 2006</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    /s/ Keith W. Abell<BR>
    <HR size="1" noshade>Name: Keith W. Abell</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;10, 2006</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    /s/ Edward F. Bader<BR>
    <HR size="1" noshade>Name: Edward F. Bader</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;10, 2006</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">II-5

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="17%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Date</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    /s/ Victor J. Bacigalupi<BR>
    <HR size="1" noshade>Name: Victor J. Bacigalupi</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;10, 2006</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    /s/ David L. Boyle<BR>
    <HR size="1" noshade>Name: David L. Boyle</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;10, 2006</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    /s/ Daniel C. Lukas<BR>
    <HR size="1" noshade>Name: Daniel C. Lukas</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;7, 2006</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    /s/ Michael J. Miller<BR>
    <HR size="1" noshade>Name: Michael J. Miller</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;9, 2006</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    /s/ Arthur P. Slepian<BR>
    <HR size="1" noshade>Name: Arthur P. Slepian</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;10, 2006</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    /s/ Steven S. Skalicky<BR>
    <HR size="1" noshade>Name: Steven S. Skalicky</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;9, 2006</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    /s/ Dirk A. Stuurop<BR>
    <HR size="1" noshade>Name: Dirk A. Stuurop</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;10, 2006</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">II-6
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="17%">&nbsp;</TD>
</TR>


<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    /s/ Steven J. Tynan<BR>
    <HR size="1" noshade>(authorized representative in the United
    States)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;10, 2006</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">II-7
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Financial Statement Schedules</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Schedule&nbsp;III&nbsp;&#151; Supplementary Insurance
Information</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>(in millions of U.S.&nbsp;dollars)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="26%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>For the Year Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>As of December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Loss</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Deferred</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Unearned</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Losses and</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Net</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>and Loss</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Other</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Acquisition</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Premium</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Loss Expense</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Written</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Net Earned</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Adjustment</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Acquisition</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Operating</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Costs</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Reserves</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Reserve</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Premiums</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Premiums</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Expenses</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Costs</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Expenses</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>58.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>140.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>66.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>34.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11.0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    December&nbsp;31, 2003</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>120.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    December&nbsp;31, 2002</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>77.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>36.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.4</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>Schedule&nbsp;IV&nbsp;&#151; Reinsurance</B>
</DIV>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">
<B>Earned Premiums (in millions of U.S.&nbsp;dollars):</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Total Assumed</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>For the Year</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Type of Business</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Financial Guaranty</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>34.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>25.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17.6</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt;color: #000000; background: #ffffff;">II-8
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="center" style="font-size: 10pt;color: #000000; background: #ffffff; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<B>EXHIBIT INDEX</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description of Document</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Underwriting Agreement*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certificate of Incorporation and Memorandum of Association of
    RAM Holdings Ltd.*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Amended and Restated Bye-laws of RAM Holdings Ltd.*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Specimen Common Share Certificate*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Fiscal Agency Agreement dated as of March&nbsp;26, 2004 between
    RAM Holdings Ltd. and The Bank of New York, as fiscal agent</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    6.875%&nbsp;Senior Note, dated March&nbsp;26, 2004, from RAM
    Holdings Ltd. to Cede&nbsp;&#38; Co., for $40.0&nbsp;million</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Opinion of Conyers Dill&nbsp;&#38; Pearman*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>8</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Opinion of LeBoeuf, Lamb, Greene&nbsp;&#38; MacRae LLP, as to
    U.S.&nbsp;tax matters*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Amended and Restated Shareholders Agreement among the
    Registrant and each of the persons listed on Schedule A thereto*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Amalgamation Agreement between the Registrant and RAM
    Holdings&nbsp;II Ltd. *</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement, as amended as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2006 between the Registrant and Vernon M. Endo*&#134;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement, as amended as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2006 between the Registrant and Richard Lutenski*&#134;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement, dated as of June&nbsp;30, 2005 between the
    Registrant and David K. Steel*&#134;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement, as amended as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2006 between the Registrant and Mary Ellen Pavlovsky*&#134;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.7</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement, dated as
    of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
    2006 between the Registrant and James P. Gerry*&#134;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.8</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    2000 Supplemental Retirement Plan&#134;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.9</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    2001 Stock Option Plan&#134;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.10</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Reserved</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.11</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Reserved</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.12</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Payment Agreement, dated as of June&nbsp;28, 2005 between the
    Registrant and James P. Gerry&#134;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.13</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Payment Agreement, dated as of June&nbsp;28, 2005 between the
    Registrant and Mary Ellen Pavlovsky&#134;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.14</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Indemnification Agreement entered into by the Registrant
    and its officers and directors*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.15</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Lease Agreement, dated January&nbsp;1, 2005 between Field Real
    Estate (Holdings) Limited and RAM Reinsurance Company Ltd.*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.16</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Credit Agreement, dated as of June&nbsp;22,
    2005, among RAM Reinsurance Company Ltd., various banks and
    Norddeutsche Landesbank Girozentrale, New York Branch, as agent</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.17</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Credit Agreement among RAM Reinsurance Company Ltd., various
    banks and Bayerische Landesbank, New York Branch, as agent</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.18</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Put Option Agreement dated as of December&nbsp;23, 2003 between
    RAM Reinsurance Company Ltd. and Blue Water Trust&nbsp;I</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.19</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certificate of Designation, Preferences and Rights of
    Class&nbsp;B Preference Shares of RAM Reinsurance Company Ltd.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>11</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Statement regarding computation of per share earnings*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>21</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Subsidiaries of the Registrant*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of PricewaterhouseCoopers (Bermuda)</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Conyers Dill&nbsp;&#38; Pearman (included in
    Exhibit&nbsp;5.1)*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of LeBoeuf, Lamb, Greene&nbsp;&#38; MacRae LLP (included
    in Exhibit&nbsp;8.1)*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>24</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Power of Attorney (included as part of the signature pages)</TD>
</TR>

</TABLE>
</CENTER>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description of Document</B></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>99</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form&nbsp;F-N*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>99</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Audit Committee Charter</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>99</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Compensation Committee Charter</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>99</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Nominating and Governance Committee Charter</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;color: #000000; background: #ffffff; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; ">
<DIV style="width: 18%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD>*&nbsp;</TD>
    <TD align="left">
    To be filed by amendment.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;color: #000000; background: #ffffff;">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD>&#134;&nbsp;</TD>
    <TD align="left">
    Indicates management contract or compensatory plan.</TD>
</TR>

</TABLE>
</BODY>
</HTML>
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S-1
Table of Contents
As filed with the Securities and Exchange Commission on
February 10, 2006.
Registration
No.
333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
RAM Holdings Ltd.
(Exact name of Registrant as specified in its charter)
Bermuda
6351
Not Applicable
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification No.)
RAM Re House
46 Reid Street
Hamilton HM 12 Bermuda
Telephone: (441) 296-6501
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive
offices)
CT Corporation System
111 Eighth Avenue, 13th Floor
New York, New York 10011
Telephone: (212) 894-8700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Richard Lutenski
Chief Financial Officer
RAM Holdings Ltd.
RAM Re House
46 Reid Street
Hamilton HM 12 Bermuda
(441) 296-6501
Michael Groll, Esq.
Sheri E. Bloomberg, Esq.
LeBoeuf, Lamb, Greene & MacRae LLP
125 West 55th Street
New York, NY 10019-5389
(212) 424-8000
Michael J. Schiavone, Esq.
Shearman & Sterling LLP
599 Lexington Avenue
New York, NY 10022-6069
(212) 848-4000
Approximate date of commencement of the proposed sale of the
securities to the public:
As soon as practicable after the
Registration Statement becomes effective.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, check the
following
box.
o
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering.
o
If this form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If this form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
CALCULATION OF REGISTRATION FEE
Title of Each Class of
Proposed Maximum Aggregate
Amount of
Securities to be Registered
Offering Price(1)(2)
Registration Fee
Common Shares
$250,000,000
$26,750
(1)
Estimated solely for the purpose of calculating the registration
    fee pursuant to Rule 457 under the Securities Act of 1933,
    as amended.
(2)
Includes shares subject to the underwriters' over-allotment
    option.
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933, or until the Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
Table of Contents
The information in
this prospectus is not complete and may be changed. We may not
sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any
jurisdiction where the offer is not permitted.
SUBJECT TO COMPLETION
Preliminary Prospectus
dated                     ,
2006
PROSPECTUS
Shares
RAM Holdings Ltd.
Common Shares
RAM Holdings Ltd. and the selling shareholders are
offering                      shares
and                      shares,
respectively, of our common shares in an underwritten offering.
This is our initial public offering and no public market exists
for our common shares. We anticipate that the initial public
offering price will be between
$          and
$           per
share. After the offering, the market price for our common
shares may be outside this range.
We intend to apply to list our common shares on the New York
Stock Exchange under the symbol
"               ."
Investing in our common shares involves risks that are
described in the "Risk Factors" section beginning on
page 9 of this prospectus.
Per Share
Total
Public offering price
$
$
Underwriting discounts
$
$
Proceeds, before expenses, to us
$
$
Proceeds, before expenses, to the Selling Shareholders
$
$
To the extent the underwriters sell more
than                      shares,
the underwriters have the option to purchase up to an
additional                     common
shares from the selling shareholders at the initial public
offering price less the underwriting discount. The underwriters
can exercise this right at any time within 30 days after
the offering.
None of the Securities and Exchange Commission, any
U.S. state securities commission, the Minister of Finance
and the Registrar of Companies in Bermuda or the Bermuda
Monetary Authority have approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The shares will be ready for delivery on or
about                     ,
2006.
Joint Book-Running Managers
Banc of America Securities LLC
Merrill Lynch & Co.
Keefe, Bruyette & Woods
The date of this prospectus
is                     ,
2006
TABLE OF CONTENTS
Page
Prospectus Summary
1
Risk Factors
9
Forward-Looking Statements
26
Reorganization Transactions
27
Use of Proceeds
27
Dividend Policy
27
Capitalization
28
Dilution
29
Selected Combined Financial Information
30
Management's Discussion and Analysis
    of Financial Condition and Results of Operations
31
Industry Overview
47
Business
51
Management
71
Principal and Selling Shareholders
85
Certain Relationships and Related
    Transactions
88
Material Tax Considerations
89
ERISA Considerations
98
Description of Share Capital
100
Shares Eligible for Future Sale
110
Underwriting
112
Legal Matters
118
Experts
118
Where You Can Find More Information
118
Enforceability of Civil Liabilities Under
    United States Federal Securities Laws and Other Matters
119
Glossary of Selected Reinsurance,
    Insurance, Investment and Other Terms
120
Index to Financial Statements
F-1
EX-4.2: FISCAL AGENCY AGREEMENT
EX-4.3: 6.875% SENIOR NOTE
EX-10.8: 2000 SUPPLEMENTAL RETIREMENT PLAN
EX-10.9: 2001 STOCK OPTION PLAN
EX-10.12: PAYMENT AGREEMENT
EX-10.13: PAYMENT AGREEMENT
EX-10.16: AMENDED AND RESTATED CREDIT AGREEMENT
EX-10.17: CREDIT AGREEMENT
EX-10.18: PUT OPTION AGREEMENT
EX-10.19: CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF CLASS B PREFERENCE SHARES
EX-23.1: CONSENT OF PRICEWATERHOUSECOOPERS (BERMUDA)
EX-99.2: AUDIT COMMITTEE CHARTER
EX-99.3: COMPENSATION COMMITTEE CHARTER
EX-99.4: NOMINATING AND GOVERNANCE COMMITTEE CHARTER
Until                     ,
2006, which is the 25th day after the date of this
prospectus, all dealers that buy, sell or trade our common
shares, whether or not participating in this offering, may be
required to deliver a prospectus. This is in addition to the
dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.
You should rely only on the information contained in this
prospectus. We have not, and the underwriters have not,
authorized any other person to provide you with information that
is different from that contained in this prospectus, including
any information included on our website. We are offering to sell
and seeking offers to buy these securities only in jurisdictions
where offers and sales are permitted. The information contained
in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this
prospectus or of any sale of common shares.
Common shares may be offered or sold in Bermuda only in
compliance with the provisions of the Investment Business Act of
2003 of Bermuda, which regulates the sale of securities in
Bermuda. In addition, the Bermuda Monetary Authority, which we
refer to as the BMA, must approve all issuances and transfers of
shares of a Bermuda exempted company. We intend to apply to the
BMA for its permission for the issue and subsequent transfer of
the common shares being offered pursuant to this prospectus, as
long as the common shares are listed on the New York Stock
Exchange, to and among persons who are resident and non-resident
of Bermuda for exchange control purposes. In addition, we will
deliver to and file a copy of this prospectus with the Registrar
of Companies in Bermuda in accordance with Bermuda law. The BMA
and the Registrar of Companies accept no responsibility for the
financial soundness of any proposal or for the correctness of
any of the statements made or opinions expressed in this
prospectus.
i
Table of Contents
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in
this prospectus and may not contain all of the information that
may be important to you. In this prospectus, references to the
"Company," "we," "us" or
"our" refer to RAM Holdings Ltd. and/or RAM
Reinsurance Company Ltd., its wholly-owned Bermuda subsidiary.
References to "RAM Re" refer solely to RAM Reinsurance
Company Ltd. and references to "RAM Holdings" refer
solely to RAM Holdings Ltd. References in this prospectus to
"dollars" or "$" are to the lawful currency
of the United States, unless the context otherwise requires.
Unless otherwise stated, all figures in this prospectus assume
a  for 1 subdivision of our common shares and the issuance
of bonus shares on
a           for
1 basis to be effected prior to the closing of this offering and
no exercise of the underwriters' over-allotment option.
Unless otherwise stated, this prospectus also assumes that the
amalgamation between RAM Holdings and RAM Holdings II Ltd.,
which we refer to as Holdings II, described under the
caption "Reorganization Transactions" has occurred.
Although this summary contains important information about our
Company and this offering, you should read it together with the
more detailed information and our financial statements and the
notes to those statements appearing elsewhere in this
prospectus. For your convenience, we have provided a Glossary of
Selected Reinsurance, Insurance, Investment and Other Terms,
which is located at the end of this prospectus.
RAM Holdings Ltd.
Our Company
RAM Holdings was founded in 1998 as a Bermuda-based provider of
financial guaranty reinsurance. We conduct substantially all of
our operations through our wholly-owned subsidiary, RAM
Reinsurance Company Ltd. We provide financial guaranty
reinsurance for public finance and structured finance
obligations, covering risks in both the United States and
international markets. We are currently the only financial
guaranty reinsurer that is both rated "AAA" by
Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc., which we refer to as
Standard & Poor's, and focused solely on providing
reinsurance to third parties.
We believe our business is characterized by low loss experience
and relatively predictable and stable earned premiums. We have
low loss experience because we operate in an industry in which
financial guaranty insurance is underwritten to a remote-loss
standard. We have relatively predictable earned premiums because
our business model allows us to build a large unearned premium
reserve ($163.8 million of unearned premium compared to
$319.3 million of equity as determined in accordance with
U.S. generally accepted accounting principles, or
U.S. GAAP, as of September 30, 2005) that is gradually
earned as revenue over a relatively long time period which for
some exposures can extend to 20 years or more.
Our business model is predicated on specialization, in that our
financial resources are dedicated exclusively to the financial
guaranty reinsurance business. We do not use our capital to
compete with our customers in the primary financial guaranty
insurance market. Key factors supporting our business model
include: we are focused on the well-established municipal bond
and asset securitization markets, we underwrite reinsurance that
is believed to have a remote risk of loss, and we derive a
significant percentage of revenues from net investment income on
high-quality investments. We believe that our customer-focused
strategy and our demonstrated successes, as well as the limited
number of highly-rated competitors, provide us with a
competitive advantage that will allow us to continue to grow our
business.
With our focused business strategy, we have improved our
operating results over time. Our new business production (gross
written premiums) has increased at a compound annual growth rate
of nearly 33% from 2000 through year-end 2004, and has grown
over 15% for the nine months ended on September 30, 2005
over the comparable 2004 period. Our unearned premium reserve
has increased from $45.6 million at year-end 2000 to
$140.0 million at year-end 2004, representing a 32%
compound annual growth rate, and was $163.8 million as of
September 30, 2005.
1
Table of Contents
As of the date of this prospectus, RAM Re had a financial
strength rating of "AAA" by Standard &
Poor's and "Aa3" by Moody's Investors
Service, Inc., which we refer to as Moody's
.
Financial strength ratings are an important factor in
establishing our competitive position in the financial guaranty
reinsurance markets. The objective of these ratings is to
provide an independent opinion of our financial strength and our
ability to meet ongoing obligations to ceding companies. In
addition, the credit received by the ceding companies from the
rating agencies for ceding insured obligations is primarily
based upon the ratings of their reinsurers.
Our Products and Industry
Financial guaranty insurance provides an unconditional and
irrevocable guarantee which protects the holder of a financial
obligation against non-payment of principal and interest when
due. Unlike other forms of insurance, financial guaranty
insurance is underwritten to a remote-loss standard, meaning
that risks are insured only if an insurer expects that no loss
will occur during the term of the policy.
Both issuers and investors benefit from financial guaranty
insurance. Issuers benefit when the insurance has the effect of
lowering an issuer's cost of borrowing because the
insurance premium is less than the value of the spread between
the yield on the insured obligation (carrying the credit rating
of the insurer) and the yield on the uninsured obligation.
Financial guaranty insurance also increases the marketability of
obligations issued by infrequent or unknown issuers or
obligations with complex structures. Investors benefit from
increased liquidity in the secondary market, reduced exposure to
price volatility caused by changes in the credit quality of the
underlying insured issue, and added protection against a
potential loss in the event that the obligor defaults on its
obligation.
Financial guaranty insurance is generally provided for public
finance obligations and structured finance obligations. Public
finance obligations consist primarily of debt obligations issued
by or on behalf of states or other governmental entities or
their political subdivisions (counties, cities, towns and
villages, utility districts, public housing and transportation
authorities), other public and quasi-public entities (including
public universities and not-for-profit hospitals, and
non-U.S.
sovereigns
and their political subdivisions), private universities,
hospitals and investor-owned utilities, or IOUs.
Structured finance obligations are generally securities backed
by pools of assets such as residential mortgage loans, consumer
or trade receivables, securities, short-term bank deposits or
other assets having a specified cash flow or market value which
are generally held by a special purpose issuing entity.
Financial guaranty reinsurance represents our obligation, in
consideration of premiums paid to us, to indemnify an insurance
company, the "primary insurer," against the portion of
any loss which the primary insurer may sustain under that part
of a financial guaranty policy which it has ceded to us.
Our Customers
Our customers are the seven primary monoline financial guaranty
insurers, whom we refer to as the primary insurers. The four
largest primary insurers are MBIA Insurance Corporation, or
MBIA, Financial Security Assurance Inc., or FSA, Financial
Guaranty Insurance Company, or FGIC, and Ambac Assurance
Corporation, or Ambac, representing a majority of the financial
guaranty industry's capitalization and insurance in force.
Other primary insurers include CDC IXIS Financial Guaranty North
America, Inc., or CIFG, XL Capital Assurance Inc., or XLCA, and
Assured Guaranty Corp., or Assured Guaranty, who compete
directly with the four major primary insurers. As of
September 30, 2005, we had quota share reinsurance treaties
in place with Ambac, FSA and MBIA. Under our quota share
reinsurance treaties, our customers are required to cede, and we
are required to assume, specific obligations underwritten by our
customers over a period of time, typically one year. For the
nine months ended September 30, 2005, approximately 85% of
our written premiums were derived from these three ceding
companies under our treaties. As of September 30, 2005, we
also had facultative arrangements with each of the seven
above-mentioned primary insurers. In facultative transactions we
assume, and the primary insurer cedes, part or all of one or
more specific financial guarantees on a case-by-case basis.
Under our
2
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facultative arrangements, we have the ability to accept or
reject individual transactions submitted to us by our customers.
Current Industry Conditions
Several trends in the financial guaranty reinsurance business
have emerged that should provide us with notable growth
opportunities. Underwriting capacity, meaning the
U.S. based statutory capital available for financial
guaranty reinsurance, is more limited now than it was in 2002,
and we believe such capacity is not likely to increase in the
immediate future. Many of the large multi-line insurance
companies that began participating in the financial guaranty
reinsurance market in the 1990s have exited the market in order
to refocus on their traditional lines of business. The exit
strategy of multi-line insurance companies has been driven by
favorable operating developments in their core property-casualty
insurance markets and by rating agency downgrades which preclude
multi-line companies from serving as an economic source of
financial guaranty reinsurance. The rating agency criteria for
financial guaranty reinsurance companies have also become more
stringent, making it more difficult for new competitors to enter
the market.
Primarily as a result of two multi-line reinsurers exiting the
financial guaranty reinsurance market without the replacement of
additional reinsurance capacity, the par value of insurance
ceded by the "AAA"-rated primary insurers (MBIA, FSA,
FGIC, Ambac, CIFG and XLCA) declined from approximately
$70.8 billion for the year ended December 31, 2002 to
approximately $46.0 billion in 2003. In 2004 and the first
nine months of 2005, activity began to recover and par value
ceded by the "AAA"-rated primary insurers increased to
$51.6 billion in 2004 and was approximately
$43.1 billion in the nine months ending September 30,
2005.
Our Competitive Strengths
We believe certain characteristics distinguish us from our
competitors and provide opportunities for growth, including:
•
Strong Financial Strength Ratings.
Our operating
    subsidiary, RAM Re, has financial strength ratings of
    "AAA" from Standard & Poor's and
    "Aa3" from Moody's. We believe these ratings are
    highly attractive relative to non-"AAA"-rated
    reinsurance sources and provide important capital benefits to
    primary insurers.
•
Unique Business Model.
We are currently the only
    "AAA"-rated financial guaranty reinsurer focused
    solely on providing financial guaranty reinsurance to third
    parties. By providing dedicated reinsurance capacity, we have
    been able to increase par outstanding by a compound annual
    growth rate of 22.4% since 2000 through year-end 2004.
•
Capacity for Operating Efficiencies.
We have decreased
    our operating expense ratio from 33.1% in 2000 to 29.9% for the
    nine months ended September 30, 2005. In the future, we
    believe we can continue to enhance our operating margins by
    continuing to increase our revenue base without significantly
    increasing our infrastructure and staffing.
•
Focused Treaty-based Business Mix.
For the nine months
    ended September 30, 2005, approximately 85% of our gross
    written premiums were sourced from treaty business that was
    derived from long-standing reinsurance relationships with three
    ceding companies. Our emphasis on treaties represents a stable
    source of business that can be conducted efficiently.
•
Experienced Management Team.
Our management team has an
    average of 11.5 years of experience in the financial
    guaranty industry. Additionally, our management has broad
    experience in the industry, with most having previously worked
    for the primary insurers in the financial guaranty industry.
3
Table of Contents
•
Bermuda Domicile.
As a Bermuda company, we are not
    subject to corporate income tax. We believe that our Bermuda
    domicile provides advantages over our non-Bermuda domiciled
    competitors who are subject to corporate income tax.
Our Business Strategy
Our corporate objective is to build shareholder value by
increasing shareholders' equity through stable and
high-quality earnings growth. We intend to achieve this
objective with the following strategies:
•
Maintaining our Financial Strength Ratings.
We intend to
    underwrite business and invest our portfolio in a manner
    consistent with maintaining our current ratings in order to
    maximize the benefits of our reinsurance products for our
    customers.
•
Achieving Attractive Risk-Adjusted Returns on Capital.
We
    strive to maintain an efficient capital base and to use a
    disciplined underwriting approach to achieve high, risk-adjusted
    returns on capital and to promote optimal diversification.
•
Enhancing Operating Margins.
We intend to continue to
    grow our treaty-based revenue without significantly increasing
    our infrastructure and staffing, which we believe will reduce
    our expense ratio over time.
•
Expanding Market Share.
We plan to continue to increase
    our share of existing treaties, establish new treaties and
    selectively increase our facultative underwriting for the
    "AAA"-rated primary insurers in order to selectively
    expand our market share.
•
Managing Risk of our Investment Portfolio.
We plan to
    continue to manage invested assets with the goal of preserving
    principal while providing a stable stream of investment income
    and controlling market risk.
Risks Relating to our Company
As part of your evaluation of our Company, you should take into
account the risks relating to our Company, which include:
•
Possibility of Negative Ratings Action.
If
    Standard & Poor's or Moody's places RAM Re on
    credit watch or downgrades RAM Re's financial strength
    ratings, it could have a material adverse effect on our ability
    to compete and would significantly decrease the value of the
    reinsurance we provide.
•
Dependence on a Small Number of Customers.
Because we
    derive substantially all of our revenues from premiums ceded by
    the largest primary financial guaranty insurers, any significant
    reduction in premiums ceded by one or more of these primary
    insurers could have a material adverse effect on our financial
    condition and results of operations.
•
Risks Associated with Reinsurance Underwriting.
We do not
    separately evaluate the individual risks assumed under the
    treaties we maintain with our customers. We are subject to the
    possibility that the primary insurers may not have evaluated
    adequately the risks or may have selected the risks they choose
    to reinsure with us in a manner adverse to our interests such
    that the premiums we receive may not sufficiently compensate us
    for the risks we assume.
•
Loss of Key Employees.
If we were to lose the services of
    members of our management team, our business could be adversely
    affected.
•
Business Subject to General Economic and Capital Markets
    Factors.
Our business, and the risks associated with our
    business, depend in large measure on general economic conditions
    and capital markets activities that affect market demand for
    financial guaranty insurance and income earned on our investment
    portfolio, including the potential negative impact of recessions
    and business failures as well as any narrowing of the credit
    spread between insured and uninsured obligations.
4
Table of Contents
•
Adequacy of Loss Reserves.
We establish estimated
    liabilities, or loss reserves, to reflect the estimated cost of
    claims incurred that we will ultimately be required to pay in
    respect of reinsurance we have written. If our loss reserves at
    any time are determined to be inadequate, we would be required
    to increase loss reserves at the time of such determination.
    This could cause a material increase in our liabilities and a
    reduction in our profitability, or possibly an operating loss
    and reduction of capital.
•
Taxation.
We manage our business so that we and RAM Re
    should not be subject to U.S. federal income tax. However,
    we cannot be certain that the U.S. Internal Revenue
    Service, which we refer to as the IRS, will not contend
    successfully that we are or RAM Re is engaged in a trade or
    business in the United States and thus subject to
    U.S. federal income taxation.
For more information about these and other risks relating to our
Company, see "Risk Factors" beginning on page 9.
You should carefully consider these risk factors together with
all the other information included in this prospectus.
Organization; Reorganization Transactions
RAM Holdings and Holdings II were each incorporated on
January 28, 1998 under the laws of Bermuda solely for the
purpose of becoming a holding company for RAM Re. RAM Re was
incorporated on January 28, 1998 under the laws of Bermuda
as an entity through which we conduct our financial guaranty
reinsurance business.
RAM Holdings and Holdings II, the owners of all of the
voting and non-voting common shares of RAM Re, will enter into
an amalgamation agreement (merger agreement) pursuant to which
the two companies will become amalgamated
(merged) effective immediately prior to the completion of
this offering. The shareholders of RAM Holdings and
Holdings II will approve the amalgamation agreement to be
effective shortly before the completion of this offering. Upon
the completion of the amalgamation, all of the shares of RAM Re
will be held by RAM Holdings as the surviving entity and RAM
Holdings will effect
a           for
1 subdivision of our common shares and the issuance of bonus
shares on
a           for 1
basis. Unless otherwise specifically stated, this prospectus
assumes the amalgamation, the share subdivision and the issuance
of bonus shares have occurred.
Principal Executive Offices
Our principal executive offices are located at RAM Re House, 46
Reid Street, Hamilton HM 12 Bermuda and our telephone number at
that location is (441) 296-6501. Our website is located at
www.ramre.bm.
5
Table of Contents
The Offering
Common shares offered by us
shares
Common shares offered by selling shareholders
shares
Common shares outstanding after this offering(1)
shares
Use of proceeds
We estimate that our net proceeds from the offering of our
    common shares, after deducting the underwriters' discount
    and estimated offering expenses payable by us, will be
    approximately
    $           million.
    We presently intend to contribute substantially all of the net
    proceeds of this offering received by us to RAM Re, to increase
    its capital and surplus in order to increase its underwriting
    capacity.
We will not receive any proceeds from the sale of common shares
    by the selling shareholders.
Dividend policy
We do not currently intend to pay dividends on our common
    shares. See "Dividend Policy."
Voting limitation
Our bye-laws contain a provision limiting the voting rights of
    any shareholder, if the shares held by such shareholder are
    treated as "controlled shares" (as defined below in
    "Risks Related to Taxation — Holders of 10% or
    more of our shares may be subject to U.S. income taxation
    under the controlled foreign corporation rules") of any
    "U.S. Person" (as defined below in "Risks
    Related to Taxation — Holders of 10% or more of our
    shares may be subject to U.S. income taxation under the
    controlled foreign corporation rules") other than The PMI
    Group, Inc., or PMI, and such controlled shares constitute more
    than 9.9% of the votes conferred by our issued shares. In
    addition, at any time that the controlled shares of PMI
    constitute (i) more than 9.9% of the voting power conferred
    by our issued shares and (ii) 24.5% or more of either the
    voting power or value of our issued shares, the voting rights
    with respect to the controlled shares owned by PMI will be
    limited to a voting power of 9.9%.
In the event the above voting limitations must be applied as
    described above, the voting limitation shall apply to PMI only
    after the limitation has been applied to all other shareholders
    whose votes are subject to reduction and the voting power held
    by PMI shall not be reduced to below 9.9% by operation of these
    provisions. It is possible that as a result of the operation of
    these provisions, certain other investors may have their voting
    powers
1 The number of shares shown to be outstanding after this
offering assumes the completion of the amalgamation and
the  for 1 subdivision of our common shares and the
issuance of bonus shares on
a           for 1
basis described in "Reorganization Transactions" and
excludes            common
shares that may be issued pursuant to the underwriters'
over-allotment option and
excludes            common
shares that may be issued pursuant to outstanding options and
shares reserved for issuance under our employee benefit plans
described in "Management — Long-Term Employment
Benefits."
6
Table of Contents
significantly limited. See "Description of Share
Capital — Limitation on Voting Rights."
Transfer restrictions
Our shares are subject to transfer, issuance and repurchase
    restrictions to avoid a non-de minimis adverse tax, legal or
    regulatory consequence to us, any direct or indirect holder of
    our shares or its affiliates. See "Description of Share
    Capital — Restrictions on Transfer of Common
    Shares."
Proposed NYSE symbol
Risk factors
See "Risk Factors" and other information included in
    this prospectus for a discussion of factors that should be
    considered carefully before deciding whether to invest in our
    common shares.
7
Table of Contents
Summary Combined Financial Information
The following tables present our historical financial and
operating data as of the dates and for the periods indicated. We
derived the selected combined data as of and for each of the
three years in the period ended December 31, 2004, from our
audited combined financial statements, which have been prepared
in accordance with U.S. GAAP and appear elsewhere in this
prospectus. We derived the selected combined data as of and for
each of the two years in the period ended December 31,
2001, from our audited combined financial statements, which have
been prepared in accordance with U.S. GAAP and which are
not included in this prospectus. We derived the summary combined
data as of and for the nine months ended September 30, 2005
from our unaudited combined financial statements. Our historical
results of operations are not necessarily indicative of the
results to be expected for any future periods and the results
for the nine months ended September 30, 2005 should not be
considered indicative of results expected for the full year. You
should read this summary in conjunction with
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial
statements and related notes appearing elsewhere in this
prospectus.
As of and for the
Nine Months Ended
September 30,
As of and for the Year Ended December 31,
2005
2004
2004
2003
2002
2001
2000
(Unaudited)
(Dollars in thousands, except as indicated otherwise)
Statement of Operations Data:
Gross written premiums
$
55,220
$
48,212
$
66,057
$
67,880
$
36,205
$
26,544
$
21,346
Net earned premiums
31,425
27,351
34,721
25,543
17,561
12,898
9,327
Net investment income
12,864
12,006
16,824
13,373
11,546
11,121
10,021
Net realized investment (losses) gains
(1,137
)
560
536
1,097
2,927
535
252
Net unrealized (losses) gains on credit derivatives
(2,544
)
2,190
2,757
456
(613
)
—
—
Total revenues
40,608
42,107
54,838
40,469
31,422
24,554
19,600
Loss and loss adjustment expenses
3,104
2,461
3,579
3,994
6,447
910
653
Acquisition expenses
11,571
10,229
13,387
10,223
7,363
5,688
3,927
Operating expenses
9,391
8,174
11,032
5,042
3,360
2,926
3,087
Interest expense
2,057
1,413
2,106
—
—
—
—
Total expenses
26,123
22,278
30,104
19,259
17,170
9,524
7,667
Net income
14,486
19,829
24,734
21,210
14,252
15,030
11,933
Balance Sheet Data:
Investments and cash
$
465,193
$
428,671
$
440,992
$
356,933
$
226,161
$
195,141
$
166,755
Deferred acquisition costs
65,777
55,881
58,653
53,017
38,712
30,387
22,976
Total assets
540,749
542,609
510,798
426,260
277,028
234,646
201,253
Losses and loss expense reserve
12,274
15,023
15,493
13,821
10,401
4,382
3,529
Unearned premiums
163,837
129,567
140,043
120,182
77,845
59,201
45,555
Long-term debt
40,000
40,000
40,000
—
—
—
—
Total liabilities
221,447
235,102
199,293
137,005
91,537
65,604
50,977
Accumulated other comprehensive (loss) income
(2,954
)
3,507
2,787
4,659
11,002
4,733
998
Shareholders' equity
319,302
307,507
311,505
289,255
185,490
169,042
150,276
Selected Ratios (Based on U.S. GAAP Income Statement
    Data)(1):
Loss and loss adjustment expense ratio(2)
9.9
%
9.0
%
10.3
%
15.6
%
36.7
%
7.1
%
7.0
%
Expense ratio(3)
66.7
%
67.3
%
70.4
%
59.7
%
61.0
%
66.8
%
75.21
%
Combined ratio
76.6
%
76.3
%
80.6
%
75.4
%
97.8
%
73.8
%
82.2
%
Other Data — Financial Guaranty:
Par outstanding (in millions)
$
26,702
$
20,708
$
22,154
$
19,773
$
15,860
$
12,803
$
9,888
U.S. Basis Statutory Capital (in millions)(4)
$
277.0
$
277.3
$
274.6
$
230.3
$
135.3
$
131.4
$
123.0
(1)
These ratios are used by management in order to compare our
    performance to benchmarks commonly used by rating agencies and
    analysts that monitor the insurance industry.
(2)
Calculated by dividing loss and loss adjustment expenses by net
    earned premiums.
(3)
Calculated by dividing the sum of acquisition expenses and
    operating expenses by net earned premiums.
(4)
Our estimate of the sum of U.S. basis policyholder surplus
    and contingency reserve, as RAM Re files Bermuda statutory
    financial statements.
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RISK FACTORS
An investment in our common shares involves a number of
risks. You should carefully consider the following information
about these risks, together with the other information contained
in this prospectus, before investing in our common shares. The
risks and uncertainties described below are not the only ones we
face. However, these are the risks our management believes are
material. Additional risks not presently known to us or that we
currently deem immaterial may also impair our business, results
of operations or financial condition. Any of the risks described
below could result in a significant or material adverse effect
on our results of operations or financial condition, and a
corresponding decline in the market price of our common shares.
You could lose all or part of your investment. This prospectus
also contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from
those anticipated in the forward-looking statements as a result
of certain factors, including the risks described below and
elsewhere in this prospectus. See "Forward-Looking
Statements."
Risks Related to Our Company
An adverse rating action concerning RAM Re's ratings
    could have a material adverse effect on our ability to compete
    in the financial guaranty reinsurance industry and would
    significantly decrease the value of the reinsurance we
    provide.
RAM Re currently has a financial strength rating of
"AAA" by Standard & Poor's and a
financial strength rating of "Aa3" by Moody's, in
each case with a stable outlook. A downgrade of either of these
ratings or a decrease in the credit given for our reinsurance
would negatively affect the value of our reinsurance. For
example, under Standard & Poor's current
guidelines for assigning credit to reinsurance, if RAM Re's
rating were downgraded from "AAA" to "AA,"
there would be a 30% decrease in the benefits financial
guarantors receive from ceding business to us based on
Standard & Poor's model. In addition to potential
negative effects on future business, a downgrade of the ratings
assigned to RAM Re by either rating agency would harm our
competitive position in the reinsurance industry. If RAM Re
experienced a rating downgrade, the primary insurers would have
the ability under our contracts with them to either reprice
existing business through increases in the ceding commission
payable by us or terminate and recapture their existing business
with us. A downgrade of RAM Re's ratings, the placing of
RAM Re's ratings on negative credit watch or under review
for a ratings downgrade, or a decrease in the credit given for
our reinsurance would also negatively affect our ability to
negotiate favorable terms with primary insurers in the future.
Any downgrade in RAM Re's financial strength rating, or the
placement of RAM Re's financial strength rating on negative
credit watch, could have a material adverse effect on our
business, financial condition and results of operations. In
addition, a decrease in the credit given for our reinsurance by
either rating agency would negatively affect pricing under our
existing and future contracts, which in turn could have a
material adverse effect on our business, financial condition and
results of operations.
We depend on a small number of primary insurers to provide
    us with a substantial portion of our business.
A significant reduction in the amount of reinsurance ceded by
one or more of the primary insurers who are our principal
customers could have a material adverse effect on our results of
operations. We derive substantially all of our financial
guaranty revenues from premiums ceded by the four largest
primary financial guaranty insurers. In 2002, 2003 and 2004,
these four major primary insurers accounted for approximately
100%, 99% and 97% of our gross written premiums, respectively.
Through September 30, 2005, the four primary insurers
accounted for approximately 96% of our gross written premiums
and three of those four primary insurers accounted for
approximately 87% of our gross written premiums. A number of
factors could cause a reduction in our business with any of our
primary insurers, including higher retention levels by a primary
insurer, a reduction in the amount of business written by the
primary insurers, an adverse rating action with respect to the
financial strength rating of RAM Re, increased participation by
one or more of the primary insurers in financial guaranty
reinsurance through strategic alliances or the greater use of
other forms of credit enhancements or transaction structures as
an
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alternative to traditional financial guaranty reinsurance. For
example, since 2003 we have not had a quota share treaty with
one of the major primary insurers because of its decision not to
use treaties for its reinsurance needs. To our knowledge, this
primary insurer has not entered into any quota share treaty with
any financial guaranty reinsurer. The loss of treaty business
from this customer has increased our dependence on the three
other main primary insurers. While we expect to continue to
write facultative business with this customer in the future, if
it or any of the other three main primary insurers were to cease
or substantially decrease ceding business to us, our dependence
on the remaining primary insurers would increase further and we
may not be able to replace the loss of business. We also depend
on the major primary insurers in that our ability to receive
profitable pricing for our reinsurance depends largely on prices
charged by the primary insurers for their insurance coverage and
the amount of ceding commissions paid by us to these primary
insurers.
If we are unable to renew our existing treaties with our
    customers, our business and financial condition could be
    adversely affected.
Each of our quota share reinsurance treaties with our primary
insurer customers is for a term of one year and provides that it
may be terminated, on a run-off basis, by either party upon
notice to the other on or after the term ends. Each quota share
reinsurance treaty may also be terminated upon the happening of
certain events, such as a downgrade of our financial strength
rating, prior to the expiration of its term. In the ordinary
course of business and consistent with the practice within the
financial guaranty reinsurance industry, our customers typically
will send us a notice of termination of their quota share
reinsurance treaty prior to the expiration of its annual term.
In most cases, we then negotiate renewal terms for the treaty
with the customer. While we generally have been able to renew
our existing quota share reinsurance treaties annually, we
cannot assure you that any of our customers will renew their
quota share reinsurance treaties with us or that the terms on
which any treaty is renewed will be as favorable to us. Any such
failure to renew our existing treaties or failure to negotiate
favorable treaty terms could have a material adverse effect on
our business and financial condition.
The size of our capital base may not allow us to compete
    effectively in our industry and may adversely affect our ability
    to grow our business and execute our business strategy.
We currently have a smaller capital base than substantially all
of the financial guaranty reinsurers with which we compete. This
effectively may reduce our ability to compete with these
reinsurers. Larger competitors have several advantages over us
because of their size, including being able to take larger
shares of facultative transactions and treaty business, being
able to offer larger single risk limits, having greater
economies of scale, benefiting from implicit or explicit
parental support and having more diverse product lines. In
addition to monoline financial guaranty reinsurers, there are a
few multi-line companies that participate in the financial
guaranty reinsurance market. To the extent that any of the
existing companies or potential new market entrants engage in
practices that result in decreased prices for reinsurance, our
results of operations could be adversely affected, which would
adversely affect our ability to grow our business and execute
our business strategy.
If we cannot obtain necessary capital on favorable terms
    or at all, our business, operating results and financial
    condition could be adversely affected.
Our future capital requirements depend on many factors,
including our ability to write new business successfully and our
ability to establish reserves at levels sufficient to cover
losses. Although we may, to the extent that capacity is
available, establish retrocessional facilities and other soft
capital facilities (which could include lines of credit, credit
swap facilities and similar capital support mechanisms) with
providers with ratings comparable to our own, no assurance can
be given that such facilities can be established, or if
established, that one or more of the rating agencies will not
downgrade or withdraw the financial strength ratings of such
providers in the future. In addition, no assurance can be given
that a replacement provider on any facility we establish would
be available. To the extent that our existing capital is
insufficient to fund future operating requirements and/or cover
losses, we may need to raise additional
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funds through financings or curtail our growth and reduce our
risk exposure portfolio. Any equity or debt financing, if
available at all, may be on terms that are not favorable to us.
In the case of equity financings, dilution to our shareholders
could result, and the securities issued may have rights,
preferences and privileges that are senior to those of the
shares offered under this prospectus. If our need for capital
arises because of significant losses, the occurrence of these
losses may make it more difficult for us to raise the necessary
capital. To the extent that additional capital is needed, our
failure to obtain the necessary capital on favorable terms or at
all would adversely affect our business, ratings, operating
results and financial condition.
We could be adversely affected by the loss of one or more
    principal employees or by an inability to retain and attract
    staff.
Our business model is predicated upon the assumption that a
small group of highly experienced individuals will be able to
successfully implement our business plan. We currently have 15
employees and we rely substantially upon the services of Vernon
M. Endo, our Chief Executive Officer, and Richard Lutenski, our
Chief Financial Officer. Our success depends upon our ability to
retain and attract qualified employees and upon the ability of
our senior management and other key employees to implement our
business strategy. We believe there are only a limited number of
available qualified executives in the financial guaranty
reinsurance industry. Further, we require our employees to work
in Bermuda, which limits our ability to attract qualified
personnel. The loss of the services of Mr. Endo or
Mr. Lutenski or of any of our senior officers or other key
members of our management team could have a material adverse
effect on our business.
Our ability to conduct our business may be adversely
    affected by Bermuda employment restrictions.
Our location in Bermuda may serve as an impediment to attracting
and retaining experienced personnel. Under Bermuda law,
non-Bermudians (other than spouses of Bermudians, holders of a
permanent resident's certificate or holders of a working
resident's certificate) may not engage in any gainful
occupation in Bermuda without an appropriate governmental work
permit. Work permits may be granted or extended by the Bermuda
government upon showing that, after proper public advertisement
in most cases, no Bermudian (or spouse of a Bermudian, holder of
a permanent resident's certificate or holder of a working
resident's certificate) is available who meets the minimum
standard requirements for the advertised position. The Bermuda
government recently announced a new policy limiting the duration
of work permits to six years, with certain exemptions for key
employees. None of our senior management team are Bermudian, and
all of our officers are working in Bermuda under work permits
with expiry dates. The work permits for our senior management
will expire at various dates beginning in 2008. It is possible
that we could lose the services of one or more of these people
if we are unable to obtain or renew their work permits, which
may significantly and adversely affect our business.
We rely to a significant degree on the underwriting
    decisions of the primary insurers and the risks associated with
    reinsurance underwriting could adversely affect us.
We conduct a substantial amount of our reinsurance business
through reinsurance treaties entered into with certain primary
insurers. As of December 31, 2005, we had quota share
reinsurance treaties in place with three of the four largest
primary insurers. All financial guaranty transactions entered
into by a primary insurer that meet a treaty's inclusion
parameters are automatically ceded to us, according to the
participation percentage set forth in the treaty. Individual
transactions entered into with a primary insurer that are
"treaty eligible" may not be rejected by us during the
term of the reinsurance treaty. We do not separately evaluate
each of the individual risks assumed under our reinsurance
treaties. Therefore, we depend to a significant degree on the
original underwriting decisions made by primary insurers. We
cannot assure you that these primary insurers will adequately
evaluate the risks underwritten by them and subsequently
reinsured by us. Any unfavorable decisions made by these primary
insurers could adversely affect our financial condition or
results of operations and the premiums ceded may not adequately
compensate us for the risks we assume.
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Adverse selection by ceding primary insurers may adversely
    affect our financial condition and results of operations.
Most of our reinsurance business is written under treaties which
generally give a primary insurer some ability to select the
obligations ceded to us as long as the obligations are covered
by the terms of the treaty. Under our treaties, we generally do
not have the right to refuse such obligations, although we do
have some ability to add to "exclusion lists" certain
categories of obligations that we will not be required to
reinsure. As a result, primary insurers may adversely select the
insured obligations ceded to us (that is, cede those policies
that have greater risk relative to premium), thereby increasing
the chances that we will pay a claim or be required to maintain
additional capital by the rating agencies. Adverse selection by
the primary insurers could have a material adverse effect on our
financial condition and results of operations.
We may incur liabilities because of the unconditional
    nature of our financial guaranty reinsurance policies.
Issuers of obligations insured by the financial guarantors whose
obligations we reinsure may default on those obligations because
of fraudulent or other intentional misconduct on the part of
such issuers, their officers or directors, employees, agents or
outside advisers or, in the case of public finance obligations,
public officials. Financial guaranty reinsurance provided by us
is unconditional and does not provide for any exclusion of
liability based on fraud or other misconduct. Despite any risk
analysis conducted by us or by the financial guarantors we
reinsure, it is impossible to predict which, if any, of the
obligations reinsured by us will result in claims against us
because of such fraudulent or other intentional misconduct
involving the issuer, or whether or to what extent we will have
any remedy available to us against any party in connection with
such conduct. Any such claims could have a material adverse
effect on our financial condition and results of operations.
The performance of our investment portfolio may be
    adversely affected by economic conditions and by decisions of
    our investment manager.
Investment income is one of the primary sources of cash flow
supporting our operations and claim payments. The success of our
investment activity is influenced by general economic conditions
that may adversely affect the markets for interest rate
sensitive securities, including the extent and timing of
investor participation in such markets, the level and volatility
of interest rates and, consequently, the value of such
fixed-income securities. In addition, if our claims exceed our
cashflow, we could have unexpected losses resulting from forced
liquidation of investments before their maturity. We have
retained the professional asset management firm of MBIA Capital
Management Corp., or MBIA Capital, a wholly-owned subsidiary of
one of our shareholders, to manage our investment portfolio. Our
investment manager has discretionary authority over our
investment portfolio, subject to the investment guidelines
adopted by us and periodic review by the audit committee of our
board of directors. As a result, the performance of our
investment portfolio depends to a great extent on the ability of
our investment manager to select and manage appropriate
investments. Although our investment policies stress
diversification of risks and conservation of principal and
liquidity, our investments are subject to market-wide risks and
fluctuations, as well as to risks inherent in any particular
security or security position. For example, for the nine months
ended September 30, 2005, we experienced net realized
investment losses on sales/maturity of securities of
$1.1 million compared to a gain of $0.6 million for
the nine months ended September 30, 2004. Investment losses
for the nine months ended September 30, 2005 and gains in
the comparable 2004 period were primarily attributable to
repositioning within our fixed income securities portfolio and
sales of securities at prevailing interest rates that were
higher in 2005 and lower in 2004 than at the time a security was
purchased. Investment losses could significantly decrease our
assets and surplus, resulting in a material adverse effect on
our financial condition and results of operations.
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Our net income may be volatile because a portion of the
    credit risk we assume is in the form of credit derivatives that
    are accounted for under Statement of Financial Accounting
    Standards No. 133, or FAS 133, which requires that
    these instruments be revalued quarterly.
Credit derivatives are classified as derivatives under
FAS 133. Derivatives must be accounted for either as assets
or liabilities on the balance sheet and measured at fair market
value. Any event causing credit spreads (that is, the difference
in interest rates between comparable securities having different
credit risk) on an underlying security referenced in a credit
derivative in our portfolio either to widen or to tighten may
affect the fair value of the credit derivative and may increase
the volatility of our earnings. Although there is no cash flow
effect from this "marking to market," net changes in
the fair market value of the derivative are reported in our
statement of operations and therefore will affect our reported
earnings. For example, for the nine months ended
September 30, 2005, we reported net unrealized losses on
credit derivatives of $2.5 million, compared to a gain of
$2.2 million for the nine months ended September 30,
2004. If the derivative is held to maturity and no credit loss
is incurred, any losses or gains previously reported would be
offset by corresponding gains or losses during the term of the
derivative such that they would cumulatively net to zero at
maturity.
Common events that may cause credit spreads on an underlying
municipal or corporate security referenced in a credit
derivative to fluctuate include changes in the state of national
or regional economic conditions, industry cyclicality, changes
to a company's competitive position within an industry,
management changes, changes in the ratings of the underlying
security, movements in interest rates, default or failure to pay
interest, or any other factor leading investors to revise
expectations about the issuer's ability to pay principal
and interest on its debt obligations. Similarly, common events
that may cause credit spreads on an underlying structured
security referenced in a credit derivative to fluctuate may
include the occurrence and severity of collateral defaults,
changes in demographic trends and their impact on the levels of
credit enhancement, rating changes, changes in interest rates or
prepayment speeds, or any other factor leading investors to
revise expectations about the risk of the collateral or the
ability of the servicer to collect payments on the underlying
assets sufficient to pay principal and interest. Estimating the
fair value of credit derivatives involves substantial judgment
as there is no standard accepted fair value model. All models
require significant assumptions and many derivatives are not
actively traded or exchanged.
We may be adversely affected by public finance exposures
    in counties impacted by Hurricane Katrina.
As of June 30, 2005, our par outstanding on public finance
exposures in counties designated by the Federal Emergency
Management Agency, which we refer to as FEMA, for both
individual and public assistance in the States of Louisiana,
Mississippi and Alabama totals approximately $119 million,
and of that amount approximately $36 million is in Greater
New Orleans (comprised of Orleans, St. Bernard, St. Charles,
Plaquemines and Jefferson parishes). Within the affected areas,
we are closely monitoring 23 specific obligations with net par
outstanding of approximately $40 million. As of
September 30, 2005, we have not recorded any portfolio
reserves or case reserves for this event; and no case reserves
have been reported to us by any of our primary insurer clients
through September 30, 2005. In addition, only four claims
have been paid, in the total amount of approximately $13,000,
for which a full reimbursement has been received. Significant
uncertainty exists with regard to both the probability of
defaults occurring and the loss severities that will apply to
any defaults that do occur. The occurrence of any such defaults
or significant loss severities could materially adversely affect
our financial condition and results of operations.
We could face unanticipated losses from war, terrorism,
    business failures, political unrest and natural disasters, and
    these or other unanticipated losses could have a material
    adverse effect on our financial condition and results of
    operations.
We may have exposure to large, unexpected losses resulting from
future man-made and natural catastrophic events, such as acts of
war, acts of terrorism, political instability, hurricanes,
earthquakes and floods. For example, as discussed in the
preceding risk factor, we currently have public finance
exposures in counties impacted by Hurricane Katrina. We also may
have exposure to significant downturns in
13
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economic conditions, including recessions in particular
geographic areas and business failures in particular industries.
For example, recent bankruptcies in the commercial airline
business have resulted in potential structured finance exposures
for us with respect to insured obligations known as Enhanced
Equipment Trust Certificates, which we refer to as EETCs.
We define EETCs as securitizations backed by whole aircraft
leases or mortgages with a single lessee or mortgagor and
limited cross-collateralization of first loss credit support.
EETCs are distinguished from pooled aircraft securitizations,
which have multiple lessees or mortgagors and/or
cross-collateralized first loss credit support. We have
reinsured EETC's with par outstanding as of
September 30, 2005 of $130 million, of which
$127 million is on our watch list. These risks are
inherently unpredictable and recent events may lead to increased
frequency and severity of defaults under the policies we
reinsure. It is difficult to predict the timing of these events
with statistical certainty or to estimate the amount of loss
that any given occurrence will generate. To the extent that
losses from these risks occur in excess of amounts we have
reserved, our financial condition and results of operations
could be materially adversely affected.
Our holding company structure and certain regulatory and
    other constraints affect our ability to pay dividends and make
    other payments.
RAM Holdings is a holding company and as such has no substantial
operations of its own or assets other than its ownership of the
shares of its only subsidiary, RAM Re. For the near future,
dividends and other permitted distributions from RAM Re are
expected to be RAM Holdings' only source of funds to meet
ongoing cash requirements, including debt service payments and
other expenses, and to pay dividends, if any, to shareholders.
Bermuda law and regulations, including but not limited to
Bermuda insurance regulations, restrict the declaration and
payment of dividends and the making of distributions by RAM Re,
unless certain regulatory requirements are met. In addition,
certain treaty obligations incurred by RAM Re in the course of
its business require it to post collateral in trusts and those
funds are unavailable for dividend or distribution to RAM
Holdings. The inability of RAM Re to pay dividends in an amount
sufficient to enable RAM Holdings to meet its cash requirements
at the holding company level could affect RAM Holdings'
ability to repay debt or have a material adverse effect on its
operations.
RAM Holdings is also subject to regulatory constraints in
Bermuda that will affect its ability to pay dividends on its
common shares and make other payments. In addition, payments of
principal to the holder of our $40.0 million aggregate
principal amount of 6.875% Senior Notes due 2024 will
receive priority over any payments of dividends on our common
shares. See "— Risks Related to Our Status as a
Bermuda Company — Our ability to pay dividends may be
limited by Bermuda law," "Dividend Policy,"
"Management's Discussion and Analysis of Financial
Condition and Results of Operations — Liquidity and
Capital Resources," and "Regulatory Matters".
Estimates of losses, income and expenses relating to
    underwriting financial guaranty products are based on modeling
    and assumptions that, if incorrect, could have a material
    adverse affect on our financial condition and results of
    operations.
Our decisions to underwrite financial guaranty products are
based on historical data and models. There can be no assurance
that the historical data relating to financial guaranty losses
available to and relied on by the industry, including us, will
approximate actual experience in the future. For example, the
sample period for observed occurrences may not be adequate, the
underlying conditions from which historical loss data were
derived may have changed, and historical data with respect to
certain types of losses may be inadequate. Actual cash flows may
also deviate significantly from assumptions, and such deviations
could have a material adverse effect on our financial condition
and operating results.
If claims exceed our loss reserves, our financial results
    could be significantly adversely affected.
Our results of operations and financial condition depend upon
our ability to assess accurately and manage the potential losses
associated with the risks that we reinsure. There is a diversity
of practice within the financial guaranty industry in loss
reserving practices and setting our loss reserves involves
significant reliance on estimates of the likelihood, magnitude
and timing of anticipated losses. In making
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such estimates, we significantly rely on reports of loss claims
from our primary insurers. We establish both case basis and
unallocated reserves for losses. We establish case basis
reserves when we determine a default has occurred or there is a
high probability of a default. We also maintain unallocated
reserves to reflect our estimate of general deterioration in our
insured credits. While we use the most current information
available and our best judgment in setting reserve estimates,
this is an inherently uncertain process. Accordingly, actual
claims and claim expenses paid will deviate from the reserve
estimates reflected in our combined financial statements, and
such deviations could be material. If our loss reserves at any
time are determined to be inadequate, we will be required to
increase loss reserves at the time of such determination. This
could significantly adversely impact our financial results.
Several of our founding shareholders may have conflicts of
    interest with us and they may take actions with respect to their
    ownership interests that have an adverse effect on our other
    shareholders.
Some of our shareholders engage in commercial activities and
enter into transactions or agreements with us or in competition
with us, which may give rise to conflicts of interest. These
parties may take actions that are not in our other
shareholders' best interests. See "Certain
Relationships and Related Transactions — Transactions
and Relationships with Investors." In addition, we may not
be in a position to influence any party's decision to
engage in activities that would give rise to a conflict of
interest. For example, our largest shareholder, PMI, is expected
to have more than 20% of the voting power of our shares after
the completion of this offering and therefore would have the
ability to elect two directors through cumulative voting. PMI
could use its influence in a manner adverse to our other
shareholders' best interests.
Risks Related to Our Industry
The primary financial guaranty insurance industry remains
    in an excess capital position which, if it continues, could
    result in lower amounts of insurance ceded.
Because of the significant increase in capital by many of the
large primary insurers and the recent lower growth in new
business, many of the primary insurers have sufficient capital
to support their business pursuant to regulatory and rating
agency capital requirements. This is one reason why the primary
insurers have ceded less reinsurance in 2003 and through the
nine months ended September 30, 2005, than in prior recent
years. If this excess capital position continues for a prolonged
period, the primary insurers are likely to cut back or cancel
treaties, increase ceding commissions, increase adverse
selection of obligations ceded to reinsurers and generally
diminish the business terms on which they cede business. Any of
these activities would have an adverse effect on our financial
condition and results of operation.
Increased capacity in the financial guaranty reinsurance
    industry may have a material adverse effect on the
    industry.
The current number of financial guaranty reinsurance companies
is relatively limited. Consequently, the industry is
particularly vulnerable to swings in capacity based on the entry
or exit of one or a small number of financial guaranty
reinsurers. The most significant barriers to entry for new
financial guaranty reinsurance competitors are rating agency
requirements and regulatory capital requirements, both of which
are lower for entrants into the financial guaranty reinsurance
market than for the primary financial guaranty market. New
entrants into the market could have an adverse effect on all
financial guaranty reinsurers by offering reinsurance on more
favorable terms than currently being offered by existing
reinsurers.
Market demand for financial guaranty products may
    decrease, affecting the profitability and competitiveness of the
    reinsurance industry.
The demand for financial guaranty reinsurance depends upon many
factors, most of which are beyond our control. In addition to
the capital position of the primary insurers, the financial
guaranty reinsurance industry, and the risks associated with the
industry, tend to be cyclical and track the demand for primary
financial guaranty insurance. The primary financial guaranty
insurance industry could be materially adversely affected by
extended national or regional economic recessions, business
failures, terrorist acts,
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acts of war or combinations of such factors. In particular, the
perceived financial strength of financial guaranty insurers
affects demand for financial guaranty insurance, which in turn
affects demand for reinsurance. Should a major financial
guarantor, or the industry generally, have its financial
strength ratings lowered, or suffer a deterioration in investor
confidence, demand for financial guaranty insurance and as a
result, reinsurance, may be reduced or eliminated entirely.
