8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

March 14, 2007
Date of report (Date of earliest event reported)

PXRE GROUP LTD.

(Exact Name of Registrant as Specified in Charter)

Bermuda	1-15259	98-0214719
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)
PXRE House		P.O. Box HM 1282
110 Pitts Bay Road		Hamilton HM FX
Pembroke HM 08		Bermuda
Bermuda
(Address, Including Zip Code, of Principal Executive Offices)		(Mailing Address)

(441) 296-5858
(Registrant’s telephone number, including area code)

NOT APPLICABLE
(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

	Item 2.02. Results of Operations and Financial Condition.
	Item 9.01. Financial Statements and Exhibits.
SIGNATURES
EX-99.1: PRESS RELEASE
EX-99.2: PRELIMINARY UNAUDITED CONSOLIDATED BALANCE SHEETS

Item 2.02. Results of Operations and Financial Condition.

On March 14, 2007, PXRE Group Ltd. (the “Company”) issued a press release (the “Press Release”) announcing the Company’s results for the year and quarter ended December 31, 2006. A copy of the Press Release and the preliminary Unaudited Consolidated Balance Sheets and Consolidated Statements of Operations and Comprehensive Operations as of and for the three months ended December 31, 2006 and twelve months ended December 31, 2006 (excluding footnotes) are attached hereto as Exhibits 99.1 and 99.2 to this Form 8-K. The information hereunder is not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, is not otherwise subject to the liabilities of that section and is not incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description
99.1	Press release of PXRE Group Ltd. dated March 14, 2007 containing financial information for the year and quarter ended December 31, 2006.
99.2	Preliminary Unaudited Consolidated Balance Sheets and Consolidated Statements of Operations and Comprehensive Operations as of and for the three months ended December 31, 2006 and twelve months ended December 31, 2006 (excluding footnotes)

 2 

SIGNATURES

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

PXRE Group Ltd.
	(Registrant)
By:	/s/ Robert P. Myron
	Name:	Robert P. Myron
	Title:	Executive Vice President, Chief Financial Officer and Treasurer

Date: March 15, 2007

EX-99.1

Exhibit 99.1

Contact:
PXRE Group Ltd.	Investors:
Robert P. Myron	Sard Verbinnen & Co
Chief Financial Officer	Jamie Tully/Lesley Bogdanow
441-296-5858	212-687-8080
bob.myron @pxre.com	jtully@sardverb.com

PXRE Group Ltd.

PXRE House
110 Pitts Bay Road, Pembroke HM 08
Bermuda
441 296 5858
441 296 6162 FAX

PXRE REPORTS FOURTH QUARTER RESULTS
NET LOSS OF $19.7 MILLION

     HAMILTON, Bermuda — (PR Newswire) — March 14, 2007 — PXRE Group Ltd. (NYSE: PXT) today announced results for the fourth quarter ended December 31, 2006. Notable items for the quarter included:

• On a fully diluted basis, book value per share decreased during the quarter by $0.24 to $6.41 at December 31, 2006

• Net loss before convertible preferred share dividends was $19.7 million for the fourth quarter of 2006 compared to $446.5 million for the fourth quarter of 2005

• On a fully diluted basis, book value per share increased during the year by $0.40 to $6.41 at December 31, 2006

• Net income before convertible preferred share dividends was $28.5 million for the year ended December 31, 2006 compared to a net loss before convertible preferred share dividends of $697.6 million for the year ended December 31, 2005

     On March 14, 2007, the Company separately announced that it had entered into an Agreement and Plan of Merger with Argonaut Group, Inc.

     For the quarter ended December 31, 2006, net loss before convertible preferred share dividends was $19.7 million compared to $446.5 million for the fourth quarter of 2005. The net loss before convertible preferred shares for the fourth quarter of 2006 is primarily attributable to $17.6 million in termination charges arising from the early commutation of a reinsurance contract with Atlantic & Western Re Limited (“A&W Reinsurance Contract”), a decrease in net premiums earned due to the cancellation and non-renewal of the majority of our reinsurance portfolio following our ratings downgrades in February 2006, offset by the absence of any significant loss events in the quarter as well as net favorable development on our loss and loss expense reserves. The net loss in the fourth quarter of 2005 principally reflects losses from Hurricane Wilma and increased estimates of losses from Hurricanes Katrina and Rita.

1

     Net premiums earned for the quarter decreased 109%, or $170.2 million, to negative $13.5 million from $156.7 million for the same period of 2005. This decrease in net premiums earned can be attributed to the cancellation and non-renewal of the majority of our reinsurance portfolio following our ratings downgrades by the major rating agencies in February 2006. The negative net earned premium in the fourth quarter of 2006 is due to the termination charges of $17.6 million related to the A&W Reinsurance Contract.

Revenues and Net Premiums Earned
	Three Months Ended									Twelve Months Ended
($000's)	December 31,						Change			December 31,						Change
	2006			2005			%			2006			2005			%
Revenues	$	1,776		$	157,097			(99	)	$	137,802		$	419,821			(67	)
Net Premiums Earned:
Cat & Risk Excess	$	(13,469	)	$	157,193			(109	)	$	84,948		$	389,582			(78	)
Exited		(14	)		(540	)		(97	)		(419	)		(1,258	)		(67	)
	$	(13,483	)	$	156,653			(109	)	$	84,529		$	388,324			(78	)

     Net premiums written in the fourth quarter of 2006 decreased 114%