Further, demand for financial guaranty insurance may be
negatively affected to the extent that conditions arise which
narrow the credit spread between insured and uninsured
obligations or between "AAA" rated securities and
lower rated securities. The purchase of insurance during periods
of relatively narrower credit rate spreads will generally
provide lower cost savings to the issuer than during periods of
relatively wider spreads. These lower cost savings generally are
accompanied by a corresponding decrease in demand for financial
guaranty insurance and as a result, decreased demand for the
type of reinsurance that we provide.
Premium rates for financial guaranty reinsurance products
    may decline due to factors beyond the control of financial
    guaranty reinsurers.
Premium rates on financial guaranty reinsurance are equal to
premium rates charged by the primary insurer less the ceding
commission paid by the reinsurer. Premium rates charged by
primary insurers are affected by factors beyond the control of
financial guaranty reinsurers, such as investor appraisals of
the insured credits, the spread between interest rates
prevailing on insured and uninsured obligations and capital
charges associated with these exposures as determined by the
rating agencies, competition among primary insurers as well as
competition with other forms of credit enhancement. Accordingly,
any decline in premium rates on business written by the primary
insurers would have a negative effect on the premium rates and
the profitability of reinsurers, including us.
Changes to accounting rules relating to loss reserve
    practices in the financial guaranty insurance and reinsurance
    industry could have a material adverse effect on the
    industry.
In January and February of 2005, the Securities and Exchange
Commission, or the SEC, discussed with financial guaranty
industry participants the diversity in practice with respect to
their accounting policies for loss reserves. In June 2005, the
Financial Accounting Standards Board, or the FASB, added a
project to its agenda to consider the accounting by financial
guaranty insurers for claims liability recognition, premium
recognition and deferred acquisition costs. The proposed and
final documents are expected to be issued in 2006. When the FASB
or the SEC reaches a conclusion on this issue, we and the rest
of the financial guaranty industry may be required to change
some aspects of our loss reserving policies and the potential
changes could extend to premium and expense recognition, which
in turn could have a material adverse effect on us and the
financial guaranty industry.
Legislative and regulatory changes and interpretations
    could harm the financial guaranty reinsurance industry.
Changes in laws and regulations affecting the public finance and
structured securities markets, the financial guaranty insurance
and reinsurance markets and the credit derivative markets, as
well as other governmental regulations, may subject reinsurers
of financial guaranty products to additional legal liability,
affect the demand for the products they provide or increase
costs. The business and legal liabilities of reinsurers of
financial guaranty products may also be affected by consumer
lending and insurance laws and regulations in the countries of
policy origin. If changes with respect to these laws and
regulations are resolved in a way that is unfavorable to the
industry, revenues and profitability of the industry could
significantly decline.
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Risks Related to our Common Shares and this Offering
There is no prior public market for our common shares and
    no assurance that an active trading market will develop.
There currently is no public trading market for our common
shares and there can be no assurance that an active trading
market will develop or continue upon completion of this offering
or that the market price of our common shares will not decline
below the initial public offering price. The initial public
offering price per common share will be determined by agreement
among us and the representatives of the underwriters and may not
be indicative of the market price of our common shares after our
initial public offering.
Future sales of common shares may affect the market price
    of our common shares.
Sales of substantial amounts of our common shares in the public
market following our initial public offering, or the perception
that such sales could occur, could adversely affect the market
price of our common shares and may make it more difficult for
shareholders to sell common shares at a time and price which
they deem appropriate. We cannot predict what effect, if any,
future sales of our common shares, or the availability of common
shares for future sale, will have on the market price of our
common shares. We, certain of our principal shareholders, all of
our executive officers and all members of our board of directors
will agree not to offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to
purchase, lend or otherwise transfer or dispose of, directly or
indirectly, any common shares, or any securities convertible
into or exercisable for any common shares or any right to
acquire our common shares, or enter into any swap or other
arrangement that transfers to another, in whole or in part,
directly or indirectly, any of the economic consequences of
ownership of the common shares, whether any such transaction is
to be settled by delivery of common shares or other securities,
in cash or otherwise for a period of 180 days following the
closing of this offering, subject to certain exceptions.
Investors of common shares in this offering will suffer
    immediate and substantial dilution.
If investors purchase common shares in this offering, they will
suffer immediate and substantial dilution of their investment,
as the initial offering price per common share is significantly
higher than our net book value per share. Based upon the
issuance and sale
of                     common
shares at a share price of
$          ,
shareholders will incur immediate dilution of approximately
$          in
the net book value per common share if they purchase common
shares in this offering. We may issue additional common shares
or debt convertible into our common shares in the future to
raise capital in connection with our business strategy or for
other reasons. These issuances may cause further dilution to our
shareholders.
There are provisions in our bye-laws that may reduce or
    increase the voting rights of our common shares.
In general, and except as provided below, shareholders have one
vote for each common share held by them and are entitled to vote
at all meetings of shareholders. However, if, and so long as,
the shares of a shareholder are treated as "controlled
shares" of any U.S. Person (as defined in "Risks
Related to Taxation — Holders of 10% or more of our
shares may be subject to U.S. federal income taxation under
the controlled foreign corporation rules") other than PMI,
and such controlled shares constitute more than 9.9% of the
votes conferred by our issued shares, the voting rights with
respect to the controlled shares of such U.S. Person (that
is, a "9.9% U.S. Shareholder") shall be limited,
in the aggregate, to a voting power of 9.9%, under a procedure
specified in our bye-laws. The procedure is applied repeatedly
until the voting power of all 9.9% U.S. Shareholders has
been reduced to 9.9%. In addition, our board of directors may
limit a shareholder's voting rights where it deems
appropriate to do so to (i) avoid the existence of any 9.9%
U.S. Shareholders or 24.5% U.S. Shareholders, and
(ii) avoid non-de minimis adverse tax, legal or regulatory
consequences to us, any direct or indirect holder of our shares
or its affiliates. "Controlled shares" include, among
other things, all of our shares that a U.S. Person is
deemed to own directly, indirectly or constructively (within the
meaning of sections 957 and 958 of the Internal Revenue Code of
1986, as amended, which we refer to as the Code). In addition,
at any time that the controlled shares of
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PMI constitute (i) more than 9.9% of the voting power
conferred by our issued shares and (ii) 24.5% or more of
either the voting power or value of our issued shares, the
voting rights with respect to the controlled shares owned by PMI
will be limited to a voting power of 9.9%.
For example, the voting power of shares owned by an investor may
be reduced or in certain cases eliminated, if, pursuant to
certain constructive ownership rules, shares owned or deemed to
be owned by the investor are attributed to another investor or
shares owned or deemed owned by another investor are attributed
to the investor or the investor is invested in an entity in
which another investor invests.
In the event the above voting limitations must be applied as
described above, the voting limitation shall apply to PMI only
after the limitation has been applied to all other shareholders
whose votes are subject to reduction and the voting power held
by PMI shall not be reduced to below 9.9% by operation of these
provisions. This would likely have the effect of eliminating the
voting power of all other shareholders whose votes are subject
to reduction.
Under these provisions, certain shareholders may have their
voting rights limited to less than one vote per share, while
other shareholders may have voting rights in excess of one vote
per share. See "Description of Share Capital —
Voting Rights." Moreover, these provisions could have the
effect of reducing the votes of certain shareholders who would
not otherwise be subject to the 9.9% limitation by virtue of
their direct share ownership. Our bye-laws provide that we will
endeavor to notify shareholders of their voting interests prior
to any vote taken by them. See "Description of Share
Capital — Voting Rights."
We also have the authority under our bye-laws to request
specified information from any shareholder for the purpose of
determining whether a shareholder's voting rights are to be
reallocated under the bye-laws. If a shareholder fails to
respond to our request for information or submits incomplete or
inaccurate information in response to a request by us, we may,
in our sole discretion, eliminate such shareholder's voting
rights.
Our board of directors may be more likely to exercise
    their right under our bye-laws to decline to approve a transfer
    of common shares because of potential adverse tax, legal or
    regulatory consequences, and that may require shareholders to
    sell their common shares.
Our board of directors may decline to approve or register a
transfer of any common shares (1) if it appears to the
board of directors, after taking into account the limitations on
voting rights contained in our bye-laws, that a non-de minimis
adverse tax, regulatory or legal consequence to us, any direct
or indirect holder of our shares or its affiliates may occur as
a result of such transfer, or (2) subject to any applicable
requirements of or commitments to any exchange or trading system
for our common shares, if a written opinion from counsel
supporting the legality of the transaction under
U.S. securities laws has not been provided or if any
required governmental approvals have not been obtained.
Our board of directors may be more likely to exercise
    their right under our bye-laws to decline to approve a
    repurchase of our own shares and an issuance of any of our
    unissued shares because of potential adverse tax, legal or
    regulatory consequences.
Under our bye-laws and subject to Bermuda law, our board of
directors may decline to approve a repurchase of our shares or
an issuance of any of our unissued shares (including the
issuance of any shares or class of shares with preferred,
deferred or other special rights) if the board of directors
determines that it may result in a non-de minimis adverse tax,
legal or regulatory consequence to us, any direct or indirect
holder of our shares or its affiliates. See "Description of
Share Capital."
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Risks Related to Our Status as a Bermuda Company
Risks of operating as a foreign corporation could
    adversely affect our ability to conduct business in the United
    States.
We do not maintain an office or solicit, advertise, settle
claims or conduct other insurance activities in any jurisdiction
other than Bermuda where the conduct of such activities would
require us to be so authorized or admitted. We believe we
conduct our U.S. business in a manner similar to that
employed by other non-admitted reinsurers that provide
reinsurance to U.S. primary insurers. We believe that, to
the extent that these operating guidelines are followed, our
activities comply with applicable insurance laws and
regulations. While we are not admitted to do business in any
jurisdiction except Bermuda, insurance departments in the United
States or elsewhere might take the position that our activities
violate the prohibitions on the transaction of insurance by a
non-admitted insurer. The insurance laws of each state of the
United States and of many
non-U.S.
jurisdictions
regulate the sale of insurance and reinsurance within that
jurisdiction by alien insurers and reinsurers, such as us, which
are not authorized or admitted to do business within such
jurisdiction. If a state insurance department were to raise this
issue and prevail, it could argue further that we are
transacting insurance in that state without appropriate licenses
or approvals. In that event, the insurance department could
attempt to take any of several actions, including imposing fines
or penalties on us. There can be no assurance that our location,
regulatory status or restrictions on our activities resulting
therefrom would not adversely affect our ability to conduct our
business. In the event such issues or disputes arise, we may be
required to consider various alternatives to our operations,
including modifying or restricting the manner of conducting our
business or, with respect to cessions by primary insurers in the
United States, applying to conduct business as an admitted or
approved reinsurer, establishing trust funds to secure our
reinsurance performance or having to comply with the various
financial and other requirements necessary to operate on an
admitted or approved basis, either directly or by subjecting us
to U.S. taxation.
Bermuda insurance regulations may adversely affect our
    ability to write reinsurance policies.
We are registered and licensed to conduct insurance and
reinsurance from within Bermuda, and the statutes, regulations
and policies of Bermuda may affect our ability to write
reinsurance policies and to make certain investments or
distributions. Bermuda statutes and regulations applicable to us
require that we, among other things: maintain minimum levels of
capital and surplus, satisfy solvency standards, restrict
dividends and distributions (including returns of capital), and
cooperate with certain periodic and other examinations by the
BMA of our financial condition. We are unable to predict what
additional government regulations, if any, affecting our
business may be promulgated in Bermuda in the future or how such
regulations may be interpreted. In addition, no assurances can
be given that, if we were to become subject to any insurance
laws of the U.S. or any state thereof or of any other
country at any time in the future, we would be in compliance
with such laws.
Our ability to pay dividends may be limited by Bermuda
    law.
Any dividends paid on our common shares are subject to
limitations imposed on dividends under Bermuda law and
regulations. Under the Bermuda Insurance Act 1978, which we
refer to as the Bermuda Insurance Act, and related regulations,
RAM Re will be required to maintain certain minimum solvency
levels and RAM Re will be prohibited from declaring or paying
dividends that would result in noncompliance with such
requirement. Further, RAM Re may not reduce its total statutory
capital by 15% or more, as set out in its previous year's
financial statements, without the prior approval of the BMA. In
addition, under the Bermuda Companies Act, we may only declare
or pay a dividend if, among other matters, there are reasonable
grounds for believing that we are, and will be after any such
payment, able to pay our liabilities as they become due and that
the realizable value of our assets will not thereby be less than
the sum of the issued share capital and share premium accounts.
These restrictions may limit the amount of funds available for
distribution to holders of our common shares. See "Dividend
Policy."
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U.S. Persons who own our common shares may have more
    difficulty in protecting their interests than if they held
    shares of a U.S. corporation.
The Bermuda Companies Act, which applies to us, differs in
certain material respects from laws generally applicable to
U.S. corporations and their shareholders. Set forth below
is a summary of certain significant provisions of the Bermuda
Companies Act which includes, where relevant, information on
modifications thereto adopted pursuant to our bye-laws,
applicable to us, which differ in certain respects from
provisions of Delaware corporate law. Because the following
statements are summaries, they do not discuss all aspects of
Bermuda law that may be relevant to us and our shareholders.
Interested Directors.
Bermuda law and our bye-laws
provide that we cannot void any transaction we enter into in
which a director has an interest, nor can such director be
liable to us for any profit realized pursuant to such
transaction, provided the nature of the interest is disclosed at
the first opportunity at a meeting of directors, or in writing,
to the directors. Under Delaware law such transaction would not
be voidable if: (i) the material facts as to such
interested director's relationship or interests were
disclosed or were known to the board of directors and the board
had in good faith authorized the transaction by the affirmative
vote of a majority of the disinterested directors,
(ii) such material facts were disclosed or were known to
the stockholders entitled to vote on such transaction and the
transaction was specifically approved in good faith by vote of
the majority of shares entitled to vote thereon, or
(iii) the transaction was fair as to the corporation as of
the time it was authorized, approved or ratified. Under Delaware
law, the interested director could be held liable for a
transaction in which the director derived an improper personal
benefit.
Business Combinations with Large Shareholders or
Affiliates.
As a Bermuda company, we may enter into business
combinations with our large shareholders or affiliates,
including asset sales and other transactions in which a large
shareholder or affiliate receives, or could receive, a financial
benefit that is greater than that received, or to be received,
by other shareholders, with prior approval from our board of
directors but without obtaining prior approval from our
shareholders. Amalgamations require the approval of the board of
directors and, except in the case of certain types of
amalgamations, a resolution of the shareholders approved by at
least 66% of the votes cast. If we were a Delaware corporation,
we would need prior approval from our board of directors or a
supermajority of our shareholders to enter into a business
combination with an interested shareholder for a period of three
years from the time the person became an interested shareholder,
unless we opted out of the relevant Delaware statute.
Shareholders' Suits.
The rights of shareholders
under Bermuda law are not as extensive as the rights of
shareholders in many U.S. jurisdictions. Class actions and
derivative actions are generally not available to shareholders
under the laws of Bermuda. However, the Bermuda courts
ordinarily would be expected to follow English case law
precedent, which would permit a shareholder to commence an
action in the name of the company to remedy a wrong done to the
company where an act is alleged to be beyond the corporate power
of the company, is illegal or would result in the violation of
our memorandum of association or bye-laws. Furthermore,
consideration would be given by the court to acts that are
alleged to constitute a fraud against the minority shareholders
or where an act requires the approval of a greater percentage of
our shareholders than actually approved it. The winning party in
such an action generally would be able to recover a portion of
attorneys' fees incurred in connection with such action.
When the affairs of a company are being conducted in a manner
which is oppressive or prejudicial to the interests of some part
of the shareholders, one or more shareholders may apply to the
Supreme Court of Bermuda, which may make such order as it sees
fit, including an order regulating the conduct of the
company's affairs in the future or ordering the purchase of
the shares of any shareholders by other shareholders or by the
company. Our bye-laws provide that shareholders waive all claims
or rights of action that they might have, individually or in the
right of the company, against any director or officer for any
act or failure to act in the performance of such director's
or officer's duties, except with respect to any fraud or
dishonesty of such director or officer. Class actions and
derivative actions generally are available to stockholders under
Delaware law for, among other things, breach of fiduciary duty,
corporate waste and actions not taken in accordance with
applicable law. In such actions, the court has discretion to
permit the winning party to recover attorneys' fees
incurred in connection with such action.
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Indemnification of Directors and Officers.
We will
indemnify our directors or officers or any person appointed to
any committee by the board of directors acting in their capacity
as such in relation to any of our affairs for any loss arising
or liability attaching to them by virtue of any rule of law in
respect of any negligence, default, breach of duty or breach of
trust of which such person may be guilty in relation to the
company other than in respect of his own fraud or dishonesty.
Under Delaware law, a corporation may indemnify a director or
officer of the corporation against expenses (including
attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred in defense of an
action, suit or proceeding by reason of such position if such
director or officer acted in good faith and in a manner he or
she reasonably believed to be in or not be opposed to the best
interests of the corporation and, with respect to any criminal
action or proceeding, such director or officer had no reasonable
cause to believe his or her conduct was unlawful.
Because we are a Bermuda company, it may be difficult to
    enforce judgments against us or against our directors and
    executive officers.
Because we are organized under the laws of Bermuda, it may not
be possible to enforce court judgments obtained in the
U.S. against us based on the civil liability provisions of
the federal or state securities laws of the U.S. in Bermuda
or in countries other than the U.S. where we have assets.
In addition, there is some doubt as to whether the courts of
Bermuda and other countries would recognize or enforce judgments
of U.S. courts obtained against us or our directors or
officers based on the civil liabilities provisions of the
federal or state securities laws of the U.S., or would hear
actions against us or those persons based on those laws. We have
been advised by our legal advisors in Bermuda that the U.S. and
Bermuda do not currently have a treaty providing for the
reciprocal recognition and enforcement of judgments in civil and
commercial matters. Therefore, a final judgment for the payment
of money rendered by any federal or state court in the
U.S. based on civil liability, whether or not based solely
on U.S. federal or state securities law, would not
automatically be enforceable in Bermuda. There are grounds upon
which a Bermuda court may not enforce the judgments of
U.S. courts and some remedies available under the laws of
U.S. jurisdictions, including some remedies available under
U.S. federal securities laws, may not be permitted under
Bermuda courts as contrary to public policy in Bermuda.
Similarly, those judgments may not be enforceable in countries
other than the U.S. where we have assets. Further, no claim
may be brought in Bermuda by or against us or our directors and
officers in the first instance for violation of
U.S. federal securities laws because these laws have no
extraterritorial application under Bermuda law and do not have
force of law in Bermuda; however, a Bermuda court may impose
civil liability, including the possibility of monetary damages,
on us or our directors and officers if the facts alleged in a
complaint constitute or give rise to a cause of action under
Bermuda law.
Risks Related to Taxation
We may become subject to taxes in Bermuda after 2016,
    which may have a material adverse effect on our financial
    condition and operating results and on an investment in our
    shares.
The Bermuda Minister of Finance, under the Exempted Undertakings
Tax Protection Act 1966, as amended, of Bermuda, has given each
of RAM Holdings and RAM Re an assurance that if any legislation
is enacted in Bermuda that would impose tax computed on profits
or income, or computed on any capital asset, gain or
appreciation, or any tax in the nature of estate duty or
inheritance tax, then the imposition of any such tax will not be
applicable to RAM Holdings, RAM Re or any of their respective
operations or their respective shares, debentures or other
obligations (except insofar as such tax applies to persons
ordinarily resident in Bermuda or to any taxes payable by them
in respect of real property or leasehold interests in Bermuda
held by them) until March 28, 2016. See "Material Tax
Considerations — Taxation of RAM Holdings and RAM
Re — Bermuda." Given the limited duration of the
Minister of Finance's assurance, we cannot be certain that
we will not be subject to any Bermuda tax after March 28,
2016. Since we are incorporated in Bermuda, we will be subject
to changes of law or regulation in Bermuda that may have an
adverse impact on our operations, including imposition of tax
liability. See "Material Tax Considerations —
Taxation of RAM Holdings and RAM Re — Bermuda."
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The impact of Bermuda's letter of commitment to the
    Organization for Economic Cooperation and Development, or the
    OECD, to eliminate harmful tax practices is uncertain and could
    adversely affect our tax status in Bermuda.
The OECD, has published reports and launched a global dialogue
among member and non-member countries on measures to limit
harmful tax competition. These measures are largely directed at
counteracting the effects of tax havens and preferential tax
regimes in countries around the world. In the OECD's report
dated April 18, 2002 and updated as of June 2004, Bermuda
was not listed as an "uncooperative tax haven."
Bermuda has signed a letter committing itself to eliminate
harmful tax practices and to embrace international tax standards
for transparency, exchange of information and the elimination of
any aspects of the regimes for financial and other services that
attract business with no substantial domestic activity. We are
not able to predict what changes will arise from the commitment
or whether such changes will subject us to additional taxes.
We may be subject to U.S. federal income tax, which
    would have an adverse effect on our financial condition and
    results of operations and on an investment in our shares.
If either RAM Holdings or RAM Re were considered to be engaged
in a trade or business in the United States, it could be subject
to U.S. federal income and additional branch profits taxes
on the portion of its earnings that are effectively connected to
such U.S. business or in the case of RAM Re, if it is
entitled to benefits under the United States income tax treaty
with Bermuda and if RAM Re were considered engaged in a trade or
business in the United States through a permanent establishment,
RAM Re could be subject to U.S. federal income tax on the
portion of its earnings that are attributable to its permanent
establishment in the United States, in which case its results of
operations could be materially adversely affected. RAM Holdings
and RAM Re are Bermuda companies. We intend to manage our
business so that each of these companies should operate in such
a manner that neither of these companies should be treated as
engaged in a U.S. trade or business and, thus, should not
be subject to U.S. federal taxation (other than
U.S. federal excise tax on insurance and reinsurance
premium income attributable to insuring or reinsuring
U.S. risks and U.S. federal withholding tax on certain
U.S. source investment income). However, because there is
considerable uncertainty as to the activities which constitute
being engaged in a trade or business within the United States,
we cannot be certain that the IRS will not contend successfully
that we are engaged in a trade or business in the U.S. See
"Material Tax Considerations — Taxation of RAM
Holdings and RAM Re — United States."
Holders of 10% or more of our shares may be subject to
    U.S. income taxation under the controlled foreign
    corporation rules.
If you are a "10% U.S. Shareholder" of a foreign
corporation (defined as a U.S. Person who owns (directly,
indirectly through foreign entities or constructively (as
defined below) at least 10% of the total combined voting power
of all classes of stock entitled to vote) that is a controlled
foreign corporation, which we refer to as a CFC, for an
uninterrupted period of 30 days or more during a taxable
year, and you own shares in the CFC directly or indirectly
through foreign entities on the last day of the CFC's
taxable year, you must include in your gross income for
U.S. federal income tax purposes your
pro rata
share
of the CFC's "subpart F income," even if the
subpart F income is not distributed. "Subpart F
income" of a foreign insurance corporation typically
includes foreign personal holding company income (such as
interest, dividends and other types of passive income), as well
as insurance and reinsurance income (including underwriting and
investment income). A foreign corporation is considered a CFC if
10% U.S. Shareholders own (directly, indirectly through
foreign entities or by attribution by application of the
constructive ownership rules of section 958(b) of the Code)
(that is, "constructively") more than 50% of the total
combined voting power of all classes of voting stock of that
foreign corporation or the total value of all stock of that
corporation. For purposes of taking into account insurance
income, a CFC also includes a foreign insurance company in which
more than 25% of the total combined voting power of all classes
of stock (or more than 25% of the total value of the stock) is
owned (directly, indirectly through
non-U.S.
entities
or constructively) by 10% U.S. Shareholders on any day
during the taxable year of such corporation. For purposes of
this discussion, the term "U.S. Person" means:
(i) an individual citizen or
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resident of the United States, (ii) a partnership or
corporation created or organized in or under the laws of the
United States, or under the laws of any State thereof (including
the District of Columbia), (iii) an estate, the income of
which is subject to U.S. federal income taxation regardless
of its source, (iv) a trust if either (x) a court
within the United States is able to exercise primary supervision
over the administration of such trust and one or more
U.S. Persons have the authority to control all substantial
decisions of such trust or (y) the trust has a valid
election in effect to be treated as a U.S. Person for
U.S. federal income tax purposes or (v) any other
person or entity that is treated for U.S. federal income
tax purposes as if it were one of the foregoing. We believe,
subject to the discussion below, that because of the anticipated
dispersion of our share ownership, provisions in our
organizational documents that limit voting power (these
provisions are described under "Description of Share
Capital") and other factors, no U.S. Person other than
PMI who owns our common shares directly or indirectly through
one or more foreign entities should be treated as owning
(directly, indirectly through foreign entities or
constructively) 10% or more of the total voting power of all
classes of RAM Holdings' or RAM Re's shares. The
provisions in our organizational documents that limit voting
power could reduce or eliminate an investor's voting power
in circumstances in which, pursuant to certain constructive
ownership rules, shares owned or deemed owned by the investor
are attributed to another investor or shares owned or deemed
owned by another investor are attributed to the investor or the
investor is invested in an entity in which another investor
invests. However, neither we nor investors may be aware of
circumstances in which shares may be so attributed in order to
timely effectuate these provisions. In addition, the IRS could
challenge the effectiveness of the provisions in our
organizational documents and a court could sustain such a
challenge. Accordingly, no assurance can be given that a
U.S. Person who acquires common shares in this offering
will not be characterized as a 10% U.S. Shareholder. See
"Material Tax Considerations — Taxation of
Shareholders — United States Taxation —
Classification of RAM Holdings or RAM Re a CFCs."
U.S. Persons who hold our shares may be subject to
    U.S. federal income taxation at ordinary income rates on
    their proportionate share of RAM Re's related person
    insurance income.
If the related person insurance income, or RPII (determined on a
gross basis) of RAM Re were to equal or exceed 20% of RAM
Re's gross insurance income in any taxable year and direct
or indirect insureds (and persons related to those insureds) own
directly or indirectly through entities 20% or more of the
voting power or value of our shares, then a U.S. Person who
owns any shares of RAM Re (directly or indirectly through
foreign entities) on the last day of the taxable year would be
required to include in its income for U.S. federal income
tax purposes such person's
pro rata
share of RAM
Re's RPII for the entire taxable year, determined as if
such RPII were distributed proportionately only to
U.S. Persons at that date, regardless of whether such
income is distributed. In addition, any RPII that is includible
in the income of a U.S. tax-exempt organization may be
treated as unrelated business taxable income. The amount of RPII
earned by RAM Re (generally, premium and related investment
income from the direct or indirect insurance or reinsurance of
any direct or indirect U.S. holder of common shares or any
person related to such holder) will depend on a number of
factors, including the identity of persons directly or
indirectly insured or reinsured by RAM Re. Although RAM
Re's gross RPII generally exceeded 20% of RAM Re's
gross insurance income in recent taxable years, we believe that
the direct or indirect insureds of RAM Re (and related persons)
did not directly or indirectly own 20% or more of either the
voting power or value of our shares in those prior years and we
do not expect this ownership threshold to be exceeded in the
foreseeable future. However, we cannot be certain that this will
be the case because some of the factors which determine the
extent of RPII may be beyond our control. See "Material Tax
Considerations — Taxation of Shareholders —
United States Taxation — The RPII CFC Provisions."
U.S. Persons who dispose of our shares may be subject
    to U.S. federal income taxation at the rates applicable to
    dividends on a portion of their gains if any.
The RPII rules provide that if a U.S. Person disposes of
shares in a foreign insurance corporation in which
U.S. Persons own 25% or more of the shares (even if the
amount of gross RPII is less than 20% of the corporation's
gross insurance income and the ownership of its shares by direct
or indirect insureds and related persons is less than the 20%
threshold), any gain from the disposition will generally be
treated as a
23
Table of Contents
dividend to the extent of the holder's share of the
corporation's undistributed earnings and profits that were
accumulated during the period that the holder owned the shares
(whether or not such earnings and profits are attributable to
RPII). In addition, such a holder will be required to comply
with certain reporting requirements, regardless of the amount of
shares owned by the holder. These RPII rules should not apply to
dispositions of our common shares because RAM Holdings will not
be directly engaged in the insurance business. The RPII
provisions, however, have never been interpreted by the courts
or the U.S. Treasury Department in final regulations, and
regulations interpreting the RPII provisions of the Code exist
only in proposed form. It is not certain whether these
regulations will be adopted in their proposed form or what
changes or clarifications might ultimately be made thereto or
whether any such changes, as well as any interpretation or
application of the RPII rules by the IRS, the courts, or
otherwise, might have retroactive effect. The U.S. Treasury
Department has authority to impose, among other things,
additional reporting requirements with respect to RPII.
Accordingly, the meaning of the RPII provisions and the
application thereof to RAM Holdings and RAM Re is uncertain. See
"Material Tax Considerations — Taxation of
Shareholders — United States Taxation — The
RPII CFC Provisions."
U.S. Persons who hold our shares will be subject to
    adverse U.S. federal income tax consequences if RAM
    Holdings is considered to be a passive foreign investment
    company.
If RAM Holdings is considered a passive foreign investment
company, or a PFIC, for U.S. federal income tax purposes, a
U.S. Person who owns directly or, in some cases, indirectly
(e.g. through a foreign partnership) any of our shares will be
subject to adverse U.S. federal income tax consequences,
including subjecting the investor to a greater tax liability
than might otherwise apply and subjecting the investor to a tax
on amounts in advance of when such tax would otherwise be
imposed, in which case your investment could be materially
adversely affected. In addition, if RAM Holdings were considered
a PFIC, upon the death of any U.S. individual owning common
shares, such individual's heirs or estate would not be
entitled to a
"step-up"
in
the basis of the common shares which might otherwise be
available under U.S. federal income tax laws. We believe
that we are not, and we currently do not expect to become, a
PFIC for U.S. federal income tax purposes; however, we
cannot assure you that we will not be deemed a PFIC by the IRS.
There are currently no regulations regarding the application of
the PFIC provisions to an insurance company. New regulations or
pronouncements interpreting or clarifying these rules may be
forthcoming. We cannot predict what impact, if any, such
guidance would have on an investor that is subject to
U.S. federal income taxation. See "Material Tax
Considerations — Taxation of Shareholders —
United States Taxation — Passive Foreign Investment
Companies."
U.S. tax-exempt organizations that own our common
    shares may recognize unrelated business taxable income.
A U.S. tax-exempt organization may recognize unrelated
business taxable income if a portion of our insurance income is
allocated to the organization. In general, insurance income will
be allocated to a U.S. tax-exempt organization if either we
are a CFC and the tax-exempt shareholder is a U.S. 10%
Shareholder or there is RPII and certain exceptions do not
apply. Although we do not believe that any U.S. Persons
should be allocated such insurance income, we cannot be certain
that this will be the case. See "Material Tax
Considerations — Taxation of Shareholders —
United States Taxation — Controlled Foreign
Corporations" and "Material Tax
Considerations — Taxation of Shareholders —
United States Taxation — The RPII CFC
Provisions." Potential U.S. tax-exempt investors are
advised to consult their own tax advisers.
Changes in U.S. federal income tax law could
    materially adversely affect an investment in our common
    shares.
Legislation has been introduced in the U.S. Congress
intended to eliminate certain perceived tax advantages of
companies (including insurance companies) that have legal
domiciles outside the United States but have certain
U.S. connections. While there are no currently pending
legislative proposals which, if enacted, would have a material
adverse effect on us or our shareholders, it is possible that
broader-based
24
Table of Contents
legislative proposals could emerge in the future that could have
an adverse effect on us, or our shareholders.
Additionally, the U.S. federal income tax laws and
interpretations regarding whether a company is engaged in a
trade or business within the United States, or is a PFIC or
whether U.S. Persons would be required to include in their
gross income the "subpart F income" or the RPII of a
CFC are subject to change, possibly on a retroactive basis.
There are currently no regulations regarding the application of
the PFIC rules to insurance companies and the regulations
regarding RPII are still in proposed form. New regulations or
pronouncements interpreting or clarifying such rules may be
forthcoming. We cannot be certain if, when or in what form such
regulations or pronouncements may be provided and whether such
guidance will have a retroactive effect.
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Table of Contents
FORWARD-LOOKING STATEMENTS
Some of the statements under "Summary," "Risk
Factors," "Management's Discussion and Analysis
of Financial Condition and Results of Operations,"
"Business" and elsewhere in this prospectus include
forward-looking statements which reflect our current views with
respect to future events and financial performance. These
statements include forward-looking statements both with respect
to us specifically and the insurance and reinsurance industries
in general. Statements which include the words
"expect," "intend," "plan,"
"believe," "project,"
"anticipate," "should," "could,"
"may," "will" and similar words or
statements of a future or forward-looking nature identify
forward-looking statements for purposes of the federal
securities laws or otherwise.
All forward-looking statements address matters that involve
risks and uncertainties. Accordingly, there are or will be
important factors that could cause our actual results to differ
materially from those indicated in these statements. We believe
that these factors include but are not limited to those
described under "Risk Factors" above and the following:
•
the loss of significant customers with whom we have a
    concentration of our reinsurance in force;
•
projected market capacity (including with respect to existing
    and potential future market entrants);
•
more severe losses or more frequent losses associated with our
    products;
•
income taxes, including our ability to write reinsurance
    business through Bermuda or other similarly tax efficient
    jurisdictions;
•
the timing of cash flows (including, principally, receipt of
    premium and timing of loss payments);
•
developments in the world's financial and capital markets
    that adversely affect the performance of our investments;
•
a downgrade of the financial strength ratings of RAM Re by
    Standard & Poor's or Moody's;
•
losses in our investment portfolio;
•
losses on credit derivatives;
•
changes in regulation or tax laws applicable to us, our
    subsidiaries or customers;
•
decreased demand for our reinsurance products;
•
our ability to identify, hire and retain qualified management
    and other personnel;
•
the effects of mergers, acquisitions, amalgamations and
    divestitures;
•
changes in accounting policies or practices; and
•
changes in general economic conditions, including inflation,
    foreign currency exchange rates, interest rates and other
    factors.
The foregoing review of important factors should not be
construed as exhaustive, and should be read in conjunction with
the other cautionary statements that are included in this
prospectus. We undertake no obligation publicly to update or
review any forward-looking statement, whether as a result of new
information, future developments or otherwise.
If one or more of these or other risks or uncertainties
materialize, or if our underlying assumptions prove to be
incorrect, actual results may vary materially from those we
projected. Any forward-looking statements you read in this
prospectus reflect our current views with respect to future
events and are subject to these and other risks, uncertainties
and assumptions relating to our operations, results of
operations, growth strategy and liquidity. All subsequent
written and oral forward-looking statements attributable to us
or to individuals acting on our behalf are expressly qualified
in their entirety by this paragraph. You should specifically
consider the factors identified in this prospectus which could
cause actual results to differ before making an investment
decision.
26
Table of Contents
REORGANIZATION TRANSACTIONS
RAM Holdings, Holdings II and RAM Re were incorporated on
January 28, 1998 under the laws of Bermuda. RAM Holdings
and Holdings II, the owners of all of the voting and
non-voting common shares of RAM Re, will enter into an
amalgamation agreement (merger agreement) pursuant to which the
two companies will amalgamate effective immediately prior to the
consummation of this offering. The shareholders of RAM Holdings
and Holdings II will approve the amalgamation agreement to
be effective shortly before the completion of this offering.
Upon consummation of the amalgamation, all of the shares of RAM
Re will be held by RAM Holdings as the surviving entity and RAM
Holdings will effect
a                     for
1 subdivision of our common shares and the issuance of
bonus shares on
a                     for
1 basis. The memorandum of association and bye-laws of RAM
Holdings in effect immediately prior to the amalgamation will
become the memorandum of association and bye-laws of the
amalgamated company, and the amalgamated company, by operation
of law, will succeed to the assets and liabilities of RAM
Holdings and Holdings II. The amalgamated company will
adopt the name RAM Holdings Ltd.
USE OF PROCEEDS
We estimate that our net proceeds from the initial public
offering of our common shares (at an assumed initial public
offering price of
$           per
common share, the midpoint of the range set forth on the cover
page of the prospectus and after deducting the estimated
underwriting discount and estimated offering expenses payable by
us) will be approximately
$           million.
We estimate that our net proceeds will continue to be
approximately
$           million
if the underwriters exercise their over-allotment option in
full. We presently intend to contribute substantially all of the
net proceeds of this offering to RAM Re to increase its capital
and surplus in order to increase its underwriting capacity. We
will not receive any proceeds from the sale of our common shares
by the selling shareholders.
DIVIDEND POLICY
We have never declared or paid, and do not currently intend to
pay, any cash dividends on our common shares. Any determination
to pay cash dividends will be at the discretion of our board of
directors and will depend upon our results of operations and
cash flows, our financial position and capital requirements,
general business conditions, legal, tax, regulatory and any
contractual restrictions on the payment of dividends and any
other factors our board of directors deems relevant.
We are a holding company and have no direct operations. Our
ability to pay dividends depends in large part on the ability of
RAM Re to pay dividends to us. RAM Re is subject to significant
regulatory restrictions limiting its ability to declare and pay
dividends.
RAM Re is subject to Bermuda laws and regulatory constraints
which affect its ability to pay dividends to RAM Holdings. Under
the Bermuda Insurance Act and related regulations, RAM Re must
maintain a minimum solvency margin and minimum liquidity ratio
and is prohibited from declaring or paying dividends if it does
not comply, or such action would result in noncompliance, with
the Bermuda Insurance Act. Under the Bermuda Insurance Act, RAM
Re must obtain the approval of the BMA before reducing its total
statutory capital by 15% or more, as set out in its previous
year's financial statements.
In addition, under the Bermuda Companies Act, RAM Holdings and
RAM Re may each only declare or pay a dividend if, among other
matters, there are reasonable grounds for believing that RAM
Holdings and RAM Re each are, or would after the payment be,
able to pay its respective liabilities as they become due and if
the realizable value of its assets would thereafter not be less
than the aggregate of its liabilities and issued share capital
and share premium accounts. Payments of interest and principal
to the holder of our $40.0 million aggregate principal
amount of 6.875% Senior Notes due 2024 will receive
priority over any payment of dividends on our common shares.
Accordingly, we cannot assure you that we will declare or pay
dividends in the future.
27
Table of Contents
CAPITALIZATION
The table below shows our combined capitalization as of
September 30, 2005 on an actual basis and as adjusted to
give effect to the sale
of                     common
shares offered by us in this offering (at an assumed initial
offering price of
$           per
common share, and after deducting the estimated underwriting
discount and estimated offering expenses payable by us and
assuming the underwriters' do not exercise their
over-allotment option) and assumes the completion of the
transactions described in "Reorganization Transactions, and
the                     for
1 subdivision of our common shares and the issuance of bonus
shares on
a                     for
1 basis has occurred. You should read this table in conjunction
with "Selected Combined Financial Information" and
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the combined
financial statements and related notes that are included
elsewhere in this prospectus.
As of September 30, 2005
Actual
As Adjusted
(Dollars in thousands)
Long-Term Debt
6.875% Senior notes due 2024
$
40,000
$
40,000
Total Long-Term Debt
$
40,000
$
40,000
Shareholders' Equity
Common shares
1,991
Additional paid-in capital
211,817
Accumulated other comprehensive income
(2,954
)
Retained earnings
108,448
Total Shareholders' Equity
$
319,302
$
Total Capitalization
$
359,302
$
Ratio of Long-Term Debt to Total Capitalization
11.1
%
%
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Table of Contents
DILUTION
As of September 30, 2005, our net book value was
$319.3 million, or $160.00 per common share. As used
below, our net book value per common share represents
shareholders' equity divided by the number of common shares
outstanding. After giving effect to (i) the issuance of our
common shares (at an assumed initial offering price of
$           per
common share, and after deducting the estimated underwriting
discount and estimated offering expenses payable by us and
assuming that the underwriters' do not exercise their
over-allotment option), (ii) the application of the
estimated net proceeds therefrom, and (iii) the completion
of transactions described in "Reorganization Transactions,
and
the                     for
1 subdivision of our common shares and the issuance of bonus
shares on
a                     for
1 basis, our net book value as of September 30, 2005 would
have been
$           million,
or
$           per
common share. This amount represents an immediate increase of
$           per
common share to the existing shareholders and an immediate
dilution of
$           per
common share issued to the new investors purchasing shares
offered hereby at the assumed offering price. The following
table illustrates this per share dilution:
Assumed initial offering price per common share
$
Net book value per common share before this offering
$
Increase attributable to this offering
$
Net book value per common share after this offering
$
Dilution per common share to new investors(1)
$
(1)
If the underwriters' exercise their over-allotment option
    in full, dilution per share to new investors will be
    $                    .
The following table sets forth the number of our common shares
issued, the total consideration paid and the average price per
common share paid by all of our existing shareholders and new
investors, after giving effect to the issuance of common shares
in this offering at an assumed initial offering price of
$           per
share (before deducting the estimated underwriting discount and
estimated offering expenses payable by us and assuming that the
underwriters' do not exercise their over-allotment option).
Shares Issued
Total Consideration
Average Price Per
Number
Percent
Amount
Percent
Share
Existing shareholders
%
$
%
$
New investors
$
Total
%
$
%
$
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Table of Contents
SELECTED COMBINED FINANCIAL INFORMATION
The following tables present our historical financial and
operating data as of the dates and for the periods indicated. We
derived the selected combined data as of and for each of the
three years in the period ended December 31, 2004, from our
audited combined financial statements, which have been prepared
in accordance with U.S. GAAP and appear elsewhere in this
prospectus. We derived the selected combined data as of and for
each of the two years in the period ended December 31,
2001, from our audited combined financial statements, which have
been prepared in accordance with U.S. GAAP and which are not
included in this prospectus. We derived the selected combined
data as of and for the nine months ended September 30, 2005
from our unaudited combined financial statements. Our historical
results of operations are not necessarily indicative of the
results to be expected for any future periods and the results
for the nine months ended September 30, 2005, should not be
considered indicative of results expected for the full year. You
should read this summary in conjunction with
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial
statements and related notes appearing elsewhere in this
prospectus.
As of and for the
Nine Months Ended
September 30,
As of and for the Year Ended December 31,
2005
2004
2004
2003
2002
2001
2000
(Unaudited)
(Dollars in thousands, except as indicated otherwise)
Statement of Operations Data:
Gross written premiums
$
55,220
$
48,212
$
66,057
$
67,880
$
36,205
$
26,544
$
21,346
Net earned premiums
31,425
27,351
34,721
25,543
17,561
12,898
9,327
Net investment income
12,864
12,006
16,824
13,373
11,546
11,121
10,021
Net realized investment (losses) gains
(1,137
)
560
536
1,097
2,927
535
252
Net unrealized (losses) gains on credit derivatives
(2,544
)
2,190
2,757
456
(613
)
—
—
Total revenues
40,608
42,107
54,838
40,469
31,422
24,554
19,600
Loss and loss adjustment expenses
3,104
2,461
3,579
3,994
6,447
910
653
Acquisition expenses
11,571
10,229
13,387
10,223
7,363
5,688
3,927
Operating expenses
9,391
8,174
11,032
5,042
3,360
2,926
3,087
Interest expense
2,057
1,413
2,106
—
—
—
—
Total expenses
26,123
22,278
30,104
19,259
17,170
9,524
7,667
Net income
14,486
19,829
24,734
21,210
14,252
15,030
11,933
Balance Sheet Data:
Investments and cash
$
465,193
$
428,671
$
440,992
$
356,933
$
226,161
$
195,141
$
166,755
Deferred acquisition costs
65,777
55,881
58,653
53,017
38,712
30,387
22,976
Total assets
540,749
542,609
510,798
426,260
277,028
234,646
201,253
Losses and loss expense reserve
12,274
15,023
15,493
13,821
10,401
4,382
3,529
Unearned premiums
163,837
129,567
140,043
120,182
77,845
59,201
45,555
Long-term debt
40,000
40,000
40,000
—
—
—
—
Total liabilities
221,447
235,102
199,293
137,005
91,537
65,604
50,977
Accumulated other comprehensive (loss) income
(2,954
)
3,507
2,787
4,659
11,002
4,733
998
Shareholders' equity
319,302
307,507
311,505
289,255
185,490
169,042
150,276
Selected Ratios (Based on U.S. GAAP Income Statement
    Data)(1):
Loss and loss adjustment expense ratio(2)
9.9
%
9.0
%
10.3
%
15.6
%
36.7
%
7.1
%
7.0
%
Expense ratio(3)
66.7
%
67.3
%
70.4
%
59.7
%
61.0
%
66.8
%
75.21
%
Combined ratio
76.6
%
76.3
%
80.6
%
75.4
%
97.8
%
73.8
%
82.2
%
Other Data — Financial Guaranty:
Par outstanding (in millions)
$
26,702
$
20,708
$
22,154
$
19,773
$
15,860
$
12,803
$
9,888
U.S. Basis Statutory Capital (in millions)(4)
$
277.0
$
277.3
$
274.6
$
230.3
$
135.3
$
131.4
$
123.0
(1)
These ratios are used by management in order to compare our
    performance to benchmarks commonly used by rating agencies and
    analysts that monitor the insurance industry.
(2)
Calculated by dividing loss and loss adjustment expenses by net
    earned premiums.
(3)
Calculated by dividing the sum of acquisition expenses and
    operating expenses by net earned premiums.
(4)
Our estimate of the sum of U.S. basis policyholder surplus
    and contingency reserve, as RAM Re files Bermuda statutory
    financial statements.
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Table of Contents
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial
condition and results of operations should be read in
conjunction with our combined financial statements and
accompanying notes which appear elsewhere in this prospectus. It
contains forward-looking statements that involve risks and
uncertainties. Please see "Forward-Looking Statements"
for more information. Our actual results could differ materially
from those anticipated in these forward-looking statements as a
result of various factors, including those discussed below and
elsewhere in this prospectus, particularly under the headings
"Risk Factors" and "Forward-Looking
Statements."
Overview
We are a Bermuda-based provider of financial guaranty
reinsurance, conducting substantially all of our operations
through our wholly owned subsidiary, RAM Re. Our business
consists of a single operating segment, financial guaranty
reinsurance, the purpose of which is to indemnify a primary
financial guarantor, referred to as the primary insurer, against
the portion of any loss it may sustain under financial guaranty
policies it has ceded to us. We reinsure policies covering both
U.S. and international exposures. We market our reinsurance
directly through the execution of treaty and facultative
contracts with seven primary insurers, with approximately 85% of
our gross written premiums ceded from three companies for the
nine months ending September 30, 2005.
Treaty reinsurance requires primary insurers to cede and us to
assume financial guarantees underwritten by the primary insurer
for specific types of obligations as determined by the treaty
terms. Facultative reinsurance requires us as the reinsurer to
assume, and the primary insurer to cede, part or all of one or
more individual financial guarantees, and is subject to separate
negotiation for each reinsurance cession. The initial
underwriting of insured risks and the reporting of underwriting
results to us are the responsibility of the primary insurers. As
a result, we are highly dependent on the underwriting, operating
and reporting standards of our primary insurers. The monitoring
and oversight of primary insurers are integral parts of our
business. These activities include reviews of their
underwriting, risk management, surveillance and reporting
practices.
We provide reinsurance in two product lines: public finance and
structured finance. Public finance obligations consist primarily
of debt obligations issued by or on behalf of states or other
governmental entities or their political subdivisions (counties,
cities, towns and villages, utility districts, public housing
and transportation authorities), other public and quasi-public
entities (including public universities and not-for-profit
hospitals, and
non-U.S.
sovereigns
and their political subdivisions), private universities and
hospitals and investor-owned utilities. Structured finance
obligations are generally securities backed by pools of assets
such as residential mortgage loans, consumer or trade
receivables, securities, short-term bank deposits or other
assets having a specified cash flow or market value which are
generally held by a special purpose issuing entity.
Our revenues are derived principally from:
•
written premiums from our reinsurance activities;
•
net investment income generated by our investment portfolio;
•
net realized investment gains (losses) from the sale of
    securities in our investment portfolio; and
•
unrealized gains (losses) in our credit derivatives portfolio.
The written premiums we receive are directly related to the
amount and type of business assumed from primary insurers under
treaty and facultative reinsurance contracts as well as to
prevailing market prices at the time of reinsurance cessions.
Written premiums are usually received on an upfront basis for
public finance transactions and earned over the life of a
policy, while premiums for structured finance transactions are
typically written on an installment basis and earned ratably
over the installment period. Investment income is primarily a
function of invested assets and the market interest rates
prevailing at the
31
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time of investments, as well as the type, credit quality and
maturity of the securities purchased. In addition, net realized
investment gains (losses) arise from capital gains or losses
realized from the sale of securities in our investment portfolio
as a result of changing market conditions, including changes in
market interest rates and the credit quality of our invested
assets. Unrealized gains (losses) on credit derivatives are a
function of changes in estimated fair value of our assumed
credit derivative contracts (primarily credit default swaps).
U.S. GAAP requires us to recognize gains and losses on
credit derivative contracts to the extent that the estimated
fair value of these contracts changes from the beginning to the
end of each reporting period, which we refer to as
"mark-to
-market"
accounting. We expect these unrealized gains or losses to
fluctuate primarily based on changes in credit spreads and
credit quality of the contracts reinsured by us. Because such
contracts are held to maturity, unless actual losses are
incurred on this business due to defaults, the cumulative
unrealized gains and losses will net to zero at the end of the
contract.
Our expenses consist of:
•
losses and loss adjustment expenses;
•
acquisition costs;
•
operating costs; and
•
interest expense.
Losses and loss adjustment expenses are a function of the amount
and types of business we write and are based in part upon
estimates of the case basis and ultimate aggregate losses
inherent in the portfolio as determined by the primary insurer,
which are reviewed and revised by us as deemed appropriate, and
by related estimates by management of losses inherent in our
portfolio. Acquisition costs are costs that vary with and are
directly related to the production of new business. Certain
acquisition costs are deferred and recognized over the period in
which the related premiums are earned. Operating costs consist
of general and administrative costs, which are primarily
salaries and other employee-related costs. Operating costs are
fixed in nature, and do not generally vary with premium
production. Interest expense is a function of outstanding debt
and the contractual interest rate related to that debt.
We believe that the financial guaranty business is significantly
affected by economic cycles. For example, a robust economic
environment featuring a good or improving credit environment is
beneficial to the in-force financial guaranty portfolios of
financial guaranty insurers and reinsurers. If such conditions
persist for an extended period, however, credit spreads tend to
narrow and pricing and/or demand for financial guaranty
insurance and, consequently, reinsurance declines. A
deteriorating economic and credit environment, in contrast, is
typically accompanied by widening credit spreads and improved
pricing for financial guaranty products. However, a prolonged
period of a weak or deteriorating economic activity could stress
in-force financial guaranty portfolios and could result in
claims payments or could adversely impact capital adequacy due
to deterioration in the credit quality of in-force portfolios.
During the most recent couple of years, credit spreads have
generally narrowed and new business production of primary
insurers in aggregate slowed.
Countervailing to some extent the recent trend in primary
insurers' new business production are developments that
have provided growth opportunities for us in our financial
guaranty reinsurance business. Underwriting capacity for
reinsurance, meaning the U.S. based statutory capital
available for financial guaranty reinsurance, is more limited
now than it was in 2002, and we believe such capacity is not
likely to increase in the immediate future. Many of the large
multi-line insurance companies that participated in the
financial guaranty reinsurance market in the 1990's have
left the market in order to refocus on their traditional lines
of business; the exit strategy of multi-line insurance companies
has been driven by favorable operating developments in their
core property-casualty insurance markets and by rating agency
downgrades which preclude multi-line companies from serving as
an economic source of financial guaranty reinsurance. The rating
agency criteria for financial guaranty reinsurance companies
have also become more stringent, making it more difficult for
new entrants.
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Two recent events are noteworthy in that they may have an impact
in the financial guaranty industry and on the financial results
of RAM Re. First, the devastation resulting from Hurricane
Katrina may affect the ability of certain entities to meet their
obligations to make payments on insured obligations. As of
June 30, 2005, our par outstanding on public finance
exposures in counties designated by FEMA for individual and
public assistance in the States of Louisiana, Mississippi and
Alabama totals approximately $119 million, of which
approximately $36 million is in Greater New Orleans
(comprised of Orleans, St. Charles, St. Bernard, Plaquemines and
Jefferson parishes). Within the affected areas, we are closely
monitoring 23 specific obligations with net par outstanding of
approximately $40 million. As of September 30, 2005,
no case reserves have been reported to us by any primary insurer
and we have not recorded case reserves for this event. Four
claims have been paid, amounting to $13,000, for which a full
reimbursement has been received. Uncertainty exists regarding
both the probability of defaults and loss severities associated
with any such defaults. Our risk management staff is actively
monitoring the specific obligations and developments in concert
with primary insurers and continues to assess the impact of
Hurricane Katrina on the credit quality of our portfolio.
Second, recent bankruptcies in the commercial airline business
present a threat to the ability and willingness of these
carriers to continue to meet obligations due under EETCs. We
have reinsured EETCs with net par outstanding as of
September 30, 2005 of $130 million, of which
$127 million is on our watch list. We are actively
monitoring our EETC exposure and developments concerning this
exposure. Because there is significant uncertainty regarding the
ability of certain obligors to meet their EETC obligations, RAM
Re could incur losses.
Critical Accounting Policies
Our combined financial statements include amounts that, either
by their nature or due to requirements of U.S. GAAP, are
determined using estimates and assumptions. The actual amounts
realized could ultimately be materially different from the
amounts currently provided for in our combined financial
statements. We believe that loss and loss adjustment expense
reserves, valuation of derivative financial instruments,
valuation of the investment portfolio including other than
temporary impairments of investments, determination of deferred
acquisition costs and premium revenue recognition to be
inherently complex and subjective, and therefore an
understanding of the accounting policies pertaining to these
items is critically important. These policies are summarized
below, and described in further detail in the notes to our
combined financial statements contained elsewhere in this
prospectus, and the discussion that follows should be read in
conjunction with our combined financial statements and notes.
Losses and Loss Expense Reserves.
The liability for
losses and loss adjustment expenses consists of case reserves
and unallocated reserves. Case reserves are established by the
primary insurer and our proportionate share of these reserves
are reported to us at least quarterly. Case reserves are
established in an amount that is sufficient to cover the present
value of the anticipated defaulted debt service payments over
the expected period of default and estimated expenses associated
with settling the claims, less estimated recoveries under
collateral and subrogation rights. Case reserves are discounted
in accordance with discount rates prescribed or permitted by
state regulatory authorities. We review and assess the ceded
case reserves and our evaluation may result in increasing the
case reserve recorded by us above the amount reported to us by
the primary insurer. Consistent with industry practice, we also
establish an unallocated reserve because we believe that
additional losses are inherent in our portfolio of reinsured
risks. We base our unallocated reserves on the unallocated
reserve amounts established by primary insurers for their
portfolios and the relative size and credit risk of our in-force
portfolio, taking into account the rating agencies' views
of credit quality as well as management judgment. Estimates of
our loss and loss adjustment expense reserves are substantially
dependent on the surveillance activities and reserving policies
of our primary insurers and such estimates are subjective and
are based on the judgment of both the primary insurer and our
senior risk and finance personnel and, therefore, the final
liability may materially differ from amounts estimated and
reserved.
Valuation of Derivative Financial Instruments.
FAS 133, "Accounting for Derivative Instruments and
Hedging Activities," establishes accounting and reporting
standards for derivative instruments and requires recognition of
all derivatives on the balance sheet at fair value. We are not a
direct writer of
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derivative contracts, however, as part of our financial guaranty
reinsurance business, we reinsure guarantees of credit
derivative contracts issued by primary insurers. These contracts
are held to maturity and are generally highly rated baskets of
credit default swaps. We do not reinsure single name credit
default swaps. We report revenues arising from such reinsurance
as earned premiums; we record estimates of losses and loss
adjustment expenses due to specific credit events as incurred;
and we record changes in fair value as incurred. Credit default
swap contracts require primary insurers to make payments upon
the occurrence of certain defined credit events relating to
underlying obligations (generally a fixed-income obligation). If
credit spreads of the underlying obligations change, the market
value of the related credit derivative contract generally
changes accordingly. Changes in credit spreads are typically
caused by changes in the market's perception of the credit
quality of the underlying obligations.
FAS 133 requires us to
mark-to
-market gains or
losses on those credit derivative contracts reinsured by us.
Because the primary insurer generally structures its credit
default swap contracts with first loss protection from various
financial institutions, the price volatility of these
instruments on account of credit spread changes is reduced, and
our risk of loss is mitigated. Changes in fair value due to
market conditions are reported as unrealized gains and losses on
derivative financial instruments in our income statement. These
unrealized gains and losses cumulatively will net to zero if no
credit defaults occur on these contracts. Should actual claim
losses be incurred as a result of credit defaults, the primary
insurer will be required to either purchase the security in
default at par, or pay to the counterparty to a credit default
swap the difference between par and market value. As a reinsurer
we would be obligated to reimburse the primary insurer for our
proportional share of the loss. In this respect, credit
derivative contracts differ from traditional financial guarantee
contracts since financial guarantee contracts require the
insurer to make payments of principal and interest only on
scheduled debt service dates, whereas defaults in our credit
derivatives portfolio may cause immediate payments of
outstanding par, net of market value.
We use a model to estimate the fair value of the derivatives
exposures assumed by us in the course of business. The valuation
model includes the use of management estimates and market
information, including factors such as current prices for
similar agreements, changes in credit spreads and interest
rates, and the duration of the credit derivative exposure. As a
result, the fair value of credit derivatives recorded by us may
materially differ from the value that might be realized in the
sale of the credit derivative portfolio. For a discussion of
changes to our model used to estimate the fair value of the
derivatives exposures assumed by us, see
"— Results of Operation — Nine Months
Ended September 30, 2005 Compared to Nine Months Ended
September 30, 2004 — Net Unrealized Gains
(Losses) on Credit Derivatives."
Valuation of Investment Portfolio.
Our investment
securities are designated as available for sale in accordance
with FAS 115, "Accounting for Certain Investments in
Debt and Equity Securities." Changes in the fair value of
our securities are reported in "Accumulated other
comprehensive income" in shareholders' equity. We have
a formal review process for all securities in our investment
portfolio, including a review for impairment losses. Factors
considered when assessing impairment include:
(i) securities with market values having declined by 20% or
more below amortized cost for a continuous period of at least
six months; (ii) recent credit downgrades by rating
agencies; (iii) the financial condition of the issuer;
(iv) whether scheduled interest payments are past due; and
(v) whether we have the ability and intent to hold the
security for a sufficient period of time to allow for
anticipated recoveries in fair value. If we believe a decline in
the value of a particular investment is temporary, we record the
decline as an unrealized loss in "Accumulated other
comprehensive income" on our balance sheet. If we believe
the decline is "other than temporary," we write-down
the carrying value of the investment and record a loss on our
income statement. Our assessment of a decline in value includes
our current judgment of the factors noted above. If that
judgment changes in the future, we may ultimately record a loss
after having originally concluded that the decline in value was
temporary.
Determination of Deferred Acquisition Costs.
We defer
certain costs that vary with and are directly related to the
production of new business, including direct expenses such as
ceding commissions and underwriting salaries, as well as
allocated costs attributable to the production of new business.
Deferred costs are amortized over the period in which the
related premiums are earned. Acquisition costs in the
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income statement represent gross policy acquisition costs, less
the deferral of expenses to future periods, plus the
amortization of previously deferred expenses. The amount of
expenses that qualify for deferral is determined on the basis of
periodic analysis, and is dependent on new business production,
ceding commissions negotiated with primary insurers,
management's judgment as to what costs and percentage
thereof are deferrable, and the level of normal and refunded
earned premiums. We periodically conduct a study to determine
the deferability of expenses and in recent years a lesser
percentage of our expenses have been deferred than was the case
in our initial years of operation.
Premium Revenue Recognition.
Written premiums are
received either as upfront premiums or in installments. Upfront
premiums are recorded as written at policy inception and earned
ratably over the life of the issue. Unearned premium reserves
represent that portion of written premiums applicable to the
outstanding amount at risk with respect to the obligations
reinsured. Public finance premiums are customarily paid upfront
and earned over the life of an issue which may extend to
30 years or more. Upfront premiums have relatively little
effect on earnings in the year written, but cumulatively affect
future years' earned premiums. When an issue reinsured by
us is retired early, has been called by the issuer, or is paid
in advance through refunding, any remaining unearned premium is
earned at that time, since there is no longer any risk
outstanding in connection with the issue. Refunding levels vary
depending upon a number of conditions, primarily the
relationship between current interest rates and interest rates
on outstanding debt. Installment premiums are received in
accordance with contractual terms, recorded as written at each
installment due date and earned over the installment period.
Structured finance premiums are customarily paid in installments
and earned over installment periods that generally range from
three months to one year in duration. We do not record a
provision for doubtful accounts because historically we have not
experienced any material issues related to the collectibility of
assumed premiums.
In January and February of 2005, the SEC discussed with
financial guaranty industry participants the diversity in
practice with respect to their accounting policies for loss
reserves. In June 2005, the FASB added a project to its agenda
to consider the accounting by financial guaranty insurers for
claims liability recognition, premium recognition and deferred
acquisition costs. The proposed and final documents are expected
to be issued in 2006. When the FASB or the SEC reaches a
conclusion on this issue, we and the rest of the financial
guaranty industry may be required to change some aspects of our
loss reserving policies and the potential changes could extend
to premium and expense recognition. We cannot predict how the
FASB or the SEC will resolve this issue and the resulting impact
on our financial statements. Until the issue is resolved, we
intend to continue to apply our existing policy with respect to
the establishment of both case and general reserves. We
anticipate that the FASB will conclude its project during 2006.
Results of Operations
Nine Months Ended September 30, 2005 Compared to Nine
    Months Ended September 30, 2004
Net Income.
Net income for the first nine months of 2005
was $14.5 million, a 26.8% decrease from the comparable
2004 period. The decrease in net income as compared to the first
nine months of 2004 was primarily due to the combination of
realized investment losses of $1.1 million, unrealized
losses on credit derivatives of $2.5 million, and a
non-recurring expense of $2.5 million associated with the
termination of a liquidity feature of equity incentives
previously granted to three executives. In the comparable period
of 2004, net income includes $0.6 million of realized
investment gains and $2.2 million of unrealized gains on
credit derivatives.
Gross Written Premiums.
Gross written premiums for the
first nine months of 2005 were $55.2 million, a 14.5%
increase from the comparable 2004 period. Gross written premiums
increased despite no growth in aggregate direct written premiums
at primary insurers for the first nine months of 2005. RAM
Re's increase in written premiums was due primarily to a
slight overall increase in our share of the reinsurance treaties
in which we participate and a greater amount of reinsurance
written on a facultative basis relative to the comparable prior
period.
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The following table sets forth the amounts of gross written
premiums by product lines:
Nine Months Ended
September 30,
Gross Written Premiums
2005
2004
(Dollars in millions)
Public Finance
$
36.7
$
33.0
Structured Finance
18.5
15.2
Total
$
55.2
$
48.2
Earned Premiums.
Earned premiums of $31.4 million
during the first nine months of 2005 were 14.5% above the
comparable period of 2004, primarily reflecting the substantial
increases in business reinsured in prior years for which
premiums are earned in relation to the amortization of exposure
or over the course of installment periods. Earned premiums for
the first three quarters of 2005 include $1.8 million of
refundings or accelerated earned premium, compared to
$2.4 million during the comparable 2004 period. As a result
of business written with upfront premiums during the first nine
months of 2005, primarily public finance business, our unearned
premiums were $163.8 million at the end of the first nine
months of 2005, a 26.4% increase over the level at the end of
first nine months of 2004 and a 17.0% increase over the
$140.0 million unearned premiums at year-end 2004. As noted
under "Premium Revenue Recognition Critical Accounting
Policies," the premiums for most public finance business
are paid upfront and a relatively small amount of such premiums
are earned in the year written. In contrast, premiums for most
structured finance business are paid in installments and the
majority of structured finance premiums are earned in the year
written.
The following table sets forth earned premiums by product lines:
Nine Months Ended
September 30,
Earned Premiums
2005
2004
(Dollars in millions)
Public Finance
$
15.8
$
12.3
Structured Finance
15.6
15.1
Total earned premiums
$
31.4
$
27.4
Investment Income.
Investment income was
$12.9 million for the first nine months of 2005, a 7.5%
improvement over the comparable 2004 period. Investment income
growth was driven primarily by the growth in invested assets and
to a lesser degree by an increase in available yields at which
cash flow can be invested.
Net Realized Investment (Losses) Gains.
Net realized
investment losses were $1.1 million during the first nine
months of 2005, compared to net realized investment gains of
$0.6 million in the comparable 2004 period. Investment
losses realized in 2005 and investment gains realized in 2004
are the result of repositioning within our portfolio of fixed
income securities and are primarily due to sales of securities
at prevailing interest rates that were higher in 2005 and lower
in 2004 than at the time a security was purchased.
Net Unrealized (Losses) Gains on Credit Derivatives.
For
the first nine months of 2005, we recorded net unrealized losses
on credit derivatives of $2.5 million, compared with net
unrealized gains of $2.2 million in the comparable period
of 2004. Our net unrealized losses during the first nine months
of 2005 reflect a change in estimated fair value that is
primarily due to modifications and refinement of certain
elements of the model used to estimate the fair value of our
assumed credit default swaps exposure. We modified certain
assumptions and inputs to our model in order to provide what we
believe to be more rigorous fair value estimates after extensive
research and an assessment of our practices and industry
approaches. We believe that the revised model provides a better
fair value estimate than our former approach and that periodic
estimates will be less volatile because the model is more
tailored to the
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very high credit quality of our assumed portfolio and better
captures the duration of our assumed contracts. From the
inception of the Company through September 30, 2005, no
losses had been incurred or paid by us on credit derivatives
contracts.
Loss and loss adjustment expenses.
Loss and loss
adjustment expenses through the first nine months of 2005
increased by $0.6 million relative to the comparable period
of 2004, to $3.1 million from $2.5 million. The loss
and loss adjustment expense ratio, calculated by dividing loss
and loss expenses by earned premiums, was 9.9% for the nine
months of 2005 compared to the ratio of 9.0% in the comparable
2004 period. During 2005, RAM Re made its largest claim payment
since its inception relating to indemnification of a primary
insurer for a $6.0 million loss. A $4.1 million case
reserve had been established for this claim during the fourth
quarter of 2004.
Acquisition Expenses.
Acquisition expenses for the first
nine months of 2005 were $11.6 million, a $1.3 million
increase over the comparable 2004 period. Acquisition expenses
are reflective of the increase in earned premiums for the first
nine months of 2005, as the acquisition expense ratio
(acquisition expenses divided by earned premiums) is 37% for
both the 2005 and 2004 nine month periods.
Operating expenses.
Operating expenses for the first nine
months of 2005 were $9.4 million, $1.2 million higher
than the $8.2 million incurred for the first nine months of
2004. Operating expenses in 2005 included a $2.5 million
charge recorded in connection with the termination of a
liquidity feature of equity incentives previously granted to
three executives. During the corresponding nine months of 2004,
expenses included approximately $2.1 million of
non-recurring items including $0.9 million in compensation
expense related to settlement of an employment matter,
$0.9 million in non-recurring legal expenses and
$0.3 million in financially-related consulting fees,
respectively.
Interest expense.
Our interest expense was
$2.1 million through the first nine months of 2005 compared
to $1.4 million in the comparable 2004 period. The increase
during 2005 reflects a full three quarters of interest on
$40 million aggregate principal amount of senior notes
issued on March 26, 2004, compared to the 2004 nine month
period which included only approximately two quarters of
interest expense.
Year Ended December 31, 2004 Compared to
    December 31, 2003 and Year Ended December 31, 2003
    Compared to December 31, 2002
Net Income.
Net income was $24.7 million in 2004,
compared to $21.2 million in 2003. The increase in net
income of $3.5 million, or 16.5%, resulted mainly from
increased earned premiums and investment income. Our net income
in 2003 of $21.2 million represents a 48.3% increase over
net income of $14.3 million in 2002, again primarily due to
an increase in earned premiums and investment income. Net income
in 2004 includes realized investment gains of $0.5 million
and unrealized gains on credit derivatives of $2.8 million.
Gross Written Premiums.
Gross written premiums in 2004
were $66.1 million, a decrease of 2.7% from
$67.9 million of gross written premiums in 2003. This
decrease in gross written premiums is primarily due to lower
ceded reinsurance premiums by the primary insurers as a result
of declines in their business written in 2004 relative to 2003.
Gross written premiums in 2003 increased 87.6% from
$36.2 million of gross written premiums in 2002. This large
percentage increase in written premiums from 2002 to 2003
reflects growth in the volume of business written by primary
insurers in 2003 versus 2002 and also partly reflects our
increased capacity resulting from a significant capital infusion
of $87.9 million in equity during 2003. The capital
infusion allowed RAM Re to underwrite a larger amount of
business and to increase capacity-constrained business due to
its larger capital base. We were also able to increase our
treaty participations in 2003 with two primary insurers, which
more than offset loss of business from the expiration of a
treaty with a third primary insurer.
Public finance gross written premiums in 2004 were
$45.2 million, a decrease of 13.4% from $52.2 million
in 2003. The decrease in public finance written premiums in 2004
relative to 2003 followed a 115.7% increase in 2003 relative to
2002, when written premiums were $24.2 million. Structured
finance
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gross written premiums in 2004 were $20.9 million, an
increase of 33.1% from $15.7 million in 2003, while this
2003 level of written premiums was 30.8% greater than the
$12.0 million written premiums in 2002.
The following table sets forth the amounts of gross written
premiums by product line:
For the Year Ended December 31,
Gross Written Premiums
2004
2003
2002
(Dollars in millions)
Public Finance
$
45.2
$
52.2
$
24.2
Structured Finance
20.9
15.7
12.0
Total
$
66.1
$
67.9
$
36.2
Our premiums are highly dependent upon the amount of business
ceded by the primary insurers which, in turn, is related to the
volume of business they underwrite and the premium rates such
primary insureds charge, and the size and type of obligations
insured by the primary insurers. In general, a growing volume of
insured business, a stable or growing usage of reinsurance and
higher premium rates will benefit our gross written premiums.
During 2004, the aggregate premium volume written by primary
insurers declined relative to 2003 and primary insurers ceded
less premium to reinsurers than in 2003. Within the
U.S. public finance market, historically high new issuance
volume in 2004 fell slightly below 2003 levels (which were a
record high); the percentage of new issues insured by the
primary insurers was slightly greater in 2004 than in 2003; and
average premium rates for public finance business assumed during
2004 year were down somewhat from those of 2003. Compared
to 2002, new issues of public finance obligations in 2003 were
up; the percentage of new issues insured was about the same; and
the average premium rates of business assumed were above the
2002 levels. In the structured finance markets, new issuance
volumes experienced double digit percentage growth both from
2003 to 2004 and from 2002 to 2003; the volume of insured
structure finance obligations was up substantially in 2004
relative to 2003, after a decline from 2002 to 2003; and average
premium rates for assumed structured finance business in 2004
were below the 2003 level, while 2003 average premium rates were
above those of 2002.
Earned Premiums.
Earned premiums in 2004 were
$34.7 million, an increase of 36.1% from $25.5 million
of earned premiums in 2003. The significant increases in upfront
premiums from the public finance business in past years, as
indicated by growth in unearned premiums on the balance sheet,
and in installment premiums from the structured finance business
in the prior years contributed to this growth, as did higher
refundings during the year. Premiums resulting from refundings
totaled $3.3 million in 2004 compared to $2.5 million
in 2003.
Earned premiums in 2003 were $25.5 million, an increase of
44.9% from $17.6 million of earned premiums in 2002. The
significant increases in upfront premiums from the public
finance business in past years, and in installment premiums from
the structured finance business contributed to this growth, as
did higher refundings during the 2003 year compared to the
2002 level of $1.1 million.
The following table sets forth earned premiums by product line:
For the Year Ended
December 31,
Earned Premiums
2004
2003
2002
(Dollars in millions)
Public Finance
$
15.9
$
10.6
$
6.8
Structured Finance
18.8
14.9
10.8
Total earned premiums
$
34.7
$
25.5
$
17.6
Net Investment Income.
Net investment income in 2004 was
$16.8 million, an increase of 25.4% from $13.4 million
in 2003. The increase was attributable to the growth of the
investment portfolio resulting from increased reinsurance
premiums and the full year impact of the capital raised during
2003 which provided $87.7 million to our investment
portfolio, partially offset by a lower investment rate due to
decreases in the interest rate environment. Our portfolio is
comprised predominantly of taxable securities,
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and had an average yield of 4.2% at December 31, 2004,
compared with 4.5% and 5.5% at December 31, 2003 and 2002,
respectively. Net investment income in 2003 of
$13.4 million increased by 16.5% from net investment income
of $11.5 million in 2002. The increase was attributable to
proceeds from our common share issuance during the second
quarter of 2003 and the growth of the investment portfolio
resulting from increased reinsurance premiums, partially offset
by a lower investment rate due to decreases in the interest rate
environment.
Net Realized Investment Gains (Losses).
Net realized
investment gains in 2004 were $0.5 million compared to
$1.1 million and $2.9 million in 2003 and 2002,
respectively. Net gains on securities sold are generated as a
result of the ongoing management of the investment portfolio and
are generally the result of repositioning within the portfolio
achieved by selling securities and purchasing securities
believed to provide improved investment characteristics.
Net Unrealized Gains (Losses) on Credit Derivatives.
Net
unrealized gains on credit derivative contracts in 2004 were
$2.8 million, compared to net unrealized gains on credit
derivative contracts of $0.5 million and net unrealized
losses of $0.6 million in 2003 and 2002, respectively. The
change in estimated fair value of credit derivative contracts in
2004 and 2003 reflects growth in the in-force portfolio and net
mark-to
-market gains
due to tightening credit spreads on the underlying obligations.
Unrealized losses in 2002 were a result of widening credit
spreads, which resulted in a decrease in the estimated fair
value of the credit derivative contracts. As of
December 31, 2004, no losses had been incurred or paid by
us on credit derivatives contracts.
Losses and Loss Adjustment Expenses.
Losses and loss
adjustment expenses in 2004 were $3.6 million, compared to
$4.0 million in 2003 and $6.4 million in 2002. In
2004, losses and loss adjustment expenses decreased by 10.0%
relative to 2003, and losses and loss adjustment expenses
decreased by 38% versus 2002. The loss ratio was 10.3% in 2004,
15.6% in 2003, and 36.7% in 2002. The greater 2002 loss activity
was driven primarily by case reserve activity associated with
defaulted credits within our structured finance portfolio. Loss
and loss adjustment expenses are generally affected by changes
in the mix, size, and credit quality of our portfolio, as well
as specific credit events within reinsured obligations and
trends in the reserving practices of our ceding insurers.
Acquisition Expenses.
Acquisition expenses were
$13.4 million in 2004, compared to $10.2 million and
$7.4 million in 2003 and 2002, respectively. The net change
in acquisition expenses was a $3.2 million increase, or
31.4%, in 2004 over 2003, and a $2.8 million increase, or
37.8%, in 2003 over 2002, with these increases primarily as a
result of amortization of acquisition expenses in concert with
higher earned premiums. Our acquisition expense ratio declined
in each year from 2002-2004, from 41.9% to 40.0% to 38.6%,
respectively, reflecting some improvement (decreases) in
ceding commissions paid to primary insurers and a lesser share
of direct expenses allocated to acquisition as a result of an
update of our analysis of expenses that qualify for deferral.
Operating Expenses.
Operating expenses were
$11.0 million in 2004, an increase of 120.0% compared to
$5.0 million in 2003, due to higher compensation costs as a
result of increase in staff during the year, allocating a lesser
portion of operating costs to deferred acquisition costs and
$2.7 million of non-recurring items including
$0.9 million in compensation expenses related to settlement
of an employment matter, $1.5 million in legal expenses and
$0.9 million in consulting fees,. Operating expenses were
$5.0 million in 2003, an increase of 47.1% from
$3.4 million in 2002, due primarily to increased staffing
and a $0.3 million expense relating to our stock option
plan. As a result of increases in operating expenses, the ratio
of operating expenses to earned premiums grew from 19.1% in 2002
to 19.7% in 2003 and to 31.8% in 2004.
Liquidity and Capital Resources
Liquidity.
RAM Holdings is a holding company and
therefore our liquidity, both on a short-term basis (for the
next twelve months) and a long-term basis (beyond the next
twelve months), is largely dependent upon (1) the ability
of RAM Re to pay dividends or make other payments to us and
(2) our ability to access debt and equity markets. Our
principal uses of liquidity are for payment of interest on our
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senior notes and capital investments in RAM Re. In 2004 we
issued unsecured senior notes of $40.0 million to a
qualified institutional buyer, with the proceeds used to
purchase preferred shares in RAM Re. In 2003, we contributed
$89.7 million to RAM Re from net proceeds of an equity
offering. Based on the amount of dividends that we expect to
receive from RAM Re for the remainder of 2005 and in 2006, we
believe that we will have sufficient liquidity to satisfy our
needs over the next twelve months. RAM Re's ability to
declare and pay dividends to us may be influenced by a variety
of factors such as adverse market changes, insurance regulatory
changes and changes in general economic conditions, beyond the
next twelve months and Bermuda law as described below.
Consequently, although we believe that we will continue to have
sufficient liquidity to meet our obligations over the long term,
we cannot guarantee that RAM Re will be able to dividend amounts
sufficient to satisfy all our obligations, and there can be no
assurance that dividends will be declared or paid in the future.
The principal sources of RAM Re's liquidity are gross
written premiums, scheduled investment maturities, capital
contributions from RAM Holdings and net investment income. The
principal uses of RAM Re's liquidity are for the payment of
operating expenses, claims, ceding commissions, dividends to RAM
Holdings and for purchases of new investments. We believe that
RAM Re's expected operating liquidity needs can be funded
exclusively from its operating cash flow.
RAM Re may declare dividends, provided that, after giving effect
to the distribution, it would not violate certain statutory
equity, solvency and asset tests. The Bermuda Insurance Act
requires RAM Re to meet a minimum solvency margin equal to the
greater of (i) $1.0 million, (ii) 20% of net
premiums written up to $6 million plus 15% of net premiums
written over $6 million, and (iii) 15% of loss and
other insurance reserves. To satisfy these requirements, RAM Re
was required to maintain a minimum level of statutory capital
and surplus of $10.2 million at December 31, 2004. RAM
Re's statutory capital and surplus was $286.4 million
at December 31, 2004, of which $212.6 million was
fully paid up share capital. In addition to the foregoing
solvency criteria, Bermuda law limits the maximum amount of
annual dividends or distributions payable and in certain
instances requires the prior notification to, or approval of,
the BMA. Based upon these tests, without regulatory approval,
the maximum amount that would have been available during 2004
for payment by RAM Re was approximately $37.8 million.
Cash Flows.
During the first nine months of 2005, net
operating cash flow was $32 million compared to
$34.6 million for the first nine months of 2004. We
generated an operating net cash flow of $49.0 million,
$49.7 million, and $24.5 million during the years
ended December 31, 2004, 2003, and 2002 respectively. Our
operating cash flows are primarily the result of the excess of
net premiums received and investment income over operating
expenses, claims payments and interest expenses. For the years
2004, 2003 and 2002, net cash flows from financing activities of
$39.3 million, $88.5 million and ($2.3) million,
respectively, relate primarily to net proceeds from the 2004
issuance of $40 million of senior notes and a 2003
contribution of $89.7 million to RAM Re from the net
proceeds of a private placement of our common shares and a
redemption of shares offset by repayment of shareholder loans.
Net cash used in investment activities amounted to
$63.3 million, $134.0 million, and $21.6 million
in the years ending December 31, 2004, 2003 and 2002,
respectively, relate to the investment of additional financing
cash flows and net cash flow from operations less financing
expenses.
Capital Resources.
RAM Re maintains a $90.0 million
contingent capital facility with a group of highly rated
commercial banks as lenders. The facility is specifically
designed to provide rating-agency qualified capital to support
RAM Re claims paying resources and may not be drawn upon except
for the payment of catastrophic losses where losses exceed
minimum thresholds in respect of certain obligations reinsured
by RAM Re. Loan obligations under this facility have limited
recourse and are repayable from, and collateralized by, a pledge
of recoveries realized on defaulted reinsured obligations
covered by the facility, including certain installment premiums
and other collateral. The facility, which contains an annual
renewal provision subject to bank approval, has a ten-year term
ending on May 11, 2015. As of the date of this prospectus,
no amounts were outstanding under this facility.
On February 3, 2006, RAM Re closed a $40.0 million
contingent capital facility with two highly rated commercial
banks. This facility is essentially the same as the
$90.0 million contingent capital facility
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described above although it may be drawn upon only to cover
catastrophic losses, exceeding the minimum threshold, from
municipal obligations reinsured by RAM Re. Loan obligations
under this facility also have limited recourse and are repayable
from, and collateralized by, a pledge of recoveries realized on
defaulted reinsured obligations covered by this facility,
including certain installment premiums and other collateral, on
a subordinate basis to the pledge made to secure the
$90.0 million facility described above. The
$40.0 million facility has a seven-year term and has an
annual renewal feature, subject to approval of the lenders. As
of the date of this prospectus, no amounts were outstanding
under this facility.
On December 23, 2003, RAM Re entered into a
$50.0 million soft capital facility whereby it was granted
the right to exercise perpetual put options in respect of its
Class B preference shares against the counterparty to the
option agreement, in return for which it pays the counterparty a
floating put option fee. The counterparty is a trust established
by Lehman Brothers Inc. The trust was created as a vehicle for
providing capital support to RAM Re by allowing it to obtain, at
its discretion and following the procedures of the option
agreement, access to new capital through the exercise of a put
option and the subsequent purchase by the trust of RAM Re
preference shares. The option agreement has no scheduled
termination date or maturity, but will be terminated if RAM Re
takes certain actions as specified in the operative facility
documents. RAM Re has the option to redeem the Class B
preference shares issued upon exercise of its put option,
subject to certain specified terms and conditions. If the put
option is exercised in full, RAM Re would receive up to
$50 million in connection with the issuance of the
preference shares, the proceeds of which may be used for any
purpose including the payment of claims. To fund the purchase of
preference shares upon exercise of the put option by RAM Re, the
trust issued $50.0 million of its own auction market
perpetual preferred securities which are rated "A+" by
Standard & Poor's and "A2" by
Moody's. The proceeds of this issuance are held by the
trust in certain high-quality, short-term commercial paper
investments.
On March 26, 2004, we issued $40.0 million aggregate
principal amount of senior unsecured debt. The net proceeds of
this issuance were contributed to RAM Re to be used for general
corporate purposes. The senior notes bear interest at a rate of
6.875%, payable semi-annually in arrears on April 1 and
October 1 of each year, beginning on October 1, 2004.
Unless previously redeemed, the senior notes will mature on
April 1, 2024. We may redeem the senior notes at any time
and from time to time, in whole or in part, at a
"make-whole" redemption price. The senior notes
contain certain covenants regarding limitations on liens and
delivery of financial information, but do not contain any
covenants regarding financial ratios or specified levels of net
worth or liquidity to which we must adhere. We were in
compliance with all covenants at September 30, 2005.
Investment Portfolio.
At September 30, 2005, our
investment portfolio consisted of $461.8 million of fixed
income securities and $3.4 million of short-term
investments. Our fixed income securities are designated as
available for sale in accordance with FAS 115
"Accounting for Certain Investments in Debt and Equity
Securities." Short-term investments consist primarily of
money market funds, domestic time deposits and discount notes.
We report changes in fair value as part of "Accumulated
other comprehensive income" in shareholders' equity.
Our portfolio is managed by an outside professional asset
management firm in accordance with specific investment policies
approved by our board of directors. These policies establish
liquidity requirements, portfolio duration, single-risk
concentration limits and minimum credit quality and investment
eligibilities. Fair values of fixed income securities are based
on quoted market prices by either independent pricing services,
or when such quoted prices are unavailable, by reference to
broker quotes. Our investment objectives include preservation of
principal, maintaining a high credit quality, liquid investment
portfolio within a prescribed duration range and achieving
stable net investment income. The effective duration of our
portfolio at September 30, 2005 is 4.23 years and our
investment policy and guidelines require the minimum portfolio
weighted credit quality to be at least "Aa2" rating by
Moody's. The yield to maturity of the portfolio is 4.91%
and the book yield of the portfolio is 4.56% at
September 30, 2005. At September 30, 2005, we had
$250.2 million of our invested assets in trust accounts for
the benefit of primary insurers (out of $465.2 million of
total cash and investments). Under its reinsurance agreements
with primary insurers, RAM Re is required to secure its
obligations and may not withdraw funds from the trust accounts
without their express permission.
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Our finance personnel monitor the portfolio on a monthly basis
(or more frequently as required) for performance and adherence
to policies, including market valuation, credit quality,
portfolio duration and liquidity. We have a formal review
process for all securities in our investment portfolio,
including a review for impairment losses based on the factors
described above under "Critical Accounting
Policies — Valuation of Investment Portfolio."
The following table summarizes our investment portfolio by bond
type, fair value and amortized cost thereof at
September 30, 2005 and December 31, 2004:
As of September 30, 2005
Fixed Income Securities
Amortized Cost
Fair Value
Agencies
$
67,069,651
$
66,060,403
U.S. government obligations
37,507,736
37,158,540
Corporate debt securities
130,880,989
130,354,640
Municipal securities
11,727,815
12,702,741
Mortgage and asset-backed securities
217,518,664
215,474,909
Total
$
464,704,855
$
461,751,233
As of December 31, 2004
Fixed Income Securities
Amortized Cost
Fair Value
Agencies
$
51,964,943
$
51,642,461
U.S. government obligations
30,995,766
31,132,074
Corporate debt securities
146,049,031
146,688,989
Municipal securities
11,736,705
12,841,960
Mortgage and asset-backed securities
161,373,122
162,600,614
Total
$
402,119,567
$
404,906,098
The amortized cost and estimated fair value of fixed income
securities available for sale as of September 30, 2005 and
December 31, 2004 by contractual maturity are shown below.
Expected maturities will differ from contractual maturities
because borrowers may have the right to call or prepay
obligations.
As of September 30, 2005
Fixed Income Securities
Amortized Cost
Fair Value
Less than one year
$
2,351,677
$
2,332,105
Due after one year through five years
156,882,197
154,434,235
Due after five years through ten years
90,271,329
89,119,256
Due after ten years
215,199,652
215,865,637
Total
$
464,704,855
$
461,751,233
As of December 31, 2004
Fixed Income Securities
Amortized Cost
Fair Value
Less than one year
$
—
$
—
Due after one year through five years
182,156,316
181,709,468
Due after five years through ten years
60,387,309
60,519,395
Due after ten years
159,575,942
162,677,235
Total
$
402,119,567
$
404,906,098
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The following table provides the ratings distribution of our
investment portfolio at each of September 30, 2005 and
December 31, 2004:
As of September 30,
Rating(1)
2005
AAA(2)
73.0
%
AA
13.0
%
A
13.0
%
Cash
1.0
%
Total
100.0
%
As of December 31,
Rating(1)
2004
AAA(2)
63.0
%
AA
14.0
%
A
17.0
%
Cash
6.0
%
Total
100.0
%
(1)
Ratings represent Standard & Poor's
    classifications. If unavailable, Moody's ratings are used.
(2)
Includes U.S. Treasury and agency obligations, which
    comprised approximately 22.0% of the investment portfolio as of
    September 30, 2005 and December 31, 2004.
Contractual Obligations
We have various contractual obligations as of December 31,
2004 that are summarized in the following table:
Less Than
More than
Total
1 Year
1-3 Years
4-5 Years
5 Years
(Dollars in millions)
Long-term debt(1)
$
40.0
—
—
—
$
40.0
Operating lease commitments(2)
$
1.0
$
0.3
$
0.6
—
—
Losses and loss expense reserve(3)
$
16.3
$
3.6
$
1.4
$
2.8
$
8.5
(1)
Principal only.
(2)
Lease payments are subject to escalation in building operating
    costs.
(3)
We have estimated the timing of these payments on an
    undiscounted basis and note that actual payments may vary
    significantly from these estimates.
Off-Balance Sheet Arrangements
As of December 31, 2004, we did not have off-balance sheet
arrangements that were not accounted for or disclosed in the
combined financial statements.
Risk Management
In the ordinary course of business, we manage a variety of
risks, primarily credit, market, liquidity and legal. These
risks are identified, measured and monitored through a variety
of control mechanisms, which are in place at different levels
throughout the organization.
Credit Risk.
We are exposed to credit risk as a reinsurer
of financial guarantees and as a holder of fixed income
investment securities. We employ various procedures and controls
to monitor and manage
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credit risk. Our senior risk management personnel focus on risk
limits and measurement, concentration and correlation of risk,
and the allocation of rating agency capital in a portfolio
context.
Our underwriting procedures differ, depending on whether we are
conducting facultative or treaty-based reinsurance activities.
Our facultative reinsurance activities are subject to a formal
underwriting process on a transaction-by-transaction basis,
whereas our treaty underwriting is based upon an evaluation of
the portfolio of transactions ceded to us by a particular
primary insurer as well as the history of each primary
insurer's own underwriting activities.
For facultative transactions, various factors affecting the
credit worthiness of the underlying obligations are evaluated
during the underwriting process. Our underwriting committee,
comprised of our CEO, CFO, Chief Risk Manager and General
Counsel, approves all treaties and facultative transactions
prior to committing any of our reinsurance capacity. Following
the issuance of a financial guarantee on a facultative basis, we
periodically update the performance of our existing exposures
using information provided by the ceding primary as well as
independent resources. Such reviews are performed independently
of transaction execution, and periodically results are reviewed
by senior finance and risk management personnel. Our management
committee determines the adequacy of our loss reserves and makes
any necessary adjustments following such assessment. Proactive
credit remediation by the primary insurer can help secure rights
and remedies, which mitigate losses in the event of default.
We, like other reinsurers, rely heavily in both our facultative
and treaty-based business on the surveillance activities of the
primary insurers to provide us with updated information on the
performance of the transactions in our reinsured portfolio. The
surveillance information provided to us by the primary insurers
is supplemented by our own independent evaluations of the
analysis and underlying performance data provided by the ceding
primary with regard to watch list transactions and verification
(where possible) of ratings information provided by the primary
insurers on large exposures and on transactions where
significant discrepancies are evident between a ceding
primary's internal rating and the reported ratings of
Standard & Poor's or Moody's.
We also conduct
on-site
due diligence reviews of the companies with whom we have treaty
arrangements, which include:
•
discussions with our underwriting and risk management personnel
    to determine if there have been any changes in underwriting
    approach or emphasis;
•
reviews of individual underwriting, surveillance and legal files
    for selected treaty transactions to determine whether cessions
    conform with treaty eligibility criteria and to ensure that the
    primary insurer's underwriting approach and implementation
    are consistent with our own risk tolerance;
•
reviews of watch list transactions to determine the propriety
    and prognosis of the credits placed on the watch list and any
    case reserves that may have been established; and
•
reviews of controls over ceded reinsurance reporting.
In addition, we also review rating agency releases and other
publicly available information on the credits reinsured by us to
further refine our loss estimation and reserving process.
Our investment portfolio is managed by the professional asset
management firm, MBIA Capital, a wholly-owned subsidiary of one
of our shareholders. Our investment policies are designed to
require the portfolio to be managed in a manner that preserves
principal, provides long term predictable growth while
maximizing income, meets statutory requirements, provides
adequate liquidity to meet claims and other cash needs and
maintains high credit quality. Our operating guidelines specify
eligible investments and establish a portfolio duration target,
high liquidity, minimum credit ratings, single risk limits,
diversification and asset allocation standards. Our finance
personnel review our portfolio monthly for compliance with
investment policies and procedures; and the investment committee
of our board of directors meets with our portfolio managers
periodically to review investment activity and results,
compliance with investment guidelines, as well as to review and
update investment policy and strategy in light of business
developments.
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Quantitative and Qualitative Information about Market
Risk.
Market risk represents the potential for losses that
may result from changes in the value of a financial instrument
as a result of changes in market conditions. The primary market
risks that would impact the value of our financial instruments
are interest rate risk and credit spread risk. An estimation of
potential losses arising from adverse changes in market
conditions is a key element in managing market risk. Senior
finance personnel are responsible for risk measurement and
monitoring procedures which include periodic analyses of shifts
in the yield curve and changes in credit spreads. The valuation
results from these analyses could differ materially from amounts
that would actually be realized in the market.
Changes in interest rates may adversely affect the value of
fixed income investment securities. The following table
summarizes the estimated change in fair value (based primarily
on the valuation models discussed above) on the net balance of
our investment securities, assuming immediate changes in
interest rates at specified levels at September 30, 2005:
Estimated
Estimated Net
(Decrease)/Increase
Change in Interest Rates
Fair Value
in Net Fair Value
(Dollars in millions)
300 basis point rise
$
399.3
$
(61.3
)
200 basis point rise
418.1
(42.5
)
100 basis point rise
438.7
(21.9
)
Base scenario
460.6
—
100 basis point decline
480.7
20.1
200 basis point decline
497.4
36.8
300 basis point decline
516.4
55.8
Financial instruments that may be adversely affected by changes
in credit spreads include our outstanding exposure to structured
credit derivative contracts. The primary insurer enters into
these types of contracts, which require the insurer to make
payments upon the occurrence of certain defined credit events
relating to underlying obligations. If credit spreads relating
to the underlying obligations change, the market value of the
related structured credit derivative changes accordingly.
Changes in credit spreads are generally caused by changes in the
market's perception of the credit quality of the underlying
obligations. As credit spreads change, we experience unrealized
or
mark-to
-market gains
or losses on credit derivative contracts reinsured by us.
However, as the primary insurer generally structures its
contracts with first loss protection from various financial
institutions, the price volatility of these instruments is
reduced and our risk of loss is mitigated. We estimate the
potential impact of credit spread changes on the value of our
contracts and the following table summarizes the estimated
changes in the fair value of our portfolio assuming immediate
changes in credit spreads at specified levels at
September 30, 2005:
Estimated Net
Estimated
Change in Credit Spreads
Fair Value
Gain/(Loss)
75 basis point narrowing
$
351,140
$
294,453
50 basis point narrowing
252,989
196,302
25 basis point narrowing
154,838
98,151
Base scenario
56,686
—
25 basis point widening
(41,465
)
(98,151
)
50 basis point widening
(139,616
)
(196,302
)
75 basis point widening
(237,767
)
(294,453
)
Liquidity Risk.
Liquidity risk relates to the possible
inability to satisfy contractual obligations when due. This risk
is most present in financial guarantee contracts reinsured by us
in that we are required to make loss payments to primary
insurers in the event they pay losses as a result of defaults in
their ceded insured obligations. We manage our liquidity risk by
analysis of projected cash flows and by maintaining a
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minimum level of cash and short-term investments which are at
all times sufficient to fulfill our contractual obligations, and
by maintaining a highly liquid investment portfolio.
Legal Risk.
Legal risks include uncertainty with respect
to the enforceability of rights under our contractual agreements
and with respect to the enforceability of rights under the
financial guaranty policies which we reinsure. We seek to remove
or minimize such uncertainties through consultation with
internal and external legal advisers to analyze and understand
the nature of legal risk, to improve documentation and to
understand transaction structure.
New Accounting Pronouncements
In January and February of 2005, the SEC discussed with
financial guaranty industry participants the diversity in
practice with respect to their accounting policies for loss
reserves. In June 2005, the FASB added a project to its agenda
to consider the accounting by financial guaranty insurers for
claims liability recognition, premium recognition and deferred
acquisition costs. The proposed and final documents are expected
to be issued in 2006. When the FASB or the SEC reaches a
conclusion on this issue, we and the rest of the financial
guaranty industry may be required to change some aspects of our
loss reserving policies and the potential changes could extend
to premium and expense recognition. We cannot predict how the
FASB or the SEC will resolve this issue and the resulting impact
on our financial statements. Until the issue is resolved, we
intend to continue to apply our existing policy with respect to
the establishment of both case and general reserves. We
anticipate that the FASB will conclude its project during 2006.
In December 2004, the FASB issued a revision of FASB Statement
No. 123, Accounting for Stock Based Compensation. Under
FAS 123(R), companies will be required to expense the fair
vale of employee stock options and other forms of stock-based
compensation and to provide associated financial statement
disclosures. We currently account for stock-based compensation
under APB 25 and do not generally recognize compensation
expense for stock-based compensation. For non-public companies,
FAS 123(R) is effective for annual reporting periods
beginning after December 15, 2005. We will apply this
statement prospectively to new awards and to awards modified,
repurchased, or cancelled after the effective date. We are
currently evaluating the new standard and completing our
assessment of the impact of FAS 123(R) and pending
completion of that activity we are unable to estimate the effect
of adoption on our results of operations and financial condition.
In January 2003, the FASB, issued FASB Interpretation
No. 46, "Consolidation of Variable Interest
Entities," or FIN 46, as an interpretation of
Accounting Research Bulletin No. 51,
"Consolidated Financial Statements." FIN 46
addresses consolidation of variable interest entities, or VIEs,
by business enterprises. An entity is considered a VIE subject
to consolidation if the equity investment at risk is not
sufficient to permit the entity to finance its activities
without additional subordinated financial support or if the
equity investors lack one of three characteristics of a
controlling financial interest. First, the equity investors lack
the ability to make decisions about the entity's activities
through voting rights or similar rights. Second, they do not
bear the obligation to absorb the expected losses of the entity
if they occur. Lastly, they do not claim the right to receive
expected returns of the entity if they occur, which are the
compensation for the risk of absorbing the expected losses.
FIN 46 requires that VIEs be consolidated by the entity
that maintains the majority of the risks and rewards of
ownership. This interpretation applies immediately to VIEs
created after January 31, 2003 and to VIEs in which an
enterprise obtains an interest after that date. The adoption of
FIN 46 did not have a material impact on our financial
statements.
In December 2003, the FASB revised FIN 46 with FASB
Interpretation No. 46R, which we refer to as FIN 46R.
The primary objectives of FIN 46R are to provide guidance
on the identification of entities for which control is achieved
through means other than through voting rights (which we refer
to as VIEs) and how to determine when and which business
enterprise (which we refer to as the primary beneficiary) should
consolidate the VIE. In addition, FIN 46R requires both the
primary beneficiary and all other enterprises with a significant
variable interest in a VIE to make additional disclosures. We
have determined that we are not a primary beneficiary nor do we
have a significant variable interest in a VIE.
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INDUSTRY OVERVIEW
Financial Guaranty Insurance
RAM Re is a reinsurer of primary companies that issue financial
guaranty insurance policies. Financial guaranty insurance
provides an unconditional and irrevocable guarantee that
protects the holder of a financial obligation against
non-payment of principal and interest when due. Financial
guaranty insurance may be issued at inception of the insured
obligations or may be issued in the secondary market, mainly to
institutional holders of such obligations. Both issuers and
investors may benefit from financial guaranty insurance. Issuers
benefit when the insurance has the effect of lowering an
issuer's cost of borrowing because the insurance premium is
less than the value of the spread between the yield on the
obligation with insurance and the yield on the obligation
without insurance. Financial guaranty insurance also increases
the marketability of obligations issued by infrequent or unknown
issuers or obligations with complex structures. Investors
benefit from increased liquidity in the secondary market,
reduced exposure to price volatility caused by changes in the
credit quality of the underlying insured issue, and added
protection against loss in the event of the obligor's
default on its obligation.
Unlike most other forms of insurance, financial guarantees are
underwritten to a remote-loss standard, meaning that risks are
insured only if an insurer expects that no loss will occur
during the term of the policy. If an issuer of an insured
obligation cannot make the scheduled debt service payment, the
primary financial guarantor would assume this responsibility as
and when due. Payment by the financial guarantor does not
extinguish the underlying obligation of the issuer of an insured
obligation and such payments are recoverable from the issuer, if
the issuer resumes debt service payments. If the issuer does not
resume such payments or becomes insolvent, the financial
guarantor may not be able to recover the payments it has made.
The financial guarantor is subrogated to the rights of the
holders of the insured obligations and would, in the event of
payment under the policy, have rights in the underlying
collateral, if any.
Our customers are the seven primary monoline financial guaranty
insurers, who we refer to as the primary insurers. The four
largest primary insurers are MBIA, FSA, FGIC, and Ambac, who
comprise the majority of the financial guaranty industry's
capitalization and insurance in force. Other primary insurers
include CIFG, XLCA and Assured Guaranty, who compete directly
with the four major primary insurers.
The global bond insurance market is frequently categorized into
two main sectors, Public Finance and Structured Finance, divided
geographically between the United States and International. The
table below sets forth the growth in adjusted gross written
premiums by key business sector for the four major primary
insurers (Ambac, MBIA, FGIC and FSA) who collectively accounted
for over 85% of the total adjusted gross written premiums in
2004:
As of December 31,
Adjusted Gross Written Premiums(1),(2)
2004
2003
2002
2001
2000
(Dollars in millions)
Public Finance
United States
$
1,763
$
2,066
$
1,704
$
1,173
$
827
International
524
767
393
402
111
Subtotal
2,287
2,833
2,097
1,575
938
Structured Finance
United States
994
961
977
951
759
International
431
481
482
362
333
Subtotal
1,425
1,442
1,459
1,313
1,092
Total
$
3,712
$
4,275
$
3,556
$
2,888
$
2,030
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(1)
A non-GAAP measure of business production commonly used by
    analysts and rating agencies, defined as the sum of upfront and
    present value of estimated installment premiums to be collected,
    related to business written in the current period.
(2)
Data from Standard & Poor's Bond Insurance Book
    2005 and individual primary operating supplements.
As indicated in the table above, after growing in excess of 32%
on an annual basis between 2002 and 2003, the primary
insurers' adjusted written premiums declined by
approximately 13% in 2004. Adjusted gross written premiums
experienced modest growth for the first nine months of 2005. We
believe the decline in 2004 was the result of the cyclical
narrowing of interest rate spreads between insured and uninsured
obligations (reflecting reduced investor concern about credit)
following heightened concern in 2002 when corporate credit
defaults reached historically unprecedented levels. We believe
that business growth in 2005 has been modest because of the
tight credit spread environment.
Against this market backdrop, increased competition from the
relatively recent market entrants such as Channel Reinsurance
Ltd., or Channel Re, and BluePoint Re Limited, or BluePoint Re,
and the decision by one of the major primary insurers to expand
its strategy to include insuring additional sectors in both the
public and structured finance product lines, has caused premium
rates to decline since 2002-2003. Management believes that
premium rates have stabilized in many of the product lines that
we reinsure.
By some measures, the primary insurance industry is currently in
an excess capital position caused by growth in capital following
several years of robust business and earnings growth and the
slower growth in business volume since 2003. Standard &
Poor's estimates that the new issue volume insured by the
"AAA"-rated primary insurers in 2004 would have
required a capital position $1 billion lower than the
capital employed at year end 2004, based on the average
relationship between par written to capital employed between
1998 and 2003. The strength of the capital position of primaries
relative to their insured portfolios is believed to be a
significant factor influencing their decisions to cede or retain
insured business.
United States Public Finance Obligations
Public finance obligations consist primarily of debt obligations
issued by or on behalf of states or other governmental entities
or their political subdivisions (counties, cities, towns and
villages, utility districts, public housing and transportation
authorities) and other public and quasi-public entities
(including public universities and not-for-profit hospitals, and
non-U.S.
sovereigns
and their political subdivisions), private universities and
hospitals and investor-owned utilities. These obligations
generally are supported by the taxing authority of the issuer,
or the issuer's or underlying obligor's ability to
collect fees or assessments for certain projects or public
services.
United States Structured Finance
Structured finance obligations are generally backed by pools of
assets such as residential mortgage loans, consumer or trade
receivables, securities or other assets having a specified cash
flow or market value which are generally held by a special
purpose issuing entity. Structured finance obligations include
funded and synthetic transactions. Funded structured finance
obligations are typically payable from cash flow generated by a
pool of assets and take the form of either
"pass-through" obligations, which represent interests
in the related assets, or "pay-through" obligations,
which generally are debt obligations collateralized by the
related assets. Synthetic structured finance transactions are
typically credit default swap contracts in which one party sells
credit protection on a reference obligation (generally a
fixed-income obligation) in return for a premium payment from
another party. As part of our financial guaranty reinsurance
business, we reinsure financial guaranty policies issued by
primary insurers that guaranty the obligations of their
subsidiaries, who act as the credit protection sellers under
these credit derivative contracts. These contracts require
primary insurers' subsidiaries to make payments upon the
occurrence of certain defined credit events relating to the
underlying reference obligation.
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International
Over the past five years, the primary insurers have
significantly increased their
non-U.S.
business.
These activities have occurred primarily in Western Europe,
Australia, Canada, Japan and South Korea, and have focused
primarily on (i) asset-backed securities similar to those
insured by them in the U.S., (ii) public/private
partnership transactions modeled after the U.K. Private Finance
Initiative, and (iii) investor-owned utilities, in areas
where the regulatory framework is supportive of that industry.
Financial Guaranty Reinsurance
Monoline financial guaranty reinsurers provide reinsurance
capacity to the primary financial guaranty companies. When a
primary company cedes a portion of a particular transaction to a
reinsurer, that reinsurer becomes obligated to pay its
proportionate share of any losses should the reinsured
transaction default. The primary insurers use such reinsurance
for a variety of reasons, including to increase their capacity
to write business, assist in meeting applicable regulatory and
rating agency requirements, in particular those applying to
single risk and risk concentration limits, manage single risks
and risk aggregations among servicers on asset backed
transactions as well as for broader risk management purposes
(such as addressing sector or geographic concentrations).
Under the terms of a reinsurance agreement, a reinsurer agrees
to indemnify the primary insurer against part or all of the loss
which a primary insurer may incur under a policy which it has
issued. In the event of a loss, the reinsurer pays its share of
the loss upon receipt of notice from the primary insurer. If
there is a dispute regarding the reinsurer's liability, the
dispute is resolved following payment. This practice is
generally different than other types of reinsurance, where the
reinsurer pays its portion of the loss following its
investigation and confirmation of its liability.
Reinsurance agreements take two major forms, "treaty"
and "facultative." Treaty reinsurance requires the
primary insurer to cede, and the reinsurer to assume, specific
obligations underwritten by the primary insurer over a period of
time, typically one year. Facultative reinsurance is the
reinsurance of specific obligations and is subject to separate
negotiation for each cession.
Customers choose financial guaranty reinsurers based upon
several factors, including overall financial strength, financial
strength ratings by the major rating agencies, single risk
capacity, level of service quality and in some cases whether or
not the reinsurer competes with the primary company. Maintaining
strong financial strength ratings increases the capital benefit
that reinsurers provide to their customers and increases the
demand and the pricing for their capacity. See
"Business — Competition in the Financial Guaranty
Reinsurance Market."
The size and growth of the financial guaranty reinsurance market
depends on the size of the primary insurance market and the
percentage of aggregate risk that the primary insurers cede to
the reinsurers. The ceded percentage can vary due to:
•
the availability of capacity from qualified reinsurers, as
    determined by the primary insurers;
•
regulatory, rating agency and other external risk retention
    limitations imposed on the primary insurers;
•
the credit given to primary insurers by their regulators and
    rating agencies for assumed reinsurance;
•
the price and availability of substitute highly-rated capital
    markets facilities and facilities provided by highly-rated
    banks; and risk management practices of the primary insurers.
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Table of Contents
The table below sets forth management's estimate of
business ceded by the "AAA"-rated primary insurers for
the periods indicated:
Nine Months
Ended
Year Ended December 31,
September 30,
Ceded Business(1)
2005
2004
2003
2002
2001
2000
(Dollars in millions)
Ceded Par
$
43,125
$51,560
$46,030
$70,760
$54,120
$45,730
(1)
Data from Standard & Poor's Bond Insurance Book
    2005 and individual primary operating supplements. The data has
    been adjusted for recaptured reinsurance cessions relating to
    the cancellation of certain reinsurance contracts and estimates
    of cession volume for primary insurers with affiliated
    reinsurance companies.
The reinsurance market experienced solid growth in ceded par and
premium, largely attributable to the growth in the primary
market and the increase in available capacity provided by
multiline insurance companies, over several years until 2002.
However, deteriorating market conditions, including adverse
selection which resulted in reinsurers' portfolios taking
on marginally greater risk than those of the primary insurers,
ultimately led Standard & Poor's to place many of
the reinsurance providers on negative credit watch. The
reinsurance market then underwent significant restructuring
beginning when two significant reinsurance providers, AXA Re and
American Re exited the market. Par ceded by the primary
insurers, in turn, declined significantly that year. MBIA, one
of the four major primary insurers, invested in RAM Re in 2003.
In early 2004, MBIA and several institutional investors formed
Channel Re as a dedicated "AAA" reinsurer to the
founding primary insurer. Channel Re assumed a portfolio of
business that had been recaptured from reinsurers whose ratings
had been downgraded. In November 2004, a new monoline financial
guaranty reinsurer, BluePoint Re was formed and this reinsurer
also assumed exposures that had been recaptured from reinsurers
that had been downgraded and are no longer active in the
financial guaranty reinsurance business. BluePoint Re is rated
"AA" by Standard & Poor's. Finally,
during this period, Assured Guaranty Corp. and Radian Assurance,
two of the largest financial guaranty reinsurance companies,
announced their intention to prioritize their primary insurance
strategies over reinsurance activities. Par ceded volume by the
primary insurers recovered in 2004, following the increase in
capacity provided by Channel Re, BluePoint Re and RAM Re and
increased again for the nine months ended September 30,
2005, but has not returned to 2002 levels.
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Table of Contents
BUSINESS
Our Company
We were founded in 1998 as a Bermuda-based provider of financial
guaranty reinsurance and conduct substantially all of our
operations through our wholly-owned subsidiary, RAM Re. We are
one of only three reinsurers dedicated solely to the financial
guaranty market. Among reinsurers, we are the only company rated
"AAA" by Standard & Poor's that is
focused solely on providing financial guaranty reinsurance to
third parties.
Overview of Our Business
We provide financial guaranty reinsurance for public finance and
structured finance obligations, covering risks in both the
United States and international markets. We believe our business
is characterized by low loss experience and relatively
predictable and stable earned premiums. We have low loss
experience because we operate in an industry in which financial
guaranty insurance is underwritten to a remote-loss standard. We
have relatively predictable earned premiums because our business
model allows us to build a large unearned premium reserve that
is gradually earned as revenue over a relatively long time
period that for some exposures can extend to 20 years or
more. Our business model is predicated on specialization, in
that our financial resources are dedicated exclusively to the
financial guaranty reinsurance business. We do not use our
capital to compete with our customers in the primary market. Key
factors supporting our business model include: we are focused on
the well-established municipal bond and asset securitization
markets, we underwrite reinsurance that is believed to have a
remote risk of loss, and we derive a significant percentage of
revenues from net investment income on high-quality investments.
We believe that our customer-focused strategy and our
demonstrated successes, as well as the limited number of
highly-rated competitors, provide us with a competitive
advantage that will allow us to continue to grow our business.
In order to continue growing, we believe we need to maintain
strong financial strength ratings, which maximizes the value of
our reinsurance products by providing our customers with a
significant amount of capital credit from rating agencies. In
order to offer greater reinsurance capacity and increased single
risk capacity to our customers, we have raised capital twice
since we began operations.
With our focused business strategy, we have improved our
operating results over time. Our new business production (gross
written premiums) has increased at a compound annual growth rate
of nearly 33% from 2000 through year-end 2004, and has grown
over 15% for the nine months ended on September 30, 2005
over the comparable 2004 period. Our unearned premium reserve
has increased from $45.6 million at year-end 2000 to
$140.0 million at year-end 2004, representing a 32%
compound annual growth rate, and was $163.8 million as of
September 30, 2005.
We believe the historic success of our business can be measured
by our growth relative to the primary industry as well as our
market share growth, as indicated in the following tables
showing net written premiums by us and by the
"AAA"-rated primary insurers, and the par value of
business ceded by the "AAA"-rated primary insurers and
the par value of business assumed by us.
Nine Months Ended
September 30,
Year Ended December 31,
Net Premiums Written(1)
2005
2004
2004
2003
2002
2001
2000
Dollars in millions
RAM Re
$
55.2
$
48.2
$
66.1
$
67.9
$
36.2
$
26.5
$
21.3
Change from prior period
15
%
n/a
(3
)%
88
%
37
%
24
%
n/a
AAA Primary Insurers
$
2,229.2
$
2,296.8
$
3,102.0
$
3,113.6
$
2,346.8
$
1,860.2
$
1,232.8
Change from prior period
(3
)%
n/a
0
%
33
%
26
%
51
%
n/a
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(1)
Net premiums written and gross premiums written are identical
    for RAM Re.
(2)
Data from Standard & Poor's Bond Insurance Book
    2005 and individual primary company operating supplements.
Since 2000, we have grown net written premiums each year but one
(2003) and at an annual rate of 32.7% through 2004 while
the "AAA" primary market has grown at an annual rate
of 25.9%. We increased net written premiums by 87.6% in 2003
even though the gross par ceded by the "AAA"-rated
primary insurers declined by more than 35.0%. Through the nine
months ended September 30, 2005 we increased our net
premiums written by almost 15% over the comparable period in
2004, while the AAA-rate primary insurers as a group experienced
flat growth.
Nine Months
Ended
Year Ended December 31,
September 30,
Industry Ceded Business(1)
2005(2)
2004
2003
2002
2001
2000
(Dollars in billions)
AAA Gross Par Ceded
$
43.1
$
51.6
$
46.0
$
70.8
$
54.1
$
45.7
RAM Re Assumed Par
7.0
8.1
6.2
4.7
4.0
3.0
RAM Market Share
16.2
%
15.6
%
13.4
%
6.7
%
7.4
%
6.5
%
(1)
Data from Standard & Poor's Bond Insurance Book
    2005 and individual primary operating supplements. The data has
    been adjusted for recaptured reinsurance cessions relating to
    the cancellation of certain reinsurance contracts and estimates
    of cession volume for primary insurers with affiliated
    reinsurance companies. RAM Re assumed par is based on a one
    quarter reporting lag.
(2)
Gross par ceded by Assured Guaranty Corp. for nine months ended
    September 30, 2005 is an estimate based on 2004 ceded
    percentage. RAM Re assumed par is based on a one quarter
    reporting lag.
After raising capital in 2003, we have significantly increased
our market share. The capital raise helped increase market share
because it expanded our underwriting capacity. We estimate that
our market share in 2004 represented approximately 15.6% of the
total par ceded. For the nine months ended September 30,
2005, we estimate that market share has continued to grow
modestly.
Our Competitive Strengths
We believe certain characteristics distinguish us from our
competitors and provide opportunities for growth, including:
•
Strong Financial Strength Ratings.
Our operating
    subsidiary, RAM Re, has financial strength ratings of
    "AAA" from Standard & Poor's and
    "Aa3" from Moody's. We believe these ratings are
    highly attractive relative to other non-"AAA"-rated
    reinsurance sources and provide important capital benefits to
    primary insurers. By ceding business to a highly-rated
    reinsurer, primary insurers are able to reduce the amount of
    capital that is required of them by the rating agencies and are
    able to increase their profitability.
•
Unique Business Model.
We are currently the only
    "AAA"-rated financial guaranty reinsurer focused
    solely on providing financial guaranty reinsurance to third
    parties. By providing dedicated reinsurance capacity, we believe
    we have established a leading market presence in the sector. As
    a result, we have increased par outstanding by a compound annual
    growth rate of 22.4% since 2000 through year-end 2004. In the
    future, we believe we will continue to be a unique and important
    reinsurance partner for primary insurers in the financial
    guaranty market.
•
Capacity for Operating Efficiencies.
We have decreased
    our operating expense ratio from 33.1% in 2000 to 29.9% for the
    nine months ended September 30, 2005. In the future, we
    believe we can continue to enhance our operating margins by
    continuing to increase our revenue base without significantly
    increasing our infrastructure and staffing. We expect to
    increase revenues without
52
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materially increasing operating expenses because we do not
    expect an increase in revenues to require a commensurate
    increase in employee headcount.
•
Focused Treaty-based Business Mix.
For the nine months
    ended September 30, 2005, approximately 85% of our gross
    written premiums were sourced from treaty business that was
    derived from three ceding companies with whom we have had
    treaties in place for more than four years. Our emphasis on
    treaties represents a stable source of business that can be
    conducted efficiently by our skilled and experienced employees
    and that reinforces our relationships with key primary insurers
    in the financial guaranty market.
•
Experienced Management Team.
Our management team has an
    average of 11.5 years of experience in the financial
    guaranty industry. Additionally, our management has broad
    experience in the industry, with most having previously worked
    for the primary insurers in the financial guaranty industry.
•
Bermuda Domicile.
As a Bermuda company, we are not
    subject currently to corporate income tax. We believe that our
    Bermuda domicile provides advantages over our non-Bermuda
    domiciled competitors that are subject to corporate income tax.
Our Business Strategy
Our corporate objective is to build shareholder value by
increasing shareholders' equity through stable and
high-quality earnings growth. We intend to achieve this
objective with the following strategies:
•
Maintaining our Financial Strength Ratings.
We intend to
    underwrite business and invest our portfolio in a manner
    consistent with maintaining our current ratings in order to
    maximize the benefits of our reinsurance products for our
    customers. We believe financial strength ratings are an
    important factor in establishing our competitive position in the
    financial guaranty reinsurance market.
•
Achieving Attractive Risk-Adjusted Returns on Capital.
We
    strive to maintain an efficient capital base and to use a
    disciplined underwriting approach to achieve high, risk-adjusted
    returns on capital and to promote optimal diversification. We
    pursue return and diversification targets by limiting product
    line exposure under our treaties, by adding specific issuers,
    product lines and countries to treaty exclusion lists and by
    selecting facultative transactions on a risk-adjusted
    profitability basis. In addition, we promote diversification by
    offering reinsurance to all "AAA"-rated primary
    insurers and by providing reinsurance for all major product
    lines.
•
Enhancing Operating Margins.
We intend to continue to
    grow our treaty-based revenue without significantly increasing
    our infrastructure and staffing, which we believe will reduce
    our expense ratio over time. We believe treaty-based revenues
    will continue to provide efficient growth opportunities because
    we do not expect an increase in treaty-based revenues to require
    a commensurate increase in employee headcount.
•
Expanding Market Share.
We plan to continue to increase
    our share of existing treaties, establish new treaties and
    selectively increase our facultative underwriting for the
    "AAA"-rated primary insurers in order to selectively
    expand our market share.
•
Managing Risk of our Investment Portfolio.
We plan to
    continue to manage invested assets with the goal of preserving
    principal while providing a stable stream of investment income
    and controlling market risk. We intend to achieve this by
    maintaining the duration of our assets within a prescribed
    target range, maintaining an average credit rating of at least
    "Aa2/ AA" for our investments, and seeking appropriate
    diversification within the portfolio.
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Table of Contents
Our Product Lines
Financial guaranty primary and reinsurance exposures are often
grouped into two broad categories, Public Finance and Structured
Finance, divided geographically between the United States and
International. The following table sets forth par outstanding by
product line geographically for RAM Re compared to the
"AAA" insurers' weighted average. Beginning in
2005, we began reporting exposure data at a one quarter lag, as
is consistent with practices of other financial guaranty
reinsurers, because we receive detailed exposure data from
primary insurers generally 45 days following the end of a
quarter.
Gross Par Outstanding of RAM Re as of
Industry Average
as of(1)
December 31,
September 30, 2005
December 31, 2004
2004
Worldwide Financial Guaranty
Volume
%(2)
Volume
%(2)
%(2)
(Dollars in millions)
Public Finance
United States
$
15,049
56.4
$
13,342
60.2
60.8
International
1,912
7.2
1,609
7.3
3.2
Subtotal
16,961
63.5
14,951
67.5
64.1
Structured Finance
United States
6,546
24.5
4,667
21.1
24.5
International(3)
3,195
12.0
2,536
11.4
11.4
Subtotal
9,741
36.5
7,203
32.5
35.9
Total
$
26,702
100.0
$
22,154
100.0
100.0
(1)
Source: Standard & Poor's Bond Insurance Book,
    2005.
(2)
Par volume expressed as a percentage of total par in-force. Due
    to rounding, the numbers in the above table may not add up to
    the total percentages reflected above.
(3)
Includes Standard & Poor's "Other"
    International category.
Public Finance Reinsurance
In 2004 and in 2003, in the public finance sector we reinsured
net par of $3.7 billion and $3.1 billion,
respectively, and reported $45.2 million and
$52.2 million of gross written premiums, respectively.
Through September 30, 2005, we reinsured net par of
$3.1 billion and reported $36.7 million of gross
premium written. Substantially all of the transactions in the
public finance sector are investment grade. Our market
opportunity is a function of the total insured public finance
issuance and the amount of business ceded by the primary
companies.
We reinsure a number of different sectors of public finance
obligations, which include:
•
General Obligations:
Transactions in this sector are
    primarily backed by the full faith and credit of state and local
    governments. Also included in this sector are lease obligations
    of state and local governments.
•
Utilities:
Transactions in this sector are typically
    secured by a pledge of revenues from the operations of
    municipal-owned water, sewer or electric utilities.
•
Tax-backed Obligations:
Transactions in this sector are
    primarily secured by sales, gas, motor vehicle registration and
    other miscellaneous excise taxes.
•
Hospitals:
Transactions in this sector are backed by the
    revenues of either stand-alone hospitals or healthcare systems
    and are also frequently secured by mortgages on the assets of
    such entities.
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Table of Contents
•
Transportation:
Transactions in this sector are secured
    by airport revenues, parking fees, highway tolls and port
    charges.
•
Colleges and Universities:
Transactions in this sector
    are secured by the general obligation pledge of a college or
    university, by student fees or by the revenues of a particular
    segment of an educational institution's operations.
•
Investor-Owned Utilities:
Transactions in this sector
    comprise the debt obligations of IOUs in the United States with
    the majority comprised of electric utilities. The majority of
    our exposure in this sector is either to secured debt or debt
    subject to negative pledge covenants.
•
Other:
This category represents transactions secured by
    miscellaneous state or local government revenues.
•
International:
Our international public finance sector
    includes obligations of sovereigns and sub-sovereigns (such as
    Canadian provinces) as well as project finance transactions
    financed via public/private partnerships, typically patterned
    after the U.K. Private Finance Initiative. This sector also
    includes
non-U.S.
IOUs.
The following table sets forth our worldwide public finance par
outstanding by obligor type, as of the dates indicated:
Gross Par Outstanding of RAM Re as of
September 30,
December 31,
Industry Average as of(1)
2005
2004
December 31, 2004
Worldwide Public Finance
Volume
%(2)
Volume
%(2)
%(2)
(Dollars in millions)
United States:
General Obligations
$
5,316
19.9
$
4,738
21.4
21.5
Utility
2,646
9.9
2,486
11.2
10.1
Tax-backed Obligations
1,769
6.6
1,482
6.7
8.3
Hospitals
1,743
6.5
1,510
6.8
4.6
Transportation
2,316
8.7
2,096
9.5
5.4
Colleges & Universities
318
1.2
232
1.0
3.1
Investor-Owned Utilities
513
1.9
441
2.0
1.6
Other
429
1.6
358
1.6
6.3
International
1,912
7.2
1,609
7.3
3.2
Total
$
16,961
63.5
$
14,951
67.5
64.1
(1)
Source: Standard & Poor's Bond Insurance Book,
    2005.
(2)
Par volume expressed as percentage of total par in-force.
Structured Finance Reinsurance
In 2004 and in 2003, in the structured finance sector we
reinsured net par of $4.4 billion and $3.1 billion,
respectively, and reported $20.9 million and
$15.7 million of gross written premiums, respectively.
Through September 30, 2005 we reinsured net par of
$3.9 billion and reported $18.5 million of gross
premiums written. We reinsure a number of different sectors of
structured finance obligations, including:
•
Mortgage-Backed Securities:
Transactions in the
    mortgage-backed securities sector include transactions secured
    by first priority prime and sub-prime mortgage loans, and
    manufactured housing transactions.
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Table of Contents
•
Home Equity Loan:
Transactions in this sector are secured
    by both prime and sub-prime home equity loans.
•
Auto Loan:
The majority of our auto loan portfolio is
    composed of transactions secured by sub-prime and non-prime auto
    loans.
•
Other Consumer Asset-Backed Securities:
This sector of
    other consumer asset-backed securities, or ABS, includes
    transactions secured by credit card receivables and student
    loans.
•
Commercial Asset-Backed Securities:
The largest component
    of this sector are collateralized debt obligations, with the
    sector also including transactions secured by equipment leases,
    small business loans and other securitizations of corporate
    assets.
•
Bank/ Financial Institutions and Other Corporate:
The
    majority of our exposure in this sector is guarantees on
    short-term bank deposits of investment grade banks. In addition,
    we have a small amount of insurance company and broker/ dealer
    exposures that are in run-off.
The following table sets forth our worldwide structured finance
par outstanding by obligor type, as of the dates indicated:
Gross Par Outstanding of RAM Re as of
Industry Average
September 30,
December 31,
as of(1)
2005
2004
December 31, 2004
Worldwide Structured Finance
Volume
%(2)
Volume
%(2)
%(2)
(Dollars in millions)
Mortgage-Backed Securities
$
466
1.7
$
684
3.1
5.2
Home Equity Loan
1,702
6.4
1,047
4.7
3.4
Auto Loan
716
2.7
449
2.0
1.8
Other Consumer ABS
473
1.8
531
2.4
1.8
Commercial ABS
2,919
10.9
1,867
8.4
6.8
Bank/ Financial Inst and Other Corporate
270
1.0
89
0.4
5.5
International(3)
3,195
12.0
2,536
11.4
11.4
Total
$
9,741
36.5
$
7,203
32.5
35.9
(1)
Source: Standard & Poor's Bond Insurance Book,
    2005.
(2)
Par volume expressed as percentage of total par in-force.
(3)
Includes Standard & Poor's "Other"
    International category.
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Reinsurance Portfolio
Portfolio by Underwriting Rating
We enter into treaties and provide facultative reinsurance for
only those securities that we consider to be investment grade
credit quality. The following table sets forth our in-force
portfolio of reinsurance as of September 30, 2005, based on
par value, by underwriting rating assigned by RAM Re:
Gross Par
Outstanding as of
September 30, 2005
Ratings Distribution(1)
Volume
%
(Dollars in
millions)
AAA
$
4,605
17.2
AA
6,773
25.4
A
9,633
36.1
BBB
5,360
20.1
Below investment grade
330
1.2
Total
$
26,702
100.0
(1)
Based upon the underlying ratings of the securities as assigned
    by RAM Re, and taking into consideration ratings assigned by
    Moody's, Standard & Poor's and the primary
    insurer, as provided to us by the primary insurer. Due to
    rounding, the numbers in the above table may not add up to the
    total percentages or amounts reflected above.
Portfolio by Geographic Distribution
We believe that we maintain a geographically balanced portfolio.
As of September 30, 2005, our largest state concentration,
California, represented less than 8% of our portfolio. In
addition, most structured finance transactions are, by nature,
geographically diversified. With respect to
non-U.S.
transactions,
our underwriting guidelines currently limit concentration to a
maximum of 25% of the total portfolio.
The following table sets forth our in force portfolio of
reinsurance as September 30, 2005, based on par value, by
geographic distribution:
Gross Par
Outstanding as of
September 30, 2005
Geography
Volume
%
(Dollars in
millions)
United States
California
$
1,987
7.4
New York
1,471
5.5
Florida
1,091
4.1
Texas
965
3.6
Illinois
918
3.4
Other states
8,237
30.8
Multi-State
6,926
25.9
International
5,107
19.1
Total
$
26,702
100.0
Due to rounding, the numbers in the above table may not add up
to the total percentages reflected above.
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Portfolio by Type of Reinsurance
We primarily write treaty reinsurance agreements that require
our customer to cede, and us to assume, specific obligations
underwritten by our customer over a period of time, typically
one year. The following table sets forth our reinsurance
business written, based on par value by type (facultative versus
treaty) for the periods indicated:
Nine Months Ending
For the Year Ended December 31,
Gross Par Written
September 30, 2005
2004
2003
2002
2001
2000
(Dollars in millions)
Transaction Type Public Finance
Facultative
$
524
$
446
$
218
$
429
$
668
$
558
Treaty
2,587
3,205
2,884
1,903
1,634
924
Total
$
3,111
$
3,652
$
3,102
$
2,333
$
2,302
$
1,482
% Treaty
83.2
%
87.8
%
93.0
%
81.6
%
71.0
%
62.3
%
Structured Finance
Facultative
$
543
$
891
$
259
$
296
$
518
$
975
Treaty
3,317
3,518
2,803
2,115
1,170
509
Total
$
3,860
$
4,409
$
3,062
$
2,412
$
1,688
$
1,484
% Treaty
85.9
%
79.8
%
91.5
%
87.7
%
69.3
%
34.2
%
All Transactions
Facultative
1,067
1,337
477
726
1,186
1,533
Treaty
5,904
6,723
5,687
4,019
2,805
1,433
Total
$
6,971
$
8,061
$
6,164
$
4,745
$
3,991
$
2,965
% Treaty
84.7
%
83.4
%
92.3
%
84.7
%
70.3
%
48.3
%
Pricing
Ceding Commissions.
We pay ceding commissions to the
primary insurers for ceded business. Commission rates paid to
the same primary insurer may vary by sector and may vary for
treaty or facultative business. In 2003 ceding commission rates
declined materially when our "AAA" ratings were
reaffirmed by Standard & Poor's and remained
stable. Ceding commission rates remained stable in 2004 and
through September 30, 2005.
Premium Rates and Capital Charges.
Premium rates on
reinsured policies are set by the major primary insurers. Under
our treaties we are obligated to accept ceded business under
terms, including premium rates, already established by the
primary insurer. On facultative business where we have the
ability to accept or reject the reinsurance submissions we focus
on measuring premium rates on a risk-adjusted basis.
Accordingly, when evaluating premiums as a component of our
profitability, we compare the average level of our premiums to
our average capital charges.
Risk Management
Our risk management objective is to obtain a high quality and
diverse portfolio while maximizing risk- adjusted returns. Our
strategy is to assemble a portfolio of obligations which is
comparable in composition (sectors and bond types) to the
"AAA"-rated primary companies. Accordingly, we
consider all types of investment grade public finance and
structured finance securities for reinsurance, as well as
limited types of corporate obligations (primarily obligations of
secured investor-owned utilities and short-term bank deposits).
We concentrate on selecting those credit sectors and obligations
that we believe are fundamentally sound and that provide the
most potential for profitability from within the total pool of
available obligations in compliance with our underwriting and
pricing guidelines, rather than limiting
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reinsurance activity to specific types of obligations. In
addition, we focus on those primary insurers which, in our
opinion, adhere to stringent underwriting guidelines and which,
with one exception, are rated "AAA" and
"Aaa" by Standard & Poor's and
Moody's, respectively. We seek to avoid any substantial
concentration of exposure by specific type of bond, geographic
area, issuer or maturity.
Underwriting
Overview.
We maintain conservative underwriting standards
both in terms of the types of risks we reinsure as well as the
risk limits that we have established. Our reinsurance is
underwritten to a remote-loss standard, which means that at the
time a policy on any particular transaction is issued (and when
we reinsure it), no losses are expected for the entire term of
the policy. In addition to our own views on the quality of the
risks we assume, such investment grade quality standard is
independently established by Moody's and
Standard & Poor's for the overwhelming majority of
the transactions reinsured. In rare instances, the investment
grade standard may only be available from one of these two
rating agencies or, if the primary insurer deems the credit to
be of high investment grade, from neither rating agency.
Our underwriting process is organized to provide multiple levels
of credit review and approval. Prior to assuming reinsurance
exposures from any new primary insurer, we will review the
operations of the primary insurer to determine adherence by the
primary to a remote-loss underwriting standard. Our underwriting
guidelines are based on those aspects of credit quality that we
deem important for the category of bond being considered for
reinsurance. In addition, our underwriting guidelines take into
consideration primary insurer and rating agency criteria
established for the category. Such guidelines are updated
periodically as appropriate to reflect changes in risk profiles,
additional knowledge obtained and changes in the structure of
the transactions being reinsured. Our underwriting is performed
by a team of experienced analysts. The process that is in place
provides that all treaties and facultative transactions are
approved by the underwriting committee. In addition, all
treaties are approved by our board of directors.
Single Risk Limits.
We seek to limit our exposures to
single risks based upon an evaluation of the relative level of
risk present in the particular reinsured transaction. Our single
risk guidelines therefore apply to the type of transaction being
ceded as well as to a transaction's uninsured rating.
We base our single risk guidelines for public finance
transactions on Standard & Poor's limits, with the
highest limits for the lowest risk product lines, such as
general obligation bonds and water and sewer transactions.
For structured finance transactions our single risk guidelines
are based upon the Standard & Poor's capital
charge and credit gap methodology, with such capital charges and
related credit gaps being further adjusted for bond sector and
underlying transaction rating. Our application of that
methodology for structured finance transactions, however,
typically results in our having retentions that are
significantly below the figures that the Standard &
Poor's methodology would allow without adjustment. In
addition to limiting single risks for structured finance
transactions, we also seek to limit our aggregate risk to
particular originators/ servicers. We do this by aggregating our
total exposure to originators/ servicers and discounting this
aggregate exposure by an assumed correlation factor. The result
of this calculation is then compared to an aggregate originator/
servicer risk limit that is sensitive to the ceded
transactions' underlying ratings.
The majority of our transactions are reinsured through treaty
cessions which do not permit the scaling down of a particular
cession based upon a transaction's underlying rating. To
mitigate the risk that we would exceed our single risk limits
(which are scaled based on uninsured rating), we establish lower
single risk cession limits in each treaty. We also use our
ability to exclude in our treaties further cessions of a
particular obligation once we have determined that we are
approaching our single-risk guideline limit for that particular
single risk. The fact that the majority of our business is ceded
through treaties that are not ratings-sensitive in their ceding
methodology, however, can sometimes result in treaty cessions
that exceed our ratings-sensitive single risk guidelines in
certain sectors. Furthermore, our single risk limits are applied
on a "when ceded" basis, so our exposure to a
particular single risk could exceed our guidelines as a result
of a subsequent downgrade.
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To manage our exposure to risks in large public finance
transactions, we maintain a retrocessional facility with a
reinsurer under which we are able to cede certain public finance
risks that exceed our internal single risk limits subject to
limits by risk categories. As of September 30, 2005, we
have not retroceded any of our business under this
retrocessional facility.
Treaty
During the process of entering into a treaty, our participation
percentage in that treaty is negotiated. After the treaty is
entered into, all transactions that meet the treaty's
inclusion parameters are automatically ceded (according to that
participation percentage) to us. Individual transactions that
are "treaty eligible" may not be rejected by us for so
long as the reinsurance treaty is in place, other than by adding
specific transactions or classes of transactions to the treaty
exclusion list, which is typically done for exposure management.
As a result, we have limited ability to control the individual
obligations ceded to us.
The treaties that we enter into generally have a one-year term
and are typically renewed annually by the primary insurers,
usually with only minor changes being made to their terms. In
addition, the business ceded by each primary insurer during the
prior year via the reinsurance treaty is evaluated to examine
the attractiveness of the business that was ceded through the
particular treaty. Pricing, capital charges, risk levels,
ratings, product line and geographic location of the obligations
are among the parameters we consider. Based upon that review and
evaluation, we will decide whether or not to seek changes in the
treaty structure as well as the level of participation in the
treaty that is desired for the upcoming year.
As of September 30, 2005, we had quota share reinsurance
treaties in place with three primary insurers (Ambac, FSA and
MBIA).
Facultative
We also reinsure facultative transactions with each of our
treaty customers, other "AAA"-rated primary insurers
and, on occasion, with other financial guaranty reinsurance
companies. Similar to our treaty reinsurance business, our
facultative transactions are assumed by us on a proportional or
quota share basis under which our customers retain a portion of
the risk. Unlike treaty reinsurance, however, each facultative
transaction is individually evaluated. The nature and extent of
that evaluation depends upon the transaction's product
line, size, underlying credit ratings and whether or not it is a
repeat transaction that has been reviewed in the past. In all
instances, the primary insurer will have provided us with its
own internal underwriting report that assesses the
creditworthiness of the transaction, provides pricing and
capital charge information and proposes any recommendations
regarding changes in the transaction terms that the primary
insurer is seeking prior to offering to insure it. For more
complex transactions the underlying transaction documents,
feasibility studies, database search results and rating agency
reports are also provided as applicable.
In addition to evaluating the particular transaction for
creditworthiness and appropriate pricing, we also evaluate the
extent to which participating in a particular facultative
transaction will assist in attaining our diversification
objectives. On occasion, otherwise acceptable transactions are
not reinsured because they would be detrimental to those
diversification objectives.
Surveillance Process
Our underwriters and risk management staff perform periodic
reviews of our reinsured portfolio in order to ensure continued
compliance with our general risk diversification guidelines,
which include limits on bond sector, originator/ servicer and
geographic concentrations. In addition, during these reviews our
portfolio profile is also compared to those of our competitors
and to the ceding primary companies to verify that our
underwriting standards are effectively maintaining the credit
quality of our portfolio compared to the industry as a whole.
Surveillance reviews are also used to identify trends or issues
in particular industries or sectors that may serve to alter or
limit our reinsurance activities in those sectors.
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Table of Contents
In terms of reviews on individual transactions, we rely heavily
upon the substantial surveillance activities of the primary
insurers, and supplement these reviews with rating agency and
general market information. Each of the primary insurers
maintains a watch list for credits that have been identified as
requiring greater than the usual level of ongoing scrutiny
and/or intervention. The primary insurer is required to notify
us when any transaction it has reinsured has been placed on such
a watch list.
Watch List
We maintain our own watch list, typically with only minor
differences from the watch lists of the primary insurers. The
purpose of our watch list is to identify those transactions
requiring increased monitoring. Transactions on our watch list
are divided into four categories. Category 1 includes
transactions for which performance of the issue or that of an
issuance participant is sufficiently below expectations that
increased monitoring is required; however, the risk of loss
remains remote. Category 2 transactions include those for which
performance of an issue or that of an issuance participant is
sufficiently below expectations that increased monitoring is
required and remedial intervention by the primary insurer is
either planned or already in progress. If performance has
deteriorated to the point where concerns about the issuer's
continued ability to meet debt service requirements on a timely
basis are substantial, such transaction would be classified as a
Category 3 transaction. Category 4 transactions include those
for which claims or loss adjustment expense payments are likely.
Designation of a transaction as Category 4 generally coincides
with the establishment of a case basis loss reserve.
As of September 30, 2005, our watch list consisted of 125
credits, comprising aggregate par amount outstanding of
$338.8 million. The number and par amount of the credits in
each category is shown in the table below:
Number of
Par as of(1)
Transactions on
Watch List as of
September 30,
December 31,
Watch List
September 30, 2005
2005
2004
Change in Par
(Dollars in millions)
ABS & Non-IOU Corporate
Category 1
39
$
72.4
$
160.2
$
(87.8
)
-54.8
%
Category 2
25
120.7
94.0
26.7
28.4
%
Category 3
17
18.1
59.5
(41.4
)
-69.6
%
Category 4
26
61.6
41.7
19.9
47.7
%
Subtotal
107
$
272.8
$
355.4
$
(82.6
)
-23.2
%
Public Finance & IOU
Category 1
11
$
18.2
$
9.2
$
9.0
97.8
%
Category 2
3
30.0
30.7
(0.7
)
-2.3
%
Category 3
4
17.8
2.8
15.0
535.7
%
Category 4
0
0
0
0
0
%
Subtotal
18
$
66.0
$
42.7
$
23.3
54.6
%
Total Watch List
125
$
338.8
$
398.1
$
(59.3
)
-14.9
%
(1)
Gross par outstanding.
All of our Category 4 transactions as of September 30, 2005
were related to ABS transactions. Historical loss experience in
the financial guaranty industry on ABS transactions indicates
that losses on ABS transactions are typically low relative to
the net par outstanding at the time of loss recognition. Each of
the transactions in Category 4 has been examined individually to
determine the likelihood, timing and severity of expected
losses. Although there can be no assurance that actual
experience will not vary from our loss expectation, our existing
case reserves represent our best estimate of likely future
losses on our Category 4 transactions, with such estimates
updated quarterly. All of our current Category 4 transactions
include losses that are estimable.
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The chart above does not include 23 obligations with net par
outstanding of approximately $40 million that we are
closely monitoring related to Hurricane Katrina. As of
September 30, 2005, RAM Re has not recorded any portfolio
reserves or case reserves for this event; and no case reserves
have been reported to us by any of our primary insurer clients.
In addition, only four claims have been paid, in the amount of
$13,000, for which a full reimbursement has been received.
Uncertainty exists with regard to both the probability of
defaults occurring and the loss severities that will apply to
any defaults that do occur. Our risk management staff is
actively monitoring the specific obligations in coordination
with the primary insurers and will continue to assess the impact
of Hurricane Katrina on the credit quality of our portfolio.
The chart above includes $127 million of our total
$130 million of net par outstanding on EETCs as of
September 30, 2005. Recent bankruptcies in the commercial
airline industry present a threat to the ability and willingness
of these carriers to continue to meet obligations due under
EETCs. We are actively monitoring our EETC exposure. Since there
is significant uncertainty regarding the ability of certain
obligors to meet their obligations, RAM Re could incur a loss.
Losses and Reserves
Our liability for losses and loss adjustment expenses consists
of case basis reserves and an unallocated or general reserve.
Case basis reserves are established based on primary insurer
reports and internal review and evaluation of obligations that
either have already defaulted or have a high probability of
default. Case basis reserves are established based on the
present value of the expected ultimate losses and loss
adjustment expense that we expect to pay less estimated
recoveries. Our current case basis reserves consist of the
estimatable losses on our Category 4 transactions. We maintain
an unallocated or general reserve based on the unallocated
reserve amounts established by primary insurers for their
portfolios and the relative size and credit risk of our in-force
portfolio, taking into account the rating agencies' views
of credit quality, as well as management judgment. General
reserves include our estimate of highly probable losses on our
Category 4 transactions that cannot be estimated currently.
Problem credits are identified initially by the primary insurers
at least on a quarterly basis. Our risk management staff uses
this input to identify and assess the status of individual
credits. Quarterly, the management committee formally reviews
case and general reserves. The committee establishes reserves
that it believes are adequate to cover the present value of the
ultimate liability for losses and loss adjustment expenses.
These reserves are necessarily based on estimates and may vary
materially from actual results. Adjustments based on actual loss
experience will be recorded in the periods in which they become
known.
As of September 30, 2005, our losses and loss expense
reserves were $12.3 million compared to total reserves of
$15.5 million at December 31, 2004 and
$13.8 million as of December 31, 2003. The following
table sets forth the balances for the previous three years of
losses and loss expense reserves, including case basis reserves
and general reserves:
As of
As of December 31,
September 30,
Losses and Loss Expense Reserves
2005
2004
2003
2002
(Dollars in thousands)
Case Reserves
$
2,312
$
5,149
$
2,967
$
2,261
Unallocated/ General Loss Reserves
9,962
10,343
10,854
8,140
Total
$
12,274
$
15,492
$
13,821
$
10,401
Ratings
As of the date of this prospectus, RAM Re has been assigned a
"AAA" (Extremely Strong) rating from
Standard & Poor's and a "Aa3"
(Excellent) rating from Moody's. Both ratings are stable.
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Table of Contents
The major rating agencies have developed and published rating
guidelines for rating financial guaranty reinsurers. The
financial strength ratings assigned by the rating agencies are
based upon factors relevant to primary insurers, and are not
directed toward the protection of investors in our common
shares. The rating criteria used by the rating agencies in
establishing these ratings include consideration of the
sufficiency of capital resources to meet projected growth (as
well as access to such additional capital as may be necessary to
continue to meet applicable capital adequacy standards), our
overall financial strength, and demonstrated management
expertise in financial guaranty and traditional reinsurance,
credit analysis, systems development and investment operations.
These ratings reflect only the views of the respective rating
agencies and are not recommendations to buy, sell or hold
securities, and are subject to revision or withdrawal at any
time.
The ratings agencies will grant credit against a primary
insurer's capital requirements and single risk limits for
insurance ceded to a reinsurer in an amount that is a function
of the financial strength rating of the reinsurer. The rating
agencies currently allow the greatest credit to a primary
insurer's capital requirements and single risk limits for
reinsurance ceded to a monoline reinsurer with a financial
strength rating of "AAA." We have a financial strength
rating of "AAA" from Standard & Poor's.
For example, Standard & Poor's has established the
following reinsurance credit for business ceded to a monoline
reinsurer:
Monoline Reinsurer Rating
Primary Insurer Rating
AAA
AA
A
BBB
AAA
100
%
70
%
50
%
no credit
AA
100
%
75
%
70
%
50
%
A
100
%
80
%
75
%
70
%
In 2003, Standard & Poor's re-examined its
methodology for the determination of credit for reinsurance
ceded to a multiline reinsurer. In the course of their
examination, Standard & Poor's considered the
effect of having both monoline and multiline companies in the
industry, determining that multiline reinsurers had not
demonstrated sufficient commitment to participation in the
industry and occasionally handle claims for financial guaranty
reinsurance as they would claims in their other business lines.
Standard & Poor's therefore determined that no
rating agency reinsurance credit would be accorded cessions to
multiline reinsurance companies that had not demonstrated their
willingness and ability to make timely payment, which
willingness and ability is measured by a financial enhancement
rating, or FER, from Standard & Poor's. FERs are
assigned by Standard & Poor's to multiline
insurers requesting the rating who meet stringent criteria
identifying our capacity and willingness to pay claims on a
timely basis. Standard & Poor's has established
the following reinsurance credit for business ceded to a
multiline reinsurer carrying an FER.
Multiline Reinsurer Rating
Primary Insurer Rating
AAA
AA
A
BBB
AAA
95
%
65
%
45
%
no credit
AA
95
%
70
%
65
%
45
%
A
95
%
75
%
70
%
65
%
Investments
Our investment objectives are to ensure our financial strength
and stability while providing long term predictable growth and
optimizing income. Our investment objectives include
preservation of principal, maintaining a high quality, liquid
investment portfolio within a prescribed duration range, and
achieving stable net investment income. As of September 30,
2005, the duration of our portfolio is 4.23 years and the
weighted portfolio credit quality is an "Aaa" rating
by Moody's.
Our invested assets are managed by the professional asset
management firm, MBIA Capital, a
wholly-owned
subsidiary
of one of our shareholders, whose investment decisions are
constrained by investment policy and guidelines developed by RAM
Re and adopted by our board of directors. Our
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investment portfolio consists of fixed maturities and short-term
investments. The investment services agreement between us and
the asset manager may be terminated by either party without
cause upon 30 days' prior written notice. The
portfolio is reported at fair value based upon quoted market
prices provided by either independent pricing services or, when
such prices are not available, by reference to broker or
underwriter bid indications.
The following table summarizes our investment portfolio by
security type:
As of September 30, 2005
Fixed Income Securities
Book Yield
Amortized Cost
Fair Value
Agencies
3.8
%
$
67,069,651
$
66,060,403
U.S. government obligations
4.1
%
37,507,736
37,158,540
Corporate debt securities
4.5
%
130,880,989
130,354,640
Municipal securities
7.1
%
11,727,815
12,702,741
Mortgage and asset-backed securities
4.8
%
217,518,664
215,474,909
Total
4.6
%
$
464,704,855
$
461,751,233
The following table summarizes our investment portfolio by
ratings:
As of
September 30,
Rating Profile(1)
2005
AAA(2)
73.0
%
AA
13.0
%
A
13.0
%
Cash
1.0
%
Total
100
%
(1)
Ratings represent Standard & Poor's
    classifications. If unavailable, Moody's ratings are used.
(2)
Includes U.S. Treasury and agency obligations, which
    comprised approximately 22.0% of the investment portfolio as of
    September 30, 2005 and December 31, 2004.
The following table summarizes our investment portfolio by
maturity category:
As of December 31, 2004
Fixed Income Securities
Amortized Cost
Fair Value
Less than one year
$
—
$
—
Due after one year through five years
182,156,316
181,709,468
Due after five years through ten years
60,387,309
60,519,395
Due after ten years
159,575,942
162,677,235
Total
$
402,119,567
$
404,906,098
Competition in the Financial Guaranty Reinsurance Market
Primary financial guaranty companies choose reinsurance
providers based upon several factors, including overall
financial strength, financial strength ratings by the major
rating agencies, single risk capacity, level of service quality
and in some cases whether or not the reinsurer competes with the
primary company. We are currently among the smallest of the
financial guaranty reinsurers as measured by equity capital, but
are the only "AAA"-rated financial guaranty insurance
company with dedicated capacity that does business with third
parties.
Our competitors include Assured Guaranty Re, XL Financial
Assurance, Channel Re, BluePoint Re, Radian Assurance, as well
as several multiline insurance companies. We also compete
directly and
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indirectly with certain credit default swaps and other
alternative transaction structures that may be a more attractive
alternative to traditional financial guaranty reinsurance. In
addition, issuers may choose to divide large transactions among
several primary insurers reducing or eliminating the need for
reinsurance. Primary insurers may also choose to reinsure
transactions with other primary insurers directly also reducing
or eliminating the need for reinsurance.
Employees and Property
As of December 31, 2005, we had 15 employees. All of our
employees are employed by us or RAM Re. See "Risk
Factors — Risks Related to Our Company — We
could be adversely affected by the loss of one or more principal
employees or by an inability to attract and retain staff."
We maintain our executive office at RAM Re House, 46 Reid
Street, Hamilton HM 12 Bermuda. Pursuant to a Lease
Agreement, dated January 1, 2005, we lease the third floor
and penthouse of this premises from Field Real Estate (Holdings)
Limited. The term of the lease is three years, starting
January 1, 2005. The basic rent is $21,420 per month
payable monthly in advance on the first day of each month, plus
a monthly maintenance service charge.
Legal Proceedings
We are not currently involved in any material legal proceedings.
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REGULATION
Bermuda
As a holding company, we are not subject to Bermuda insurance
regulations. The Bermuda Insurance Act, which regulates the
insurance business of RAM Re, provides that no person shall
carry on an insurance business in or from within Bermuda unless
registered as an insurer under the Bermuda Insurance Act by the
BMA. Under the Bermuda Insurance Act insurance business includes
reinsurance. The BMA, in deciding whether to grant registration,
has broad discretion to act as it believes is in the public
interest. The BMA is required by the Bermuda Insurance Act to
determine whether the applicant is a fit and proper body to be
engaged in the insurance business and, in particular, whether it
has, or has available to it, adequate knowledge and expertise.
The registration of an applicant as an insurer is subject to its
complying with the terms of its registration and such other
conditions as the BMA may impose at any time.
An Insurance Advisory Committee appointed by the Bermuda
Minister of Finance advises the BMA on matters connected with
the discharge of the BMA's functions, and subcommittees
thereof supervise and review the law and practice of insurance
in Bermuda, including reviews of accounting and administrative
procedures.
The Bermuda Insurance Act imposes on Bermuda insurance companies
solvency and liquidity standards, as well as auditing and
reporting requirements. The
day-to
-day supervision
of insurers is the responsibility of the BMA. The Bermuda
Insurance Act also grants to the BMA powers to supervise,
investigate and intervene in the affairs of insurance companies.
Certain significant aspects of the Bermuda insurance regulatory
framework are set forth below:
Classification of Insurers.
The Bermuda Insurance Act
distinguishes between insurers carrying on long-term business
and insurers carrying on general business. There are four
classifications of insurers carrying on general business, with
Class 4 insurers subject to the strictest regulation and
Class 3 insurers subject to the next strictest regulation.
RAM Re is registered as a Class 3 insurer and is
regulated as such under the Bermuda Insurance Act.
Cancellation of Insurer's Registration.
The BMA, on
certain grounds specified in the Bermuda Insurance Act, may
cancel an insurer's registration. Failure of the insurer to
comply with its obligations under the Bermuda Insurance Act or,
if the BMA believes that the insurer has not been carrying on
business in accordance with sound insurance principles, would be
such grounds.
Principal Representative.
An insurer is required to
maintain a principal office in Bermuda and to appoint and
maintain a principal representative in Bermuda. For the purpose
of the Bermuda Insurance Act, the principal office of
RAM Re is at RAM Re House, 46 Reid Street,
Hamilton HM12 Bermuda, and Vernon Endo is the principal
representative of RAM Re. Without a reason acceptable to
the BMA, an insurer may not terminate the appointment of its
principal representative, and the principal representative may
not cease to act as such unless 30 days' notice in
writing to the BMA is given of the intention to do so. It is the
duty of the principal representative to immediately notify the
BMA and to make a written report to the BMA within 14 days
where the principal representative believes there is a
likelihood of the insurer (for which the principal
representative acts) becoming insolvent or where a reportable
"event" has, to the principal representative's
knowledge, occurred or believed to have occurred. Examples of
such a reportable "event" include failure by the
insurer to comply substantially with a condition imposed upon
the insurer by the BMA relating to a solvency margin or a
liquidity or other ratio, or the insurer's ceasing to carry
on insurance business in or from within Bermuda. The written
report must set out all the particulars of the case that are
available to the principal representative.
Independent Approved Auditor.
Every registered insurer
must appoint an independent auditor who will annually audit and
report on the statutory financial statements and the statutory
financial return of the insurer. RAM Re's statements,
as a Class 3 insurer, must be filed annually with the BMA.
The independent auditor of the insurer must be approved by the
BMA and may be the same person or firm
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that audits the insurer's financial statements and reports
for presentation to its shareholders. Our independent auditor is
PricewaterhouseCoopers (Bermuda).
Loss Reserve Specialist.
As a Class 3 insurer,
RAM Re is required to submit an opinion of its approved
loss reserve specialist with its statutory financial return in
respect of its loss and loss expense provisions. The loss
reserve specialist will normally be a qualified casualty actuary
and must be approved by the BMA. Simon Lambert FIA MAAA is
RAM Re's loss reserve specialist and an employee of
PricewaterhouseCoopers (Bermuda).
Annual Statutory Financial Statements.
An insurer must
prepare annual statutory financial statements. The Bermuda
Insurance Act prescribes rules for the preparation and substance
of such statutory financial statements, which include, in
statutory form, a balance sheet, income statement, a statement
of capital and surplus and notes thereto. The insurer is
required to give detailed information and analysis regarding
premiums, claims, reinsurance and investments. The statutory
financial statements are not prepared in accordance with
U.S. GAAP. They are distinct from the financial statements
prepared for presentation to the insurer's shareholders
under the Bermuda Companies Act, which may be prepared in
accordance with U.S. GAAP. RAM Re is required to
submit the annual statutory financial statements as part of its
annual statutory financial return. The statutory financial
statements and the statutory financial return do not form part
of the public records maintained by the BMA or the Registrar of
Companies of Bermuda.
Annual Statutory Financial Return.
RAM Re, as a
Class 3 insurer, is required to file with the BMA a
statutory financial return no later than four months after its
financial year-end, unless specifically extended. The statutory
financial return includes, among other matters, a report of the
approved independent auditor on the statutory financial
statements of the insurer, a general business solvency
certificate, the statutory financial statements themselves and
the opinion of the loss reserve specialist. The principal
representative and at least two directors of the insurer must
sign the return and the solvency certificate (certifying, among
other matters, whether the minimum solvency margin has been met
and the independent approved auditor is required to state
whether in its opinion it was reasonable for the directors to so
certify). Where an insurer's accounts have been audited for
any purpose other than compliance with the Bermuda Insurance
Act, a statement to that effect must be filed with the statutory
financial return.
Minimum Solvency Margin and Restrictions on Dividends and
Distributions.
Under the Bermuda Insurance Act, the value of
general business assets of a Class 3 insurer must exceed
its general business liabilities by an amount greater than the
prescribed minimum solvency margin, or the general business
solvency margin.
As a Class 3 insurer: (1) RAM Re is required to
maintain the general business solvency margin being a minimum
solvency margin equal to the greatest of: (A) $1,000,000;
(B) 20% of net written premiums up to $6,000,000 plus 15%
of net written premiums over $6,000,000; or (C) 15% of loss
and other insurance reserves; (2) at any time RAM Re
fails to meet its general business solvency margin it must,
within 30 days after becoming aware of that failure or
having reason to believe that such failure has occurred, file
with the BMA a written report containing particulars of the
circumstances leading to the failure and of the manner and time
within which the insurer intends to rectify the failure;
(3) RAM Re is prohibited from declaring or paying any
dividends at any time it is in breach of its general business
solvency margin or the required minimum liquidity ratio, or if
the declaration or payment of such dividends would cause it to
fail to meet such margin or ratio; (4) if RAM Re has
failed to meet its minimum solvency margin or minimum liquidity
ratio on the last day of any financial year, RAM Re will be
prohibited, without the approval of the BMA, from declaring or
paying any dividends during the next financial year; and
(5) RAM Re is prohibited, without the prior approval
of the BMA, from reducing by 15% or more its total statutory
capital as set out in its previous year's statutory
financial statements. Total statutory capital includes
paid-up
share capital,
and a redemption or repurchase of shares will be a reduction in
total statutory capital.
Minimum Liquidity Ratio.
The Bermuda Insurance Act
provides a minimum liquidity ratio for general business
insurers. An insurer engaged in general business (as is the case
for us) is required to
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maintain the value of its relevant assets at not less than 75%
of the amount of its relevant liabilities. Relevant assets
include, cash and time deposits, quoted investments, unquoted
bonds and debentures, first liens on real estate, investment
income due and accrued, accounts and premiums receivable, and
reinsurance balances receivable. There are certain categories of
assets, which, unless specifically permitted by the BMA, do not
qualify as relevant assets, such as, unquoted equity securities,
investments in and advances to affiliates, and real estate and
collateral loans. The relevant liabilities are total general
business insurance reserves and total other liabilities less
deferred income tax and sundry liabilities (by interpretation,
those not specifically defined).
Supervision, Investigation and Intervention.
The BMA may
appoint an inspector with extensive powers to investigate the
affairs of an insurer if the BMA believes that an investigation
is required in the interest of the insurer's policyholders
or potential policyholders. In order to verify or supplement
information otherwise provided to the BMA, the BMA may direct an
insurer to produce documents or information relating to matters
connected with the insurer's business. If it appears to the
BMA that there is a risk of the insurer becoming insolvent, or
that it is in breach of the Bermuda Insurance Act or any
conditions imposed upon its registration, the BMA may, among
other things, direct the insurer (1) not to take on any new
insurance business, (2) not to vary any insurance contract
if the effect would be to increase the insurer's
liabilities, (3) not to make certain investments,
(4) to realize certain investments, (5) to maintain
in, or transfer to the custody of a specified bank, certain
assets, and (6) not to declare or pay any dividends or
other distributions or to restrict the making of such payments,
and/or to limit its premium income.
Disclosure of Information.
In addition to powers under
the Bermuda Insurance Act to investigate the affairs of an
insurer, the BMA may require certain information from an insurer
or certain other persons to be produced to the BMA. Further, the
BMA has been given powers to assist other regulatory authorities
with their investigations involving insurance and reinsurance
companies in Bermuda, subject to restrictions. For example, the
BMA must be satisfied that the assistance being requested is in
connection with the discharge of regulatory responsibilities of
the foreign regulatory authority. Further, the BMA must consider
whether to cooperate is in the public interest. The grounds for
disclosure are limited and the Bermuda Insurance Act provides
sanctions for breach of the statutory duty of confidentiality.
Certain Other Bermuda Law Considerations.
We have been
designated as non-resident for exchange control purposes by the
BMA. We are required to obtain the prior permission of the BMA
for the issuance and transfer of the common shares. It is
expected that the BMA will give its consent for the issuance and
transfer to persons not resident in Bermuda for exchange control
purposes.
We have been incorporated in Bermuda as an "exempted
company." Under Bermuda law, exempted companies are
companies formed for the purpose of conducting business outside
Bermuda from a principal place in Bermuda. As a result, they are
exempt from Bermuda laws restricting the percentage of share
capital that may be held by non-Bermudians, but they may not
participate in certain business transactions, including
(1) the acquisition or holding of land in Bermuda (except
as may be required for their business and held by way of lease
or tenancy for terms of not more than 50 years) without the
express authorization of the Bermuda legislature, (2) the
taking of mortgages on land in Bermuda to secure an amount in
excess of BD$50,000 without the consent of the Bermuda Minister
of Finance, (3) the acquisition of any bonds or debentures
secured by any land in Bermuda, other than certain types of
Bermuda government securities or (4) the carrying on of
business of any kind in Bermuda, except in furtherance of their
business carried on outside Bermuda or under license granted by
the Minister of Finance. While an insurer is permitted to
reinsure risks undertaken by any company incorporated in Bermuda
and permitted to engage in the insurance and reinsurance
business, generally it is not permitted without a special
license granted by the Minister of Finance, to insure Bermuda
domestic risks or risks of persons of, in or based in Bermuda.
RAM Re does not have such a special license.
We must comply with the provisions of the Bermuda Companies Act
regulating the payment of dividends, and making distributions
from contributed surplus, redemptions and repurchases of shares.
A company shall not declare or pay a dividend, or make a
distribution out of contributed surplus, if there are
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reasonable grounds for believing that: (a) the company is,
or would after the payment be, unable to pay its liabilities as
they become due; or (b) the realizable value of the
company's assets would thereby be less than the aggregate
of its liabilities and its issued share capital and share
premium accounts. Under the Bermuda Companies Act, when a
Bermuda company issues shares at a premium (that is for a price
above the par value), whether for cash or otherwise, a sum equal
to the aggregate amount or value of the premium on those shares
must be transferred to an account called "the share premium
account". The provisions of the Bermuda Companies Act
relating to the reduction of the share capital of a company
apply as if the share premium account were
paid-up
share capital
of that company, except for certain matters such as premium
arising on a particular class of shares which may be used in
paying up unissued shares to be issued to shareholders as fully
paid bonus shares. The
paid-up
share capital
may not be reduced if on the date the reduction is to be
effected there are reasonable grounds for believing that the
company is, or after the reduction would be, unable to pay its
liabilities as they become due. Similarly, no redemption or
purchase by a company of its own shares may be effected if, on
the date on which the purchase is to be effected, there are
reasonable grounds for believing that the company is, or after
the purchase would be, unable to pay its liabilities as they
become due.
Exempted companies, such as us, must comply with Bermuda
resident representation provisions under the Bermuda Companies
Act. Under Bermuda law, non-Bermudians (other than spouses of
Bermudians, or holders of a permanent resident's
certificate, or holders of a working resident's
certificate) may not engage in any gainful occupation in Bermuda
without an appropriate governmental work permit. A work permit
may be granted or extended upon showing that, after proper
public advertisement, no Bermudian (or spouse of a Bermudian, or
holder of a permanent resident's certificate, or holder of
a working resident's certificate) is available who meets
the minimum standards reasonably required by the employer. The
current policy of the Bermuda government is to place a six-year
term limit on individuals with work permits, subject to certain
exemptions for key employees. There are employee protection laws
and social security laws in Bermuda that apply to our employees
based in Bermuda.
Regulation Outside Bermuda
RAM Re is registered as an insurer in Bermuda and permitted
to write reinsurance. We are not admitted to conduct business in
any jurisdiction in the United States, or in any other country.
The insurance laws of each state of the United States and of
many
non-U.S.
jurisdictions
regulate the sale of insurance and reinsurance therein by alien
insurers, such as us, which are not authorized or admitted to do
business within such jurisdiction. We do not maintain an office,
solicit business, advertise, settle claims or conduct other
insurance activities in any jurisdiction other than Bermuda
where the conduct of such activities would require that we be so
authorized or admitted. We conduct our U.S. business in a
manner similar to that employed by other non-admitted reinsurers
that provide reinsurance to U.S. primary insurers.
Moreover, we have developed operating guidelines to assist our
personnel in conducting business in conformity with the laws of
U.S. jurisdictions. Accordingly, we do not believe that our
operations would result in any violation of the insurance laws
of any U.S. or
non-U.S.
jurisdiction.
There can be no assurance, however, that insurance regulators in
the U.S. or elsewhere will not raise inquiries or
challenges relating to our activities, or claim that we are
subject to such jurisdiction's licensing requirements, or
that our location, regulatory status or restrictions on our
activities resulting therefrom will not adversely affect our
ability to conduct our business. In the event such inquiries or
disputes arise, we may be required to consider various
alternatives to our operations, including modifying or
restricting the manner of conducting our business or, with
respect to cessions by primary insurers in the U.S., applying to
conduct business as an admitted or approved reinsurer, or
establishing trust funds to secure our reinsurance performance.
There can be no assurance that we would be able to comply with
the various financial and other requirements necessary to
operate on an admitted or approved basis. Having to comply with
such requirements could materially and adversely affect our
results of operations, whether directly or by subjecting us to
U.S. taxation.
An unlicensed reinsurer's business operations may also be
affected by regulatory requirements governing "credit for
reinsurance" which are imposed on its primary insurers.
Where a primary insurer has
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obtained reinsurance from a reinsurer that is licensed,
accredited or approved by the jurisdiction or state in which a
U.S. primary insurer files statutory financial statements,
it is permitted to reflect in its statutory financial statement
a credit in an aggregate amount equal to the liability for
unearned premiums and loss reserves and LAE reserves ceded to
the reinsurer. Although we are an unlicensed reinsurer for
U.S. regulatory purposes and therefore are not licensed,
accredited or approved by any U.S. jurisdiction or state,
our U.S. primary insurers will generally be permitted a
credit to their statutory financial statements for reinsurance
provided by us where we provide a qualifying letter of credit, a
deposit of assets in trust or other acceptable security
arrangement and meet certain other financial and regulatory
requirements. There can be no assurance that we will be able to
make such arrangements or meet those requirements on terms and
at costs that are acceptable. In addition, a U.S. primary
insurer is required to establish and maintain a contingency
reserve pursuant to the California, Connecticut, Florida, Iowa
and New York insurance laws and to make contributions to its
contingency reserve equal to the greater of 50% of written
premiums for the relevant category of insurance or a percentage
of the principal guaranteed or outstanding, depending upon the
type of obligation. A U.S. primary insurer is permitted to
reduce its contingency reserves by an amount of the contingency
reserve that a reinsurer is required to establish and maintain
pursuant to a reinsurance agreement between the parties.
Recently, the insurance and reinsurance regulatory framework has
been subject to increased scrutiny in many jurisdictions,
including the United States and various states within the United
States and elsewhere. It is not possible to predict the future
impact of changing law or regulation on our operations. Such
changes could have a material adverse effect on us or the
insurance industry in general.
In general, the Bermuda statutes and regulations applicable to
us are less restrictive than those that would be applicable to
us were we subject to the insurance laws of any state in the
United States. We are unable to predict, however, what
additional government regulations, if any, affecting our
business may be promulgated in Bermuda in the future or how such
regulations may be interpreted. Furthermore, no assurances can
be given that if we were to become subject to any insurance laws
of the United States or any state thereof or any other country
at any time in the future, we would be in compliance with such
laws.
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MANAGEMENT
Directors and Executive Officers
Set forth below are the names, ages and positions of our
directors and members of management of RAM Re as of
January 31, 2006.
Name
Age
Position(s)
Steven J. Tynan
51
Chairman of the Board of Directors
Vernon M. Endo
51
President and Chief Executive Officer and Director
Richard Lutenski
55
Chief Financial Officer
David K. Steel
48
Chief Risk Manager
Mary Ellen Pavlovsky
48
Managing Director for Asset-Backed Securities
James P. Gerry
44
Managing Director for Municipal & Infrastructure Finance
Marie L. Martineau
46
General Counsel and Secretary
Keith W. Abell
48
Director
Edward F. Bader
64
Director
Victor J. Bacigalupi
62
Director
David L. Boyle
58
Director
Daniel C. Lukas
34
Director
Michael J. Miller
38
Director
Arthur P. Slepian
50
Director
Steven S. Skalicky
57
Director
Dirk A. Stuurop
57
Director and Deputy Chairman of the Board of Directors
Steven J. Tynan
has been a Director since 1998 and has
served as Chairman of the Board of Directors since 2001.
Mr. Tynan co-founded High Ridge Capital LLC, a private
equity firm that specializes in the insurance sector, in 1995
and has served as a member of the firm since that time. He has
also been a member of Northaven Associates LLC, the General
Partner of several financial services hedge funds, since 2005.
In his capacity with High Ridge and Northaven, Mr. Tynan
has served on the boards of numerous private insurance,
reinsurance and related entities. Mr. Tynan also founded
Constitution Partners LLC in 1987 and remains its Managing
Member. Constitution Partners provides regulatory consulting
services to Lloyd's of London and a number of European
reinsurance companies.
Vernon M. Endo
is the President and Chief Executive
Officer and Director. Mr. Endo joined the Company in 2003
from GFGC LLC, a startup venture formed to establish a
European-based financial guaranty company, where he was CEO and
co-founder. Mr. Endo was a managing director and member of
the corporate leadership team and board of directors at FGIC
from 1991 to 2001. During his tenure at FGIC, he was responsible
for various business segments including structured finance, bond
insurance underwriting (including public finance and
international), capital markets and new products. Between 1988
and 1991, Mr. Endo was also a managing director responsible
for the mortgage finance unit and was later a member of the
financial institutions group at Prudential Securities. He began
his career at Citibank in 1976. He is Vice Chairman and a
director of the Association of Financial Guaranty Insurers.
Mr. Endo attended Williams College where he graduated with
a B.A. in political science.
Richard Lutenski
, Chief Financial Officer, is primarily
responsible for financial and investment management, information
technology, banking relationships and capital planning policies,
including financial reporting, budgets and forecasting, pricing,
accounting practices and controls. Prior to joining RAM Re
in 2004, he served as Chief Operating Officer for
RISC Ventures LLC, a Boston-based firm engaged in the
development of businesses involving the specification, modeling,
structuring and placement
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of complex financial risk. For two years prior to that he was an
independent consultant providing financial and risk management
services to insurance and investment firms. Mr. Lutenski
served as Executive Vice President and Chief Financial Officer
of Enhance Financial Services Group, Inc., a company engaged in
the financial guaranty reinsurance and direct financial guaranty
business, as well as having significant interests in specialty
finance businesses, from 1999 through the sale of that company
in 2001. Prior to joining Enhance, he served five years as
Managing Director and Chief Financial Officer of Crum &
Forster Insurance Group and for five years preceding that as
Chief Financial Officer of Amerisure Insurance Group. He has
extensive experience in financial and investment management,
planning, and strategic development and transactions. His early
career includes serving in officer level positions with
General Re and NAC Re, and as a senior insurance
regulator in the State of Minnesota. Mr. Lutenski received
his undergraduate degree from the University of Michigan and
graduate degree from Michigan State University, where he also
completed doctoral coursework and exams. He is a Chartered
Financial Analyst and serves as is a director of
PMA Capital Corporation.
David K. Steel
, Chief Risk Manager, is responsible for
credit policy and approval, portfolio surveillance, risk
reporting, loss reserving and treaty negotiations.
Mr. Steel joined RAM Re in August 2005 from
Hanover Capital Mortgage Holdings, Inc. where he was a Managing
Director and Portfolio Manager. Prior to Hanover, Mr. Steel
served as head of the Domestic Mortgage Insurance and
Reinsurance business at ACE Capital Re, Inc. from 2002
to 2004. Prior to ACE, Mr. Steel worked at FGIC from 1990
to 2002 where he was a member of the corporate leadership team
and headed the Mortgage-Backed Securities and Investments
business. He began his career at Lehman Brothers in 1984.
Mr. Steel holds an M.B.A. from the University of
California, Los Angeles and a B.S. from California State
University, Sacramento.
Mary Ellen Pavlovsky
, Managing Director,
Structured & Asset-Backed Finance, is responsible for
underwriting transactions involving asset-backed securities and
other structured financings, as well as corporate, financial
institution and sovereign risks. Prior to joining the Company in
1998, Ms. Pavlovsky served for three years as FGIC's
U.K. country manager, with responsibility for the insurance
company's London branch activities, which included credit
enhancement of public infrastructure, asset-backed and other
structured transactions. Before moving to London,
Ms. Pavlovsky underwrote a broad range of insured
transactions for FGIC in their New York office, including
financial institutions and foreign country risks. She joined
FGIC in New York in 1987, after eight years with the
Federal Reserve Bank of Philadelphia, where her responsibilities
included the supervision and regulation of foreign activities of
numerous major U.S. banks, as well as analysis and review
of bank international lending, investment and trading activity.
Ms. Pavlovsky has a B.A. in economics and international
relations from Brown University.
James P. Gerry
, Managing Director, Municipal &
Infrastructure Finance, is responsible for underwriting in
domestic and international public finance and investor owned
utility transactions. He has worked for the Company since its
inception in February 1998. Prior to joining the Company,
Mr. Gerry was underwriting manager for MBIA's southern
region with responsibility for all analysis, underwriting and
marketing of tax-backed deals in the southern U.S. Later,
he also analyzed utility, transportation and higher-education
bonds. Before joining MBIA, Mr. Gerry analyzed and
underwrote all tax-backed and non-health care related revenue
bonds originating in the western U.S. for Bond Investors
Guaranty Insurance Company, which we refer to as BIG, in their
San Francisco office. Previously at BIG, he specialized in
the underwriting of utility, transportation and special revenue
bonds for new and secondary market issues. Mr. Gerry
attended Syracuse University where he received a B.A. in
economics and political science and an M.P.A. from the Maxwell
School of Public Affairs.
Marie L. Martineau
, General Counsel, has responsibility
for overseeing all legal matters at the Company. She joined the
Company in January 2004 from GFGC LLC, a startup
venture formed to establish a European-based financial guaranty
company, where she was General Counsel. Prior to that,
Ms. Martineau worked for five years for Prudential
Financial, Inc., as Vice President and Corporate Counsel for its
Prudential Real Estate Investors, or PREI, division. In this
capacity she was responsible for legal oversight for all of
PREI's international real estate investment activities.
Before joining Prudential, she was a corporate partner at
O'Melveny & Myers LLP, where she began her legal
career in 1983.
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During her tenure at O'Melveny & Myers, she worked
on various types of public and private offerings with special
emphasis on offerings of public finance and asset backed
securities. Ms. Martineau has a J.D. from Boston University
School of Law and a B.A. in humanities from Providence College.
Ms. Martineau is scheduled to leave the Company in
February 2006. A successor to Ms. Martineau as General
Counsel has commenced employment, but the terms of such
successor's employment agreement have not been finalized.
Keith W. Abell
has been a director since 1998. He is Vice
Chairman and Co-Founder of GSC Partners and Co-Chairman of
Tishman Speyer GSC. He
co-founded
GSC Partners
in 1994 and has served in a variety of senior management roles
at GSC. He was previously a Managing Director of The Blackstone
Group, based in Hong Kong and Tokyo from 1990-1994. Prior
thereto, he worked at Goldman, Sachs & Co. from
1986-1990.
Mr. Abell serves on the Board of Directors of the National
Committee on United States-China Relations and the Board of
Governors of The New School for Social Research and is a member
of the Council on Foreign Relations. He serves as a director of
Telex Communications Inc., Duke's Place Holdings, Ltd., and
China Interactive Media Group. Mr. Abell graduated with
Honors from Brown University with a B.A. in 1979, and from The
Wharton School with a M.B.A. in 1986, and from the University of
Pennsylvania with a M.A. in International Studies in 1986.
Edward F. Bader
has been a director since 2004. Prior to
that, he was a partner in the Insurance Services Practice of
Arthur Andersen LLP with more than 37 years of experience
in accounting and auditing concentrating in the insurance
industry. He served as the head of Andersen's World Wide
Insurance Practice Group.
Victor J. Bacigalupi
has been a director since 1998.
Mr. Bacigalupi has worked for PMI since 1996 and currently
serves as Executive Vice President, Chief Administrative
Officer, General Counsel and Secretary. He is a director of
PMI's U.S., European and Australian mortgage insurance
subsidiaries. He is also a member of the Board of Regents of
John F. Kennedy University in Pleasant Hill, California.
David L. Boyle
has been a director since
August 2005. Mr. Boyle recently retired as Vice
Chairman and Head of Portfolio Risk Management of Ambac
Financial Group, Inc., and had served in many different
capacities at Ambac for the last eight years. Mr. Boyle
worked at Citibank, N.A. from 1974 to 1996, most recently as
Managing Director of Worldwide Securities Services. He is the
former chairman of the Association of Financial Guaranty
Insurers and a member of the board of trustees of Wittenberg
University.
Daniel C. Lukas
has been a director since 2004.
Mr. Lukas is a Managing Director of GSC Partners, where he
has been employed since 2003. He was previously with Thomas
Weisel Partners, where he served as Vice President in the
private equity and distressed debt funds. Prior to that he was
with Consolidated Press Holdings Limited, the private investment
vehicle of Kerry Packer in Sydney, Australia. Earlier,
Mr. Lukas was at Hellman & Friedman after
beginning his career at Goldman, Sachs & Co. He is also
a director of Iron Age Corporation and Precision Partners,
Inc. Mr. Lukas is a Phi Beta Kappa graduate of
Dartmouth College.
Michael J. Miller
has been a director since 2002.
Mr. Miller is currently a principal at CIVC Partners.
Mr. Miller is a director of AF&L, Inc., and Partners
Equity Capital Company LLC. Prior to joining CIVC in 1999, he
worked in the Investment Banking Division at Merrill
Lynch & Co., Inc. from 1996 through 1999.
Mr. Miller received a B.S. in Business from Miami
University and an M.B.A. from the J.L. Kellogg Graduate
School of Management at Northwestern University.
Steven S. Skalicky
has been a director since 1998.
Mr. Skalicky is Chief Financial Officer, Chief Accounting
Officer and Executive Vice President of Transatlantic
Reinsurance Co., and Transatlantic Holdings, Inc. He is a
director of Transatlantic Reinsurance Co., Putnam Reinsurance
Co. and TransRe Zurich.
Arthur P. Slepian
has been a director since 2003.
Mr. Slepian is Senior Vice President and Managing Director,
Financial Guaranty of PMI, and has served in many different
capacities for PMI for the last 21 years. He is currently
accountable for development and oversight of PMI's
strategic investments in the
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financial guaranty industry. He served from 2000 to 2002 as Vice
President of Corporate Development in PMI's International
and Strategic Investments Group and prior to that directing the
establishment of, and serving as Vice President/General Manager
for, CMG Mortgage Insurance Company, or CMG, a joint
venture that is now the leading provider of mortgage insurance
to credit unions throughout the United States. Mr. Slepian
continues to serve on the board of directors of CMG.
Dirk A. Stuurop
has been a director since 2004.
Mr. Stuurop retired as Chairman Global Financial
Institutions at Merrill Lynch where he worked from 1982 to 1999.
Mr. Stuurop served as Chairman of Worldinsure Ltd., a
privately owned provider of solutions to the Life Insurance
Industry, from 2000 to 2002. He also served as Senior Executive
Director to Banc of America Securities in 2003. He is a Director
of Philadelphia Consolidated Holding Corp. (PHLY) where he is
the Chairman of the Investment Committee and a member of the
Nominating Committee.
Board of Directors
There are currently eleven directors on the boards of RAM
Holdings and RAM Re. The total number of directors who serve on
the board at any given time is set at eleven, but this number
may increase up to a maximum of fifteen board members, subject
to the following exception: pursuant to the certificate of
designation, preferences and rights, which sets forth the terms
relating to RAM Re's Class B preference shares,
the size of the board may automatically be expanded by two
members (subject to the consent of RAM Re's
shareholders) upon a failure by us to pay dividends to holders
of RAM Re's Class B preference shares for a
period in excess of eighteen consecutive months. RAM Re
does not currently have outstanding any Class B preference
shares.
Board of Directors Committees
We have an audit committee, a compensation committee and a
nominating/governance committee, all of which consist
exclusively of members who we believe would qualify as
independent directors under the applicable requirements of the
New York Stock Exchange.
Audit Committee
The audit committee was established to assist the board of
directors in its oversight of the integrity of our financial
reporting process, the system of internal controls, the audit
process, and the performance, qualification and independence of
our independent auditors. We believe each member of the audit
committee would be "independent" within the meaning of
the rules of the New York Stock Exchange and has the attributes
of an "audit committee financial expert" as defined by
the SEC. Current members of the audit committee are: Edward F.
Bader (chairman), Steven S. Skalicky and Dirk A. Stuurop.
The duties and responsibilities of the audit committee are set
forth in the committee's charter, a copy of which has been
filed as an exhibit to the registration statement of which this
prospectus is a part, and include:
•
recommend, through the board, to the shareholders on their
    appointment and termination (subject to Bermuda law) of our
    independent auditors and actuaries;
•
review and approve the independent auditors' proposed audit
    scope, approach, staffing and, subject to our shareholders
    authorizing our board of directors acting by the audit
    committee, fees;
•
pre-approve all audit and, unless applicable law permits
    otherwise, permitted non-audit services to be performed by the
    independent auditors;
•
meet regularly with the chief executive officer, the chief
    financial officer and the general counsel and the independent
    auditors in separate executive sessions;
•
review policies with respect to risk assessment and risk
    management;
•
review the adequacy of our internal control structure;
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•
review any proposed public disclosures regarding an assessment
    or evaluation of our internal controls and procedures for
    financial reporting every quarter;
•
review our loss and loss expense reserves, including any reports
    of actuaries;
•
review and discuss with management and the independent auditors,
    our annual audited financial statements and Management's
    Discussion and Analysis of Financial Condition and Results of
    Operations;
•
discuss with management our earnings press releases, including
    the use of "pro forma" or "adjusted"
non-U.S.
GAAP
    information, as well as financial information and earnings
    guidance provided to analysts and rating agencies;
•
discuss with management and the independent auditors significant
    financial reporting issues and judgments made in connection with
    the preparation of our financial statements, including any
    significant changes in our selection or application of
    accounting principles (which shall be communicated to the
    committee by our chief financial officer as soon as reasonably
    practicable), the selection and disclosure of critical
    accounting estimates, and the effect of alternative assumptions,
    estimates or accounting principles on our financial
    statements; and
•
review and approve procedures for the receipt, retention and
    treatment of complaints regarding accounting, internal
    accounting controls or auditing matters and for the
    confidential, anonymous submission by employees of concerns
    regarding questionable accounting or auditing matters.
Compensation Committee
The compensation committee was established to discharge the
board of directors' responsibilities relating to
compensation of our employees. We believe each member of the
compensation committee would be "independent" within
the meaning of the rules of the New York Stock Exchange.
Current members of the compensation committee are: Keith W.
Abell (chairman), Michael J. Miller and Arthur P. Slepian.
The duties and responsibilities of the compensation committee
are set forth in the committee's charter, a copy of which
has been filed as an exhibit to the registration statement of
which this prospectus is a part, and include:
•
establish and oversee our executive compensation policies,
    including issues relating to pay and performance, targeted pay
    positioning (median, percentile etc.), comparison companies, pay
    mix, and stock ownership;
•
establish a formal evaluation process for and determine the
    compensation for the chief executive officer and as part of such
    process, to review and approve corporate goals and objectives
    relevant to chief executive officer compensation and evaluate
    the chief executive officer's performance in light of those
    goals and objectives;
•
review recommendations regarding the compensation of our other
    senior officers and determine appropriate compensation levels,
    which review may, depending on the number of senior officers, be
    restricted to reviewing and approving the compensation of the
    senior officers who are the chief executive officer's
    direct reports;
•
make recommendations to the board of directors with respect to
    new incentive and benefit plans, or amendments to any such
    existing plans, other than plans covering solely outside
    directors;
•
approve and ratify awards under incentive compensation and
    equity-based plans, including amendments to the awards made
    under any such plans;
•
consult with the chief executive officer on any decisions to
    retain or terminate any senior executive officer (except
    termination under exigent circumstances) and approve any
    retention or severance terms for the chief executive officer or
    any senior executive officer; and
•
oversee development and evaluation of succession planning for
    other key senior officers.
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Nominating and Governance Committee
The nominating and governance committee was established by the
board of directors to assist the board of directors in
(1) identifying individuals qualified to become board of
directors members, and recommending to the board of directors
director nominees for the next annual general meeting of
shareholders or to fill vacancies; and (2) developing and
recommending to the board of directors appropriate corporate
governance guidelines. We believe each member of the nominating
and governance committee would be "independent" within
the meaning of the rules of the New York Stock Exchange.
Current members of the nominating and governance committee are:
Dirk A. Stuurop (chairman), Victor J. Bacigalupi and Daniel C.
Lukas.
The duties and responsibilities of the nominating and governance
committee are set forth in the committee's charter, a copy
of which has been filed as an exhibit to the registration
statement of which this prospectus is a part, and include:
•
develop qualification criteria for board of directors members,
    and actively seek, interview and screen individuals qualified to
    become board of directors members for recommendation to the
    board of directors in accordance with our Corporate Governance
    Guidelines;
•
recommend to the board of directors potential nominees to the
    board of directors, and the renomination of incumbent directors
    as appropriate;
•
consider potential nominees recommended by shareholders;
•
review the compensation of directors and make recommendations to
    the board of directors on any recommended changes;
•
review the directors who are members (including qualifications
    and requirements), structure (including authority to delegate)
    and performance, of committees of the board of directors
    (including reporting to the board of directors), and make
    recommendations to the board of directors, as appropriate;
•
review the qualification of directors as "independent"
    within the meaning of SEC and New York Stock Exchange rules;
•
prepare and assist the board of directors and each committee
    thereof in its self-evaluation to determine whether the board of
    directors and such committees are functioning effectively;
•
serve in an advisory capacity to the board of directors and
    Chairman of the board of directors on matters of our
    organizational and governance structure and the conduct of the
    board of directors;
•
review and reassess the adequacy of our Corporate Governance
    Guidelines and recommend any proposed changes thereto; and
•
receive comments from all directors and report to the board of
    directors with an assessment of the board of directors'
    performance.
Director Compensation
As of the date of this prospectus, we have three directors that
are not affiliated with or employed by a current institutional
shareholder. Each such "unaffiliated director,"
currently Edward F. Bader, Dirk A. Stuurop and David L. Boyle,
receives $30,000 per year. Unaffiliated directors also
receive $1,500 per board meeting attended and $800 per
committee (on which such unaffiliated director serves as a
member) meeting attended. Unaffiliated directors also receive
$1,500 for each committee meeting attended as the chair of that
committee. In addition, the audit committee chair receives
$10,000 per year. Each unaffiliated director received an
award of 1,000 stock options upon his appointment to the board
and is eligible for annual grants of 200 stock options if he
remains on the board. The annual stock option awards are
generally made at the third quarter board meeting each year.
These stock option awards will be adjusted pro rata based on
the      for 1 subdivision of our
common shares and the issuance of bonus shares
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to be effective immediately prior to the closing of this
offering, and based on any future subdivision of our shares.
Each stock option award vests quarterly over a three year
period. Directors who are employed by a shareholder or by us do
not receive compensation for their service as directors, except
for the chairman of the board who receives $150,000 per
year for his services as chair. We reimburse all directors for
their reasonable travel and related expenses in connection with
attending board and committee meetings.
Executive Compensation
The following table sets forth the compensation earned during
the years indicated by our executive officers as of
December 31, 2005. All information set forth in this table
reflects compensation earned by the named individuals for
services with us.
Summary Compensation Table
Long Term
Annual Compensation
Compensation
Awards
Other Annual
Underlying
All Other
Name and Principal Position
Year
Salary(1)
Bonus
Compensation(2)
Options/SARs
Compensation(3)
Vernon M. Endo
2005
$
350,000
$
*
$
301,964
—
$
73,500
President and Chief
2004
350,000
385,000
323,308
—
40,789
Executive Officer
2003
57,885
57,885
68,224
25,000
5,833
Richard Lutenski(4)
2005
300,000
*
177,132
—
50,000
Chief Financial Officer
2004
188,077
200,000
159,471
12,000
18,710
David K. Steel(5)
2005
114,231
*
124,599
11,500
11,458
Chief Risk Manager
Mary Ellen Pavlovsky
2005
287,432
*
183,344
—
50,000
Managing Director for
2004
269,500
269,500
169,034
—
70,612
Asset-Backed Securities
2003
275,337
331,450
170,022
—
50,675
James P. Gerry
2005
225,000
*
175,002
—
45,000
Managing Director for
2004
225,000
225,000
172,962
—
51,765
Municipal & Infrastructure
2003
230,654
247,500
171,115
—
44,825
Finance
Marie L. Martineau(6)
2005
250,000
*
177,112
—
48,500
General Counsel
2004
$
243,269
239,100
179,791
6,000
24,261
*
Not yet determined.
(1)
The numbers presented reflect earned salary.
(2)
Other Annual Compensation for the year 2005 includes:
    (i) housing allowance paid to Mr. Endo in the amount
    of $216,000; (ii) housing allowance paid to
    Mr. Lutenski in the amount of $120,000; (iii) housing
    allowance paid to Mr. Steel in the amount of $49,486;
    (iv) housing allowance paid to Ms. Pavlovsky in the
    amount of $130,118; (v) housing allowance paid to
    Mr. Gerry in the amount of $122,000; and (vi) housing
    allowance paid to Ms. Martineau in the amount of $120,000.
    Other Annual Compensation for the year 2004 includes:
    (i) housing allowance paid to Mr. Endo in the amount
    of $216,000; (ii) housing allowance paid to
    Mr. Lutenski in the amount of $75,231; (iii) housing
    allowance paid to Ms. Pavlovsky in the amount of $122,000;
    (iv) housing allowance paid to Mr. Gerry in the amount
    of $122,000; and (v) housing allowance paid to
    Ms. Martineau in the amount of $116,769. Other Annual
    Compensation for the year 2003 includes: (i) housing
    allowance paid to Mr. Endo in the amount of $35,723;
    (ii) relocation reimbursement expense paid to Mr. Endo
    in the amount of $21,774; (iii) housing allowance paid to
    Ms. Pavlovsky in the amount of $124,892; and
    (iv) housing allowance paid to Mr. Gerry in the amount
    of $124,892. The reported amount of Other Annual Compensation
    also includes the amount we paid for health insurance and health
    flexible spending accounts, social insurance and taxes, home
    computers, travel allowances, and relocation, legal and tax
    preparation reimbursement expenses on behalf of the named
    individuals.
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(3)
Includes amounts paid under our supplemental retirement plan.
(4)
Mr. Lutenski joined us in 2004, and accordingly has no
    salary to report for 2003.
(5)
Mr. Steel joined us in 2005, and accordingly has no salary
    to report for 2004 and 2003.
(6)
Ms. Martineau joined us in 2004, and accordingly has no
    salary to report for 2003.
Options/SAR Grants in 2005
The following table presents information concerning stock
options granted to the named individuals during the year ended
December 31, 2005.
Options/SAR Grants
Number of
Percent of Total
Securities
Options/SARs
Underlying
Granted to
Grant Date
Options/SARs
Employees in
Exercise or
Present Value
Name
Granted
Fiscal Year
Base Price
Expiration Date
(1)
Vernon M. Endo
—
—
—
—
—
Richard Lutenski
—
—
—
—
—
David K. Steel
11,500
100%
$
156.41
June 30, 2015
$
300,239
Mary Ellen Pavlovsky
—
—
—
—
—
James P. Gerry
—
—
—
—
—
Marie L. Martineau
—
—
—
—
—
(1)
There was no public market for our common shares as of
    December 31, 2005. The fair market value of each option
    grant is estimated on the date of grant using the minimum value
    method with the following weighted average assumptions used for
    grants in 2005: risk free interest rates of 3.7%, expected life
    of 6.5 years, volatility of 0 and a dividend yield of 0.
Option Values as of December 31, 2005
The following table presents information concerning the number
of unexercised stock options outstanding as of December 31,
2005, and the value of any unexercised
in-the
-money stock
options outstanding at such time, held by the named individual.
Value of Unexercised
Number of Securities
In-The-Money
Underlying Unexercised
Options/SARs at
Options/SARs at Fiscal Year-
Fiscal Year-End ($)
Name
End Exercisable/Unexercisable
Exercisable/Unexercisable
Vernon M. Endo
11,250/13,750
$
256,388/313,363
Richard Lutenski
4,200/7,800
71,232/132,288
David K. Steel
1,150/10,350
6,486/58,374
Mary Ellen Pavlovsky
—
—
James P. Gerry
—
—
Marie L. Martineau
2,400/3,600
41,928/62,892
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Employment and Related Agreements
The following information summarizes the employment agreements
for our Chief Executive Officer and our other named executive
officers.
Chief Executive Officer
Vernon M. Endo.
Under Mr. Endo's employment
agreement, dated as of November 1, 2003 and amended as of
August 10, 2005, Mr. Endo has agreed to serve as our
President and Chief Executive Officer and a member of our board
of directors. Mr. Endo's term of service under this
agreement currently continues until October 27, 2006
followed by automatic additional one-year terms unless notice of
termination of Mr. Endo's employment is provided by us
or Mr. Endo prior to the end of the term. Prior to the
completion of this offering, we expect to enter into an
amendment to Mr. Endo's employment agreement to extend
his term of employment to March 2009. Mr. Endo receives an
annual base salary of $350,000 and an annual incentive bonus to
be determined by the board of directors. The target annual
incentive bonus amount for each year is an amount equal to 100%
of Mr. Endo's annual base salary. Mr. Endo's
salary is subject to review by the board of directors at least
annually but may not be decreased during Mr. Endo's
term of employment without his consent. Mr. Endo has also
been granted stock options as an inducement to accept such
position and as a performance incentive.
If Mr. Endo's employment terminates as a result of
death, Mr. Endo's estate or his beneficiaries are
entitled to (i) Mr. Endo's base salary through
the date that is 90 days after the date of his death;
(ii) an annual incentive award prorated based on the target
annual bonus and the number of days worked in such year, payable
in a lump sum promptly after his death; (iii) immediate
vesting of all stock options, with such options to remain
exercisable for the remainder of their stated terms;
(iv) any accrued benefits under our plans, programs or
agreements; (v) continued participation for one year for
each of Mr. Endo's dependents in all medical, dental,
hospitalization or other employee welfare benefit plans, program
and arrangements and (vi) payment of a monthly cost of
living allowance for three months.
If Mr. Endo's employment ends as a result of
disability, the agreement provides that Mr. Endo is
entitled to (i) his base salary until commencement of
long-term disability payments, but in no event for more than one
year following the last day of his employment; (ii) an
annual incentive award prorated based on the target annual bonus
and the number of days worked in such year, payable in a lump
sum promptly following the last day of his employment;
(iii) immediate vesting of all stock options, with such
options to remain exercisable for the remainder of their stated
terms; (iv) any accrued benefits under our plans, programs
or agreements; (v) continued participation for one year for
each of Mr. Endo's dependents in all medical, dental,
hospitalization or other employee welfare benefit plans, program
and arrangements and (vi) payment of a monthly cost of
living allowance for three months.
If we terminate Mr. Endo's employment for cause (as
defined in the agreement), Mr. Endo is entitled to his base
salary through the last day of his employment and any accrued
benefits under our plans, programs or agreements. If we
terminate Mr. Endo's employment without cause, or if
Mr. Endo terminates his employment for good reason (as
defined in the agreement), Mr. Endo is entitled to
(i) his base salary for two years following the last day of
Mr. Endo's employment (with a duty by Mr. Endo to
mitigate or reduce the amount due to him during the last twelve
months of such two year period by seeking other employment,
which we refer to as the Mitigation Period); (ii) an annual
incentive award based on the target annual bonus;
(iii) continued participation for one year for each of
Mr. Endo's dependents in all medical, dental,
hospitalization or other employee welfare benefit plans, program
and arrangements (with a duty by Mr. Endo to mitigate or
reduce the amount due to him during the Mitigation Period);
(iv) payment of a monthly cost of living allowance for
three months and (v) any accrued benefits under our plans,
programs or agreements. If Mr. Endo becomes employed during
the Mitigation Period, he must notify us within 10 days of
his date of hire and we may offset any payments to which he is
entitled against any comparable payments from his new employer.
If Mr. Endo fails to seek other employment in good faith or
fails to notify us of his new employment, our obligation to
provide severance benefits to him shall cease.
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Mr. Endo is also subject to non-competition and
non-solicitation provisions for a period of one year after
termination of the employment agreement along with ongoing
confidentiality and non-disparagement requirements.
Executive Officers
Richard Lutenski.
Under Mr. Lutenski's
employment agreement, dated as of May 1, 2004 and amended
as of August 10, 2005, Mr. Lutenski has agreed to
serve as our Chief Financial Officer. Mr. Lutenski's
term of service under this agreement currently continues until
May 26, 2007, followed by automatic additional one-year
terms unless notice of termination of Mr. Lutenski's
employment is provided by us or Mr. Lutenski prior to the
end of the term. Prior to the completion of this offering, we
expect to enter into an amendment to Mr. Lutenski's
employment agreement to extend his term of employment to
September 2008. Mr. Lutenski receives an annual base salary
of $300,000 and an annual incentive bonus to be determined by
the board of directors. The target annual incentive bonus amount
for each year is an amount equal to 80% of
Mr. Lutenski's annual base salary.
Mr. Lutenski's salary is subject to review by the
board of directors at least annually but may not be decreased
during Mr. Lutenski's term of employment without his
consent. Mr. Lutenski has also been granted stock options
as an inducement to accept such position and as a performance
incentive.
If Mr. Lutenski's employment terminates as a result of
death, Mr. Lutenski's estate or his beneficiaries are
entitled to (i) Mr. Lutenski's base salary
through the date that is 90 days after the date of his
death; (ii) an annual incentive award prorated based on the
target annual bonus and the number of days worked in such year,
payable in a lump sum promptly after his death;
(iii) immediate vesting of all stock options, with such
options to remain exercisable for the remainder of their stated
terms; (iv) any accrued benefits under our plans, programs
or agreements; (v) continued participation for one year for
each of Mr. Lutenski's dependents in all medical,
dental, hospitalization or other employee welfare benefit plans,
program and arrangements and (vi) payment of a monthly cost
of living allowance for three months.
If Mr. Lutenski's employment ends as a result of
disability, the agreement provides that Mr. Lutenski is
entitled to (i) his base salary until commencement of
long-term disability payments, but in no event for more than one
year following the last day of his employment; (ii) an
annual incentive award prorated based on the target annual bonus
and the number of days worked in such year, payable in a lump
sum promptly following the last day of his employment;
(iii) immediate vesting of all stock options, with such
options to remain exercisable for the remainder of their stated
terms; (iv) any accrued benefits under our plans, programs
or agreements; (v) continued participation for one year for
each of Mr. Lutenski's dependents in all medical,
dental, hospitalization or other employee welfare benefit plans,
program and arrangements and (vi) payment of a monthly cost
of living allowance for three months.
If we terminate Mr. Lutenski's employment for cause
(as defined in the agreement), Mr. Lutenski is entitled to
his base salary through the last day of his employment and any
accrued benefits under our plans, programs or agreements. If we
terminate Mr. Lutenski's employment without cause, or
if Mr. Lutenski terminates his employment for good reason
(as defined in the agreement), Mr. Lutenski is entitled to
(i) his base salary for one year following the last day of
Mr. Lutenski's employment; (ii) an annual
incentive award based on the target annual bonus;
(iii) continued participation for one year for each of
Mr. Lutenski's dependents in all medical, dental,
hospitalization or other employee welfare benefit plans, program
and arrangements (with a duty by Mr. Lutenski to mitigate
or reduce the amount due to him during the one year period
following his last day of employment by seeking other
employment); (iv) payment of a monthly cost of living
allowance for three months and (v) any accrued benefits
under our plans, programs or agreements. If Mr. Lutenski
becomes employed by another employer during the year following
his last day of employment, he must notify us within
10 days of his date of hire and we may offset any payments
to which he is entitled against any comparable payments from his
new employer. If Mr. Lutenski fails to seek other
employment in good faith or fails to notify us of his new
employment, our obligation to provide severance benefits to him
shall cease.
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Mr. Lutenski is also subject to non-competition and
non-solicitation provisions for a period of one year after
termination of the employment agreement along with ongoing
confidentiality and non-disparagement requirements.
David K. Steel.
Under Mr. Steel's employment
agreement, dated as of June 30, 2005, Mr. Steel has
agreed to serve as our Chief Risk Manager. Mr. Steel's
term of service under this agreement continues until
August 1, 2008, followed by automatic additional one-year
terms unless earlier terminated in accordance with the
employment agreement. Mr. Steel receives an annual base
salary of $275,000 and an annual incentive bonus to be
determined by the board of directors. The target annual
incentive bonus amount for each year is an amount equal to 100%
of Mr. Steel's annual base salary.
Mr. Steel's salary is subject to review by the board
of directors at least annually but may not be decreased during
Mr. Steel's term of employment without his consent.
Mr. Steel has also been granted stock options as an
inducement to accept such position and as a performance
incentive.
If Mr. Steel's employment terminates as a result of
death, Mr. Steel's estate or his beneficiaries are
entitled to (i) Mr. Steel's base salary through
the date that is 90 days after the date of his death;
(ii) an annual incentive award prorated based on the target
annual bonus and the number of days worked in such year, payable
in a lump sum promptly after his death; (iii) immediate
vesting of all stock options, with such options to remain
exercisable for the remainder of their stated terms;
(iv) any accrued benefits under our plans, programs or
agreements; (v) continued participation for three months
for each of Mr. Steel's dependents in all medical,
dental, hospitalization or other employee welfare benefit plans,
program and arrangements and (vi) payment of a monthly cost
of living allowance for three months.
If Mr. Steel's employment ends as a result of
disability, the agreement provides that Mr. Steel is
entitled to (i) his base salary until commencement of
long-term disability payments, but in no event for more than one
year following the last day of his employment; (ii) an
annual incentive award prorated based on the target annual bonus
and the number of days worked in such year, payable in a lump
sum promptly following the last day of his employment;
(iii) immediate vesting of all stock options, with such
options to remain exercisable for the remainder of their stated
terms; (iv) any accrued benefits under our plans, programs
or agreements; (v) continued participation for three months
for each of Mr. Steel's dependents in all medical,
dental, hospitalization or other employee welfare benefit plans,
program and arrangements and (vi) payment of a monthly cost
of living allowance for three months.
If we terminate Mr. Steel's employment for cause (as
defined in the agreement), Mr. Steel is entitled to his
base salary and cost of living allowance through the last day of
his employment and any accrued benefits under our plans,
programs or agreements. If we terminate Mr. Steel's
employment without cause, or if Mr. Steel terminates his
employment for good reason (as defined in the agreement),
Mr. Steel is entitled to (i) his base salary for one
year following the last day of Mr. Steel's employment;
(ii) an annual incentive award based on the target annual
bonus; (iii) continued participation for three months for
each of Mr. Steel's dependents in all medical, dental,
hospitalization or other employee welfare benefit plans, program
and arrangements; (iv) payment of a monthly cost of living
allowance for three months and (v) any accrued benefits
under our plans, programs or agreements. Any payments to be made
following termination without cause or for good reason will be
reduced to the extent Mr. Steel obtains other employment
and any such payments will cease if Mr. Steel violates the
terms of the non-competition and confidentiality provisions of
his employment agreement.
Following any termination by Mr. Steel other than for good
reason, Mr. Steel is subject to non-competition provisions
during the term of the agreement and further during any period
which he is being paid the base salary and cost of living
allowance following termination without cause or for good
reason. Mr. Steel is also subject to ongoing
confidentiality and non-disparagement requirements.
Mary Ellen Pavlovsky.
Under Ms. Pavlovsky's
employment agreement, dated as of May 1, 2005,
Ms. Pavlovsky has agreed to serve as our Managing Director
for Asset-backed Securities. Ms. Pavlovsky's term of
service under this agreement continues until April 30,
2006, unless earlier terminated in accordance with the
employment agreement. We and Ms. Pavlovsky expect to extend
her term of service as our Managing Director for Asset-backed
Securities until December 31, 2006. Ms. Pavlovsky
receives an
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annual base salary of $296,450 and an annual incentive bonus to
be determined by the board of directors. The target annual
incentive bonus amount for each year is an amount equal to 100%
of Ms. Pavlovsky's annual base salary.
Ms. Pavlovsky is also subject to non-competition provisions
during the term of the agreement and further during any period
which she is being paid the base salary and cost of living
allowance following termination without cause or for good
reason, along with ongoing confidentiality and non-disparagement
requirements.
The remaining terms of Ms. Pavlovsky's agreement are
substantially identical to Mr. Steel's agreement.
James P. Gerry.
Under Mr. Gerry's second
amended and restated employment agreement, dated as of
February 11, 2003, as amended, Mr. Gerry has agreed to
serve as our Managing Director, Municipal/ Infrastructure
Finance. Mr. Gerry's term of service under this
agreement continues until March 11, 2006. During the
120 days preceding such date, we will attempt in good faith
to negotiate a new employment agreement or an extension of the
term with Mr. Gerry on mutually agreeable terms. Prior to
the completion of this offering, we expect to enter into an
amendment to Mr. Gerry's employment agreement to
extend his term of employment
to                     ,
2008. Mr. Gerry receives an annual base salary of $225,000
and an annual housing allowance of $122,000. He is entitled to a
minimum annual bonus of 90% of his base salary and based on
certain factors described in the agreement, may be entitled to
an additional bonus of up to 20% of his base salary.
Mr. Gerry has also been granted stock options as an
inducement to accept such position and as a performance
incentive.
If Mr. Gerry's employment is terminated due to death
or disability, or by us without cause (as defined in the
agreement) or by Mr. Gerry for good reason (as defined in
the agreement), he (or, in the event of his death, his surviving
spouse or his estate) will be paid (i) any combined base
salary and housing allowance earned but unpaid on or prior to
the date of termination; (ii) any vested benefits under our
plans, programs or agreements; (iii) a prorated annual
incentive bonus determined by the board of directors; and
(iv) reimbursement for certain relocation expenses up to
$63,000. If Mr. Gerry's employment is terminated by us
for cause, he will be entitled to the same benefits, except any
accrued bonus or reimbursement of relocation expenses.
Mr. Gerry is also subject to non-competition provisions
during the term of the agreement (except upon a termination by
us without cause or by Mr. Gerry for good reason), a
one-year post-employment covenant not to solicit employees or
customers and ongoing confidentiality requirements.
Marie L. Martineau.
Ms. Martineau currently serves
as our General Counsel. Under the terms of
Ms. Martineau's employment agreement dated as of
January 12, 2004, Ms. Martineau's term of service
continued until January 12, 2006, unless earlier terminated
in accordance with the employment agreement, subject to a one
year extension unless either party gave 6 months'
notice of non-renewal. In July 2005, Ms. Martineau
delivered a notice of non-renewal of her employment agreement at
its expiration on January 12, 2006. Ms. Martineau and
the Company subsequently mutually agreed to extend her term of
service to February 15, 2006. Ms. Martineau receives
an annual base salary of $250,000 and an annual incentive bonus
to be determined by the board of directors. The target annual
incentive bonus amount for each year is an amount equal to 80%
of Ms. Martineau's annual base salary.
Ms. Martineau's salary is subject to review by the
board of directors at least annually but may not be decreased
during Ms. Martineau's term of employment without her
consent. Ms. Martineau has also been granted stock options
as an inducement to accept such position and as a performance
incentive.
If Ms. Martineau's employment terminates as a result
of death, Ms. Martineau's estate or her beneficiaries
are entitled to (i) Ms. Martineau's base salary
through the date that is 90 days after the date of her
death; (ii) an annual incentive award prorated based on the
target annual bonus and the number of days worked in such year,
payable in a lump sum promptly after her death;
(iii) immediate vesting of all stock options, with such
options to remain exercisable for the remainder of their stated
terms; (iv) any accrued benefits under our plans, programs
or agreements; (v) continued participation for one year for
each of Ms. Martineau's dependents in all medical,
dental, hospitalization or other employee welfare
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benefit plans, program and arrangements and (vi) payment of
a monthly cost of living allowance for three months.
If Ms. Martineau's employment ends as a result of
disability, the agreement provides that Ms. Martineau is
entitled to (i) her base salary until commencement of
long-term disability payments, but in no event for more than one
year following the last day of her employment; (ii) an
annual incentive award prorated based on the target annual bonus
and the number of days worked in such year, payable in a lump
sum promptly following the last day of her employment;
(iii) immediate vesting of all stock options, with such
options to remain exercisable for the remainder of their stated
terms; (iv) any accrued benefits under our plans, programs
or agreements; (v) continued participation for one year for
each of Ms. Martineau's dependents in all medical,
dental, hospitalization or other employee welfare benefit plans,
program and arrangements and (vi) payment of a monthly cost
of living allowance for three months.
If we terminate Ms. Martineau's employment for cause
(as defined in the agreement), Ms. Martineau is entitled to
her base salary through the last day of her employment and any
accrued benefits under our plans, programs or agreements. If we
terminate Ms. Martineau's employment without cause, or
if Ms. Martineau terminates her employment for good reason
(as defined in the agreement), Ms. Martineau is entitled to
(i) her base salary for one year following the last day of
Ms. Martineau's employment; (ii) an annual
incentive award based on the target annual bonus;
(iii) continued participation for one year for each of
Ms. Martineau's dependents in all medical, dental,
hospitalization or other employee welfare benefit plans, program
and arrangements; (iv) payment of a monthly cost of living
allowance for three months and (v) any accrued benefits
under our plans, programs or agreements.
Ms. Martineau is also subject to non-competition provisions
for one year following any termination, along with ongoing
confidentiality and non-disparagement requirements.
Indemnification Agreements.
We expect to enter into
indemnification agreements with each of our directors and
certain officers. Under those agreements, we agree to indemnify
each of these individuals against claims arising out of events
or occurrences related to that individual's service as
director, officer, employee, agent or fiduciary of us or, at our
request, any other entity, to the fullest extent permitted by
applicable law.
Long-Term Employment Benefits
On March 13, 2001, we adopted a Stock Option Plan for
Management Employees to enable key employees to acquire common
shares of Holdings II. Stock options granted under the plan
have a per share exercise price of not less than the estimated
fair value of the underlying common shares as determined at the
time of grant and a term not to exceed 10 years from
March 13, 2001. Our board of directors has authorized the
granting of a maximum of 122,503 common shares of
Holdings II under the plan. As of December 31, 2005,
there were 57,900 stock options outstanding under this plan. In
connection with the amalgamation, each outstanding stock option
will be converted into an option to acquire common shares of the
amalgamated company and, after giving effect to the subdivision
of our common shares and the issuance of bonus shares described
in "Reorganization Transactions," immediately prior to
the closing of this offering, we anticipate there will
be                     stock
options outstanding under this plan with a weighted average
exercise price of
$                    .
We also maintain the RAM Reinsurance Company Ltd. Supplemental
Retirement Plan for our key employees. Under our Supplemental
Retirement Plan, we contribute an amount equal to 10% of a
participant's annual salary and bonus to an account
maintained for the participant in which the participant is
vested after one year of service. In addition, a participant may
elect to defer all or a portion of annual salary and bonus and
have the amounts so deferred deposited in the participant's
account. A participant may elect to have the funds in the
account invested in one or more investment options offered
through a third party investment management company. A
participant's account is distributed in accordance with his
or her election made under the Supplemental Retirement Plan.
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Payment Agreements
On June 28, 2005, each of James P. Gerry and Mary Ellen
Pavlovsky entered into payment agreements with RAM Holdings, RAM
Re and Holdings II, which replaced existing option and
contingent share agreements entered into by such senior
executives. Subject to certain terms set forth therein, and
provided that the senior executive's employment is not
terminated by us for cause (as defined in the agreement) or by
the senior executive without good reason (as defined in the
agreement) on or before the earliest to occur of June 30,
2006 or the date of a change in control, the senior executive is
entitled to receive a cash payment in accordance with the
formula set forth in the payment agreement. In anticipation of
the June 30, 2006 payout date, as of September 30,
2005 we accrued $829,798 for payment to Mr. Gerry and
$805,318 for payment to Ms. Pavlovsky. We do not believe
that the restructuring transactions or this offering will result
in an earlier payout under these agreements.
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PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth information as of
January 31, 2006 regarding beneficial ownership of our
common shares by:
•
each person known by us to beneficially own 5% or more of our
    common shares;
•
each selling shareholder;
•
each of our directors;
•
each of our named executive officers; and
•
all of our executive officers and directors as a group.
Beneficial Ownership of
Beneficial Ownership of
Principal
Principal
and Selling
and Selling
Shareholders Prior to
Shareholders After
This Offering(1)
Number of
This Offering(1)
Shares Offered
Name of Beneficial Owner(2)
Number
Percentage
in This Offering
Number
Percentage
The PMI Group, Inc.(3)
496,415
24.9
%
Transatlantic Reinsurance Company(4)
451,602
22.7
Greenwich Street Capital Partners(5)
Greenwich Street Capital Partners II, L.P.
227,582
11.4
Greenwich Fund, L.P.
7,710
*
Greenwich Street Employees Fund, L.P.
13,585
*
TRV Executive Fund, L.P.
1,123
*
MBIA Insurance Corporation(6)
227,715
11.4
High Ridge Capital Partners Limited Partnership(7)
188,696
9.5
BankAmerica International Investment Corporation, or
    BAIIC(8)
120,000
6.0
CIVC Sidecar Fund, L.P.(9)
109,751
5.5
Canaan Partners(10)
Canaan Equity L.P.
65,000
3.3
Canaan Ventures II Limited Partnership
5,820
*
Canaan Ventures II Offshore C.V.
9,180
*
CIVC Partners IV
30,000
1.5
Bermuda International Finance Limited
20,000
*
Western General Insurance Company(11)
14,956
*
James P. Gerry
1,000
*
Mary Ellen Pavlovsky
1,000
*
Steven J. Tynan(12)
—
—
Vernon M. Endo(13)
12,500
*
Richard Lutenski(14)
4,800
*
David K. Steel(15)
1,725
*
Marie L. Martineau(16)
2,400
*
Keith W. Abell(17)
250,000
12.6
Edward F. Bader(18)
555
*
Victor J. Bacigalupi(19)
—
—
David L. Boyle(20)
252
*
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Beneficial Ownership of
Beneficial Ownership of
Principal
Principal
and Selling
and Selling
Shareholders Prior to
Shareholders After
This Offering(1)
Number of
This Offering(1)
Shares Offered
Name of Beneficial Owner(2)
Number
Percentage
in This Offering
Number
Percentage
Daniel C. Lukas
—
—
Michael J. Miller(21)
10,637
*
Arthur P. Slepian(22)
—
—
Steven S. Skalicky(23)
—
Dirk A. Stuurop(24)
723
*
All directors and executive officers as a group
285,592
12.6
%
*
Less than 1%.
(1)
Includes outstanding common shares and assumes exercise of all
    outstanding options currently exercisable or exercisable within
    60 days of January 31, 2006. Common shares subject to
    options or warrants currently exercisable, or exercisable within
    60 days of January 31, 2006, are deemed outstanding
    for the purpose of computing the percentage ownership of the
    person holding such options, but are not deemed outstanding for
    computing the percentage ownership of any other person.
(2)
Unless otherwise stated, the address for each beneficial owner
    is RAM Re House, 46 Reid Street, Hamilton HM12 Bermuda.
(3)
The address of the beneficial owner is PMI Plaza, 3003 Oak
    Road, Walnut Creek, California 94597.
(4)
The address of the beneficial owner is 80 Pine Street, New
    York, New York 10005.
(5)
The address of the beneficial owner is 12 East
    49th Street, Suite 3200, New York, New York 10017.
(6)
The address of the beneficial owner is 113 King Street,
    Armonk, New York, 10504.
(7)
The address of the beneficial owner is 5405 2 Morgan Hill
    Road, South Woodstock, Vermont 05071.
(8)
The address of the beneficial owner is Bank of America Corporate
    Center, 100 North Tryon St., Charlotte, North Carolina
    28255. These common shares are managed by CIVC Partners, LLC, or
    CIVC Partners, pursuant to a management agreement. The voting of
    such common shares is directed by CIVC Partners and the
    disposition of such shares is also directed by CIVC Partners,
    with the consent of BAIIC.
(9)
BAIIC owns a 95.5% limited partnership interest in CIVC Sidecar
    Fund, L.P., or CIVC Sidecar Fund. The general partner of CIVC
    Sidecar Fund is CIVC GP Sidecar Fund, L.P., which has sole
    voting and dispositive power over BAIIC's limited
    partnership interest in CIVC Sidecar Fund.
(10)
The address of the beneficial owner is 105 Rowayton Avenue,
    Rowayton, Connecticut 06853.
(11)
Western General Insurance Company's wholly owned
    subsidiary, Westgen High Ridge Holdings has a 25% interest in
    High Ridge Capital Partners Limited. The address of the
    beneficial owner is Swan Building, 26 Victoria Street,
    Hamilton, Bermuda.
(12)
Mr. Tynan, one of our directors, is a Managing Member of
    High Ridge Capital LLC, an entity which is a general partner of
    High Ridge Capital Partners Limited Partnership. Mr. Tynan
    disclaims beneficial ownership of any of the common shares owned
    by High Ridge Capital Partners Limited Partnership.
(13)
Consists of options exercisable for 12,500 common shares.
(14)
Consists of options exercisable for 4,800 common shares.
(15)
Consists of options exercisable for 1,725 common shares.
(16)
Consists of options exercisable for 2,400 common shares.
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(17)
Mr. Abell, one of our directors, is the Vice Chairman of
    Greenwich Street Capital Partners, Inc., a limited partner of
    Greenwich Street Capital Partners, L.P. and a managing member of
    Greenwich Street Investments II, L.L.C. Mr. Abell has
    voting and investment power over the securities beneficially
    owned by Greenwich Street Capital Partners. Mr. Abell
    disclaims beneficial ownership of any of the common shares owned
    by Greenwich Street Capital Partners other than to the extent of
    his pecuniary interest therein.
(18)
Consists of options exercisable for 555 common shares.
(19)
Mr. Bacigalupi, one of our directors, is the Executive Vice
    President, Chief Administrative Officer, General Counsel and
    Secretary of The PMI Group, Inc. Mr. Bacigalupi
    disclaims beneficial ownership of any of the common shares owned
    by The PMI Group, Inc.
(20)
Consists of options exercisable for 252 common shares.
(21)
Represents 6,982 common shares beneficially owned by BAIIC,
    1,746 common shares beneficially owned by CIVC
    Partners IV and 1,909 common shares beneficially owned
    by CIVC Sidecar Fund, L.P. Mr. Miller, one of our
    directors, is a member of CIVC Partners IV and CIVC
    Partners LLC, which contractually manages the shares of RAM
    Holdings beneficially owned by BankAmerica International
    Investment Corporation. As a member of CIVC Partners IV and
    CIVC Partners LLC, Mr. Miller has voting and investment
    power with respect to the 6,982 voting shares beneficially
    owned by BankAmerica International Investment Corporation and
    the 1,746 common shares beneficially owned by CIVC Partners
    IV. Mr. Miller may also be deemed to share voting and
    investment power with respect to the 1,909 shares
    beneficially owned by CIVC Sidecar Fund. He disclaims beneficial
    ownership of any of the common shares owned by CIVC Sidecar
    Fund, L.P. other than to the extent of his pecuniary interest
    therein.
(22)
Mr. Slepian, one of our directors, is the Senior Vice
    President and Managing Director, Financial Guaranty of The
    PMI Group, Inc. Mr. Slepian disclaims beneficial
    ownership of any of the common shares owned by The PMI Group,
    Inc.
(23)
Mr. Skalicky, one of our directors, is the Executive Vice
    President and Chief Financial Officer of Transatlantic
    Reinsurance Company. Mr. Skalicky disclaims beneficial
    ownership of any of the common shares owned by Transatlantic
    Reinsurance Company.
(24)
Consists of options exercisable for 723 common shares.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We describe below some of the transactions we have entered into
with parties that are related to us.
Transactions and Relationships with Investors
MBIA, one of the four major primary insurers, invested
$25.4 million in our April 3, 2003 private offering of
common shares of RAM Holdings and Holdings II. As of
September 30, 2005, MBIA owned 11.4% of our aggregate
issued and outstanding common shares. We have engaged MBIA
Capital, a wholly-owned subsidiary of the parent company to
MBIA, to provide us with investment advisory and management
services. We have agreed to pay an annual investment management
fee payable quarterly in arrears based on the average market
value of the assets under management for each quarter. In
addition, we have agreed to reimburse custodian fees, transfer
agent fees and brokerage costs, fees and commissions and certain
other
out-of
-pocket
expenses. An amount of $195,122 was payable as of
December 31, 2004 to MBIA Capital for these services in
2004. In the ordinary course of business, we have also entered
into reinsurance agreements with MBIA. For the nine months
ending September 30, 2005 and the year ended
December 31, 2004, MBIA treaties accounted for 31% and 39%
of our gross written premiums, respectively.
In December 2003, two shareholders, PMI and the CIVC Partners
group, who together own approximately 38% (with only PMI owning
in excess of 10%) of the aggregate issued and outstanding common
shares of RAM Holdings and Holdings II, became investors in
FGIC Corporation, an insurance holding company whose subsidiary
FGIC is one of the four largest United States based primary
financial guaranty insurance companies. In the ordinary course
of business, we have entered into reinsurance agreements with
FGIC. In 2004 and 2003, gross written premiums ceded from FGIC
accounted for 1% and 2% of total gross premiums written by us,
respectively. Amounts due from FGIC as of December 31, 2004
and 2003 were $5,318 and $32,438, respectively, and have been
included in premiums receivable.
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MATERIAL TAX CONSIDERATIONS
The following summary of our taxation and the taxation of our
shareholders is based upon current law and is for general
information only. Legislative, judicial or administrative
changes may be forthcoming that could affect this summary.
The following legal discussion (including and subject to the
matters and qualifications set forth in such summary) of the
material tax considerations under (i) "Taxation of RAM
Holdings and RAM Re — Bermuda" and "Taxation
of Shareholders — Bermuda Taxation" is based upon
the advice of Conyers, Dill & Pearman, Hamilton,
Bermuda, our Bermuda counsel and (ii) "Taxation of RAM
Holdings and RAM Re — United States" and
"Taxation of Shareholders — United States
Taxation" is based upon the advice of LeBoeuf, Lamb,
Greene & MacRae LLP, New York, New York. The advice of
such firms does not include any factual or accounting matters,
determinations or conclusions including amounts and computations
of RPII and amounts or components thereof or facts relating to
our business or activities. The discussion is based upon current
law. Legislative, judicial or administrative changes or
interpretations may be forthcoming that could be retroactive and
could affect the tax consequences to holders of common shares.
The tax treatment of a holder of common shares, or of a person
treated as a holder of common shares for U.S. federal
income, state, local or
non-U.S.
tax
purposes, may vary depending on the holder's particular tax
situation. Statements contained herein as to the beliefs,
expectations and conditions of RAM Holdings and RAM Re as to the
application of such tax laws or facts represent the view of
management as to the application of such laws and do not
represent the opinions of counsel. PROSPECTIVE INVESTORS SHOULD
CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THEIR PARTICULAR
CIRCUMSTANCES CONCERNING THE U.S. FEDERAL, STATE, LOCAL AND
NON-U.S.
TAX
CONSEQUENCES OF OWNING OUR COMMON SHARES.
Taxation of RAM Holdings and RAM Re
Bermuda
Under current Bermuda law, there is no income, corporate or
profits tax or withholding tax, capital gains tax or capital
transfer tax, estate or inheritance tax payable by us or our
shareholders, other than shareholders ordinarily resident in
Bermuda, if any. RAM Holdings and RAM Re have each obtained from
the Minister of Finance under The Exempted Undertaking Tax
Protection Act 1966, as amended, an assurance that, in the event
that Bermuda enacts legislation imposing tax computed on
profits, income, any capital asset, gain or appreciation, or any
tax in the nature of estate duty or inheritance, then the
imposition of any such tax shall not be applicable to RAM
Holdings and RAM Re or to any of their operations or their
shares, debentures or other obligations, until March 28,
2016. RAM Holdings and RAM Re could be subject to taxes in
Bermuda after that date. This assurance is subject to the
proviso that it is not to be construed so as to prevent the
application of any tax or duty to such persons as are ordinarily
resident in Bermuda or to prevent the application of any tax
payable in accordance with the provisions of the Land Tax Act
1967 or otherwise payable in relation to any property leased to
RAM Holdings and RAM Re. RAM Holdings and RAM Re each pay annual
Bermuda government fees, and RAM Re pays annual insurance
license fees. In addition, all entities employing individuals in
Bermuda are required to pay a payroll tax and there are other
sundry taxes payable, directly or indirectly, to the Bermuda
government.
United States
The following discussion is a summary of all material
U.S. tax considerations relating to our operations. A
foreign corporation that is engaged in the conduct of a
U.S. trade or business will be subject to U.S. federal
income tax as described below, unless entitled to the benefits
of an applicable tax treaty. Whether business is being conducted
in the United States is an inherently factual determination.
Because the Code, regulations and court decisions fail to
definitively identify activities that constitute being engaged
in a trade or business in the United States, we cannot be
certain that the IRS will not contend successfully that RAM
Holdings and/or RAM Re are or will be engaged in a trade or
business in the
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United States for U.S. federal income tax purposes. A
foreign corporation deemed to be so engaged would be subject to
U.S. federal income tax at regular corporate rates, as well
as the branch profits tax, on its income which is treated as
effectively connected with the conduct of that trade or business
unless the corporation is entitled to relief under the permanent
establishment provision of an applicable tax treaty, as
discussed below. Such income tax, if imposed, would be based on
effectively connected income computed in a manner generally
analogous to that applied to the income of a
U.S. corporation, except that a foreign corporation is
generally entitled to deductions and credits only if it files a
U.S. federal income tax return. RAM Re does not intend to
file protective U.S. federal income tax returns. The
highest marginal federal income tax rates currently are 35% for
a corporation's effectively connected income and 30% for
the additional "branch profits" tax.
If RAM Re is entitled to benefits under the income tax treaty
between the United States and Bermuda, which we refer to as the
Bermuda Treaty, RAM Re would not be subject to U.S. federal
income tax on any income found to be effectively connected with
a U.S. trade or business unless that trade or business is
conducted through a permanent establishment in the United
States. No regulations interpreting the Bermuda Treaty have been
issued. RAM Re currently intends to conduct its activities so
that it does not have a permanent establishment in the United
States, although we cannot be certain that we will achieve this
result.
An insurance enterprise resident in Bermuda generally will be
entitled to the benefits of the Bermuda Treaty if (i) more
than 50% of its shares are owned beneficially, directly or
indirectly, by individual residents of the United States or
Bermuda or U.S. citizens and (ii) its income is not
used in substantial part, directly or indirectly, to make
disproportionate distributions to, or to meet certain
liabilities of, persons who are neither residents of either the
United States or Bermuda nor U.S. citizens. We cannot be
certain that RAM Re will be eligible for Bermuda Treaty benefits
immediately following this offering or in the future because of
factual and legal uncertainties regarding the residency and
citizenship of RAM Holdings' shareholders. RAM Holdings
would not be eligible for treaty benefits because it is not an
insurance company. Accordingly, RAM Holdings and RAM Re have
conducted and intend to conduct substantially all of their
operations outside the United States and to limit their
U.S. contacts so that neither RAM Holdings nor RAM Re
should be treated as engaged in the conduct of a trade or
business in the United States.
Foreign insurance companies carrying on an insurance business
within the United States have a certain minimum amount of
effectively connected net investment income, determined in
accordance with a formula that depends, in part, on the amount
of U.S. risk insured or reinsured by such companies. If RAM
Re is considered to be engaged in the conduct of an insurance
business in the United States and it is not entitled to the
benefits of the Bermuda Treaty in general (because it fails to
satisfy one of the limitations on treaty benefits discussed
above), the Code could subject a significant portion of RAM
Re's investment income to U.S. federal income tax. In
addition, while the Bermuda Treaty clearly applies to premium
income, it is uncertain whether the Bermuda Treaty applies to
other income such as investment income. If RAM Re is considered
engaged in the conduct of an insurance business in the United
States and is entitled to the benefits of the Bermuda Treaty in
general, but the Bermuda Treaty is interpreted to not apply to
investment income, a significant portion of RAM Re's
investment income could be subject to U.S. federal income
tax.
Foreign corporations not engaged in a trade or business in the
United States are nonetheless subject to a U.S. income tax
imposed by withholding on certain "fixed or determinable
annual or periodic gains, profits and income" derived from
sources within the United States (such as dividends and certain
interest on investments), subject to exemption under the Code or
reduction by applicable treaties. The Bermuda Treaty does not
reduce the U.S. federal withholding rate on
U.S.-sourced
investment
income.
The United States also imposes an excise tax on insurance and
reinsurance premiums paid to foreign insurers or reinsurers with
respect to risks located in the United States. The rates of tax
applicable to premiums paid to RAM Re are 4% for casualty
insurance premiums and 1% for reinsurance premiums.
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Taxation of Shareholders
Bermuda Taxation
Currently, there is no Bermuda income, corporate or profits tax
or withholding tax, capital gains tax or capital transfer tax,
estate or inheritance tax or other tax payable by holders of the
common shares, other than shareholders ordinarily resident in
Bermuda, if any.
United States Taxation
The following summary sets forth the material U.S. federal
income tax considerations related to the purchase, ownership and
disposition of common shares. Unless otherwise stated, this
summary deals only with shareholders that are U.S. Persons
(as defined below) who purchase their common shares in this
offering, who do not own (directly, indirectly through foreign
entities or "constructively") shares of RAM Holdings
or RAM Re prior to this offering and who hold their common
shares as capital assets within the meaning of section 1221
of the Code. The following discussion is only a discussion of
the material U.S. federal income tax matters as described
herein and does not purport to address all of the
U.S. federal income tax consequences that may be relevant
to a particular shareholder in light of such shareholder's
specific circumstances. In addition, except as disclosed below,
the following summary does not address the U.S. federal
income tax consequences that may be relevant to special classes
of shareholders, such as financial institutions, insurance
companies, regulated investment companies, real estate
investment trusts, dealers or traders in securities, tax exempt
organizations, expatriates, investors in pass through entities,
persons who are considered with respect to any of us as
"United States shareholders" for purposes of the CFC
rules of the Code (generally, a U.S. Person, as defined
below, who owns or is deemed to own 10% or more of the total
combined voting power of all classes of RAM Holdings or RAM Re
shares entitled to vote (that is, 10% U.S. Shareholders)),
or persons who hold their shares as part of a hedging or
conversion transaction or as part of a short-sale or straddle,
who may be subject to special rules or treatment under the Code.
This discussion is based upon the Code, the Treasury Regulations
promulgated thereunder and any relevant administrative rulings
or pronouncements or judicial decisions, all as in effect on the
date hereof and as currently interpreted, and does not take into
account possible changes in such tax laws or interpretations
thereof, which may apply retroactively. This discussion does not
include any description of the tax laws of any state or local
governments within the United States or of any foreign
government. Persons considering making an investment in our
shares should consult their own tax advisors concerning the
application of the U.S. federal tax laws to their
particular situations as well as any tax consequences arising
under the laws of any state, local or foreign taxing
jurisdiction prior to making such investment.
If a partnership holds our common shares, the tax treatment of
the partners will generally depend on the status of the partner
and the activities of the partnership. If you are a partner of a
partnership holding our shares, you should consult your tax
advisor.
For purposes of this discussion, the term
"U.S. Person" means: (i) an individual
citizen or resident of the United States, (ii) a
partnership or corporation created or organized in or under the
laws of the United States, or under the laws of any State
thereof (including the District of Columbia), (iii) an
estate the income of which is subject to U.S. federal
income taxation regardless of its source, (iv) a trust if
either (x) a court within the United States is able to
exercise primary supervision over the administration of such
trust and one or more U.S. Persons have the authority to
control all substantial decisions of such trust or (y) the
trust has a valid election in effect to be treated as a
U.S. Person for U.S. federal income tax purposes or
(v) any other person or entity that is treated for
U.S. federal income tax purposes as if it were one of the
foregoing.
Taxation of Dividends.
Subject to the discussions below
relating to the potential application of the CFC, RPII and PFIC
rules, cash distributions, if any, made with respect to the
common shares will constitute dividends for U.S. federal
income tax purposes to the extent paid out of current or
accumulated earnings and profits of RAM Holdings (as computed
using U.S. tax principles). We believe that dividends paid
by us to non-corporate holders on our common shares before 2009
should be eligible for reduced rates
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of tax up to a maximum of 15% as "qualified dividend
income," because our common shares should be treated as
readily tradable on an established securities market in the
United States. Qualified dividend income is subject to tax at
capital gain rates. Dividends paid by us to corporate holders
will not be eligible for the dividends received deduction. To
the extent such distributions exceed RAM Holdings' earnings
and profits, they will be treated first as a return of the
shareholder's basis in their shares to the extent thereof,
and then as gain from the sale of a capital asset.
Classification of RAM Holdings or RAM Re as CFCs.
Each
10% U.S. Shareholder of a foreign corporation that is a CFC
for an uninterrupted period of 30 days or more during a
taxable year, and who owns shares in the CFC, directly or
indirectly through foreign entities, on the last day of the
CFC's taxable year, must include in its gross income for
U.S. federal income tax purposes its pro rata share of the
CFC's "subpart F income," even if the subpart F
income is not distributed. "Subpart F income" of a
foreign insurance corporation typically includes foreign
personal holding company income (such as interest, dividends and
other types of passive income), as well as insurance and
reinsurance income (including underwriting and investment
income). A foreign corporation is considered a CFC if 10%
U.S. Shareholders own (directly, indirectly through foreign
entities or by attribution by application of the constructive
ownership rules of section 958(b) of the Code (that is,
"constructively")) more than 50% of the total combined
voting power of all classes of voting stock of such foreign
corporation, or more than 50% of the total value of all stock of
such corporation on any day of the taxable year of such
corporation, which we refer to as the 50% CFC Test. For purposes
of taking into account insurance income, a CFC also includes a
foreign insurance company in which more than 25% of the total
combined voting power of all classes of stock or more than 25%
of the total value of all stock is owned (directly, indirectly
through foreign entities or constructively) by 10%
U.S. Shareholders on any day of the taxable year of such
corporation, which we refer to as the 25% CFC Test, if the gross
amount of premiums or other consideration for the reinsurance or
the issuing of insurance or annuity contracts (other than
certain insurance or reinsurance related to same country risks
written by certain insurance companies not applicable here),
exceeds 75% of the gross amount of all premiums or other
consideration in respect of all risks. Moreover, RAM Re may be
characterized as a CFC even if, based on the nominal voting
power attributable to its shares, it avoids CFC characterization
under the 50% CFC Test in the case of RAM Holdings and the 25%
CFC Test in the case of RAM Re if, based on the facts and
circumstances, U.S. Persons who are not 10%
U.S. Shareholders based on the nominal voting power
attributable to the shares of RAM Holdings or RAM Re owned by
such U.S. Persons exercise control over RAM Holdings or RAM
Re disproportionate to their nominal voting power in such a
manner that RAM Holdings or RAM Re should be considered a CFC
under the 50% CFC Test or 25% CFC Test, as applicable.
We believe, subject to the discussion below, that because of the
anticipated dispersion of our share ownership, provisions in our
organizational documents that limit voting power (these
provisions are described in "Description of Share
Capital") and other factors, no U.S. Person who
acquires common shares in this offering directly or indirectly
through foreign entities and that did not own (directly,
indirectly through foreign entities, or
"constructively") shares of RAM Holdings or RAM Re
prior to this offering should be treated as owning (directly,
indirectly through foreign entities or
"constructively") 10% or more of the total voting
power of all classes of shares of RAM Holdings or RAM Re. We
note that the provisions in our organizational documents that
limit voting power could reduce or eliminate an investor's
voting power in circumstances in which, pursuant to certain
constructive ownership rules, shares owned or deemed owned by
the investor are attributed to another investor or shares owned
or deemed owned by another investor are attributed to the
investor or the investor is invested in an entity in which
another investor invests. However, neither we nor investors may
be aware of circumstances in which shares may be so attributed
in order to timely effectuate these provisions. In addition, the
IRS could challenge the effectiveness of the provisions in our
organizational documents and a court could sustain such a
challenge. Accordingly, no assurance can be given that a
U.S. Person who acquires common shares in this offering
will not be characterized as a 10% U.S. Shareholder.
The RPII CFC Provisions.
The following discussion
generally is applicable only if the RPII of RAM Re, determined
on a gross basis, is 20% or more of its gross insurance income
for the taxable year and the
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20% Ownership Exception (as defined below) is not met. The
following discussion generally would not apply for any fiscal
year in which RAM Re's RPII falls below the 20% threshold
or the 20% Ownership Exception is met. Although we cannot be
certain, we believe that RAM Re met the 20% Ownership Exception
in prior years of operation and will meet the 20% Ownership
Exception for each tax year for the foreseeable future.
Additionally, as RAM Holdings is not licensed as an insurance
company we do not anticipate that RAM Holdings will have
insurance income, including RPII.
RPII is any insurance income (as defined below) attributable to
policies of insurance or reinsurance with respect to which the
person (directly or indirectly) insured is an RPII shareholder
(as defined below) or a related person (as defined below) to
such RPII shareholder. In general, and subject to certain
limitations, "insurance income" is income (including
premium and investment income) attributable to the issuing of
any insurance or reinsurance contract which would be taxed under
the portions of the Code relating to insurance companies if the
income were the income of a domestic insurance company. The term
"RPII shareholder" means any U.S. Person who owns
(directly or indirectly through foreign entities) any amount of
RAM Holdings' or RAM Re's shares. Generally, the term
"related person" for this purpose means someone who
controls or is controlled by the RPII shareholder or someone who
is controlled by the same person or persons which control the
RPII shareholder. Control is measured by either more than 50% in
value or more than 50% in voting power of stock applying certain
constructive ownership principles. A corporation's pension
plan is ordinarily not a related person with respect to the
corporation unless the pension plan owns, directly or indirectly
through the application of certain constructive ownership rules,
more than 50% measured by vote or value, of the stock of the
corporation. RAM Re will be treated as a CFC under the RPII
provisions if RPII shareholders are treated as owning (directly,
indirectly through foreign entities or constructively) 25% or
more of the shares of RAM Re by vote or value.
RPII Exceptions. The special RPII rules do not apply to RAM Re
if (i) direct and indirect insureds and persons related to
such insureds, whether or not U.S. Persons, are treated as
owning (directly or indirectly through entities) less than 20%
of the voting power and less than 20% of the value of the shares
of RAM Re, which we refer to as the 20% Ownership Exception,
(ii) RPII, determined on a gross basis, is less than 20% of
the gross insurance income of RAM Re for the taxable year, which
we refer to as the 20% Gross Income Exception, (iii) RAM Re
elects to be taxed on its RPII as if the RPII were effectively
connected with the conduct of a U.S. trade or business and
to waive all treaty benefits with respect to RPII and meet
certain other requirements or (iv) RAM Re elects to be
treated as a U.S. corporation and waives all treaty
benefits and meets certain other requirements. RAM Re does not
intend to make these elections. Where none of these exceptions
applies to RAM Re, each U.S. Person owning directly or
indirectly through foreign entities, any shares in RAM Holdings
(and therefore indirectly, in RAM Re) on the last day of RAM
Re's taxable year will be required to include in its gross
income for U.S. federal income tax purposes its share of
the RPII of RAM Re for the portion of the taxable year during
which RAM Re was a CFC under the RPII provisions, determined as
if all such RPII were distributed proportionately only to such
U.S. Persons at that date, but limited by each such
U.S. Person's share of RAM Re's current-year
earnings and profits as reduced by the U.S. Person's
share, if any, of certain prior-year deficits in earnings and
profits. RAM Re intends to operate in a manner that is intended
to ensure that it qualifies for the 20% Ownership Exception;
however, it is possible that we will not be successful in
qualifying under this exception. RAM Re has not qualified for
the 20% Gross Income Exception in recent prior years, and it is
unclear whether RAM Re will qualify for the 20% Gross Income
Exception in the future.
Computation of RPII. In order to determine how much RPII RAM Re
has earned in each taxable year (for purposes of providing this
information to RPII shareholders), RAM Re may obtain and rely
upon information from its insureds and reinsureds to determine
whether any of the insureds, reinsureds or persons related
thereto own (directly or indirectly through foreign entities)
shares of RAM Re and are U.S. Persons. RAM Re may not be
able to determine whether any of its underlying direct or
indirect insureds are RPII shareholders or related persons to
such RPII shareholders. Consequently, RAM Re may not be able to
determine accurately the gross amount of RPII it earns in a
given taxable year or whether the 20% Ownership Exception is
met. For any year in which the 20% Ownership Exception does not
apply
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and the 20% Gross Income Exception is not met, RAM Holdings may
also seek information from its shareholders as to whether
beneficial owners of RAM Re shares at the end of the year are
U.S. Persons so that the RPII may be determined and
apportioned among such persons; to the extent RAM Holdings is
unable to determine whether a beneficial owner of RAM Re shares
is a U.S. Person, RAM Holdings may assume that such owner
is not a U.S. Person, thereby increasing the per share RPII
amount for all known RPII shareholders.
If, as expected, for each taxable year RAM Re meets the 20%
Ownership Exception, RPII shareholders will not be required to
include RPII in their taxable income. The amount of RPII
includible in the income of a RPII shareholder is based upon the
net RPII income for the year after deducting related expenses
such as losses, loss reserves and operating expenses.
Apportionment of RPII to U.S. Holders. Every RPII
shareholder who directly or indirectly owns shares of RAM Re on
the last day of any taxable year of RAM Re in which the 20%
Ownership Exception does not apply to RAM Re and the 20% Gross
Income Exception is not met should expect that for such year the
RPII Shareholder will be required to include in gross income its
share of RAM Re's RPII for the portion of the taxable year
during which RAM Re was a CFC under the RPII provisions, whether
or not distributed, even though such shareholders may not have
owned the shares throughout such period. A RPII shareholder who
owns RAM Re shares during such taxable year but not on the last
day of the taxable year is not required to include in gross
income any part of RAM Re's RPII.
Basis Adjustments. A RPII shareholder's tax basis in its
shares will be increased by the amount of any RPII that the
shareholder includes in income. The RPII shareholder may exclude
from income the amount of any distributions by RAM Holdings out
of previously taxed RPII income. The RPII shareholder's tax
basis in its common shares will be reduced by the amount of such
distributions that are excluded from income.
Uncertainty as to Application of RPII. The RPII provisions have
never been interpreted by the courts or the U.S. Treasury
Department in final regulations, and regulations interpreting
the RPII provisions of the Code exist only in proposed form. It
is not certain whether these regulations will be adopted in
their proposed form or what changes or clarifications might
ultimately be made thereto or whether any such changes, as well
as any interpretation or application of the RPII provisions by
the IRS, the courts or otherwise, might have retroactive effect.
These provisions include the grant of authority to the
U.S. Treasury Department to prescribe "such
regulations as may be necessary to carry out the purpose of this
subsection including ... regulations preventing the avoidance of
this subsection through cross insurance arrangements or
otherwise." Accordingly, the meaning of the RPII provisions
and the application thereof to RAM Re is uncertain. In addition,
we cannot be certain that the amount of RPII or the amounts of
the RPII inclusions for any particular RPII shareholder, if any,
will not be subject to adjustment based upon subsequent IRS
examination. Any prospective investors considering an investment
in common shares should consult his tax advisor as to the
effects of these uncertainties.
Information Reporting.
Under certain circumstances,
U.S. Persons who own (directly or indirectly) shares in a
foreign corporation are required to file IRS Form 5471 with
their U.S. federal income tax returns. Generally,
information reporting on IRS Form 5471 is required by
(i) a person who is treated as a RPII shareholder,
(ii) a 10% U.S. Shareholder of a foreign corporation
that is a CFC for an uninterrupted period of 30 days or
more during any tax year of the foreign corporation, and who
owned the stock on the last day of that year and
(iii) under certain circumstances, a U.S. Person who
acquires stock in a foreign corporation and as a result thereof
owns 10% or more of the voting power or value of such foreign
corporation, whether or not such foreign corporation is a CFC.
For any taxable year in which RAM Holdings determines that the
20% Gross Income Exception is not met and the 20% Ownership
Exception does not apply, RAM Holdings will provide to all
U.S. Persons registered as shareholders of its shares a
completed IRS Form 5471 or the relevant information
necessary to complete the form. Failure to file IRS
Form 5471 may result in penalties.
Tax-Exempt Shareholders.
Tax-exempt entities will be
required to treat certain subpart F insurance income, including
RPII, that is includible in income by the tax-exempt entity as
unrelated business taxable
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income. Prospective investors that are tax exempt entities are
urged to consult their tax advisors as to the potential impact
of the unrelated business taxable income provisions of the Code.
A tax-exempt organization that is treated as a 10%
U.S. Shareholder or a RPII Shareholder also must file IRS
Form 5471 in the circumstances described above.
Dispositions of Common Shares.
Subject to the discussions
below relating to the potential application of the Code
section 1248 and PFIC rules, U.S. holders of common
shares generally should recognize capital gain or loss for
U.S. federal income tax purposes on the sale, exchange or
other disposition of common shares in the same manner as on the
sale, exchange or other disposition of any other shares held as
capital assets. If the holding period for these common shares
exceeds one year, any gain will be subject to tax at a current
maximum marginal tax rate of 15% for individuals and certain
other non-corporate shareholders and 35% for corporations.
Moreover, gain, if any, generally will be U.S. source gain
and will generally constitute "passive income" for
foreign tax credit limitation purposes.
Code section 1248 provides that if a U.S. Person sells
or exchanges stock in a foreign corporation and such person
owned, directly, indirectly through certain foreign entities or
constructively, 10% or more of the voting power of the
corporation at any time during the five-year period ending on
the date of disposition when the corporation was a CFC, any gain
from the sale or exchange of the shares will be treated as a
dividend to the extent of the CFC's earnings and profits
(determined under U.S. federal income tax principles)
during the period that the shareholder held the shares and while
the corporation was a CFC (with certain adjustments). We believe
that, because of the anticipated dispersion of our share
ownership, provisions in our organizational documents that limit
voting power and other factors, no U.S. shareholder of RAM
Holdings should be treated as owning (directly, indirectly
through foreign entities or constructively) 10% or more of the
total voting power of RAM Holdings; to the extent this is the
case, the application of Code section 1248 under the
regular CFC rules should not apply to dispositions of our common
shares. It is possible, however, that the IRS could challenge
the effectiveness of these provisions and that a court could
sustain such a challenge. A 10% U.S. Shareholder may in
certain circumstances be required to report a disposition of
shares of a CFC by attaching IRS Form 5471 to the
U.S. federal income tax or information return that it would
normally file for the taxable year in which the disposition
occurs. In the event this is determined necessary, RAM Holdings
will provide a completed IRS Form 5471 or the relevant
information necessary to complete the Form.
Code section 1248 also applies to the sale or exchange of
shares in a foreign corporation if the foreign corporation would
be treated as a CFC for RPII purposes regardless of whether the
shareholder is a 10% U.S. Shareholder or whether the 20%
Gross Income Exception is met or the 20% Ownership Exception
applies. Existing proposed regulations do not address whether
Code section 1248 would apply if a foreign corporation is
not a CFC but the foreign corporation has a subsidiary that is a
CFC and that would be taxed as an insurance company if it were a
domestic corporation. We believe, however, that this application
of Code section 1248 under the RPII rules should not apply
to dispositions of common shares because RAM Holdings will not
be directly engaged in the insurance business. We cannot be
certain, however, that the IRS will not interpret the proposed
regulations in a contrary manner or that the U.S. Treasury
Department will not amend the proposed regulations to provide
that these rules will apply to dispositions of common shares.
Prospective investors should consult their tax advisors
regarding the effects of these rules on a disposition of common
shares.
Passive Foreign Investment Companies.
In general, a
foreign corporation will be a PFIC during a given year if
(i) 75% or more of its gross income constitutes
"passive income", or the 75% test or (ii) 50% or
more of its assets produce (or are held for the production of)
passive income, or the 50% test.
If RAM Holdings were characterized as a PFIC during a given
year, each U.S. Person holding our shares would be subject
to a penalty tax at the time of the sale at a gain of, or
receipt of an "excess distribution" with respect to,
their shares, unless such person is a 10% U.S. Shareholder
or made a "qualified electing fund election," or a
"mark-to
-market
election." It is uncertain that RAM Holdings would be able
to provide its shareholders with the information necessary for a
U.S. Person to make a qualified electing fund election. A
U.S. Person may elect mark-to-market treatment for its shares,
provided
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the shares, for purposes of the rules, constitute
"marketable stock" as defined in Treasury Regulations.
In general, a U.S. Person electing the mark-to-market regime
would compute gain or loss at the end of each taxable year as if
the shares had been sold at fair market value or on an actual
sale, which gain would generally be ordinary income. A
market-to-market election is generally irrevocable. In addition,
if RAM Holdings were considered a PFIC, upon the death of any
U.S. individual owning shares, such individual's heirs
or estate would not be entitled to a
"step-up"
in
the basis of their shares that might otherwise be available
under U.S. federal income tax laws. In general, a
shareholder receives an "excess distribution" if the
amount of the distribution is more than 125% of the average
distribution with respect to the shares during the three
preceding taxable years (or shorter period during which the
taxpayer held the shares). In general, the penalty tax is
equivalent to the generally applicable U.S. federal income
tax and an interest charge on taxes that are deemed due during
the period the shareholder owned the shares, computed by
assuming that the excess distribution or gain (in the case of a
sale) with respect to the shares was taken in equal portion at
the highest applicable tax rate on ordinary income throughout
the shareholder's period of ownership. In addition, a
distribution paid by a PFIC to U.S. Shareholders that is
characterized as a dividend and is not characterized as an
excess distribution would not be eligible for a reduced rate of
tax as qualified dividend income.
For the above purposes, passive income generally includes
interest, dividends, annuities and other investment income. The
PFIC rules provide that income "derived in the active
conduct of an insurance business by a corporation which is
predominantly engaged in an insurance business ... is not
treated as passive income." The PFIC provisions also
contain a look-through rule under which a foreign corporation
shall be treated as if it "received directly its
proportionate share of the income ..." and as if it
"held its proportionate share of the assets ..." of
any other corporation in which it owns at least 25% of the value
of the stock. Under the look-through rule, RAM Holdings should
be deemed to own its proportionate share of the assets and to
have received its proportionate share of the income of RAM Re
for purposes of the 75% test and the 50% test. We expect that
the income and assets of RAM Holdings other than the income
generated by RAM Re and the assets held by RAM Re will be
de
minimis
in each year of operations with respect to the
overall income and assets of RAM Holdings and RAM Re.
The insurance income exception is intended to ensure that income
derived by a bona fide insurance company is not treated as
passive income, except to the extent such income is attributable
to financial reserves in excess of the reasonable needs of the
insurance business. We expect, for purposes of the PFIC rules,
that RAM Re will be predominantly engaged in the active conduct
of an insurance business and is unlikely to have financial
reserves in excess of the reasonable needs of its insurance
business in each year of operations. Accordingly, the Insurance
Company Exception should apply to RAM Re, and none of the income
or assets of RAM Re should be treated as passive. As a result,
based upon the look-through rule, we believe that RAM Holdings
was not and should not be treated as a PFIC. We cannot be
certain, however, as there are currently no regulations
regarding the application of the PFIC provisions to an insurance
company and new regulations or pronouncements interpreting or
clarifying these rules may be forthcoming, that the IRS will not
challenge this position and that a court will not sustain such
challenge. Prospective investors should consult their tax
advisor as to the effects of the PFIC rules.
Foreign Tax Credit.
Because it is anticipated that
U.S. Persons will own a majority of our shares, only a
portion of the current income inclusions, if any, under the CFC,
RPII and PFIC rules and of dividends paid by us (including any
gain from the sale of common shares that is treated as a
dividend under section 1248 of the Code) will be treated as
foreign source income for purposes of computing a
shareholder's U.S. foreign tax credit limitations. We
will consider providing shareholders with information regarding
the portion of such amounts constituting foreign source income
to the extent such information is reasonably available. It is
also likely that substantially all of the subpart F income, RPII
and dividends that are foreign source income will constitute
either "passive" or "financial services"
income for foreign tax credit limitation purposes (and for
taxable years beginning after December 31, 2006 will
constitute either "passive" or "general"
income). Thus, it may not be possible for most shareholders to
utilize excess foreign tax credits to reduce U.S. tax on
such income.
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Information Reporting and Backup Withholding on Distributions
and Disposition Proceeds.
Information returns may be filed
with the IRS in connection with distributions on the common
shares and the proceeds from a sale or other disposition of the
common shares unless the holder of the common shares establishes
an exemption from the information reporting rules. A holder of
common shares that does not establish such an exemption may be
subject to U.S. backup withholding tax on these payments if
the holder is not a corporation or
non-U.S.
Person or
fails to provide its taxpayer identification number or otherwise
comply with the backup withholding rules. The amount of any
backup withholding from a payment to a U.S. Person will be
allowed as a credit against the U.S. Person's
U.S. federal income tax liability and may entitle the
U.S. Person to a refund, provided that the required
information is furnished to the IRS.
Proposed U.S. Tax Legislation.
Legislation has been
introduced in the U.S. Congress intended to eliminate
certain perceived tax advantages of companies (including
insurance companies) that have legal domiciles outside the
United States but have certain U.S. connections. While
there are no currently pending legislative proposals which, if
enacted, would have a material adverse effect on us or our
shareholders, it is possible that broader-based legislative
proposals could emerge in the future that could have an adverse
impact on us or our shareholders.
Additionally, the U.S. federal income tax laws and
interpretations regarding whether a company is engaged in a
trade or business within the United States or is a PFIC, or
whether U.S. Persons would be required to include in their
gross income the subpart F income or the RPII of a CFC, are
subject to change, possibly on a retroactive basis. There are
currently no regulations regarding the application of the PFIC
rules to insurance companies and the regulations regarding RPII
are still in proposed form. New regulations or pronouncements
interpreting or clarifying such rules may be forthcoming. We
cannot be certain if, when or in what form such regulations or
pronouncements may be provided and whether such guidance will
have a retroactive effect.
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ERISA CONSIDERATIONS
The following is a summary of certain considerations associated
with an investment in us by employee benefit plans that are
subject to Title I of the Employee Retirement Income
Security Act of 1974, as amended, or ERISA, or Section 4975
of the Code (and such plans are referred to as ERISA Plans), and
entities whose underlying assets are considered to include
"plan assets" of such plans within the meaning of U.S.
Department of Labor Regulation 29 C.F.R. 2510.101 et seq.,
which we refer to as the Plan Asset Regulations. (which we refer
to, together with ERISA Plans, as the Plans).
THE FOLLOWING IS MERELY A SUMMARY, HOWEVER, AND SHOULD NOT BE
CONSTRUED AS LEGAL ADVICE OR AS COMPLETE IN ALL RELEVANT
RESPECTS. ALL INVESTORS ARE URGED TO CONSULT THEIR LEGAL
ADVISORS BEFORE INVESTING ASSETS OF A PLAN IN OUR COMPANY AND TO
MAKE THEIR OWN INDEPENDENT DECISIONS.
A fiduciary considering investing the assets of an ERISA Plan in
us should consult its legal advisor about ERISA, fiduciary and
other legal considerations before making such an investment.
Specifically, before investing in our common shares, any
fiduciary should, after considering the ERISA Plan's
particular circumstances, determine whether the investment is
appropriate under the fiduciary standards of ERISA or other
applicable law including standards with respect to prudence,
diversification and delegation of control and the prohibited
transaction provisions of ERISA and the Code.
Plan Assets Regulations
ERISA and the Code do not define "plan assets."
However, the Plan Asset Regulations generally provide that when
a Plan acquires an equity interest in an entity that is neither
a "publicly-offered security" nor a security issued by
an investment company registered under the Investment Company
Act of 1940, as amended, which we refer to as the Act, the
Plan's assets include both the equity interest in the
entity and an undivided interest in each of the underlying
assets of the entity, unless it is established either that
equity participation in the entity by "benefit plan
investors" is not "significant" or that the
entity is an "operating company," in each case as
defined in the Plan Asset Regulations.
We anticipate that our common shares will meet the criteria for
"publicly-offered securities" under the Plan Asset
Regulations and, accordingly, our underlying assets should not
be considered plan assets of any Plan that purchases our common
shares.
Prohibited Transactions
The purchase or holding of our common shares by or on behalf of
a Plan could result in a prohibited transaction.
Section 406 of ERISA prohibits a "party in
interest" and Section 4975 of the Code prohibits a
"disqualified person" with respect to a Plan from
engaging in some transactions, including loans or sales,
involving a Plan and its assets unless a statutory or
administrative exemption applies to the transaction. Therefore,
if you are a fiduciary of an ERISA Plan or a person making
investment decisions for another Plan, you should consider
whether an investment in us might constitute or give rise to a
non-exempt prohibited transaction under ERISA and/or the Code.
Parties in interest or disqualified persons that participate in
a prohibited transaction may be subject to a penalty imposed
under ERISA and/or an excise tax imposed pursuant to
Section 4975 of the Code, unless a statutory or
administrative exemption is available.
Governmental plans (as defined in Section 3(32) of ERISA),
church plans (as defined in Section 3(33) of ERISA), if no
election has been made under Section 410(d) of the Code,
and foreign plans (as defined in Section 4(b)(4) of ERISA),
while generally not subject to the fiduciary responsibility
provisions of ERISA or the provisions of Section 4975 of
the Code, may nevertheless be subject to provisions of any
federal, state, local, non-U.S. or other laws or regulations
that are similar to such provisions of ERISA or the Code
(collectively, Similar Laws). Assets of such plans may be
invested in
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our common shares without regard to the ERISA considerations
described herein, subject to the provisions of other applicable
Similar Laws.
The sale of our common shares to a Plan investor is in no
respect a representation by us that such an investment meets all
relevant legal requirements with respect to investments by Plans
generally or any particular Plan, or that such an investment is
appropriate for Plans generally or any particular Plan.
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DESCRIPTION OF SHARE CAPITAL
The following summary of our share capital is qualified by the
provisions of our memorandum of association, our amended and
restated bye-laws and the amended and restated shareholders
agreement among substantially all of our existing shareholders,
copies of which will be filed as exhibits to the registration
statement of which this prospectus is a part. Our amended and
restated bye-laws and the amended and restated shareholders
agreement will each become effective immediately prior to the
completion of this offering. Except as otherwise specifically
stated, all references to "bye-laws" are intended to
refer to our amended and restated bye-laws and all references to
"shareholders agreement" are intended to refer to our
amended and restated shareholders agreement, both as will be in
effect upon the consummation of this offering. In this section,
"we," "us" and "our" refers to RAM
Holdings and not to RAM Re.
General
Immediately prior to the completion of this offering, we will
have authorized share capital of
$          comprised
of                      shares
of par value
$           per
share, of
which           are
common shares,
and           are
preference shares. Immediately after completion of this
offering,           common
shares and no preference shares will be issued and outstanding.
Common Shares
Except as described below, our common shares will have no
preemptive rights or other rights to subscribe for additional
common shares, no rights of redemption, conversion or exchange
and no sinking fund rights. In the event of liquidation,
dissolution or winding-up, the holders of our common shares are
entitled to share equally and ratably in our assets, if any,
remaining after the payment of all our debts and liabilities and
the liquidation preference of any outstanding preferred shares.
All of the common shares being sold in this offering will be
fully paid and non-assessable. Holders of our common shares are
entitled to receive such dividends as may be lawfully declared
from time to time by our board of directors.
Preference Shares
As of the date of this prospectus, no preference shares have
been issued. Subject to certain limitations contained in our
bye-laws and any limitations prescribed by applicable law, our
board of directors is authorized to issue preference shares in
one or more series and to fix the designation, powers,
preferences and rights and the qualifications, limitations or
restrictions of such shares, including but not limited to
dividend rates, conversion rights, voting rights, terms of
redemption/repurchase (including sinking fund provisions),
redemption/repurchase prices and liquidation preferences, and
the number of shares constituting and the designation of any
such series, without further vote or action by our shareholders.
Voting Rights
In general, and except as provided below, shareholders have one
vote for each common share held by them and are entitled to vote
at all meetings of shareholders. However, if, and for so long
as, the shares of a shareholder are treated as "controlled
shares" of any U.S. Person other than PMI and such
controlled shares constitute more than 9.9% of the votes
conferred by our issued shares, the voting rights with respect
to the controlled shares owned by such U.S. Person shall be
limited, in the aggregate, to a voting power of less than 9.9%,
under a procedure specified in our bye-laws. The procedure is
applied repeatedly until the voting power of all such
U.S. Persons (that is, 9.9% U.S. Shareholders) has
been reduced to less than 9.9%. Further, except as set forth
below, our board of directors may deviate from the foregoing
principles when it deems it appropriate to do so (i) to
avoid the existence of any 9.9% U.S. Shareholders, or 24.5%
U.S. Shareholders or (ii) to avoid a non-de minimis
adverse tax, legal or regulatory consequence to us, any direct
or indirect holder of our shares or its affiliates.
"Controlled shares" includes, among other things, all
shares of the Company that a person is deemed to own directly,
indirectly or constructively (within the meaning of sections 957
and 958 of the Code). In addition, at any time that the
controlled
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shares of PMI constitute (i) more than 9.9% of the voting
power conferred by our issued shares and (ii) 24.5% or more
of either the voting power or value of our issued shares, the
voting rights with respect to the controlled shares owned by PMI
will be limited to a voting power of 9.9%.
For example, the voting power of shares owned by an investor may
be reduced or in certain cases eliminated, if, pursuant to
certain constructive ownership rules, shares owned or deemed to
be owned by the investor are attributed to another investor or
shares owned or deemed owned by another investor are attributed
to the investor or the investor is invested in an entity in
which another investor invests.
In the event the above voting limitations must be applied in
situations as described above, the voting limitation shall apply
to PMI only after the limitation has been applied to all other
shareholders whose votes are subject to reduction and the voting
power held by PMI shall not be reduced to below 9.9% by
operation of these provisions.
Under these provisions, certain shareholders may have their
voting rights limited to less than one vote per share, while
other shareholders may have voting rights in excess of one vote
per share. Moreover, these provisions could have the effect of
reducing the votes of certain shareholders who would not
otherwise be subject to the 9.9% limitation by virtue of their
direct ownership of our shares. Our bye-laws provide that our
board of directors will endeavor to inform shareholders of their
voting interests prior to any vote to be taken by them.
Our board is authorized to request that any direct or indirect
holder of shares provide information as the board may reasonably
request for the purpose of determining whether any holder's
voting rights are to be adjusted. If any such holder fails to
respond to this request or submits incomplete or inaccurate
information, our board may determine that such holders'
shares shall carry no voting rights until such time as our board
determines otherwise. All information provided by the
shareholder will be treated by us as confidential information
and shall be used by us solely for the purpose of establishing
whether any 9.9% U.S. Shareholder exists (except as
otherwise required by applicable law or regulation).
With respect to the election of directors, shareholders have the
right to cast votes in the election or appointment of directors
on a cumulative basis, meaning they may cast the number of votes
for directors equal to the product of the number of shares owned
by the shareholder and the number of directors to be elected.
Restrictions on Transfer of Common Shares
Each transfer of common shares must comply with current BMA
rules and regulations or have specific permission from the BMA.
Our board of directors may decline to register a transfer of any
common shares under certain circumstances, including if it
appears to the board, after taking into account the effect of
any voting power adjustments under our bye-laws, that a non-de
minimis adverse tax, regulatory or legal consequence to us, any
direct or indirect holder of our shares or its affiliates may
occur as a result of such transfer. Transfers must be made by
instrument (not in electronic or other form) unless otherwise
permitted by the Bermuda Companies Act.
Acquisition of Common Shares by Us
Under our bye-laws and subject to Bermuda law, we may purchase
our own shares, provided, however, that such purchase may not be
made if the board of directors determines that it would result
in a non-de minimis adverse tax, legal or regulatory consequence
to us, any direct or indirect holder of our shares or its
affiliates.
Issuance of Shares
Subject to our bye-laws and Bermuda law, our board of directors
has the power to issue any of our unissued shares as it
determines, including the issuance of any shares or class of
shares with preferred, deferred or other special rights,
provided, however, we may not issue such shares if the board of
directors
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determines such issuance may result in a non-de minimis adverse
tax, legal or regulatory consequence to us, any direct or
indirect holder of shares or its affiliates.
Bye-laws
In addition to the provisions of our bye-laws described above
under "— Voting Rights," the following
provisions are a summary of some of the other important
provisions of our bye-laws.
Our Board of Directors and Corporate Action.
Subject to
our bye-laws and Bermuda law, the directors shall be elected or
appointed by holders of common shares. Our bye-laws provide that
our board of directors shall consist of between 11 and 15
members, as the board of directors may determine. The current
board of directors consists of 11 persons. Shareholders may only
remove a director for cause at any general meeting and by a vote
of a majority of the voting power of all outstanding voting
shares (after giving effect to any voting power adjustments
under the bye-laws), provided that the notice of any such
meeting convened for the purpose of removing a director shall
contain a statement of the intention to do so and shall be
provided to that director at least two weeks before such
meeting. A vacancy created by removal of a director by the
shareholders may be filled by a vote of the majority of votes
cast (after giving effect to any voting power adjustments under
the bye-laws) by the shareholders at the meeting where the
vacancy is created. Subject to the right of shareholders
mentioned above, any vacancies on the board of directors can be
filled by the vote of a majority of the members of the board of
directors then in office if the vacancy occurs as a result of
death, disability, disqualification, or resignation of a
director or any other proper cause, including removal, provided
that the vacancy is filled within 28 days of its occurrence.
Generally, the affirmative votes of a majority of the votes cast
at any meeting at which a quorum is present is required to
authorize a resolution put to vote at a meeting of the board of
directors. Corporate action may also be taken by a unanimous
written resolution of the board of directors without a meeting,
provided, among other things, that the board has not determined
that the use of a resolution in writing would have a non-de
minimis adverse tax, legal or regulatory consequence to us, any
direct or indirect holder of our shares or its affiliates. The
quorum necessary for the transaction of business at a meeting of
the board of directors shall be fixed by the board of directors
and unless so fixed shall be a simple majority of directors then
in office present in person or represented by a duly authorized
representative.
Our bye-laws provide that our board is authorized to appoint a
chairman of the board of directors. In the event that the voting
rights of controlled shares owned by PMI are limited to a voting
power of 9.9% as described above under "— Voting
Rights," then our bye-laws provide that PMI may appoint the
chairman of the board from among the directors then serving on
the board of directors. However, PMI may only appoint a director
as chairman if PMI voted at least half of the voting power of
common shares it owned at the time of the last general meeting
of our shareholders for the election of directors in favor of
the director it appoints.
Voting of Subsidiary Shares.
Our bye-laws provide that if
we are required or entitled to vote at a general meeting of our
direct
non-U.S.
subsidiaries,
our board of directors shall refer the subject matter of the
vote to our shareholders and seek direction from our
shareholders as to how we should vote on the resolution proposed
by such direct
non-U.S.
subsidiary.
Substantially similar provisions are or will be contained in the
bye-laws of RAM Re and the organizational documents of any other
of our
non-U.S.
subsidiaries
that we may form in the future.
Shareholder Action.
At the commencement of any general
meeting, two or more persons present in person and representing,
in person or by proxy, more than 50% of the aggregate voting
power of our shares shall constitute a quorum for the
transaction of business. In general, anything that may be done
by resolution of our shareholders in a general meeting may,
without a meeting, be taken by a resolution in writing signed by
all of the shareholders entitled to attend such meeting and vote
on the resolution; provided that, among other things, the board
has not determined that the use of a resolution in writing would
have a non-de minimis adverse tax, legal or regulatory
consequence to us, any direct or indirect holder of our shares
or its affiliates. In general, any questions proposed for the
consideration of the shareholders at any general meeting shall
be decided by the affirmative votes of a majority of the votes
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cast in accordance with the bye-laws. The following actions
shall be approved by the affirmative vote of at least sixty-six
percent (66%) of the voting power of shares entitled to vote at
a meeting of shareholders (in each case, after taking into
account voting power adjustments under our bye-laws): certain
business combination transactions and amendments to the bye-laws
affecting the provisions on voting power adjustments, election
of directors, terms of office of directors, removal of
directors, business combinations and amendment of the bye-laws.
As noted above, removal of directors from our board requires the
vote of a majority of outstanding voting shares.
Advance Notice of Certain Actions.
Our bye-laws provide
that if a shareholder desires to submit a proposal for
consideration at an annual general meeting or special general
meeting, written notice of such shareholder's intent to
make such a proposal must contain the information required by
the bye-laws and must be given and received by us not later than
(1) with respect to an annual general meeting,
120 days prior to the anniversary date of the immediately
preceding annual general meeting and (2) with respect to a
special general meeting, the close of business on the tenth day
following the date on which notice of such meeting is first sent
or given to shareholders. If a shareholder desires to nominate
persons for election as directors at an annual general meeting
or special general meeting, written notice of such
shareholder's intent to make such nomination, and must be
given and received by us not later than (1) with respect to
an annual general meeting, 90 days prior to the anniversary
date of the immediately preceding annual general meeting and
(2) with respect to a special general meeting, the close of
business on the tenth day prior to the meeting at which
directors are to be elected.
Amendment.
The bye-laws may only be amended by a
resolution adopted by the board of directors and by resolution
of the shareholders. See "— Shareholder
Action" for a discussion of the vote required for
shareholders to amend the bye-laws. In addition, as long as PMI
remains a shareholder, the following changes to the bye-laws may
only be made with the consent of PMI: (1) amending the
voting power adjustments if a change would adversely affect PMI,
(2) reducing the size of the board of directors,
(3) amending PMI's right to appoint the chairman of
the board of directors, (4) permitting removal of a
director for other than cause, (5) amending the cumulative
voting provisions and (6) amending the amendment provision.
Anti-Takeover Provisions Concerning Change of Control
Some of the provisions described above could delay or prevent a
change of control that our shareholders might consider
favorable. Even in the absence of an attempt to effect a change
in management or a takeover attempt, these provisions may
adversely affect the prevailing market price of our common
shares if they are viewed as discouraging changes in management
and takeover attempts in the future. For example, our bye-laws
contain the following provisions that could have such an effect:
•
shareholders are required to provide us with advance notice of
    shareholder nominations and proposals to be brought before any
    general meeting of shareholders, which could discourage or deter
    a third party from conducting a solicitation of proxies to elect
    its own slate of directors or to introduce a proposal;
•
shareholders have limited rights to remove directors;
•
our board of directors may issue preference shares, without
    shareholder approval, with voting and conversion rights that
    could adversely affect the voting power or other rights of
    holders of our common shares;
•
any shareholder owning, directly, indirectly or, in the case of
    any U.S. Person by attribution, more than 9.9%, or in
    certain cases 24.5%, of our common shares will have the voting
    rights attached to such common shares reduced so that it may not
    exercise more than 9.9% of the total voting rights; and
•
our directors may, in their discretion, decline to record the
    transfer of any common shares on our share register, if the
    directors have made a determination that such transfer may
    result in any non-
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de-minimis tax, legal or regulatory consequences to us, our
    subsidiaries or our shareholders or if they are not satisfied
    that all required regulation approvals for such transfer have
    been obtained.
Differences in Corporate Law
You should be aware that the Bermuda Companies Act, which
applies to us, differs in certain material respects from laws
generally applicable to U.S. corporations and their
shareholders. In order to highlight these differences, set forth
below is a summary of certain significant provisions of the
Bermuda Companies Act applicable to us (including modifications
adopted pursuant to our bye-laws) which differ in certain
respects from provisions of the corporate law of the State of
Delaware. Because the following statements are summaries, they
do not address all aspects of Bermuda law that may be relevant
to us and our shareholders.
Duties of Directors.
Under Bermuda common law, members of
a board of directors owe a fiduciary duty to the company to act
in good faith in their dealings with or on behalf of the
company, and to exercise their powers and fulfill the duties of
their office honestly. This duty has the following essential
elements: (1) a duty to act in good faith in the best
interests of the company; (2) a duty not to make a personal
profit from opportunities that arise from the office of
director; (3) a duty to avoid conflicts of interest; and
(4) a duty to exercise powers for the purpose for which
such powers were intended. The Bermuda Companies Act also
imposes a duty on directors and officers of a Bermuda company,
to act honestly and in good faith, with a view to the best
interests of the company, and to exercise the care, diligence
and skill that a reasonably prudent person would exercise in
comparable circumstances. In addition, the Bermuda Companies Act
imposes various duties on officers of a company with respect to
certain matters of management and administration of the company.
The Bermuda Companies Act provides that in any proceedings for
negligence, default, breach of duty or breach of trust against
any officer, if it appears to a court that such officer is or
may be liable in respect of the negligence, default, breach of
duty or breach of trust, but that he has acted honestly and
reasonably, and that, having regard to all the circumstances of
the case, including those connected with his appointment, he
ought fairly to be excused for the negligence, default, breach
of duty or breach of trust, that court may relieve him, either
wholly or partly, from any liability on such terms as the court
may think fit. This provision has been interpreted to apply only
to actions brought by or on behalf of the company against such
officers.
Under Delaware law, the business and affairs of a corporation
are managed by or under the direction of its board of directors.
In exercising their powers, directors are charged with a
fiduciary duty of care to protect the interests of the
corporation and a fiduciary duty of loyalty to act in the best
interests of its shareholders. The duty of care requires that
directors act in an informed and deliberate manner, and inform
themselves, prior to making a business decision, of all relevant
material information reasonably available to them. The duty of
care also requires that directors exercise care in overseeing
and investigating the conduct of corporate employees. The duty
of loyalty may be summarized as the duty to act in good faith,
not out of self-interest, and in a manner which the director
reasonably believes to be in the best interests of the
shareholders. A party challenging the propriety of a decision of
a board of directors bears the burden of rebutting the
applicability of the presumptions afforded to directors by the
"business judgment rule." If the presumption is not
rebutted, the business judgment rule attaches to protect the
directors and their decisions. Where, however, the presumption
is rebutted, the directors bear the burden of demonstrating the
fairness of the relevant transaction. Notwithstanding the
foregoing, Delaware courts subject directors' conduct to
enhanced scrutiny in respect of defensive actions taken in
response to a threat to corporate control and approval of a
transaction resulting in a sale of control of the corporation.
Interested Directors.
Under Bermuda law and our bye-laws,
a transaction entered into by us, in which a director has an
interest, will not be voidable by us, and such director will not
be liable to us for any profit realized pursuant to such
transaction, provided the nature of the interest is disclosed at
the first opportunity at a meeting of directors, or in writing
to the directors. In addition, our bye-laws allow a director to
be taken into account in determining whether a quorum is present
and to vote on a transaction
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in which the director has an interest following a declaration of
the interest pursuant to the Bermuda Companies Act, provided
that the director is not disqualified from doing so by the
chairman of the meeting. Under Delaware law, such transaction
would not be voidable if (i) the material facts with
respect to such interested director's relationship or
interests are disclosed or are known to the board of directors,
and the board of directors in good faith authorizes the
transaction by the affirmative vote of a majority of the
disinterested directors, (ii) such material facts are
disclosed or are known to the shareholders entitled to vote on
such transaction, and the transaction is specifically approved
in good faith by vote of the majority of shares entitled to vote
thereon, or (iii) the transaction is fair to the
corporation as of the time it is authorized, approved or
ratified. Under Delaware law, such interested director could be
held liable for a transaction in which such director derived an
improper personal benefit.
Dividends.
Bermuda law does not permit payment of
dividends or distributions of contributed surplus by a company
if there are reasonable grounds for believing that the company,
after the payment is made, would be unable to pay its
liabilities as they become due, or the realizable value of the
company's assets would be less, as a result of the payment,
than the aggregate of its liabilities and its issued share
capital and share premium accounts. The excess of the
consideration paid on issue of shares over the aggregate par
value of such shares must (except in certain limited
circumstances) be credited to a share premium account. Share
premium may be distributed in certain limited circumstances, for
example to pay up unissued shares which may be distributed to
shareholders in proportion to their holdings, but is otherwise
subject to limitation. In addition, RAM Re's ability to pay
dividends is subject to Bermuda insurance laws and regulatory
constraints. See "Dividend Policy" and
"Regulation." Under Delaware law, subject to any
restrictions contained in the company's certificate of
incorporation, a company may pay dividends out of surplus or, if
there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and for the preceding fiscal
year. Delaware law also provides that dividends may not be paid
out of net profits at any time when capital is less than the
capital represented by the outstanding stock of all classes
having a preference upon the distribution of assets.
Amalgamations, Mergers and Similar Arrangements.
We may
acquire the business of another Bermuda exempted company or a
company incorporated outside Bermuda when conducting such
business would benefit us and would be conducive to attaining
our objectives contained within our memorandum of association.
We may, with the approval of at least 66% of the outstanding
voting shares at a general meeting of our shareholders at which
a quorum is present, amalgamate with another Bermuda company or
with a body incorporated outside Bermuda; provided that if our
board of directors has approved the amalgamation, then approval
of a majority of votes cast by our shareholders at a general
meeting at which a quorum is present will authorize the
amalgamation. In the case of an amalgamation, a shareholder may
apply to a Bermuda court for a proper valuation of such
shareholder's shares if such shareholder is not satisfied
that fair market value has been paid for such shares. The court
ordinarily would not disapprove the transaction on that ground
absent evidence of fraud or bad faith. Under Delaware law, with
certain exceptions, a merger, consolidation or sale of all or
substantially all the assets of a corporation must be approved
by the board of directors and a majority of the outstanding
shares entitled to vote thereon. Under Delaware law, a
shareholder of a corporation participating in certain major
corporate transactions may, under certain circumstances, be
entitled to appraisal rights pursuant to which such shareholder
may receive payment in the amount of the fair market value of
the shares held by such shareholder (as determined by a court)
in lieu of the consideration such shareholder would otherwise
receive in the transaction.
Takeovers.
Bermuda law provides that where an offer is
made for shares of a company and, within four months of the
offer, the holders of not less than 90% of the shares which are
the subject of the offer accept, the offeror may by notice
require the non-tendering shareholders to transfer their shares
on the terms of the offer. Dissenting shareholders may apply to
the court within one month of the notice objecting to the
transfer. The burden is on the dissenting shareholders to show
that the court should exercise its discretion to enjoin the
required transfer, which the court will be unlikely to do unless
there is evidence of fraud or bad faith or collusion between the
offeror and the holders of the shares who have accepted the
offer as a means of unfairly forcing out minority shareholders.
Delaware law provides that a parent corporation, by resolution
of its board of directors and without any shareholder vote, may
merge
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with any subsidiary of which it owns at least 90% of each class
of capital shares. Upon any such merger, dissenting shareholders
of the subsidiary would have appraisal rights.
Certain Transactions with Significant Shareholders.
As a
Bermuda company, we may enter into certain business transactions
with our significant shareholders, including asset sales, in
which a significant shareholder receives, or could receive, a
financial benefit that is greater than that received, or to be
received, by other shareholders with prior approval from our
board of directors but without obtaining prior approval from our
shareholders. If we were a Delaware corporation, we would need,
subject to certain exceptions, prior approval from the board of
directors and shareholders holding at least two-thirds of our
outstanding common stock not owned by such interested
shareholder to enter into a business combination (which, for
this purpose, includes asset sales of greater than 10% of our
assets that would otherwise be considered transactions in the
ordinary course of business) with an interested shareholder for
a period of three years from the time the person became an
interested shareholder, unless we opted out of the relevant
Delaware statute.
Shareholders' Suits.
The rights of shareholders
under Bermuda law are not as extensive as the rights of
shareholders under legislation or judicial precedent in many
U.S. jurisdictions. Class actions and derivative actions
are generally not available to shareholders under the laws of
Bermuda. However, the Bermuda courts ordinarily would be
expected to follow English case law precedent, which would
permit a shareholder to commence an action in our name to remedy
a wrong done to us where the act complained of is alleged to be
beyond our corporate power or is illegal or would result in the
violation of our memorandum of association or bye-laws.
Furthermore, consideration would be given by the court to acts
that are alleged to constitute a fraud against the minority
shareholders or where an act requires the approval of a greater
percentage of our shareholders than actually approved it. The
winning party in such an action generally would be able to
recover a portion of attorneys' fees incurred in connection
with such action. When the affairs of a company are being
conducted in a manner which is oppressive or prejudicial to the
interests of some part of the shareholders, one or more
shareholders may apply to the Supreme Court of Bermuda, which
may make such order as it sees fit, including an order
regulating the conduct of the company's affairs in the
future or ordering the purchase of the shares of any
shareholders by other shareholders or by the company. Class
actions and derivative actions generally are available to
shareholders under Delaware law for, among other things, breach
of fiduciary duty, corporate waste and actions not taken in
accordance with applicable law. In such actions, the court
generally has discretion to permit the winning party to recover
attorneys' fees incurred in connection with such action.
Indemnification of Directors and Officers.
Under Bermuda
law and our bye-laws, we may indemnify our directors, officers
or any other person appointed to a committee of the board of
directors (and their respective heirs, executors or
administrators) to the full extent permitted by law against all
actions, costs, charges, liabilities, loss, damage or expense
incurred or suffered by such person by reason of any act done,
concurred in or omitted in the conduct of our business or in the
discharge of his/her duties; provided that such indemnification
shall not extend to any matter involving any fraud or dishonesty
(as determined in a final judgment or decree not subject to
appeal) on the part of such director, officer or other person.
Under Delaware law, a corporation may indemnify a director or
officer of the corporation against expenses (including
attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred in defense of an
action, suit or proceeding by reason of such position if
(i) such director or officer acted in good faith and in a
manner he reasonably believed to be in or not opposed to the
best interests of the corporation and (ii) with respect to
any criminal action or proceeding, such director or officer had
no reasonable cause to believe his conduct was unlawful.
Inspection of Corporate Records.
Members of the general
public have the right to inspect our public documents available
at the office of the Registrar of Companies in Bermuda and our
registered office in Bermuda, which will include our memorandum
of association (including its objects and powers) and any
alteration to our memorandum of association and documents
relating to any increase or reduction of authorized capital. Our
shareholders have the additional right to inspect our bye-laws,
minutes of general meetings and financial statements, which must
be presented to the annual general meeting of shareholders. The
register of our shareholders is also open to inspection by
shareholders without charge, and to members
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of the public for a fee. We are required to maintain our share
register in Bermuda but may establish a branch register outside
of Bermuda. We are required to keep at our registered office a
register of our directors and officers which is open for
inspection by members of the public without charge. Bermuda law
does not, however, provide a general right for shareholders to
inspect or obtain copies of any other corporate records.
Delaware law permits any shareholder to inspect or obtain copies
of a corporation's shareholder list and its other books and
records for any purpose reasonably related to such person's
interest as a shareholder.
Shareholder Proposals.
Under Bermuda law, the Bermuda
Companies Act provides that shareholders may, as set forth below
and at their own expense (unless a company otherwise resolves),
require a company to give notice of any resolution that the
shareholders can properly propose at the next annual general
meeting and/or to circulate a statement prepared by the
requesting shareholders in respect of any matter referred to in
a proposed resolution or any business to be conducted at a
general meeting. The number of shareholders necessary for such a
requisition is either that number of shareholders representing
at least 5% of the total voting rights of all shareholders
having a right to vote at the meeting to which the requisition
relates or not less than 100 shareholders. Delaware law
does not include a provision restricting the manner in which
nominations for directors may be made by shareholders or the
manner in which business may be brought before a meeting.
Calling of Special Shareholders Meetings; Approval of
Corporate Matters by Written Consent.
Under our bye-laws, a
special general meeting may be called by our President or by our
Chairman or by the board of directors. Under Bermuda law, a
special meeting may also be called by the shareholders when
requisitioned by the holders of at least 10% of the paid up
voting share capital of RAM Holdings as provided by the Bermuda
Companies Act. Delaware law permits the board of directors or
any person who is authorized under a corporation's
certificate of incorporation or bye-laws to call a special
meeting of shareholders. Under Bermuda law, the Bermuda
Companies Act provides that shareholders may take action by
written consent with 100% shareholders consent required.
Delaware law permits shareholders to take action by the consent
in writing by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to
authorize or take such action at a meeting of shareholders at
which all shares entitled to vote thereon were present and voted.
Amendment of Memorandum of Association.
Bermuda law
provides that the memorandum of association of a company may be
amended by a resolution passed at a general meeting of
shareholders of which due notice has been given. An amendment to
the memorandum of association that alters a company's
business objects may require approval of the Bermuda Minister of
Finance, who may grant or withhold approval at his or her
discretion. Under Bermuda law, the holders of an aggregate of
not less than 20% in par value of a company's issued share
capital have the right to apply to the Bermuda courts for an
annulment of any amendment of the memorandum of association
adopted by shareholders at any general meeting, other than an
amendment which alters or reduces a company's share capital
as provided in the Bermuda Companies Act. Where such an
application is made, the amendment becomes effective only to the
extent that it is confirmed by the Bermuda court. An application
for an annulment of an amendment of the memorandum of
association must be made within 21 days after the date on
which the resolution altering the company's memorandum of
association is passed and may be made on behalf of persons
entitled to make the application by one or more of their
designees as such holders may appoint in writing for such
purpose. No application may be made by the shareholders voting
in favor of the amendment.
Under Delaware law, amendment of the certificate of
incorporation, which is the equivalent of a memorandum of
association, of a company must be made by a resolution of the
board of directors setting forth the amendment, declaring its
advisability, and either calling a special meeting of the
shareholders entitled to vote or directing that the amendment
proposed be considered at the next annual meeting of the
shareholders. Delaware law requires that, unless a different
percentage is provided for in the certificate of incorporation,
a majority of the outstanding shares entitled to vote thereon is
required to approve the amendment of the certificate of
incorporation at the shareholders meeting. If the amendment
would alter the number of authorized shares or otherwise
adversely affect the rights or preference of any class of a
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company's stock, Delaware law provides that the holders of
the outstanding shares of such affected class should be entitled
to vote as a class upon the proposed amendment, regardless of
whether such holders are entitled to vote by the certificate of
incorporation. However, the number of authorized shares of any
class may be increased or decreased, to the extent not falling
below the number of shares then outstanding, by the affirmative
vote of the holders of a majority of the stock entitled to vote,
if so provided in the company's certificate of
incorporation or any amendment that created such class or was
adopted prior to the issuance of such class or that was
authorized by the affirmative vote of the holders of a majority
of such class of stock.
Amendment of Bye-Laws.
Consistent with the Bermuda
Companies Act, RAM Holdings' bye-laws provide that the
bye-laws may only be rescinded, altered or amended, upon
approval by a resolution of our board of directors and by a
resolution of our shareholders. Under Delaware law, holders of a
majority of the voting power of a corporation and, if so
provided in the certificate of incorporation, the directors of
the corporation, have the power to adopt, amend and repeal the
bylaws of a corporation.
Staggered Board of Directors.
Under Bermuda law, the
Bermuda Companies Act does not contain statutory provisions
specifically mandating staggered board arrangements for a
Bermuda exempted company. Such provisions, however, may validly
be provided for in the bye-laws governing the affairs of such a
company. Delaware law permits corporations to have a staggered
board of directors.
Shareholders Agreement
All of the current holders of our common shares are parties to a
Shareholders Agreement. Investors who purchase our shares in
this offering will neither be subject to the requirements of the
Shareholders Agreement nor have any rights under the
Shareholders Agreement. Upon completion of this offering,
certain provisions of the Shareholders Agreement will terminate.
The following is a summary of some of the important provisions
of the Shareholders Agreement that will be in effect following
the closing of this offering:
Registration Rights.
Subject to obtaining all approvals
required by Bermuda governmental authorities and to compliance
with applicable provisions of the Bermuda Companies Act, the
parties to the Shareholders Agreement shall have the right to
require us to register all or part of our common shares held by
such shareholders pursuant to an underwritten public offering,
subject to the following limitations: (i) certain
requirements as to the size of the demand are met for all
shareholders who are party to the Shareholders Agreement except
PMI, (ii) in connection with the demand, the common shares
to be offered must have an aggregate offering price of at least
$25 million (based on the then-current market price, or
offering price if there has been no initial public offering of
our common shares), (iii) our right to delay the
registration for a period not to exceed 60 days if either
we are proceeding with an offering and in the judgment of the
managing underwriter for our offering, the requested
registration would have an adverse effect on our proposed
offering or we are in possession of material non-public
information that our board has determined would not be in our
best interests to disclose publicly, (iv) we will not be
required to effect a registration under the Shareholders
Agreement to the extent required by a managing underwriter in an
underwritten public offering, during a period not to exceed
180 days (in the case of this offering) or 90 days (in
the case of all other offerings), from the effectiveness of any
previous registration statement filed by us, (v) we are not
required to give effect to such rights more than four times,
subject to PMI having the right to demand one or two additional
registrations in certain circumstances, and (vi) such
rights will be subject to customary cutback provisions. Our
ability to not file or to delay the filing of a registration
will be, in certain circumstances, limited to twice per any
12-month
period.
We will pay all expenses (other than underwriting commissions
and discounts and transfer taxes relating to the shares to be
sold by the shareholders), including legal and accounting fees
and expenses, for the registration. Holders of our common shares
also have customary incidental registration rights. Other
customary registration rights provisions apply, including
indemnification and contribution provisions as permitted by
Bermuda law.
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If the size of a requested registration of our shares in
accordance with the rights described above exceeds the largest
number of securities which can be sold without having an adverse
effect on this offering (in the view of the managing
underwriter), the number of securities to be registered shall be
allocated on a pro rata basis (subject to adjustment).
Pursuant to the Shareholders Agreement, the shareholders will
also have certain incidental registration rights in the event
that we at any time propose to register any of our shares or any
options, warrants or other rights to acquire, or securities
convertible into or exchangeable for, our shares, subject to the
exceptions listed therein.
If the registration of shares pursuant to the rights described
shall be in connection with an underwritten public offering:
•
the shareholders whose shares are to be registered in any given
    offering have agreed that, subject to certain conditions and
    exceptions, they will not effect any sale or distribution of
    their remaining shares or any other of our equity securities or
    any security convertible into or exchangeable or exercisable for
    any of our equity securities for a period of ten days prior to
    the date of the effectiveness of the relevant registration
    statement until 180 days (in the case of this offering) or
    90 days (in the case of all other offerings) following such
    date; and
•
we have agreed, subject to certain conditions and exceptions,
    not to effect any public sale or distribution of any of our
    equity securities or of any other security convertible into or
    exchangeable or exercisable for any of our equity securities for
    a period of ten days prior to the date of the effectiveness of
    the relevant registration statement until 180 days (in the
    case of an initial public offering) or 90 days (in the case
    of all other offerings) following such date.
Pre-emptive Rights of PMI.
The Shareholders Agreement
provides that in the event we propose to issue new voting
shares, excluding shares issued in any stock split,
recapitalization or similar transaction where shares are issued
proportionately to all shareholders, we will provide PMI with
notice of the proposed issuance and PMI has the option to
purchase from us new voting shares up to the amount needed to
maintain its then-existing voting percentage ownership after
giving effect to the issuance. If we are issuing new voting
shares for cash, PMI shall pay the same price as we are
receiving in the issuance. If we are issuing new shares for
consideration other than cash, PMI shall pay the fair market
value for such shares. PMI's preemptive right will
terminate on the first business day following any one-year
period during which PMI's voting percentage ownership
remained equal to less than 18%.
This summary of the Shareholders Agreement does not purport to
be complete and is subject to, and qualified in its entirety by
reference to, all the provisions of the Shareholders Agreement.
Listing
We have applied to have our common shares approved for listing
on the New York Stock Exchange under the trading symbol
"          ."
Transfer Agent and Registrar
The transfer agent and registrar for the common shares will
be           ,
whose principal executive office is located
at           .
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering and
a                     for
1 subdivision of our common shares and the issuance of bonus
shares on
a                     for
1 basis described in "Reorganization Transactions," we
will have a total of common shares outstanding. All of
the                     common
shares sold in this offering (plus an
additional                     if
the over-allotment option is exercised in full, all of which are
currently outstanding and would be sold by the selling
shareholders) will be freely tradable without restriction or
further registration under the Securities Act by persons other
than our "affiliates." Under the Securities Act, an
"affiliates" of a company is a person that directly or
indirectly controls, is controlled by or is under common control
with that company.
The
remaining                     common
shares outstanding will be "restricted securities"
within the meaning of Rule 144 under the Securities Act and
may not be sold in the absence of registration under the
Securities Act unless an exemption from registration is
available, including the exemptions contained in Rule 144.
We, certain of our principal shareholders, all of our executive
officers and all members of our board of directors will agree
not to offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, lend or
otherwise transfer or dispose of, directly or indirectly, any
common shares, or any securities convertible into or exercisable
for any common shares or any right to acquire our common shares,
or enter into any swap or other arrangement that transfers to
another, in whole or in part, directly or indirectly, any of the
economic consequences of ownership of the common shares, whether
any such transaction is to be settled by delivery of common
shares or other securities, in cash or otherwise for a period of
180 days following the closing of this offering, subject to
certain exceptions.
The preceding sentence however does not apply to (i) the
common shares sold in this offering; (ii) any common shares
issued by us upon the exercise of an option outstanding on the
date of the Underwriting Agreement; (iii) certain transfers
by shareholders to affiliates or related persons; or
(iv) such issuances of options or grants of restricted
shares under our stock option and incentive plans as described
herein. The underwriters, at any time, and without notice, may
release all or any portion of the common shares subject to the
foregoing
lock-up
agreements.
In general, under Rule 144, a person (or persons whose
shares are aggregated), including any person who may be deemed
our affiliate, is entitled to sell within any three-month
period, a number of restricted securities that does not exceed
the greater of 1% of the then outstanding common shares and
restricted securities that does not exceed the greater of 1% of
the then outstanding common shares and the average weekly
trading volume in the
over-the
-counter market
during the four calendar weeks preceding each such sale,
provided that at least one year has elapsed since such shares
were acquired from us or any affiliate of ours and certain
manner of sale, notice requirements and requirements as to
availability of current public information about us are
satisfied. Any person who is deemed to be our affiliated must
comply with the provisions of Rule 144 (other than the
one-year holding period requirement) in order to sell common
shares which are not restricted securities (such as shares
acquired by affiliates either in this offering or through
purchases in the open market following this offering). In
addition, under Rule 144(k), a person who is not our
affiliate, and who has not been our affiliate at any time during
the 90 days preceding any sale, is entitled to sell such
shares without regard to the foregoing limitations, provided
that at least two years have elapsed since the shares were
acquired from us or any affiliate of ours.
We have granted options to purchase a total of  common
shares (after giving effect to
a                     for
1 subdivision of our common shares and the issuance of bonus
shares on
a                     for
1 basis issuance described in "Reorganization
Transactions") which remain outstanding.
Pursuant to the Shareholders Agreement, the parties thereto
shall have the right to require us to register all or part of
our common shares held by such shareholders pursuant to an
underwritten public offering, subject to the following
limitations: (i) certain requirements as to the size of the
demand are met for all shareholders who are party to the
Shareholders Agreement except PMI, (ii) in connection with
the
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demand, the common shares to be offered must have an aggregate
offering price of at least $25 million (based on the
then-current market price, or offering price if there has been
no initial public offering of our common shares), (iii) our
right to delay the registration for a period not to exceed
60 days if either we are proceeding with an offering and in
the judgment of the managing underwriter for our offering, the
requested registration would have an adverse effect on our
proposed offering or we are in possession of material non-public
information that our board has determined would not be in our
best interests to disclose publicly, (iv) to the extent
required by a managing underwriter in an underwritten public
offering, during a period not to exceed 180 days (in the
case of an initial public offering) or 90 days (in the case
of all other offerings), from the effectiveness of any previous
registration statement filed by us, (v) we are not required
to give effect to such rights more than four times, subject to
PMI having the right to demand one or two additional
registrations in certain circumstances, and (vi) such
rights will be subject to customary cutback provisions. Our
ability to not file or to delay the filing of a registration
will be, in certain circumstances, limited to twice per any
12-month
period. We are
generally obligated to bear the expenses of all such
registrations, other than underwriting commissions and discounts
and transfer taxes relating to the shares to be sold by the
shareholders.
Following the consummation of this offering, we intend to file
one or more registration statements on
Form
S-8
under the
Securities Act to register common shares issued or reserved for
issuance under the 2001 Stock Option Plan. Any such
Form
S-8
registration statement will automatically become effective upon
filing. Accordingly, shares registered under such registration
statement will be available for sale in the open market, unless
such shares are subject to vesting restrictions with us or the
lock-up
restrictions
described above.
No prediction can be made as to the effect, if any, future sales
of shares, or the availability of shares for future sales, will
have on the market price of our common shares prevailing from
time to time. The sale of substantial amounts of our common
shares in the public market, or the perception that such sales
could occur, could harm the prevailing market price of our
common shares.
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UNDERWRITING
We and the selling shareholders are offering the common shares
described in this prospectus through a number of underwriters.
Banc of America Securities LLC and Merrill Lynch, Pierce,
Fenner & Smith Incorporated are the representatives of
the underwriters. We and the selling shareholders have entered
into a firm commitment underwriting agreement with the
representatives. Subject to the terms and conditions of the
underwriting agreement, we and the selling shareholders have
agreed to sell to the underwriters, and each underwriter has
agreed to purchase, the number of common shares listed next to
its name in the following table:
Underwriter
Number of Shares
Banc of America Securities LLC
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Keefe, Bruyette & Woods
Total
The underwriting agreement is subject to a number of terms and
conditions and provides that the underwriters must buy all of
the shares if they buy any of them. The underwriters will sell
the shares to the public when and if the underwriters buy the
shares from us and the selling shareholders.
The underwriters initially will offer the shares to the public
at the price specified on the cover page of this prospectus. The
underwriters may allow a concession of not more than
$           per
share to selected dealers. The underwriters may also allow, and
those dealers may re-allow, a concession of not more than
$           per
share to some other dealers. If all the shares are not sold at
the public offering price, the underwriters may change the
public offering price and the other selling terms. The common
shares are offered subject to a number of conditions, including:
•
receipt and acceptance of the common shares by the
    underwriters; and
•
the underwriters' right to reject orders in whole or in
    part.
Over-Allotment Option.
The selling shareholders have
granted the underwriters an over-allotment option to buy up
to  additional common shares, at the same price per share
as they are paying for the shares shown in the table above.
These additional shares would cover sales of shares by the
underwriters which exceed the total number of shares shown in
the table above. The underwriters may exercise this option at
any time within 30 days after the date of this prospectus.
To the extent that the underwriters exercise this option, each
underwriter will purchase additional shares from the selling
shareholders in approximately the same proportion as it
purchased the shares shown in the table above. If purchased, the
additional shares will be sold by the underwriters on the same
terms as those on which the other shares are sold. The selling
shareholders will pay the underwriting discounts and commissions
associated with the exercise of this option.
Discount and Commissions.
The following table shows the
per share and total underwriting discounts and commissions to be
paid to the underwriters by us and by the selling shareholders.
These amounts are shown assuming no exercise and full exercise
of the underwriters' option to purchase additional shares.
We estimate that the expenses of the offering to be paid by us,
not including underwriting discounts and commissions, will be
approximately
$                    .
The underwriters have agreed to reimburse us for a portion of
these expenses.
Listing.
We intend to apply to have our common shares
listed on the New York Stock Exchange, subject to notice of
issuance, under the symbol
"          ".
In order to meet one of the requirements for
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listing our common shares on the New York Stock Exchange, the
underwriters have undertaken to sell 100 or more shares of our
common shares to a minimum of 2,000 beneficial holders.
Paid by the Selling
Paid by Us
Shareholders
No Exercise
Full Exercise
No Exercise
Full Exercise
Per Share
$
$
$
$
Total
$
$
$
$
Stabilization.
In connection with this offering, the
underwriters may engage in activities that stabilize, maintain
or otherwise affect the price of our common shares, including:
•
stabilizing transactions;
•
short sales;
•
syndicate covering transactions;
•
imposition of penalty bids; and
•
purchases to cover positions created by short sales.
Stabilizing transactions consist of bids or purchases made for
the purpose of preventing or retarding a decline in the market
price of our common shares while this offering is in progress.
Stabilizing transactions may include making short sales of our
common shares, which involve the sale by the underwriters of a
greater number of common shares than they are required to
purchase in this offering, and purchasing common shares from us
or on the open market to cover positions created by short sales.
Short sales may be "covered" shorts, which are short
positions in an amount not greater than the underwriters'
over-allotment option referred to above, or may be
"naked" shorts, which are short positions in excess of
that amount. Syndicate covering transactions involve purchases
of our common shares in the open market after the distribution
has been completed in order to cover syndicate short positions.
The underwriters may close out any covered short position either
by exercising their over-allotment option, in whole or in part,
or by purchasing shares in the open market. In making this
determination, the underwriters will consider, among other
things, the price of shares available for purchase in the open
market compared to the price at which the underwriters may
purchase shares through the over-allotment option.
A naked short position is more likely to be created if the
underwriters are concerned that there may be downward pressure
on the price of the common shares in the open market that could
adversely affect investors who purchased in this offering. To
the extent that the underwriters create a naked short position,
they will purchase shares in the open market to cover the
position.
The representatives also may impose a penalty bid on
underwriters and dealers participating in the offering. This
means that the representatives may reclaim from any syndicate
members or other dealers participating in the offering the
commissions on shares sold by them and purchased by the
representatives in stabilizing or short covering transactions.
In addition, one or more selling shareholders may have covered
short positions in respect of the shares being sold by them in
this offering which will become uncovered as a result of the
sale. After the distribution has been completed, they may close
out these positions through purchases of the common shares in
the open market.
These activities may have the effect of raising or maintaining
the market price of our common shares or preventing or retarding
a decline in the market price of our common shares. As a result
of these activities, the price of our common shares may be
higher than the price that otherwise might exist in the open
market. If the underwriters and the selling shareholders
commence the activities, they may
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discontinue them at any time. The underwriters and the selling
shareholders may carry out these transactions on the New York
Stock Exchange, in the
over-the
-counter market
or otherwise.
Discretionary Accounts.
The underwriters have informed us
that they do not expect to make sales to accounts over which
they exercise discretionary authority in excess of 5% of the
common shares being offered.
IPO Pricing.
Prior to this offering, there has been no
public market for our common shares. The initial public offering
price will be negotiated between us and the representatives of
the underwriters. Among the factors to be considered in these
negotiations are:
•
the history of, and prospects for, our company and the industry
    in which we compete;
•
our past and present financial performance;
•
an assessment of our management;
•
the present state of our development;
•
the prospects for our future earnings;
•
the prevailing conditions of the applicable United States
    securities market at the time of this offering;
•
market valuations of publicly traded companies that we and the
    representatives of the underwriters believe to be comparable to
    us; and
•
other factors deemed relevant.
The estimated initial public offering price range set forth on
the cover of this preliminary prospectus is subject to change as
a result of market conditions and other factors.
Qualified Independent Underwriter.
Because affiliates of
Banc of America Securities LLC, an underwriter in this offering
and a member of the National Association of Securities Dealers,
Inc., which we refer to as the NASD, may economically own in
excess of 10% of us, the NASD may view the participation of Banc
of America Securities LLC as an underwriter in this offering as
the public distribution of securities issued by a company with
which Banc of America Securities LLC has a conflict of interest
and/or affiliation, as those terms are defined in Rule 2720
of the Conduct Rules of the NASD. Accordingly, this offering
will be made in compliance with the applicable provisions of
Rule 2720 of the NASD Conduct Rules. Rule 2720
requires that the initial public offering price can be no higher
than that recommended by a "qualified independent
underwriter," as defined by the NASD, which has
participated in the preparation of the registration statement
and performed its usual standard of due diligence with respect
to that registration statement. Merrill Lynch, Pierce, Fenner
& Smith Incorporated has agreed to act as qualified
independent underwriter for the offering and to perform a due
diligence investigation and review and participate in the
preparation of the registration statement of which this
prospectus forms a part. We have agreed to indemnify Merrill
Lynch, Pierce, Fenner & Smith Incorporated against
liabilities incurred in connection with acting as a qualified
independent underwriter, including liabilities under the
Securities Act. Additionally, no member of the NASD
participating in the offering will execute a transaction in the
common shares in a discretionary account without the prior
specific written approval of the member's customer.
Lock-up
Agreements.
We, certain of our principal shareholders, all
of our executive officers and all members of our board of
directors will agree not to offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant
to purchase, lend or otherwise transfer or dispose of, directly
or indirectly, any common shares, or any securities convertible
into or exercisable for any common shares or any right to
acquire our common shares, or enter into any swap or other
arrangement that transfers to another, in whole or in part,
directly or indirectly, any of the economic consequences of
ownership of the common shares, whether any such transaction is
to be settled by delivery of common shares or other securities,
in cash or otherwise for a
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period of 180 days following the closing of this offering,
subject to certain exceptions. The preceding sentence however
does not apply to (i) the common shares sold in this
offering; (ii) any common shares issued by us upon the
exercise of an option outstanding on the date of the
Underwriting Agreement; (iii) certain transfers by
shareholders to affiliates or related persons; or (iv) such
issuances of options or grants of restricted shares under our
stock option and incentive plans as described herein. The
underwriters, at any time, and without notice, may release all
or any portion of the common shares subject to the foregoing
lock-up
agreements.
Indemnification.
We and the selling shareholders will
indemnify the underwriters against some liabilities, including
liabilities under the Securities Act. If we and the selling
shareholders are unable to provide this indemnification, we and
the selling shareholders will contribute to payments the
underwriters may be required to make in respect of those
liabilities.
Online Offering.
A prospectus in electronic format may be
made available on the web sites maintained by one or more of the
underwriters participating in this offering. Other than the
prospectus in electronic format, the information on any such web
site, or accessible through any such web site, is not part of
the prospectus. The representatives may agree to allocate a
number of shares to underwriters for sale to their online
brokerage account holders. Internet distributions will be
allocated by the underwriters that will make internet
distributions on the same basis as other allocations. In
addition, shares may be sold by the underwriters to securities
dealers who resell shares to online brokerage account holders.
Conflicts/ Affiliates.
The underwriters and their
affiliates have provided, and may in the future provide, various
investment banking, commercial banking and other financial
services for us and the selling shareholders for which services
they have received, and may in the future receive, customary
fees. In addition, Banc of America Securities LLC and its
affiliates, Merrill Lynch, Pierce, Fenner & Smith
Incorporated and its affiliates, and Keefe, Bruyette & Woods
and its affiliates have owned, currently own or may own, equity
or equity-like securities of us or our affiliates.
Compliance with
Non-U.S.
Laws and
Regulations
Each underwriter intends to comply with all applicable laws and
regulations in each jurisdiction in which it acquires, offers,
sells or delivers shares of our common stock or has in its
possession or distributes the prospectus.
European Economic Area
In relation to each Member State of the European Economic Area
which has implemented the Prospectus Directive (each, a Relevant
Member State), with effect from and including the date on which
the Prospectus Directive is implemented in that Relevant Member
State (the Relevant Implementation Date) an offer of common
shares to the public may not be made in that Relevant Member
State prior to the publication of a prospectus in relation to
the common shares which has been approved by the competent
authority in that Relevant Member State or, where appropriate,
approved in another Relevant Member State and notified to the
competent authority in that Relevant Member State, all in
accordance with the Prospectus Directive, except that it may,
with effect from and including the Relevant Implementation Date,
make an offer of common shares to the public in that Relevant
Member State at any time:
•
to legal entities which are authorised or regulated to operate
    in the financial markets or, if not so authorised or regulated,
    whose corporate purpose is solely to invest in securities;
•
to any legal entity which has two or more of (1) an average
    of at least 250 employees during the last financial year;
    (2) a total balance sheet of more than
€
43,000,000 and
    (3) an annual net turnover of more than
€
50,000,000, as
    shown in its last annual or consolidated accounts; or
•
in any other circumstances which do not require the publication
    by the Issuer of a prospectus pursuant to Article 3 of the
    Prospectus Directive.
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For the purposes of this provision, the expression an
"offer of common shares to the public" in relation to
any common shares in any Relevant Member State means the
communication in any form and by any means of sufficient
information on the terms of the offer and the common shares to
be offered so as to enable an investor to decide to purchase or
subscribe for the common shares, as the same may be varied in
that Member State by any measure implementing the Prospectus
Directive in that Member State and the expression Prospectus
Directive means Directive 2003/71/ EC and includes any relevant
implementing measure in each Relevant Member State.
France
No prospectus (including any amendment, supplement or
replacement thereto) has been prepared in connection with the
offering of the common shares that has been approved by the
Autorité des marchés financiers or by the competent
authority of another State that is a contracting party to the
Agreement on the European Economic Area and notified to the
Autorité des marchés financiers; no common shares have
been offered or sold and will be offered or sold, directly or
indirectly, to the public in France except to permitted
investors, which we refer to as Permitted Investors, consisting
of persons licensed to provide the investment service of
portfolio management for the account of third parties, qualified
investors (investisseurs qualifiés) acting for their own
account and/or investors belonging to a limited circle of
investors (cercle restreint d'investisseurs) acting for
their own account, with "qualified investors" and
"limited circle of investors" having the meaning
ascribed to them in Articles L. 411-2, D. 411-1, D. 411-2,
D. 734-1, D. 744-1, D. 754-1 and D. 764-1 of the French Code
Monétaire et Financier and applicable regulations
thereunder; none of this prospectus or any other materials
related to the offering or information contained therein
relating to the common shares has been released, issued or
distributed to the public in France except to Permitted
Investors; and the direct or indirect resale to the public in
France of any Securities acquired by any Permitted Investors may
be made only as provided by Articles L. 411-1, L. 411-2, L.
412-1 and L. 621-8 to L. 621-8-3 of the French Code
Monétaire et Financier and applicable regulations
thereunder.
United Kingdom
Each underwriter acknowledges and agrees that:
(i) (a) it is a person whose ordinary activities
    involve it acquiring, holding, managing or disposing of
    investments (as principal or agent) for the purposes of its
    business and (b) it has not offered or sold and will not
    offer or sell the common shares other than to persons whose
    ordinary activities involve them in acquiring, holding, managing
    or disposing of investments (as principal or as agent) for the
    purposes of their businesses or who it is reasonable to expect
    will acquire, hold, manage or dispose of investments (as
    principal or agent) for the purposes of their businesses where
    the issue of the common shares would otherwise constitute a
    contravention of Section 19 of the Financial Services and
    Markets Act 2000, or the FSMA, by the issuer;
(ii) it has only communicated or caused to be communicated
    and will only communicate or cause to be communicated an
    invitation or inducement to engage in investment activity
    (within the meaning of Section 21 of the FSMA) received by
    it in connection with the issue or sale of the common shares in
    circumstances in which Section 21(1) of the FSMA does not
    apply to the issuer; and
(iii) it has complied and will comply with all applicable
    provisions of the FSMA with respect to anything done by it in
    relation to the common shares in, from or otherwise involving
    the United Kingdom.
This document is only being distributed to and is only directed
at (i) persons who are outside the United Kingdom or
(ii) to investment professionals falling within
Article 19(5) of the Financial Services and Markets Act
2000 (Financial Promotion) Order 2005, which we refer to as the
Order, or (iii) high net worth entities, and other persons
to whom it may lawfully be communicated, falling within
Article 49(2)(a) to (d) of the Order (all such persons
together being referred to as relevant persons).
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The common shares are only available to, and any invitation,
offer or agreement to subscribe, purchase or otherwise acquire
such common shares will be engaged in only with, relevant
persons. Any person who is not a relevant person should not act
or rely on this document or any of its contents.
Italy
The offering of the common shares has not been cleared by the
Italian Securities Exchange Commission (Commissione Nazionale
per le Società e la Borsa, or CONSOB) pursuant to Italian
securities legislation and, accordingly, has represented and
agreed that the common shares may not and will not be offered,
sold or delivered, nor may or will copies of the prospectus or
any other documents relating to the common shares be distributed
in Italy, except (i) to professional investors (operatori
qualificati), as defined in Article 31, second paragraph,
of CONSOB Regulation No. 11522 of July 1, 1998, as
amended, which we refer to as Regulation No. 11522, or
(ii) in other circumstances which are exempted from the
rules on solicitation of investments pursuant to
Article 100 of Legislative Decree No. 58 of
February 24, 1998, which we refer to as the Financial
Service Act, and Article 33, first paragraph, of CONSOB
Regulation No. 11971 of May 14, 1999, as amended.
Any offer, sale or delivery of the common shares or distribution
of copies of the prospectus or any other document relating to
the common shares in Italy may and will be effected in
accordance with all Italian securities, tax, exchange control
and other applicable laws and regulations, and, in particular,
will be: (i) made by an investment firm, bank or financial
intermediary permitted to conduct such activities in Italy in
accordance with the Financial Services Act, Legislative Decree
No. 385 of September 1, 1993, as amended, which we
refer to as the Italian Banking Law, Regulation No. 11522,
and any other applicable laws and regulations; (ii) in
compliance with Article 129 of the Italian Banking Law and
the implementing guidelines of the Bank of Italy; and
(iii) in compliance with any other applicable notification
requirement or limitation which may be imposed by CONSOB or the
Bank of Italy.
Any investor purchasing the common shares in the offering is
solely responsible for ensuring that any offer or resale of the
common shares it purchased in the offering occurs in compliance
with applicable laws and regulations.
The prospectus and the information contained therein are
intended only for the use of its recipient and, unless in
circumstances which are exempted from the rules on solicitation
of investments pursuant to Article 100 of the Financial
Service Act and Article 33, first paragraph, of CONSOB
Regulation No. 11971 of May 14, 1999, as amended, is
not to be distributed, for any reason, to any third party
resident or located in Italy. No person resident or located in
Italy other than the original recipients of this document may
rely on it or its content.
Italy has only partially implemented the Prospectus Directive.
The provisions under the heading "European Economic
Area" above shall apply with respect to Italy only to the
extent that the relevant provisions of the Prospectus Directive
have already been implemented in Italy.
Insofar as the requirements above are based on laws which are
superseded at any time pursuant to the implementation of the
Prospectus Directive, such requirements shall be replaced by the
applicable requirements under the Prospectus Directive.
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LEGAL MATTERS
Certain matters as to U.S. law in connection with this
offering will be passed upon for us by LeBoeuf, Lamb,
Greene & MacRae LLP, New York, New York. The validity
of the issuance of common shares under Bermuda law will be
passed upon for us by Conyers Dill & Pearman, Hamilton,
Bermuda. Certain legal matters in connection with this offering
will be passed upon for the underwriters by Shearman &
Sterling LLP, New York, New York.
EXPERTS
The financial statements as of December 31, 2004 and
December 31, 2003 and for each of the three years in the
period ended December 31, 2004 included in this prospectus
have been so included in reliance on the report of
PricewaterhouseCoopers, an independent registered public
accounting firm, given on the authority of said firm as experts
in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on
Form
S-1
under the
Securities Act with respect to the common shares offered in this
prospectus. This prospectus, filed as part of the registration
statement, does not contain all of the information set forth in
the registration statement and its exhibits and schedules,
portions of which have been omitted as permitted by the rules
and regulations of the SEC. For further information about us and
our common shares, we refer you to the registration statement
and to its exhibits and schedules. Statements in this prospectus
about the contents of any contract, agreement or other document
are not necessarily complete and, in each instance, we refer you
to the copy of such contract, agreement or document filed as an
exhibit to the registration statement, with each such statement
being qualified in all respects by reference to the document to
which it refers. Anyone may inspect the registration statement
and its exhibits and schedules without charge at the public
reference facilities the SEC maintains at 100 F Street, N.E.,
Room 1580, Washington, D.C. 20549. You may obtain
copies of all or any part of these materials from the SEC upon
the payment of certain fees prescribed by the SEC. You may
obtain further information about the operation of the SEC's
Public Reference Room by calling the SEC at
1-800-SEC-0330.
You may
also inspect these reports and other information without charge
at a web site maintained by the SEC. The address of this site is
http://www.sec.gov.
Upon completion of this offering, we will become subject to the
informational requirements of the Securities Exchange Act of
1934 and will be required to file reports, proxy statements and
other information with the SEC. You will be able to inspect and
copy these reports, proxy statements and other information at
the public reference facilities maintained by the SEC at the
address noted above. You also will be able to obtain copies of
this material from the Public Reference Room of the SEC as
described above, or inspect them without charge at the
SEC's web site. We intend to furnish our shareholders with
annual reports containing combined financial statements audited
by an independent accounting firm.
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ENFORCEABILITY OF CIVIL LIABILITIES UNDER UNITED STATES
FEDERAL SECURITIES LAWS AND OTHER MATTERS
We are organized under the laws of Bermuda. In addition, some of
our directors and officers reside outside the United States, and
all or a substantial portion of their assets and our assets are
or may be located in jurisdictions outside the United States.
Therefore, it may be difficult for investors to effect service
of process within the United States upon our
non-U.S.
directors
and officers or to recover against us, or our
non-U.S.
directors
and officers on judgments of U.S. courts, including
judgments predicated upon the civil liability provisions of the
U.S. federal securities laws. However, we may be served
with process in the United States with respect to actions
against us arising out of or in connection with violations of
U.S. federal securities laws relating to offers and sales
of common shares made hereby by serving CT Corporation System,
our U.S. agent, irrevocably appointed for that purpose.
Uncertainty exists as to whether courts of Bermuda will enforce
judgments obtained in other jurisdictions (including the U.S.)
against us or our directors or officers under the securities
laws of those jurisdictions or entertain actions in Bermuda
against us or our directors or officers under the securities
laws of other jurisdictions. Further there is no treaty in
effect between the U.S. and Bermuda providing for the
enforcement of judgments of U.S. courts, and there are
grounds upon which Bermuda courts may not enforce judgments of
U.S. courts. Some remedies available under the laws of
U.S. jurisdictions, including some remedies available under
the U.S. federal securities laws, may not be allowed in
Bermuda courts as contrary to that jurisdiction's public
policy. Because judgments of U.S. courts are not
automatically enforceable in Bermuda, it may be difficult for
you to recover against us based upon such judgments.
We intend to apply to the BMA for its permission for the issue
and subsequent transfer of our common shares being offered
pursuant to this prospectus, as long as the shares are listed on
the NYSE, to and among persons who are resident and non-resident
of Bermuda for exchange control purposes. In addition, we will
deliver a copy of this prospectus to the Registrar of Companies
in Bermuda for filing pursuant to the Bermuda Companies Act.
However, the BMA and Registrar of Companies in Bermuda accept no
responsibility for the financial soundness of any proposal or
for the correctness of any of the statements made or opinions
expressed in this prospectus.
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GLOSSARY OF SELECTED REINSURANCE,
INSURANCE, INVESTMENT AND OTHER TERMS
Acquisition expenses
The aggregate of policy acquisition expenses, including ceding
    commissions and the portion of administrative, general and other
    expenses attributable to underwriting operations.
Adjusted written premiums
All upfront premiums and the present value of all expected
    installment premiums, in each case for business written in a
    given period.
Capacity
The percentage of surplus, or the dollar amount of exposure,
    that an insurer or reinsurer is willing or able to place at
    risk. Capacity may apply to a single risk, a program, a line of
    business or an entire book of business. Capacity may be
    constrained by legal restrictions, corporate restrictions or
    indirect restrictions.
Capital charge
A measure of portfolio risk by a rating agency based on an
    expected loss, considering the expected default frequency
    (relative likelihood of a default in severe economic depression)
    and loss severity (relative duration and magnitude).
Case reserves
Loss reserves, established with respect to specific, individual
    reported claims.
Ceded par
The par value of the obligations that primary financial guaranty
    insurers have reinsured with financial guaranty reinsurers.
Ceding commission
Commission paid to primary insurer by reinsurer based on the
    amount of the premiums ceded, which is intended to reimburse the
    primary insurer for the costs of writing and administering the
    business.
Claim
Request by an insured or reinsured for indemnification by an
    insurance company or a reinsurance company for loss incurred
    from an insured peril or event.
Combined ratio
The sum of the loss ratio and the expense ratio. A combined
    ratio under 100% generally indicates an underwriting profit. A
    combined ratio over 100% generally indicates an underwriting
    loss.
Correlation
The degree to which events or financial results tend to
    correspond to each other.
Direct insurance
Insurance sold by an insurer that contracts with the insured, as
    distinguished from reinsurance.
Distributable reserves
Under the Bermuda Companies Act, a company may declare or pay a
    dividend out of contributed surplus only if it has reasonable
    grounds for believing that it is, and would after the payment
    be, able to pay its liabilities as they become due and if the
    realizable value of its assets would not be less than the
    aggregate of its liabilities and issued share capital and share
    premium accounts as a result of the payment. Such amounts
    permissible for distribution under the Bermuda Companies Act are
    called "distributable reserves."
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Earned premiums
That portion of written premiums that applies to the expired
    portion of the policy term. Earned premiums are recognized as
    revenues under both standard accounting principles and
    U.S. GAAP.
Expense Ratio
Financial ratio calculated by dividing acquisition expenses and
    general and administrative expenses by net earned premiums.
Exposure
The possibility of loss. A unit of measure of the amount of risk
    a company assumes.
Facultative reinsurance
The reinsurance of all or a portion of the insurance provided by
    a single policy. Each policy reinsured is separately negotiated.
Frequency
The number of claims occurring during a given coverage period.
Gross written premiums
Total premiums for insurance written and reinsurance assumed
    during a given period. See also "Premiums."
Limits
The maximum amounts that an insurer or reinsurer will insure or
    reinsure in a given area of coverage. The term also refers to
    the maximum amount of benefit payable for a given situation or
    occurrence.
Loss; losses
An occurrence that is the basis for submission and/or payment of
    a claim. Losses may be covered, limited or excluded from
    coverage, depending on the terms of the policy.
Losses and loss adjustment expenses
The expenses of settling claims, including legal and other fees
    and the portion of general expenses allocated to claim
    settlement costs.
Loss ratio
Financial ratio calculated by dividing net losses and loss
    expenses by net earned premiums.
Loss reserves
Liabilities established by insurers and reinsurers to reflect
    the estimated cost of claims incurred that the insurer or
    reinsurer will ultimately be required to pay in respect of
    insurance or reinsurance it has written. Reserves are
    established for losses and for loss expenses, and consist of
    case reserves and general reserves. As the term is used in this
    prospectus, "loss reserves" is meant to include
    reserves for both losses and for loss expenses.
Net par
The par value of obligations reinsured, net of amounts that have
    been retroceded.
Net earned premiums
The portion of net written premiums during or prior to a given
    period that was actually recognized as income during such period.
Net written premiums
Direct written premiums plus assumed reinsurance premiums less
    premiums ceded to reinsurers.
Par
The par value of an obligation for which either the primary
    financial guaranty insurers have provided credit support or the
    reinsurer has provided reinsurance.
Premiums
The amount charged during the term on policies and contracts
    issued, renewed or reinsured by an insurance company or
    reinsurance company.
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Premiums ceded
When an insurer reinsures some or all of its liability with
    another reinsurer, the premiums that it "cedes" or
    pays to the reinsurer is called the premiums ceded.
Quota share
Reinsurance arrangement in which the insurer, or primary
    insurer, automatically transfers, and the reinsurer accepts, a
    stated proportion of every risk within a defined type of
    business written by the insurer. For this, the reinsurer
    receives an equal proportion of the premiums less commission.
    The reinsurer is dependent on the primary insurer's ability
    in underwriting, pricing and claims administration.
Rate
Amount charged per unit of insurance and reinsurance.
Reserves
Liabilities established by insurers and reinsurers to reflect
    the estimated costs of claim payments and the related expenses
    that the insurer or reinsurer will ultimately be required to pay
    in respect of insurance or reinsurance it has written. Reserves
    are established for losses, for loss adjustment expenses and for
    unearned premiums. Loss reserves consist of "case
    reserves," or reserves established with respect to
    individual reported claims, and "general reserves."
    Unearned premium reserves constitute the portion of premium paid
    in advance for insurance or reinsurance that has not yet been
    provided. See also "Loss Reserves."
Retention
The amount of exposure a policyholder retains on any one risk or
    group of risks. The term may apply to an insurance policy, where
    the policyholder is an individual, family or business, or a
    reinsurance policy, where the policyholder is an insurance
    company.
Surplus or statutory surplus
As determined under the statutory or regulatory accounting
    practice required by the relevant jurisdictions, the amount
    remaining after all liabilities, including loss reserves, are
    subtracted from all admitted assets. Admitted assets are assets
    of an insurer prescribed or permitted by the respective
    regulators to be recognized on the statutory balance sheet or
    regulatory returns for purposes of calculating solvency margins
    and statutory ratios, as applicable. Statutory surplus is also
    referred to as "surplus" or "surplus as regards
    policyholders" for statutory accounting purposes.
Treaty or treaty reinsurance
The reinsurance of a specified type or category of risks defined
    in a reinsurance agreement between a primary insurer or other
    reinsured and a reinsurer. Typically, in treaty reinsurance, the
    primary insurer or reinsured is obligated to offer and the
    reinsurer is obligated to accept a specified portion of all of
    that type or category of risks originally written by the primary
    insurer or reinsured.
Underwriter
An employee of an insurance or reinsurance company who examines,
    accepts or rejects risks and classifies accepted risks in order
    to charge an appropriate premium for each accepted risk. The
    underwriter is expected to select business that will produce
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an average risk of loss no greater than that anticipated for the
    class of business.
Underwriting
The insurer's or reinsurer's process of reviewing
    applications for insurance coverage, and the decision whether to
    accept all or part of the coverage and determination of the
    applicable premiums; also refers to the acceptance of that
    coverage.
Unearned premium
The portion of written premiums that is allocable to the
    unexpired portion of the policy term.
123
RAM RE GROUP OF COMPANIES
INDEX TO FINANCIAL STATEMENTS
Page
Combined Audited Financial Statements:
Report of Independent Registered Public
    Accounting Firm (December 31, 2004, 2003 and 2002)
F-2
Combined Balance Sheets as of
    December 31, 2004 and 2003
F-3
Combined Statements of Operations for the
    Years Ended December 31, 2004, 2003 and 2002
F-4
Combined Statements of Comprehensive Income
    for the Years Ended December 31, 2004, 2003 and 2002
F-5
Combined Statements of Shareholders'
    Equity and Retained Earnings for the Years Ended
    December 31, 2004, 2003 and 2002
F-6
Combined Statements of Cash Flows for the
    Years Ended December 31, 2004, 2003 and 2002
F-7
Notes to the Combined Financial
    Statements
F-8
Unaudited Condensed Combined Financial Statements
Condensed Combined Balance Sheet as of
    September 30, 2005 and December 31, 2004
F-24
Condensed Combined Statements of Income for
    the Nine Months Ended September 30, 2005 and
    September 30, 2004
F-25
Condensed Combined Statement of
    Stockholders' Equity and Retained Earnings for the Nine
    Months Ended September 30, 2005 and September 30,
    2004
F-26
Condensed Combined Statements of Cash Flows
    for the Nine Months Ended September 30, 2005 and
    September 30, 2004
F-27
Notes to the Unaudited Condensed Combined
    Financial Statements
F-28
F-1
Table of Contents
April 22, 2005
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of RAM Holdings
Ltd., RAM Holdings II Ltd. and RAM Reinsurance Company Ltd.
(collectively, "the Company" or "the RAM Re Group
of Companies")
In our opinion, the accompanying combined balance sheets and the
related combined statements of operations, comprehensive income,
shareholders' equity and retained earnings and of cash
flows present fairly, in all material respects, the financial
position of the RAM Re Group of Companies, all of which are
under common ownership and common management, at
December 31, 2004 and 2003, and the combined results of
their operations and their combined cash flows for each of the
three years in the period ended December 31, 2004 in
conformity with accounting principles generally accepted in the
United States of America. These financial statements are the
responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles
used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
/s/ PricewaterhouseCoopers
PricewaterhouseCoopers
Hamilton, Bermuda
F-2
Table of Contents
RAM RE GROUP OF COMPANIES
Combined Balance Sheets
December 31, 2004 and 2003
2004
2003
ASSETS
Assets:
Investments: Fixed-maturity securities held as available for
    sale, at fair value (amortized cost of $402,119,567 and
    $341,177,876)
$
404,906,098
$
345,836,682
Cash and cash equivalents
36,086,774
11,096,199
Accrued investment income
4,002,811
3,342,343
Premiums receivable
1,983,149
10,353,243
Recoverables on paid losses
1,167,575
1,641,375
Deferred policy acquisition costs
58,652,627
53,016,534
Fixed assets
188,218
262,024
Deferred expenses
930,826
495,628
Prepaid expenses
158,891
216,350
Other assets
2,721,058
—
Total assets
$
510,798,027
$
426,260,378
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Losses and loss expense reserve
$
15,492,726
$
13,821,463
Unearned premiums
140,042,526
120,182,186
Accounts payable and accrued liabilities
2,995,969
2,844,293
Long-term debt
40,000,000
—
Accrued interest payable
693,151
—
Other liabilities
68,161
157,168
Total liabilities
199,292,533
137,005,110
Shareholders' equity:
Common stock: $1 par value; authorized shares —
    4,500,000; issued and outstanding shares — 1,993,635
    at December 31, 2004 and December 31, 2003
1,993,635
1,993,635
Additional paid-in capital
212,572,647
213,184,291
Accumulated other comprehensive income
2,786,531
4,658,806
Retained earnings
94,152,681
69,418,536
Total shareholders' equity
311,505,494
289,255,268
Total liabilities and shareholders' equity
$
510,798,027
$
426,260,378
See accompanying Notes to Combined Financial Statements.
F-3
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RAM RE GROUP OF COMPANIES
Combined Statements of Operations
Years Ended December 31,
2004
2003
2002
Revenues:
Gross premiums written
$
66,057,407
$
67,880,078
$
36,205,476
Change in unearned premiums
(31,336,119
)
(42,336,794
)
(18,644,083
)
Premiums earned
$
34,721,288
$
25,543,284
$
17,561,393
Net investment income
16,824,087
13,372,949
11,546,320
Net realized gains on sale of investments
535,682
1,097,044
2,927,199
Net unrealized gains (losses) on credit derivatives
2,757,435
456,113
(613,281
)
20,117,204
14,926,106
13,860,238
Total revenues
54,838,492
40,469,390
31,421,631
Expenses:
Losses and loss adjustment expenses
3,579,351
3,994,306
6,446,996
Acquisition expenses
13,386,461
10,223,042
7,362,701
Operating expenses
11,032,190
5,041,686
3,360,336
Interest expense
2,106,345
—
—
Total expenses
30,104,347
19,259,034
17,170,033
Net income for the year
$
24,734,145
$
21,210,356
$
14,251,598
Net income per common share:
Basic
$
12.41
$
11.68
$
10.97
Diluted
12.35
11.65
10.96
Weighted-average number of common shares outstanding:
Basic
1,993,635
1,816,352
1,298,800
Diluted
2,002,295
1,820,211
1,300,451
See accompanying Notes to Combined Financial Statements.
F-4
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RAM RE GROUP OF COMPANIES
Combined Statements of Comprehensive Income
Years Ended December 31,
2004
2003
2002
Net income for the year
$
24,734,145
$
21,210,356
$
14,251,598
Other comprehensive income (loss)
Change in unrealized appreciation of investments
(1,336,593
)
(5,246,637
)
9,196,283
Less: Reclassification adjustment for net realized gains
    included in net income
(535,682
)
(1,097,044
)
(2,927,199
)
Other comprehensive income (loss)
(1,872,275
)
(6,343,681
)
6,269,084
Comprehensive income for the year
22,861,870
14,866,675
20,520,682
See accompanying Notes to Combined Financial Statements.
F-5
Table of Contents
RAM RE GROUP OF COMPANIES
Combined Statements of Shareholders' Equity and Retained
Earnings
Accumulated
Other
Share
Additional
Comprehensive
Retained
Capital
Paid-In Capital
Income
Earnings
Total
Balance, January 1, 2002
$
1,318,936
$
128,933,232
$
4,733,403
$
33,956,582
$
168,942,153
Issue of share capital
15,405
2,172,259
—
—
2,187,664
Redemption of share capital
(44,056
)
(6,116,012
)
—
—
(6,160,068
)
Net income
—
—
—
14,251,598
14,251,598
Other comprehensive (loss) income
—
—
6,269,084
—
6,269,084
Balance, December 31, 2002
1,290,285
124,989,479
11,002,487
48,208,180
185,490,431
Issue of share capital
703,350
90,902,853
—
—
91,606,203
Expenses related to share issuance
—
(1,886,308
)
—
—
(1,886,308
)
Committed preferred shares expenses
—
(1,184,094
)
—
—
(1,184,094
)
Non-cash compensation
—
362,361
—
—
362,361
Net income
—
—
—
21,210,356
21,210,356
Other comprehensive (loss) income
—
—
(6,343,681
)
—
(6,343,681
)
Balance, December 31, 2003
1,993,635
213,184,291
4,658,806
69,418,536
289,255,268
Expenses related to share issuance
—
—
—
—
—
Committed preferred shares expenses
—
(611,644
)
—
—
(611,644
)
Net income
—
—
—
24,734,145
24,734,145
Other comprehensive (loss) income
—
—
(1,872,275
)
—
(1,872,275
)
Balance, December 31, 2004
1,993,635
212,572,647
2,786,531
94,152,681
311,505,494
See accompanying Notes to Combined Financial Statements.
F-6
Table of Contents
RAM RE GROUP OF COMPANIES
Combined Statements of Cash Flows
Years Ended December 31,
2004
2003
2002
Cash flows from operating activities:
Net income for the year
$
24,734,145
$
21,210,356
$
14,251,598
Adjustments to reconcile net income to net cash provided by
    operating activities:
Net realized gains on sale of investments
(535,682
)
(1,097,044
)
(2,927,199
)
Depreciation and amortization
925,775
592,751
—
Amortization of debt discount
4,810
—
—
Net unrealized (gains) losses on credit derivatives
(2,757,435
)
(456,133
)
613,281
Amortization of bond premium and discount
2,736,936
2,145,580
405,508
Non-cash compensation
—
362,361
—
Changes in assets and liabilities:
Accrued interest receivable
(660,468
)
(1,197,233
)
(13,065
)
Premiums receivable
8,370,094
(3,286,611
)
(3,306,381
)
Recoverables on paid losses
473,800
18,140
(1,659,515
)
Deferred policy acquisition costs
(5,636,093
)
(14,304,479
)
(8,325,264
)
Prepaid expenses
57,459
(121,069
)
(184,600
)
Deferred expenses
(1,156,355
)
(353,199
)
Other assets
68,161
249,035
374,002
Losses and loss adjustment expenses
1,671,263
3,420,737
6,018,681
Unearned premiums
19,860,340
42,336,794
18,644,083
Accounts payable and accrued liabilities
151,676
166,454
657,696
Accrued interest payable
693,151
—
—
Net cash provided by operating activities
49,001,577
49,686,460
24,548,825
Cash flows from investing activities:
Purchases of investments
(225,348,133
)
(322,768,301
)
(154,073,752
)
Proceeds from sales of investments
161,609,536
148,110,973
105,131,731
Proceeds on maturities of investments
595,650
40,758,264
27,380,578
Purchases of fixed assets
(130,811
)
(58,227
)
—
Net cash used in investing activities
(63,273,758
)
(133,957,291
)
(21,561,443
)
Cash flows from financing activities:
Net issuance (redemption) of share capital
—
89,719,895
(3,972,404
)
Proceeds of issuance of long-term debt
39,874,400
—
—
Committed preferred securities expenses
(611,644
)
(1,184,094
)
—
Repayment of loans to shareholders
—
—
1,653,621
Net cash provided by financing activities
39,262,756
88,535,801
(2,318,783
)
Net increase in cash and cash equivalents
24,990,575
4,264,970
668,599
Cash and cash equivalents — Beginning of year
11,096,199
6,831,229
6,162,630
Cash and cash equivalents — End of year
$
36,086,774
$
11,096,199
$
6,831,229
Supplemental cash flow disclosure:
Interest paid on long-term debt
2,106,345
—
—
See accompanying Notes to Combined Financial Statements.
F-7
Table of Contents
RAM RE GROUP OF COMPANIES
Notes to Combined Financial Statements
1
BACKGROUND
RAM Holdings Ltd. ("Holdings"), RAM Holdings II
Ltd. ("Holdings II"), and RAM Reinsurance Company
Ltd. ("RAM Re") (collectively "the Company"
or "the RAM Re Group of Companies") were incorporated
on January 28, 1998 under the laws of Bermuda. Holdings
owns 100% of the voting shares of RAM Re and Holdings II
owns 100% of the non-voting shares of RAM Re. There are
overlapping investor interests in the shares of Holdings and
Holdings II and the economic interest of each investor is
determined based on each investor's combined interest in
both holding companies.
RAM Re's principal activity is the reinsurance of financial
guarantees of public finance and asset-backed debt obligations
insured by the triple-A rated monoline financial guaranty
companies. The Company provides reinsurance through treaty and
facultative agreements that it maintains with each of its
customers. Financial guaranty reinsurance written by RAM Re
generally provides for guarantees of scheduled principal and
interest payments on an issuer's obligation in accordance
with the obligation's original payment schedule and, in
rare circumstances, such amounts are payable on an accelerated
basis.
2
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting
policies adopted by the Company:
(a)
Basis of preparation
The combined financial statements have been prepared in
accordance with accounting principles generally accepted in the
United States of America ("US GAAP"). The preparation
of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and
liabilities, as well as disclosure of contingent assets and
liabilities as of the balance sheet date. Estimates also affect
the reported amounts of income and expenses for the reporting
period. Actual results could differ materially from those
estimates.
(b)
Basis of combination
The combined financial statements include the consolidated
accounts of Holdings and the accounts of Holdings II as
this presentation is considered most meaningful to the
shareholders. The consolidated accounts of Holdings include
those of its subsidiary RAM Re. Holdings and Holdings II
have common shareholders and are under common management.
Intercompany balances and transactions have been eliminated in
combination. Results are not consolidated due to the ownership
structure of the Company. There are no significant differences
between financial statements prepared on a combined basis and
those which would be prepared on a consolidated basis.
(c)
Investments
The Company has classified its fixed-maturity investments as
available for sale as defined by Statement of Financial
Accounting Standards No. 115 ("SFAS 115").
Available for sale investments are carried at fair value, with
unrealized appreciation or depreciation reported as a separate
component of accumulated other comprehensive income. The Company
considers all highly liquid debt instruments purchased with
maturities of three months or less to be cash equivalents. All
investment transactions are recorded on a trade date basis.
Realized gains and losses on sales of fixed maturity investments
are determined on the basis of amortized cost. Gains and losses
on sale of investments are included in investment income when
realized. The cost of securities sold is determined using the
specific identification method. All declines in fair value below
cost that are considered other than temporary are recognized in
income. Factors considered when assessing impairment include:
(i) securities whose market values have declined by 20% or
more below amortized cost for a continuous period of at least
six months; (ii) recent
F-8
Table of Contents
RAM RE GROUP OF COMPANIES
Notes to Combined Financial
Statements — (Continued)
credit downgrades by rating agencies; (iii) the financial
condition of the issuer; (iv) whether scheduled interest
payments are past due; and (v) whether the Company has the
ability and intent to hold the security for a sufficient period
of time to allow for anticipated recoveries in fair value. The
Company's investment guidelines require the orderly sale of
securities that do not meet investment guidelines due to a
downgrade by rating agencies or other circumstances.
(d)
Premium revenue recognition
Instalment premiums are recorded as written at each instalment
due date and are earned over the respective instalment period,
which equates to the period of risk. All other premiums written
are recorded as written at the inception of the policy and are
earned rateably over the period of risk. When insured issues are
refunded or called, the remaining unearned premiums are earned
at that time, since there is no longer risk to the Company.
Premiums are recorded on a one month lag due to the timing of
receipt of the information from the ceding companies.
(e)
Deferred policy acquisition costs
Deferred policy acquisition costs comprise those expenses that
vary with and are primarily related to the production of
business, including ceding commissions paid on reinsurance
assumed, a portion of salaries and related costs of underwriting
personnel, rating agency fees, and certain other underwriting
expenses. Policy acquisition costs are deferred and amortized
over the period in which the related premiums are earned. When
assessing the recoverability of deferred policy acquisition
costs, the Company considers the future earnings of premiums
paid upfront and the estimated present value of net instalment
premiums to be received.
(f)
Losses and loss adjustment expenses
The Company's liability for losses and loss adjustment
expenses consists of case basis reserves and an unallocated
reserve.
Case basis reserves are established based on ceding company
reports and internal review and evaluation of exposures related
to guaranteed obligations that either have already defaulted or
have a high probability of default. Case reserves are
established based on the present value of the expected ultimate
losses and loss adjustment expense that the Company expects to
pay less estimated recoveries. Changes to the ceding
company's reserves are reported at regular intervals and
are reviewed by the Chief Underwriting Officer and the
Company's Management Committee. The Management Committee
may determine a value different than that reported if its
assessment of circumstances leads to such a judgment.
The Company maintains an unallocated reserve based on its
reinsured net par outstanding and a loss reserve factor. The
loss reserve factor is based on the unallocated loss reserves of
the ceding companies relative to their respective net par
exposures. The loss reserve factor is risk adjusted to reflect
the risk of RAM Re's outstanding par relative to the ceding
companies. RAM Re's unallocated reserve is reviewed
periodically by the Management Committee and the estimate may be
modified if industry experience or company specific-developments
are judged to warrant such an adjustment.
The Management Committee has two guidelines with respect to the
interaction of unallocated and case reserves. No more than 20%
of the unallocated reserve balance at quarter end can be reduced
to offset a case reserve associated with a single default. No
more than 50% of the unallocated reserve balance at year end can
be reduced to offset aggregate case reserve activity during the
following year.
Underwriting management reviews the portfolio on a continuous
basis to identify problem credits. Quarterly, the Management
Committee formally reviews case and the unallocated reserves.
Management establishes reserves that it believes are adequate to
cover the present value of the ultimate liability for
F-9
Table of Contents
RAM RE GROUP OF COMPANIES
Notes to Combined Financial
Statements — (Continued)
claims. The reserves are necessarily based on estimates and may
vary materially from actual results. Adjustments based on actual
loss experience will be recorded in the periods in which they
become known.
The Company has become aware of the SEC's recent review of
the loss reserving practices of certain public financial
guarantee companies. The Company recognizes that there is
diversity in practice among financial guarantee insurers and
reinsurers with respect to their accounting policies for loss
reserves. Current accounting literature, specifically FASB
Statement of Financial Accounting Standards No. 60
"Accounting and Reporting by Insurance Enterprises"
(FAS 60) and FASB Statement of Financial Accounting
Standards No. 97 "Accounting and Reporting by
Insurance Enterprises for Certain Long-Duration Contracts and
for Realized Gains and Losses from the Sale of Investments"
("FAS 97"), do not specifically address the
unique characteristics of financial guarantee insurance
contracts. Consequently, the accounting principles applied by
the industry, as well as the Company, have evolved over time and
incorporate the concepts of both short-duration contracts
accounting under the provisions of FAS 60 and FAS 97,
as well as other accounting literature, such as FASB No. 5
"Accounting for Contingencies" and Emerging Issues
Task Force ("EITF") Issue No. 85-20
"Recognition of Fees for Guaranteeing a Loan". It is
our understanding that the SEC has requested that the FASB
review this matter and provide guidance for the accounting of
financial guarantee insurance contracts. The Company will
continue its loss reserving methodology as noted above until
further guidance is provided by the SEC or FASB. The Company
cannot predict how the FASB or SEC will resolve this issue and
the resulting impact on its financial statement.
(g)
Derivative instruments
The Company has reinsured derivative instruments, consisting
primarily of credit default swaps that it intends to reinsure
for the full term of the contract. Management considers these
derivative instruments to be a normal extension of its financial
guaranty reinsurance business. FASB Statement of Financial
Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities," establishes
accounting and reporting standards for derivative instruments,
and requires the Company to recognize the derivative instruments
on the balance sheet at their fair value, with changes in fair
value recognized in earnings. In determining the fair value of
derivative instruments, management relies on quoted market
spread data as an input to its internal valuation model. The
valuation model considers among other things, the estimated
remaining premium to be earned, credit and change in credit
quality since inception, and the current market pricing of
credit default swaps in comparison to market pricing that was
applicable at the transaction inception. Different valuation
models may produce materially different results. The Company
reviews its valuation model from time to time and may make
enhancements as best-practices in the industry develop. Upon
occurrence of specific credit events such as default, an
appropriate case reserve is established and the obligation is no
longer marked to market.
(h)
Foreign Currency Translation
Financial statement accounts expressed in foreign currencies are
translated into U.S. dollars in accordance with
SFAS Statement 52, "Foreign Currency
Translation" ("SFAS 52"). Monetary assets
and liabilities denominated in foreign currencies are translated
at the rate in effect at the balance sheet date. Non monetary
assets and liabilities are translated at historical rates.
Foreign currency transaction gains and losses, arising primarily
from cash denominated in foreign currencies are reflected in net
income. The Company has recorded gains from such foreign
exchange items of $808,087, $564,135, and $106,328 in 2004,
2003, and 2002 respectively.
F-10
Table of Contents
RAM RE GROUP OF COMPANIES
Notes to Combined Financial
Statements — (Continued)
(i)
Stock compensation plans
The Company accounts for its stock compensation plans in
accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees."
Accordingly, compensation expense for stock option grants are
recognized to the extent that the fair value of the stock
exceeds the exercise price of the option at the measurement date.
(j)
Recent accounting pronouncements
In December 2004, the FASB issued a revision of FASB Statement
No. 123, Accounting for Stock Based Compensation. Under
FAS 123(R), companies will be required to expense the fair
vale of employee stock options and other forms of stock-based
compensation and to provide associated financial statement
disclosures. The Company currently accounts for stock-based
compensation under APB 25 and does not generally recognize
compensation expense for stock-based compensation. For
non-public companies, FAS 123(R) is effective for annual
reporting periods beginning after December 15, 2005. The
Company will apply this statement prospectively to new awards
and to awards modified, repurchased, or cancelled after the
effective date. The Company is currently evaluating the new
standard and completing its assessment of the impact of
FAS 123(R) and pending completion of that activity is
unable to estimate the effect of adoption on the Company's
results of operations and financial condition.
In December 2003, the FASB revised FASB Interpretation
No. 46 ("FIN 46") "Consolidation of
Variable Interest Entities" with FASB Interpretation
No. 46R ("FIN 46R"). The primary objectives
of FIN 46R are to provide guidance on the identification of
entities for which control is achieved through means other than
through voting rights ("variable interest entities" or
"VIEs") and how to determine when and which business
enterprise (the "primary beneficiary") should
consolidate the VIE. In addition, FIN 46R requires both the
primary beneficiary and all other enterprises with a significant
variable interest in a VIE to make additional disclosures. The
Company has determined that as of December 31, 2004 and
2003, it was not a primary beneficiary nor did it have a
significant variable interest in any VIEs.
(k)
Reclassifications
Certain reclassifications have been made to the prior
year's amounts to conform to the current year's
presentation.
(l)
Segment Information
The Company has one reportable segment, financial guaranty,
which provides financial guarantees for public finance,
structured finance and other obligations.
(m)
Reinsurance Transactions
The Company currently has no retrocession agreements with other
insurance companies.
3
PLEDGED ASSETS
As of December 31, 2004 and 2003, the Company had
$247,439,158 and $187,160,206, respectively, invested in trust
accounts for the benefit of ceding companies. Pursuant to the
terms of the reinsurance agreements with ceding companies, the
Company is required to secure its obligations with ceding
companies and may not withdraw funds from these trust accounts
without their express permission.
F-11
Table of Contents
RAM RE GROUP OF COMPANIES
Notes to Combined Financial
Statements — (Continued)
4
DERIVATIVE INSTRUMENTS
As of December 31, 2004, 2003, and 2002, included in the
Company's outstanding exposure are $2.2 billion,
$2.0 billion, and $1.2 billion, respectively, in
derivative instruments, primarily credit default swaps, that
have been fair valued under Statement of Financial Accounting
Standards No. 133. These derivative instruments have a
weighted average maturity of 10.9 years, 13.2 years,
and 6.1 years as of December 31, 2004, 2003, and 2002,
respectively. In accordance with predominant industry practice,
the Company believes that the most meaningful presentation of
the financial statement impact of these derivative instruments
is to record premiums as installments are received and changes
in fair value as incurred. Changes in fair value are recorded in
net unrealized gains (losses) on credit derivatives and in other
assets/liabilities. The estimated income statement impact of
derivative activity, by category, is as follows:
2004
2003
2002
Gross premiums written
$
2,324,752
$
2,049,368
$
1,252,436
Change in unearned premiums
21,243
(193,106
)
(131,163
)
Premiums earned
2,345,995
1,856,262
1,121,273
Acquisition expenses
(753,302
)
(777,875
)
(496,439
)
Net unrealized gains (losses) on credit derivatives
2,757,435
456,113
(613,281
)
Net income from derivative instruments
$
4,350,128
$
1,534,500
$
11,553
5
MAJOR CUSTOMERS
The Company derives the majority of its business from four
United States based primary financial guaranty insurance
companies namely MBIA Insurance Corp., Financial Security
Assurance Inc., Ambac Assurance Corp. and Financial Guaranty
Insurance Co. The four primary insurers accounted for 39%, 38%,
20%, and 1% in 2004, 35%, 36%, 26%, and 2% in 2003, and 18%,
46%, 28%, 8% in 2002 of gross premiums written. This customer
concentration results from the small number of primary insurance
companies that are licensed to write financial guaranty
insurance. The majority of the Company's gross premiums
written are derived from treaty agreements that are renewed on
an annual basis. Two of the four United States based primary
financial guaranty insurance companies are also related parties.
Descriptions of the relationships are discussed in Note 17
"Related party transactions."
6
EARNINGS PER SHARE
Basic earnings per share excludes dilution and is computed by
dividing net income available to common shareholders by the
weighted average number of common shares outstanding during the
period. Diluted earnings per share show the dilutive effect of
all stock options and other items outstanding during the period
that could potentially result in the issuance of common stock.
As of December 31, 2004, 2003 and 2002 there were 0, 0, and
16,518 stock options, respectively that were not included in the
diluted earnings per share calculation because they were
antidilutive.
F-12
Table of Contents
RAM RE GROUP OF COMPANIES
Notes to Combined Financial
Statements — (Continued)
The following table sets forth the computation of basic and
diluted earnings per share for the years ended December 31,
2004, 2003 and 2002:
2004
2003
2002
Net Income
$
24,734,145
$
21,210,356
$
14,251,598
Basic weighted-average shares
1,993,635
1,816,352
1,298,800
Effect of stock options
8,660
3,859
1,651
Diluted weighted-average shares
2,002,295
1,820,211
1,300,451
Basic EPS
$
12.41
11.68
10.97
Diluted EPS
$
12.35
11.65
10.96
7
INVESTMENTS
The amortized cost and fair value of investments at
December 31, 2004 and 2003 were as follows:
Gross
Gross
Amortized
Unrealized
Unrealized
Estimated Fair
Cost
Gains
Losses
Value
2004:
Fixed interest securities:
Agencies
$
51,964,943
$
31,689
$
354,171
$
51,642,461
U.S. government obligations
30,995,766
244,328
108,020
31,132,074
Corporate debt securities
146,049,031
2,615,933
1,975,975
146,688,989
Municipal securities
11,736,705
1,125,583
20,328
12,841,960
Mortgage and asset-backed securities
161,373,122
1,908,877
681,385
162,600,614
$
402,119,567
$
5,926,410
$
3,139,879
$
404,906,098
Gross
Gross
Amortized
Unrealized
Unrealized
Estimated Fair
Cost
Gains
Losses
Value
2003:
Fixed interest securities:
Agencies
$
11,901,853
$
75,793
$
—
$
11,977,646
U.S. government obligations
47,404,835
607,704
103,563
47,908,976
Corporate debt securities
89,712,550
2,522,010
1,530,445
90,704,115
Municipal securities
17,498,472
1,008,082
342,340
18,164,214
Mortgage and asset-backed securities
174,660,166
3,237,751
816,186
177,081,731
$
341,177,876
$
7,451,340
$
2,792,534
$
345,836,682
As a result of its obligation under a loss indemnity policy
entered into in the normal course of business, the Company
purchased a defaulted corporate debt security which it holds in
its investment portfolio as of December 31, 2004 and 2003,
at an amortized cost of $3,703,000. Since the bond also carries
with it a financial guaranty insurance policy issued by a
triple-A guarantor, the fair value of the bond is considered
equal to its amortized cost. The Company did not have an
aggregate investment in a single entity, other than the US
Government securities, in excess of 10% of total investments at
December 31, 2004 and 2003.
F-13
Table of Contents
RAM RE GROUP OF COMPANIES
Notes to Combined Financial
Statements — (Continued)
The investments that have unrealized loss positions as of
December 31, 2004 and 2003, aggregated by investment
category and the length of time they have been in a continued
unrealized loss position, are as follows:
Less Than 12 Months
12 Months or More
Total
Unrealized
Unrealized
Unrealized
Fair Value
Loss
Fair Value
Loss
Fair Value
Loss
Temporarily Impaired Securities
2004:
Fixed income securities
Agencies
$
38,238,803
$
354,171
$
—
$
—
$
38,238,803
$
354,171
U.S. government obligations
20,007,709
108,020
—
—
20,007,709
108,020
Corporate debt securities
86,184,344
1,358,813
25,369,296
617,162
111,553,640
1,975,975
Municipal securities
—
—
1,379,672
20,328
1,379,672
20,328
Mortgage and asset-backed securities
54,257,649
368,654
18,926,843
312,731
73,184,492
681,385
Total temporarily impaired securities
$
198,688,505
$
2,189,658
$
45,675,811
$
950,221
$
244,364,316
$
3,139,879
2003:
Fixed income securities
Agencies
$
—
$
—
$
—
$
—
$
—
$
—
U.S. government obligations
16,085,844
103,563
—
—
16,085,844
103,563
Corporate debt securities
58,500,618
1,530,445
—
—
58,500,618
1,530,445
Municipal securities
6,216,814
342,340
—
—
6,216,814
342,340
Mortgage and asset-backed securities
74,623,474
813,132
278,267
3,054
74,901,741
816,186
Total temporarily impaired securities
$
155,426,750
$
2,789,480
$
278,267
$
3,054
$
155,705,017
$
2,792,534
As of December 31, 2004 and 2003, 54 out of 114 securities
and 42 out of 105 securities, respectively, were in unrealized
loss positions. As of December 31, 2004, 18 securities with
total unrealized losses of $358,401 had continued losses for
6 months or less, 20 securities with total unrealized
losses of $1,831,257 had continued losses for 7 months to
12 months and 16 securities with an unrealized loss of
$950,221 had a continued loss for 12 months or more. As of
December 31, 2003, all 32 securities with unrealized loss
positions totalling $1,952,794 had continued unrealized loss
positions for 6 months or less. 9 securities with total
unrealized losses of $836,686 had continued losses for
7 months to 12 months and 1 security with an
unrealized loss of $3,054 had a continued loss for
12 months or more. The unrealized losses as of
December 31, 2004 are attributed to the current interest
rate environment and the Company believes the impairments to be
temporary.
F-14
Table of Contents
RAM RE GROUP OF COMPANIES
Notes to Combined Financial
Statements — (Continued)
The amortized cost and estimated fair value of fixed interest
securities classified as available for sale as of
December 31, 2004, by contractual maturity, are shown
below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or repay
obligations with or without call or prepayment penalties.
Amortized
Estimated Fair
Cost
Value
2004
Less than one year
$
—
$
—
Due after one year through five years
182,156,316
181,709,468
Due after five years through ten years
60,387,309
60,519,395
Due after ten years
159,575,942
162,677,235
$
402,119,567
$
404,906,098
Proceeds from maturities and sales of investments in fixed
interest securities available for sale during 2004, 2003, and
2002 were $162,205,186, $188,869,237, and $132,512,309
respectively. Gross gains of $1,128,642, $4,011,321, and
$3,342,148 in 2004, 2003, and 2002, respectively, and gross
losses of $592,960, $2,914,277, and $414,949 in 2004, 2003, and
2002, respectively, were realized on those sales.
Major categories of net investment income are summarized as
follows:
2004
2003
2002
Interest from debt securities and cash equivalents
$
16,846,971
$
13,508,223
$
11,940,991
Net foreign exchange gains
808,087
564,135
106,328
Interest income — shareholder loan
10,214
9,984
40,324
Investment expense
(841,185
)
(709,393
)
(541,323
)
Net investment income
$
16,824,087
$
13,372,949
$
11,546,320
8
CONTINGENT CAPITAL AND CREDIT FACILITIES
As of December 31, 2004 and 2003 the Company maintained a
$90,000,000 credit facility with major commercial banks. The
facility may be drawn upon by the Company if cumulative losses
exceed certain minimum thresholds in respect of public finance
bonds and, in a limited capacity, asset-backed securities
reinsured by the Company. Loan obligations under this facility
have limited recourse and would be repayable from, and
collateralized by, a pledge of recoveries realized on defaulted
reinsured obligations covered by the facility, including certain
instalment premiums and other collateral. The facility, which
contains an annual renewal provision subject to approval by the
banks, has a seven-year term ending on May 11, 2011. As of
December 31, 2004 and 2003, no amounts were outstanding
under this facility.
On December 23, 2003, RAM Re entered into a contingent
capital facility whereby it was granted the right to exercise
perpetual put options in respect of its Class B preference
shares against the counterparty to the option agreement, in
return for which it pays the counterparty a monthly floating put
option fee. The counterparty is a trust established by an
investment bank. The trust was created as a vehicle for
providing capital support to RAM Re by allowing it to obtain, at
its discretion and subject to the terms of the option agreement,
access to new capital through the exercise of a put option and
the subsequent purchase by the trust of RAM Re preference
shares. The rights of the holders of the preference shares are
subordinate to those of ceding companies under reinsurance
contracts. The put agreement has no scheduled termination date
or maturity, but will be terminated if RAM Re takes certain
actions as specified in the operative facility documents. RAM Re
has the option to redeem the Class B preference shares
issued upon exercise of its put option, subject to certain
specified terms and conditions. If the put
F-15
Table of Contents
RAM RE GROUP OF COMPANIES
Notes to Combined Financial
Statements — (Continued)
option is exercised in full, RAM Re would receive up to
$50,000,000 in connection with the issuance of the preference
shares, the proceeds of which may be used for any purpose
including the payment of claims. To fund the purchase of
preference shares upon exercise of the put option by RAM Re, the
trust issued $50,000,000 of its own auction market perpetual
preferred securities which are rated "A+" by
Standard & Poor's and "A2" by
Moody's. The proceeds of this issuance are held by the
trust in certain high quality, short-term commercial paper
investments. As of December 31, 2004, the perpetual put
options have not been exercised. Expenses of $611,644 and
$1,184,094 relating to the establishment and operation of the
facility for the years ended December 31, 2004 and 2003,
respectively, have been charged directly to additional paid-in
capital.
9
FAIR VALUES OF FINANCIAL INSTRUMENTS
Management has estimated the fair value of certain financial
instruments based upon market information using appropriate
valuation methodologies. The estimates presented herein are not
necessarily indicative of the amounts the Company could realize
in a current market exchange. The fair values of investments are
based on quoted market prices or dealer quotes. The carrying
amounts of cash and cash equivalents, interest and premiums
receivable, other assets, accounts payable and accrued
liabilities and other liabilities are considered reasonable
estimates of their fair values.
F-16
Table of Contents
RAM RE GROUP OF COMPANIES
Notes to Combined Financial
Statements — (Continued)
10
LOSSES AND LOSS EXPENSE RESERVE
The Company's liability for losses and loss adjustment
expenses consists of case basis loss reserves and an unallocated
reserve. Movement in the provision for losses and loss
adjustment expenses is summarized as follows:
2004
2003
2002
Case basis loss reserves:
Balance — Beginning of year
$
2,967,532
$
2,260,819
$
84,033
Less: Recoverables on paid losses
(1,641,375
)
(1,659,515
)
—
Net balance — Beginning of year
1,326,157
601,304
84,033
Incurred related to:
Current year
—
—
—
Prior years
4,089,754
1,280,282
2,605,101
Total incurred
4,089,754
1,280,282
2,605,101
Net losses paid related to:
Current year
—
—
—
Prior years
1,434,288
555,429
2,087,830
Total paid
1,434,288
555,429
2,087,830
Net balance — End of year
3,981,623
1,326,157
601,304
Add: Recoverables on paid losses
1,167,575
1,641,375
1,659,515
Balance — End of year
5,149,198
2,967,532
2,260,819
Unallocated loss reserve:
Balance — Beginning of year
10,853,931
8,139,907
4,298,012
Net provision for losses
2,075,479
3,420,738
3,841,895
Transfers to case reserves
(2,585,882
)
(706,714
)
—
Balance — End of year
10,343,528
10,853,931
8,139,907
Total losses and loss adjustment expenses
$
15,492,726
$
13,821,463
$
10,400,726
Incurred case basis reserves of $4,089,754 in 2004, $1,280,282
in 2003, and $2,605,101 in 2002 represent the Company's
proportionate share of losses established by ceding companies
and are based on notification by ceding companies and the
judgment of management. The net unallocated reserve increases of
$2,075,479 in 2004, $3,420,738 in 2003, and $3,841,895 in 2002
are due primarily to increased exposures reinsured by the
Company in the ordinary course of business.
As of December 31, 2004, 2003, and 2002, recoverables on
paid losses included $1,025,373, $1,515,827, and $1,652,723,
respectively, in collateral certificates purchased by MBIA (see
Note 17 "Related party transactions") in a
foreclosure on assets underlying certain insured equipment trust
lease obligations reinsured by the Company. The recoverable is
recorded at its estimated fair value based on the estimated
present value of lease payments over an average of
27 months, 39 months, and 48 months as of
December 31, 2004, 2003, and 2002, respectively, and the
estimated present value of the recovery value of the underlying
assets. There are no assurances that the ultimate value received
or recovered will not be materially different than the estimated
fair value. As of December 31, 2004, the difference between
the paid loss less lease payments received to date of $1,526,606
and the estimated fair value of $1,025,373 is $501,233. As of
December 31, 2003, the difference between the paid loss of
$1,697,268 and the estimated fair value of $1,515,827 is
$181,441. As of December 31, 2002, the difference between
the paid loss of $1,989,761 and the estimated fair value of
$1,652,723 is $337,038. This change in fair value for the year
F-17
Table of Contents
RAM RE GROUP OF COMPANIES
Notes to Combined Financial
Statements — (Continued)
ended December 31, 2004, 2003, and 2002, respectively, has
been recorded as part of losses and loss adjustment expenses on
the income statement.
In 2000, the Company entered into a loss indemnity policy with
one of its customers insuring the liquidity risk on a portfolio
of synthetic collateralized bond obligations. Loss exposure
under the indemnity policy is limited to $30 million in the
aggregate and $10 million per reference obligation once
total losses in the portfolio exceed $30 million. The
Company's exposure under this policy is fully insured by a
triple-A rated financial guarantor. The financial guaranty
insurance policy guarantees the principal and interest payments
on a defaulted reference obligation in accordance with its debt
service schedule. Since the Company is fully insured for all
obligations under the loss indemnity policy and the numbers are
not considered significant to either the balance sheet or the
income statement, gross premiums written, losses and loss
adjustment expenses and net realized gains (losses) on credit
derivatives have been recorded on a net basis in the financial
statements. As of December 31, 2004 and 2003, one defaulted
bond had been purchased by the Company pursuant to its
obligation under the loss indemnity policy as total losses in
the portfolio exceeded $30 million. The bond has been
classified as an available for sale investment and is disclosed
in Note 7 to these financial statements.
11
OUTSTANDING EXPOSURE
Financial guarantees are unconditional commitments that guaranty
the performance of obligations under a debt service schedule.
The Company's potential liability in the event of
non-performance by the issuer of the reinsured obligation is
represented by its proportionate share of the aggregate
outstanding principal and interest payable on such insured
obligation. As of December 31, 2004 and 2003, the
Company's outstanding principal reinsured was
$22.2 billion and $19.8 billion, respectively. If a
primary financial guaranty insurance company pays a claim and
has recourse through subrogation rights, the Company would
benefit based on its proportionate share of risk.
Outstanding principal reinsured as of December 31, 2004 and
2003 by credit sector was (in billions):
2004
2003
Asset-backed securities
$
7.1
$
6.5
General obligation and lease
5.0
4.1
Transportation
2.8
2.6
Municipal utilities
2.7
2.3
Healthcare
1.6
1.4
Sales and excise tax
1.4
1.3
Investor-owned utilities
0.7
0.5
Other
0.9
1.1
$
22.2
$
19.8
F-18
Table of Contents
RAM RE GROUP OF COMPANIES
Notes to Combined Financial
Statements — (Continued)
Outstanding principal reinsured at December 31, 2004 and
2003 by geographic location was (in billions):
2004
2003
Multi-state
$
5.1
$
3.6
International
4.1
3.6
California
1.8
1.6
New York
1.3
1.2
Florida
1.0
0.9
Texas
0.9
0.9
Other U.S. states
8.0
8.0
$
22.2
$
19.8
The Company controls its exposure to credit risk through risk
management guidelines, the objectives of which are to ensure
that the Company maintains a reinsured portfolio that is of high
quality and is sufficiently diversified to protect the Company
from unexpected severe deterioration in any particular credit
sector or geographic location.
12
PENSION AND PROFIT PARTICIPATION PLANS
The Company maintains qualified and non-qualified,
non-contributory, defined contribution pension plans for the
benefit of eligible employees. These plans are administered by a
third party. The Company's contributions are based upon a
fixed percentage of employee compensation. Pension expense,
which is funded as accrued, for the years ended
December 31, 2004, 2003, and 2002 was $628,921, $356,030,
and $286,456, respectively.
The Company maintains a closed profit participation plan that
provides for awards comprised of a cash payment based on the
Company exceeding minimum performance hurdles preceding a
liquidity event. A liquidity event is defined under the plan to
be a stock or asset sale, an initial public offering, an
incremental dividend or a common stock distribution to an
investor. There is only one participant in this plan. As of
December 31, 2004, 2003 and 2002, the Company had not
exceeded the minimum performance hurdles and as a result no
accrual for incentive compensation under this plan has been made.
F-19
Table of Contents
RAM RE GROUP OF COMPANIES
Notes to Combined Financial
Statements — (Continued)
13
STOCK OPTION PLAN
On March 13, 2001, the Company adopted a Stock Option Plan
for Management Employees to enable key employees to acquire
common shares of Holdings II. Options granted under the
plan generally have a per share exercise price not less than the
estimated fair value of the underlying common stock as
determined at the time of grant and a term not to exceed
10 years. As of December 31, 2004 and 2003, 108,340
and 92,340 options, were granted and unexercised. The options
are exercisable once vested. The typical vesting period is
5 years, or 5% per quarter. A summary of the
Company's stock option plan as of December 31, 2004
and 2003 is as follows:
2004
2003
Weighted
Weighted
Number of
Average Exercise
Number of
Average Exercise
Shares
Price Per Share
Shares
Price Per Share
Options
Outstanding — Beginning of year
92,340
$
136.88
67,340
$
135.99
Purchased from employee
(3,000
)
130.33
—
—
Forfeited
(3,000
)
130.33
—
—
Granted during the year
22,000
145.60
25,000
139.26
Outstanding — End of year
108,340
139.01
92,340
136.88
Exercisable — End of year
71,326
137.25
48,040
134.24
Weighted average fair value per share of options granted during
    the year
145.60
139.26
As of December 31, 2004, exercise prices range from $126.15
to $154.24 and the weighted average remaining contractual life
of the options is 8 years. During 2004 the Company
purchased from employees 3,000 options that were fully vested at
an expense of $87,950.
The Company applies Accounting Principles Board Opinion
("APB") No. 25 and related Interpretations in
accounting for its stock-based plans. During 2003, compensation
expense of $362,361 was recognized and has been recorded as a
reduction in additional paid-in capital. The expense was
incurred when 25,000 options were issued with an exercise price
less than the estimated fair value of the Company's common
stock on the grant date and 16,518 options previously granted
had a reduction in their exercise price. For the remaining
options outstanding, since the fair value of the options on the
grant dates were not less than the estimated fair value of the
Company's common stock, the Company has not recognized
compensation expense. Under Statement of Financial Accounting
Standards No. 123, the Company would have reported
additional compensation expense of $453,928, $164,223, and
$896,034 and pro forma net income of $24,280,217, $21,046,133,
and $13,355,564 for the years ending December 31, 2004,
2003, and 2002, respectively.
The fair value of each option was determined using the minimum
value method, which is applicable for private companies. This
method excludes the expected volatility of a company's
stock. In estimating the fair value of options, the Company made
the following assumptions: i) dividend yield was zero; ii)
weighted average risk-free interest rate was 3.8% and 4.0% as of
December 31, 2004 and December 31, 2003, respectively;
and iii) expected average life was 3.0 years and
2.7 years as of December 31, 2004 and
December 31, 2003.
14
CONTINGENT SHARE PLAN
On March 13, 2001, the Company entered into Contingent
Share Agreements (the "Agreements") to enable three
management employees to benefit in the event they left the
Company and a liquidity event
F-20
Table of Contents
RAM RE GROUP OF COMPANIES
Notes to Combined Financial
Statements — (Continued)
occurred. The contingent share plan requires that the employees
let their regular stock options (see note 13) expire
unexercised. The employees can exercise either their regular
stock options or the contingent share plan, but not both.
Together the plans are a tandem plan where exercise of one
component cancels the other.
If the employees leave the Company and let their regular stock
options expire, one year after their termination date
("Anniversary Date") and ending no later than
February 11, 2007 (subsequently amended February 9,
2005 to end no later than February 11, 2009), the employees
covered by the Agreements have the right to receive a cash
payment upon the occurrence of certain events specified in the
Agreements. If such certain events do not occur, then the
employees have the right to purchase contingent shares of
Holdings II. Contingent shares purchased under these
Agreements carry liquidity rights in certain situations such as
an initial public offering of common shares of the Company or a
change in control as defined in the Agreements.
The number of contingent shares is based on the number of
exercisable options that terminated under the Company's
Stock Option Plan (note 13) multiplied by the proportionate
growth in adjusted book value from the grant date to the
Anniversary Date. The number of contingent shares granted is
determined on the Anniversary Date. The contingent share price
is determined at the time of grant and may not be less than the
estimated fair value of the Company's common stock at the
time of grant.
As of December 31, 2004 and 2003, management was not able
to reasonably estimate the assumptions as to when an employee
might terminate, which plan they would choose to exercise, the
likelihood and timing of certain specified future events, the
ultimate number of contingent shares that may be issued, and
whether there would be a cash payment or the contingent share
options would be exercised.
15
COMMITMENTS AND CONTINGENCIES
During 2004, the Company renewed its agreement to lease office
space for the 2005 calendar year. As of December 31, 2004,
the future minimum commitment under the lease, with three years
remaining, is $323,595 per year. Rental expense for the
aforementioned lease amounted to $314,415 in 2004, $291,465 in
both 2003 and 2002.
A downgrade of RAM Re's ratings would have a material
adverse affect on RAM Re's ability to compete in the
financial guaranty reinsurance industry and significantly
decrease the value of the reinsurance provided. As at
December 31, 2004, the Company's financial strength
and financial enhancement ratings are "Aa3" by
Moody's and its financial strength rating is
"AAA" by Standard & Poor's, both with a
stable outlook. A downgrade of these ratings would negatively
affect the value of RAM Re's reinsurance. Under the current
guidelines for assigning credit to reinsurance, if
Standard & Poor's were to downgrade RAM Re's
rating from "AAA" to "AA," there would be an
immediate 30% decrease in the benefits financial guarantors
receive from ceding business to RAM Re based on
Standard & Poor's model. In addition to potential
negative effects on future business, a downgrade of RAM
Re's rating would cause its competitive position in the
reinsurance industry to suffer. If RAM Re experienced a rating
downgrade, the ceding companies would have the ability under the
reinsurance contracts to either reprice existing business via
increases in the ceding commissions charged or recapture
existing business. A downgrade of RAM Re's ratings, or the
placing of RAM Re's ratings on credit watch or under review
for a ratings downgrade, would also negatively affect its
ability to negotiate favourable terms with ceding companies on a
going-forward basis.
The Company settled its dispute with the former President and
CEO of RAM Re. The settlement amount expensed in 2004 was
$843,256 and there is no further liability.
A discussion of additional contingencies is in Note 14
"Contingent Share plan."
F-21
Table of Contents
RAM RE GROUP OF COMPANIES
Notes to Combined Financial
Statements — (Continued)
16
LONG-TERM DEBT
On March 26, 2004 RAM Holdings Ltd. issued $40,000,000 of
unsecured senior notes (the "Notes") to a qualified
institutional buyer as defined in Rule 144A of the
Securities Act. The term of the Notes is 20 years with the
full principal amount due at maturity. RAM Holdings II Ltd.
has provided an unconditional guarantee of all amounts due with
respect to the Notes. The Notes rank pari passu in right of
repayment with RAM Holding Ltd.'s other unsecured senior
debt. The net proceeds from the Notes have been used to provide
capital for RAM Reinsurance Company Ltd.
The applicable interest rate is 6.875% and is payable
semi-annually. The Notes are subject to redemption at the option
of RAM Holdings Ltd., in whole or in part at any time upon
30 days advance notice by paying principal, accrued
interest and the Make Whole Amount. There are no financial
covenants in place. As of December 31, 2004 interest
expense amounting to $2,106,345 has been recorded.
17
RELATED PARTY TRANSACTIONS
As of December 31, 2004 and 2003, the Company had a loan to
a shareholder, who is also a current employee, in the amount of
$100,000. The loan is repayable to the Company on the occurrence
of a liquidity event. The note bears interest at the rate of:
(1) prior to April 1, 2003, the greater of 8.5%, or
the applicable U.S. federal mid-term rate at the date of
the loan agreement and (2) on and after April 1, 2003,
the prime rate plus 2.0%. The loan to shareholder has been
recorded as a reduction to additional paid-in capital.
Interest earned in 2004, 2003, and 2002 from shareholder loans
was $10,214, $9,984, and $40,324, respectively, and has been
included in net investment income.
MBIA Insurance Corporation ("MBIA"), one of the four
United States based primary financial guaranty insurance
companies ceding business to the Company, invested
$25.4 million in the April 3, 2003 private offering of
common shares of Holdings and Holdings II. The shares were
issued at $111.41. As of December 31, 2004, MBIA owned
11.4% of the aggregate issued and outstanding common shares of
Holdings and Holdings II. The Company has engaged MBIA
Capital Management Corp. ("MBIA Capital"), a wholly
owned subsidiary of the parent company of MBIA, to provide the
Company with investment advisory and management services. An
amount of $751,672 and $452,458 was incurred in fees for the
years ended December 31, 2004 and 2003 to MBIA Capital for
these services and had been recorded in net investment income on
the income statement. The amount due to MBIA Capital as of
December 31, 2004 and 2003 was $195,122 and $174,924,
respectively, and has been included in accounts payable and
accrued liabilities. In the ordinary course of business, the
Company has also entered into reinsurance agreements with MBIA.
In 2004 and 2003, gross written premiums ceded from MBIA
accounted for 39% and 35% of total gross premiums written,
respectively. Amounts due from MBIA as of December 31, 2004
and 2003 were $nil and $4,524,163, respectively, and has been
included in premiums receivable. Case reserves/(recoverables)
established on transactions ceded from MBIA as of
December 31, 2004 and 2003 were ($63,157) and $443,242,
respectively. Reinsurance recoverables on paid losses on
transactions ceded from MBIA as of December 31, 2004 and
2003 were $1,025,372 and $1,641,374, respectively.
In December 2003, two shareholders, who together own 37.93% of
the aggregate issued and outstanding common shares of Holdings
and Holdings II, became investors in FGIC Corporation, an
insurance holding company whose subsidiary Financial Guaranty
Insurance Company ("FGIC") is one of the four largest
United States based primary financial guaranty insurance
companies. In the ordinary course of business, the Company has
entered into reinsurance agreements with FGIC. In 2004 and 2003,
gross written premiums ceded from FGIC accounted for 1% and 2%
of total gross premiums written by
F-22
Table of Contents
RAM RE GROUP OF COMPANIES
Notes to Combined Financial
Statements — (Continued)
the Company, respectively. Amounts due from FGIC as of
December 31, 2004 and 2003 were $5,318 and $32,438,
respectively, and have been included in premiums receivable.
18
SHARE CAPITAL
Holdings is authorized to issue 2,000,000 common shares at a par
value of $1 per share, of which 107,448 shares were
issued and outstanding as of December 31, 2004 and 2003.
Holdings II is authorized to issue 2,500,000 common shares
at a par value of $1 per share, of which
1,886,187 shares were issued and outstanding as of
December 31, 2004 and 2003.
On April 3, 2003, 19,258 shares of Holdings and
684,092 shares of Holdings II were issued in
connection with a private placement of equity for proceeds of
$91,606,203. Shares issued to MBIA (See Note 17
"Related party transactions") were issued at $111.41
and shares issued to certain existing shareholders were issued
at $139.26. In contemplation of the issuance of additional
common shares, the Company increased its authorized shares in
Holdings II to 2,500,000 from 1,500,000 on April 2,
2003. Costs incurred of $1,886,308 directly relating to the
issuance of capital have been charged directly to
shareholders' equity upon closing of the transaction.
In January 2002, 8,052 shares of Holdings II were
redeemed from a former shareholder for $1,056,221 and
3,506 shares of Holdings II were sold by one
shareholder to another in exchange for a promissory note.
Holdings II then redeemed these shares in February 2002 for
$488,806 and the promissory note was cancelled.
In June 2002, 12,818 shares of Holdings were redeemed from
two former shareholders for $1,820,284. In connection with the
repurchase, current shareholders of Holdings and
Holdings II redeemed 15,405 shares of Holdings II
and purchased 15,405 shares of Holdings for $2,187,664 and
4,275 shares of Holdings were redeemed for $607,093.
19
TAXATION
The Company has received an undertaking from the Bermuda
government exempting it from all local income, withholding and
capital gains taxes until March 28, 2016. At the present
time no such taxes are levied in Bermuda.
20
STATUTORY REQUIREMENTS
RAM Re is registered under the Bermuda Insurance Act 1978,
amendments thereto and related Regulations (the
"Act"), which require that they maintain minimum
levels of solvency and liquidity. For the years ended
December 31, 2004 and 2003 these requirements have been
met. The minimum required statutory capital and surplus was
$10.2 million and $10.5 million and actual statutory
capital and surplus was $286.4 million and
$233.4 million as of December 31, 2004 and 2003,
respectively. The minimum required level of liquid assets was
$120.5 million and $103.1 million and actual liquid
assets were $446.9 million and $370.8 million as of
December 31, 2004 and 2003, respectively.
The Act limits the maximum amount of the annual dividends paid
by RAM Reinsurance without notification to, and in certain cases
the approval of, the Bermuda Monetary Authority of such payment.
The maximum amount of dividends that could be paid by RAM
Reinsurance, without such notification, was $37.8 million
and $32.0 million as at December 31, 2004 and 2003,
respectively.
Statutory financial statements prepared under the Act differ
from financial statements prepared in accordance with US GAAP
due to the exclusion of non-admitted assets such as deferred
policy acquisition costs, prepaid expenses and the fair value
adjustment of derivative instruments.
F-23
Table of Contents
RAM Re Group of Companies
Condensed Combined Balance Sheet
(Unaudited)
As of September 30, 2005 and December 31st, 2004
September 30,
December 31,
2005
2004
Assets
Cash and cash equivalents
$
3,441,945
$
36,086,774
Investments, at fair value (amortized cost: September 30,
    2005 — $464,704,855; December 31,
    2004 — $402,119,567)
461,751,233
404,906,098
Accrued interest receivable
3,424,473
4,002,811
Premiums receivable
3,588,169
1,983,149
Recoverable on paid losses
1,173,419
1,167,575
Deferred policy acquisition costs
65,776,692
58,652,627
Fixed assets
143,232
188,218
Deferred expenses
869,792
930,826
Prepaid expenses
407,219
158,891
Other assets
172,784
2,721,058
Total assets
540,748,958
510,798,027
Liabilities and Shareholders' Equity
Losses and loss adjustment expenses
12,273,579
15,492,726
Unearned premiums
163,837,242
140,042,526
Accounts payable and accrued liabilities
2,534,148
2,995,969
Unsecured senior notes
40,000,000
40,000,000
Accrued interest payable
—
693,151
Share based compensation liability
2,801,535
—
Other liabilities
—
68,161
Total liabilities
221,446,504
199,292,533
Shareholders' Equity
Share capital: $1 par value; authorized
    4,500,000 shares (September 30, 2005 —
    4,500,000 shares); issued and outstanding 1,991,135
    (December 31, 2004 — 1,993,635)
1,991,135
1,993,635
Additional paid-in capital
211,816,828
212,572,647
Accumulated other comprehensive income
(2,953,623
)
2,786,531
Retained earnings
108,448,114
94,152,681
Total shareholders' equity
319,302,454
311,505,494
Total liabilities and shareholders' equity
540,748,958
510,798,027
See accompanying Notes to Condensed Combined Financial Statements
F-24
Table of Contents
RAM Re Group of Companies
Condensed Combined Statements of Income
(Unaudited)
Nine Months Ended September 30,
2005
2004
Revenues
Gross premiums written
$
55,219,997
$
48,212,116
Change in unearned premiums
(23,794,716
)
(20,861,080
)
Premiums earned
31,425,281
27,351,036
Net investment income
12,863,911
12,006,080
Net realized gains (losses) on sale of investments
(1,137,349
)
560,163
Net unrealized gains (losses) on credit derivatives
(2,543,581
)
2,190,051
Total revenues
40,608,262
42,107,330
Expenses
Losses and loss adjustment expenses
3,103,622
2,461,594
Acquisition expenses
11,570,983
10,229,355
Operating expenses
9,391,131
8,174,352
Interest expense
2,056,849
1,413,194
Total expenses
26,122,585
22,278,495
Net income for the period
14,485,677
19,828,835
See accompanying Notes to Condensed Combined Financial Statements
F-25
Table of Contents
RAM Re Group of Companies
Condensed Combined Statement of Shareholders' Equity and
Retained Earnings
(Unaudited)
For the Nine Months Ended September 30, 2005 and 2004
Accumulated Other
Additional Paid-
Comprehensive
Retained
Share Capital
In Capital
Income
Earnings
Total
Balance, December 31, 2003
$
1,993,635
$
213,184,291
$
4,658,806
$
69,418,536
$
289,255,268
Committed preferred shares expenses
(424,855
)
(424,855
)
Net income
19,828,835
19,828,835
Other comprehensive income
Unrealized gain (loss) on securities
(1,151,872
)
(1,151,872
)
Balance, September 30, 2004
1,993,635
212,759,436
3,506,934
89,247,371
307,507,376
Balance, December 31, 2004
1,993,635
212,572,647
2,786,531
94,152,681
311,505,494
Issue/(redemption) of share capital
(2,500
)
(147,500
)
—
(190,244
)
(340,244
)
Committed preferred shares expenses
—
(449,862
)
—
—
(449,862
)
Non-cash compensation
—
(158,457
)
—
—
(158,457
)
Net income
—
—
—
14,485,677
14,485,677
Other comprehensive income
Unrealized gain (loss) on securities
—
—
(5,740,154
)
—
(5,740,154
)
Balance, September 30, 2005
1,991,135
211,816,828
(2,953,623
)
108,448,114
319,302,454
See accompanying Notes to Condensed Combined Financial Statements
F-26
Table of Contents
RAM Re Group of Companies
Condensed Combined Statements of Cash Flows
(Unaudited)
For the Nine Months Ended September 30, 2005 and 2004
2005
2004
Cash flows from operating activities:
Net Income
$
14,485,677
$
19,828,835
Adjustments to reconcile net income to net cash provided by
    operating activities:
Net realized investment gains
1,137,349
(560,163
)
Net unrealized (gains) losses on credit derivatives
2,543,581
(2,190,051
)
Depreciation and amortization
131,328
198,352
Amortization of bond premium and discount
(239,206
)
1,992,821
Non-cash compensation
178,411
—
Amortization of debt discount
4,690
3,230
Accrued interest receivable
578,338
337,564
Prepaid expenses
(248,328
)
(164,295
)
Premiums receivable
(1,605,020
)
8,511,529
Recoverable on paid losses
(5,844
)
195,785
Deferred acquisition costs
(7,124,065
)
(2,864,192
)
Deferred expenses
61,034
(1,281,078
)
Other liabilities
(68,161
)
—
Loss and loss adjustment expenses
(3,219,147
)
1,202,036
Unearned premiums
23,794,716
9,385,301
Accounts payable and accrued liabilities
(461,821
)
(35,530
)
Shared based compensation liability
2,801,535
—
Accrued interest payable
(693,150
)
—
Net cash provided by operating activities
32,051,917
34,560,144
Cash flows from investing activities:
Proceeds on sales and maturities of investments
113,994,665
195,001,063
Purchases of investments
(177,875,995
)
(254,106,653
)
Purchase of fixed assets
(25,310
)
(102,747
)
Net cash used in investing activities
(63,906,640
)
(59,208,337
)
Cash flows from financing activities:
Proceeds from issuance of debt facility
—
38,874,400
Shares issued (redeemed)
(340,244
)
—
Committed preferred shares expenses
(449,862
)
(424,855
)
Net cash used in financing activities
(790,106
)
39,449,545
Net (decrease)/increase in cash and cash equivalents
(32,644,829
)
14,801,352
Cash and cash equivalents, beginning of period
36,086,774
11,096,199
Cash and cash equivalents, end of period
3,441,945
25,897,551
See accompanying Notes to Condensed Combined Financial Statements
F-27
Table of Contents
RAM Re Group of Companies
Notes to the Unaudited Condensed Combined Financial
Statements
For the nine month periods ended September 30, 2005 and
September 30, 2004
1.
Background
RAM Holdings Ltd. ("Holdings"), RAM Holdings II
Ltd. ("Holdings II"), and RAM Reinsurance Company
Ltd. ("RAM Re") (collectively "the Company"
or "the RAM Re Group of Companies") were incorporated
on January 28, 1998 under the laws of Bermuda. Holdings
owns 100% of the voting shares of RAM Re and Holdings II
owns 100% of the non-voting shares of RAM Re. There are
overlapping investor interests in the shares of Holdings and
Holdings II and the economic interest of each investor is
determined based on each investor's combined interest in
both holding companies.
RAM Re's principal activity is the reinsurance of financial
guarantees of public finance and asset-backed debt obligations
insured by the triple-A rated monoline financial guaranty
companies. The Company provides reinsurance through treaty and
facultative agreements that it maintains with each of its
customers. Financial guaranty reinsurance written by RAM Re
generally provides for guarantees of scheduled principal and
interest payments on an issuer's obligation in accordance
with the obligation's original payment schedule and, in
rare circumstances, such amounts are payable on an accelerated
basis.
2.
Basis of Preparation
The September 30, 2005 unaudited condensed combined
financial statements do not include all of the information and
disclosures required by accounting principles generally accepted
in the United States of America ("US GAAP"). These
statements should be read in conjunction with the combined
financial statements and notes for the year ended
December 31, 2004 for RAM Re Group of Companies. The
September 30, 2005 condensed combined financial statements
are unaudited. In the opinion of management, the financial
statements represent a fair statement of the Company's
financial position and results of operations. The preparation of
financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements
and the reported revenues and expenses during the reporting
period. Actual results may differ from those estimates. The
results of operations for the nine months ending
September 30, 2005 may not be indicative of the results
that may be expected for the year ended December 31, 2005.
The December 31, 2004 balance sheet, included in these
statements, was derived from audited financial statements, but
does not include all the disclosures required by GAAP.
3.
Basis of Combination
The combined financial statements include the consolidated
accounts of Holdings and the accounts of Holdings II as
this presentation is considered most meaningful to the
shareholders. The consolidated accounts of Holdings include
those of its subsidiary RAM Re. Holdings and Holdings II
have common shareholders and are under common management.
Intercompany balances and transactions have been eliminated in
combination. Results are not consolidated due to the ownership
structure of the Company. There are no significant differences
between financial statements prepared on a combined basis and
those which would be prepared on a consolidated basis.
4.
Loss and Loss Adjustment Expenses
During the nine months ended September 30, 2005, the
Company paid a loss of $6 million on a reinsured
obligation. As of December 31, 2004, the Company had
established a case reserve of $4.1M, thus the incremental
incurred loss related to this claim was $1.9M for 2005. Based on
available information as of September 30, 2005, there are
no further case reserves nor amounts recoverable for this
obligation.
F-28
Table of Contents
RAM Re Group of Companies
Notes to the Unaudited Condensed Combined Financial
Statements
For the nine month periods ended September 30, 2005 and
September 30, 2004 — (Continued)
The Company has exposures in its insured portfolio related to
regions impacted by hurricanes Katrina, Rita and Wilma. The
Company is continuing to assess its exposure in concert with
ceding companies to evaluate the actual and potential impact
that the hurricanes may have on its insured credits. Based on
available information, the Company does not currently expect
there to be material cases of prolonged non-payment that would
result in unreimbursed losses. As a result, during the third
quarter of 2005, RAM Re did not establish case reserves for its
exposure to the regions impacted. To date, RAM Re has paid $13
thousand in claim payments that are expected to be reimbursed.
In 2000, the Company entered into a loss indemnity policy with
one of its customers insuring the liquidity risk on a portfolio
of synthetic collateralized bond obligations. During August
2005, a default resolution was entered, and the Company received
the full par value of the bond $3,703,000, as well as all
interest accrued to the date of default. Loss exposure under the
indemnity policy was limited to $30 million in the
aggregate and $10 million per reference obligation. The
Company's exposure under this policy was fully insured by a
triple-A rated financial guarantor.
5.
Derivative instruments
The Company has reinsured derivative instruments, consisting
primarily of credit default swaps that it intends to reinsure
for the full term of the contract. Management considers these
derivative instruments to be a normal extension of its financial
guaranty reinsurance business. All derivative instruments are
recognized on the balance sheet at their fair value, and changes
in fair value are recognized in earnings. In determining the
fair value of derivative instruments, management relies on
quoted market spread data as an input to its internal valuation
model. The valuation model considers among other things, the
estimated remaining premium to be earned, the duration of the
policy, the credit and change in credit quality since inception,
and the current market pricing of credit default swaps in
comparison to market pricing that was applicable at the
transaction inception. Different valuation models may produce
materially different results. The Company reviews its valuation
model from time to time and may make enhancements as
best-practices in the industry develop. Upon occurrence of
specific credit events such as default, an appropriate case
reserve is established and the obligation is no longer marked to
market.
6.
Recent Accounting Pronouncements
(a)
FASB Review
In January and February of 2005, the SEC discussed with the
financial guaranty industry participants the diversity in
practice with respect to their accounting policies for loss
reserves. In June 2005, the FASB added a project to its agenda
to consider the accounting by financial guaranty insurers for
claims liability recognition, premium recognition and deferred
acquisition costs. The proposed and final documents are expected
to be issued in 2006. When the FASB issues authoritative
guidance on this matter, RAM Re and the rest of the financial
guaranty industry may be required to change some aspects of
their loss reserving policies and the potential changes could
extend to premium and expense recognition. RAM Re cannot predict
how the FASB will resolve this issue and the resulting impact on
the Company's financial statements. Until the authoritative
guidance is issued, RAM Re intends to continue to apply its
existing policy with respect to the establishment of both case
and general reserves.
(b)
Stock compensation plans
In December 2004, the FASB issued a revision of FASB Statement
No. 123, Accounting for Stock Based Compensation. Under
FAS 123(R), companies are required to expense the fair vale
of employee stock options and other forms of stock-based
compensation and to provide associated financial statement
disclosures. For non-public companies, FAS 123(R) is
effective for annual reporting periods beginning
F-29
Table of Contents
RAM Re Group of Companies
Notes to the Unaudited Condensed Combined Financial
Statements
For the nine month periods ended September 30, 2005 and
September 30, 2004 — (Continued)
after December 15, 2005. The Company will apply this
statement prospectively to new awards and to awards modified,
repurchased, or cancelled after the effective date. RAM Re will
continue to account for awards granted prior to
December 15, 2005 under APB No. 25, using the minimum
value method.
7.
Stock Option Plan
On June 30, 2005, the Company granted 11,500 additional
stock options at a strike price of $156.41 to a management
employee. In August 2005, the Company granted 1,400 additional
options at a strike price of $159.98 to the unaffiliated
directors of the Company.
As of June 30, 2005, the Company entered into Payment
Agreements that terminated both the Contingent Share Agreements
(see note 8) and 36,340 vested Stock Options (this note) of
three management employees. As the options are vested and the
payment is for past service, the Company has recorded a share
based compensation liability of $2,801,535 as of
September 30, 2005 which represents management's best
estimate of the ultimate liability. In accordance with the terms
of the agreement, the Company will re-evaluate this liability on
its best estimate of June 30, 2006 book value and record
any changes in estimate periodically until the payment date of
July 1, 2006.
8.
Contingent Share Plan
On March 13, 2001, the Company entered into Contingent
Share Agreements with three management employees. The contingent
share plan was a tandem plan with the stock option plan. Per
Note 7 and as of June 30, 2005, the Company entered
into Payment Agreements that terminated both the Contingent
Share Agreements and vested Stock Options of three management
employees. As noted above, the Company has a share based
compensation liability of $2,801,535 as of September 30,
2005.
9.
Related Party Transactions
MBIA Insurance Corporation ("MBIA"), one of the four
United States based primary financial guaranty insurance
companies ceding business to the Company, invested
$25.4 million in the April 3, 2003 private offering of
common shares of Holdings and Holdings II. The shares were
issued at $111.41. As of September 30, 2005, MBIA owned
11.4% of the aggregate issued and outstanding common shares of
Holdings and Holdings II. In the ordinary course of
business, the Company has entered into reinsurance agreements
with MBIA. For the nine months ending September 30, 2005
and the year ended December 31, 2004, gross written
premiums ceded from MBIA accounted for 31% and 39% of total
gross premiums written, respectively.
F-30
Table of Contents
Shares
RAM Holdings Ltd.
Common Shares
PROSPECTUS
,
2006
Banc of America Securities LLC
Merrill Lynch & Co.
Keefe, Bruyette & Woods
Until                     ,
2006 all dealers that buy, sell or trade the common shares may
be required to deliver a prospectus, regardless of whether they
are participating in this offering. This is in addition to the
dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.
Table of Contents
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.
Other Expenses of Issuance and Distribution.
The following table sets forth the expenses payable by the
Registrant in connection with the issuance and distribution of
the common shares being registered hereby. All of such expenses
are estimates, other than the filing and listing fees payable to
the Securities and Exchange Commission, the New York Stock
Exchange and the National Association of Securities Dealers, Inc.
Securities and Exchange Commission Filing Fee
$
26,750
New York Stock Exchange Listing Fee
National Association of Securities Dealers Filing Fee
25,500
Legal Fees and Expenses
Printing Expenses
Accounting Fees and Expenses
Blue Sky Fees and Expenses
Transfer Agent Fees and Expenses
Miscellaneous Expenses
Total
$
Item 14.
Indemnification of Directors and Officers.
Bye-law 54 of the Registrant's Amended and Restated
Bye-Laws provides, among other things, that: the directors,
secretary and other officers (including any persons appointed to
a committee of the board of directors) of the Registrant, and
their heirs, executors and administrators, shall be indemnified
and secured harmless out of the assets of the Registrant to the
full extent permitted by law from and against all actions,
costs, charges, liabilities, losses, damages and expenses which
they or any of them, their heirs, executors or administrators,
shall or may incur or sustain by or by reason of any act done,
concurred in or omitted in or about the execution of their duty,
or supposed duty, or in their respective offices or trusts, and
none of them shall be answerable for the acts, receipts,
neglects or defaults of the others of them or for joining in any
receipts for the sake of conformity, or for any bankers or other
persons with whom any moneys or effects belonging to the
Registrant shall or may be lodged or deposited for safe custody,
or for insufficiency or deficiency of any security upon which
any moneys of or belonging to the Registrant shall be placed out
on or invested, or for any other loss, misfortune or damage
which may happen in the execution of their respective offices or
trusts, or in relation thereto; provided, that this indemnity
shall not extend to any matter in respect of any fraud or
dishonesty which may attach to any of the said persons.
Bye-law 54.A of the Registrant's Amended and Restated
Bye-Laws provides that the Registrant and each shareholder
agrees to waive any claim or right of action it might have,
whether individually or by or in the right of the Registrant,
against any director, secretary or other officer on account of
any action taken by such director or officer, or the failure of
such director or officer to take any action in the performance
of his duties with or for the Registrant, provided that such
waiver shall not extend to any matter in respect of any fraud or
dishonesty which may attach to such director or officer.
Section 98 of the Companies Act provides generally that a
Bermuda company may indemnify its directors, officers and
auditors against any liability which by virtue of any rule of
law would otherwise be imposed on them in respect of any
negligence, default, breach of duty or breach of trust, except
in cases where such liability arises from fraud or dishonesty of
which such director, officer or auditor may be guilty in
relation to the company. Section 98 further provides that a
Bermuda company may indemnify its directors, officers and
auditors against any liability incurred by them in defending any
proceedings, whether civil or criminal, in which judgment is
awarded in their favour or in which they are acquitted or granted
II-1
Table of Contents
relief by the Supreme Court of Bermuda pursuant to
section 281 of the Companies Act. Section 98 further
provides that any provision, whether contained in the bye-laws
of a company or in any contract or arrangement between the
company and any director exempting or indemnifying him against
any liability which would otherwise attach to him in respect of
any fraud or dishonesty of which he may be guilty in relation to
the company shall be void.
Section 98A of the Companies Act permits a Bermuda company
to purchase and maintain insurance for the benefit of any
officer or director in respect of any loss or liability
attaching to him in respect of any negligence, default, breach
of duty or breach of trust, whether or not such Bermuda company
may otherwise indemnify such officer or director.
The Registrant has purchased directors and officers liability
insurance policies. Such insurance would be available to the
Registrant's directors and officers in accordance with its
terms. In addition, certain directors may be covered by
directors and officers liability insurance policies purchased by
their respective employers.
The Registrant intends to enter into indemnification agreements
with each of its directors and executive officers. Under those
agreements, the Registrant will agree to indemnify each of these
individuals against claims arising out of events or occurrences
related to that individual's service as director, officer,
employee, agent or fiduciary of us or, at our request, any other
entity, to the fullest extent permitted by applicable law.
Reference is made to the form of Underwriting Agreement filed as
Exhibit 1.1 hereto for provisions providing that the
Underwriters are obligated, under certain circumstances, to
indemnify the directors, certain officers and the controlling
persons of the Registrant against certain liabilities under the
Securities Act of 1933, as amended.
Item 15.
Recent Sales of Unregistered Securities.
In the three years prior to this filing, the Registrant has
issued unregistered securities as described below. None of the
transactions involved any underwriters, underwriting discounts
or commissions or any public offering, and the Registrant
believes that each transaction, if deemed to be a sale of a
security, was exempt from the registration requirements of the
Securities Act by virtue of Section 4(2) thereof,
Regulation D promulgated thereunder, Rule 144A
promulgated thereunder, Rule 701 pursuant to compensatory
benefit plans and contracts relating to compensation as provided
under Rule 701 or Regulation S for offerings of
securities outside of the United States. The recipients of
securities in each such transaction represented their intention
to acquire the securities for investment only and not with a
view to or for sale in connection with any distribution thereof,
such securities were restricted as to transfers and appropriate
legends were affixed to the share certificates and instruments
issued in such transactions.
On March 26, 2004, the Registrant issued $40,000,000
aggregate principal amount of 6.875% Senior Notes dues 2024
to Deutsche Asset Management, as initial purchaser. Banc of
America Securities LLC acted as private placement agent with
respect to the Senior Notes. The Senior Notes were sold pursuant
to the private placement exemption contained in
Section 4(2) of the Securities Act and subsequently resold
by the initial purchaser pursuant to Rule 144A promulgated
thereunder.
From time to time between March 31, 2001 and
December 31, 2005, the Registrant issued common shares and
granted options pursuant to its 2001 Stock Option Plan for
Management Employees. These issuances were made in reliance on
Rule 701 under the Securities Act. As of December 31,
2005, options with respect to 57,900 common shares of the
Registrant were outstanding under this plan. In connection with
the amalgamation, each outstanding stock option will be
converted into an option to acquire common shares of the
amalgamated company and, after giving effect to the subdivision
of the Registrant's common shares described in
"Reorganization Transactions," immediately prior to
the closing of this offering, the Registrant anticipates there
will
be               stock
options outstanding under this plan with a weighted average
exercise price of
$              .
II-2
Table of Contents
Item 16.
Exhibits and Financial Statement Schedules.
(a)
Exhibits
Exhibit
Number
Description of Document
1
.1
Underwriting Agreement*
3
.1
Certificate of Incorporation and Memorandum of Association of
    RAM Holdings Ltd.*
3
.2
Form of Amended and Restated Bye-laws of RAM Holdings Ltd.*
4
.1
Specimen Common Share Certificate*
4
.2
Fiscal Agency Agreement dated as of March 26, 2004 between
    RAM Holdings Ltd. and The Bank of New York, as fiscal agent
4
.3
6.875% Senior Note, dated March 26, 2004, from RAM
    Holdings Ltd. to Cede & Co., for $40.0 million
5
.1
Opinion of Conyers Dill & Pearman*
8
.1
Opinion of LeBoeuf, Lamb, Greene & MacRae LLP, as to
    U.S. tax matters*
10
.1
Form of Amended and Restated Shareholders Agreement among the
    Registrant and each of the persons listed on Schedule A thereto*
10
.2
Form of Amalgamation Agreement between the Registrant and RAM
    Holdings II Ltd. *
10
.3
Employment Agreement, as amended as
    of              ,
    2006 between the Registrant and Vernon M. Endo*†
10
.4
Employment Agreement, as amended as
    of              ,
    2006 between the Registrant and Richard Lutenski*†
10
.5
Employment Agreement, dated as of June 30, 2005 between the
    Registrant and David K. Steel*†
10
.6
Employment Agreement, as amended as
    of              ,
    2006 between the Registrant and Mary Ellen Pavlovsky*†
10
.7
Employment Agreement, dated as
    of              ,
    2006 between the Registrant and James P. Gerry*†
10
.8
2000 Supplemental Retirement Plan†
10
.9
2001 Stock Option Plan†
10
.10
Reserved
10
.11
Reserved
10
.12
Payment Agreement, dated as of June 28, 2005 between the
    Registrant and James P. Gerry†
10
.13
Payment Agreement, dated as of June 28, 2005 between the
    Registrant and Mary Ellen Pavlovsky†
10
.14
Form of Indemnification Agreement entered into by the Registrant
    and its officers and directors*
10
.15
Lease Agreement, dated January 1, 2005 between Field Real
    Estate (Holdings) Limited and RAM Reinsurance Company Ltd.*
10
.16
Amended and Restated Credit Agreement, dated as of June 22,
    2005, among RAM Reinsurance Company Ltd., various banks and
    Norddeutsche Landesbank Girozentrale, New York Branch, as agent
10
.17
Credit Agreement among RAM Reinsurance Company Ltd., various
    banks and Bayerische Landesbank, New York Branch, as agent
10
.18
Put Option Agreement dated as of December 23, 2003 between
    RAM Reinsurance Company Ltd. and Blue Water Trust I
10
.19
Certificate of Designation, Preferences and Rights of
    Class B Preference Shares of RAM Reinsurance Company Ltd.
11
.1
Statement regarding computation of per share earnings*
21
.1
Subsidiaries of the Registrant*
23
.1
Consent of PricewaterhouseCoopers (Bermuda)
II-3
Table of Contents
Exhibit
Number
Description of Document
23
.2
Consent of Conyers Dill & Pearman (included in
    Exhibit 5.1)*
23
.3
Consent of LeBoeuf, Lamb, Greene & MacRae LLP (included
    in Exhibit 8.1)*
24
.1
Power of Attorney (included as part of the signature pages)
99
.1
Form F-N*
99
.2
Audit Committee Charter
99
.3
Compensation Committee Charter
99
.4
Nominating and Governance Committee Charter
*
To be filed by amendment.
†
Indicates management contract or compensatory plan.
(b)
Financial Statement Schedules
Schedule III — Supplementary Insurance Information
Schedule IV — Reinsurance
Item 17.
Undertakings
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the
    Securities Act, the information omitted from the form of
    prospectus filed as part of this Registration Statement in
    reliance upon Rule 430A and contained in the form of
    prospectus filed by the Registrant pursuant to
    Rule 424(b)(1) or (4) or 497(h) under the Securities
    Act shall be deemed to be part of this Registration Statement as
    of the time it was declared effective.
(2) For the purpose of determining any liability under the
    Securities Act, each post-effective amendment that contains a
    form of prospectus shall be deemed to be a new registration
    statement relating to the securities offered therein, and the
    offering of such securities at that time shall be deemed to be
    the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting
agreement certificates in such denominations and registered in
such names as required by the underwriters to permit prompt
delivery to each purchaser.
II-4
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Hamilton, Bermuda, on
the 10th day of February, 2006.
RAM Holdings Ltd.
By:
/s/ Vernon M. Endo
Name: Vernon M. Endo
Title: President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned officers, directors and authorized
representatives of RAM Holdings Ltd., hereby severally
constitute and appoint Vernon M. Endo and Richard Lutenski, and
each of them, our true and lawful
attorneys-in
-fact, with
full power of substitution and resubstitution, to sign for us
and in our names in the capacities indicated below, the
Registration Statement on
Form
S-1
filed
herewith and any and all pre-effective and post-effective
amendments to said Registration Statement, and any subsequent
Registration Statement for the same offering which may be filed
under Rule 462(b), and generally to do all such things in
our names and on our behalf in our capacities as officers and
directors to enable RAM Holdings Ltd. to comply with the
provisions of the Securities Act of 1933, as amended, and all
requirements of the Securities and Exchange Commission, hereby
ratifying and confirming our signatures as they may be signed by
each of said
attorney-in
-fact, or
his substitute or substitutes, to said Registration Statement
and any and all amendments thereto or to any subsequent
Registration Statement for the same offering which may be filed
under Rule 462(b).
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed by the
following persons in the capacities indicated on the dates
indicated.
Signature
Title
Date
/s/ Steven J. Tynan
Name: Steven J. Tynan
Chairman of the Board; Director
February 10, 2006
/s/ Vernon M. Endo
Name: Vernon M. Endo
President and Chief Executive Officer and Director (principal
    executive officer)
February 10, 2006
/s/ Richard Lutenski
Name: Richard Lutenski
Chief Financial Officer (principal financial officer)
February 10, 2006
/s/ Dana Williams
Name: Dana Williams
Controller (principal accounting officer)
January 30, 2006
/s/ Keith W. Abell
Name: Keith W. Abell
Director
February 10, 2006
/s/ Edward F. Bader
Name: Edward F. Bader
Director
February 10, 2006
II-5
Table of Contents
Signature
Title
Date
/s/ Victor J. Bacigalupi
Name: Victor J. Bacigalupi
Director
February 10, 2006
/s/ David L. Boyle
Name: David L. Boyle
Director
February 10, 2006
/s/ Daniel C. Lukas
Name: Daniel C. Lukas
Director
February 7, 2006
/s/ Michael J. Miller
Name: Michael J. Miller
Director
February 9, 2006
/s/ Arthur P. Slepian
Name: Arthur P. Slepian
Director
February 10, 2006
/s/ Steven S. Skalicky
Name: Steven S. Skalicky
Director
February 9, 2006
/s/ Dirk A. Stuurop
Name: Dirk A. Stuurop
Director
February 10, 2006
II-6
Table of Contents
/s/ Steven J. Tynan
(authorized representative in the United
    States)
February 10, 2006
II-7
Table of Contents
Financial Statement Schedules
Schedule III — Supplementary Insurance
Information
(in millions of U.S. dollars)
For the Year Ended December 31,
As of December 31,
Loss
Deferred
Unearned
Losses and
Net
and Loss
Other
Acquisition
Premium
Loss Expense
Written
Net Earned
Adjustment
Acquisition
Operating
Costs
Reserves
Reserve
Premiums
Premiums
Expenses
Costs
Expenses
December 31, 2004
$
58.7
$
140.0
$
15.5
$
66.0
$
34.7
$
3.6
$
13.4
$
11.0
December 31, 2003
53.0
120.2
13.8
67.9
25.5
4.0
10.2
5.0
December 31, 2002
38.7
77.8
10.4
36.2
17.6
6.4
7.4
3.4
Schedule IV — Reinsurance
Earned Premiums (in millions of U.S. dollars):
Total Assumed
For the Year
Ended December 31,
Type of Business
2004
2003
2002
Financial Guaranty
$
34.7
$
25.5
$
17.6
II-8
Table of Contents
EXHIBIT INDEX
Exhibit
Number
Description of Document
1
.1
Underwriting Agreement*
3
.1
Certificate of Incorporation and Memorandum of Association of
    RAM Holdings Ltd.*
3
.2
Form of Amended and Restated Bye-laws of RAM Holdings Ltd.*
4
.1
Specimen Common Share Certificate*
4
.2
Fiscal Agency Agreement dated as of March 26, 2004 between
    RAM Holdings Ltd. and The Bank of New York, as fiscal agent
4
.3
6.875% Senior Note, dated March 26, 2004, from RAM
    Holdings Ltd. to Cede & Co., for $40.0 million
5
.1
Opinion of Conyers Dill & Pearman*
8
.1
Opinion of LeBoeuf, Lamb, Greene & MacRae LLP, as to
    U.S. tax matters*
10
.1
Form of Amended and Restated Shareholders Agreement among the
    Registrant and each of the persons listed on Schedule A thereto*
10
.2
Form of Amalgamation Agreement between the Registrant and RAM
    Holdings II Ltd. *
10
.3
Employment Agreement, as amended as
    of           ,
    2006 between the Registrant and Vernon M. Endo*†
10
.4
Employment Agreement, as amended as
    of           ,
    2006 between the Registrant and Richard Lutenski*†
10
.5
Employment Agreement, dated as of June 30, 2005 between the
    Registrant and David K. Steel*†
10
.6
Employment Agreement, as amended as
    of           ,
    2006 between the Registrant and Mary Ellen Pavlovsky*†
10
.7
Employment Agreement, dated as
    of           ,
    2006 between the Registrant and James P. Gerry*†
10
.8
2000 Supplemental Retirement Plan†
10
.9
2001 Stock Option Plan†
10
.10
Reserved
10
.11
Reserved
10
.12
Payment Agreement, dated as of June 28, 2005 between the
    Registrant and James P. Gerry†
10
.13
Payment Agreement, dated as of June 28, 2005 between the
    Registrant and Mary Ellen Pavlovsky†
10
.14
Form of Indemnification Agreement entered into by the Registrant
    and its officers and directors*
10
.15
Lease Agreement, dated January 1, 2005 between Field Real
    Estate (Holdings) Limited and RAM Reinsurance Company Ltd.*
10
.16
Amended and Restated Credit Agreement, dated as of June 22,
    2005, among RAM Reinsurance Company Ltd., various banks and
    Norddeutsche Landesbank Girozentrale, New York Branch, as agent
10
.17
Credit Agreement among RAM Reinsurance Company Ltd., various
    banks and Bayerische Landesbank, New York Branch, as agent
10
.18
Put Option Agreement dated as of December 23, 2003 between
    RAM Reinsurance Company Ltd. and Blue Water Trust I
10
.19
Certificate of Designation, Preferences and Rights of
    Class B Preference Shares of RAM Reinsurance Company Ltd.
11
.1
Statement regarding computation of per share earnings*
21
.1
Subsidiaries of the Registrant*
23
.1
Consent of PricewaterhouseCoopers (Bermuda)
23
.2
Consent of Conyers Dill & Pearman (included in
    Exhibit 5.1)*
23
.3
Consent of LeBoeuf, Lamb, Greene & MacRae LLP (included
    in Exhibit 8.1)*
24
.1
Power of Attorney (included as part of the signature pages)
Table of Contents
Exhibit
Number
Description of Document
99
.1
Form F-N*
99
.2
Audit Committee Charter
99
.3
Compensation Committee Charter
99
.4
Nominating and Governance Committee Charter
*
To be filed by amendment.
†
Indicates management contract or compensatory plan.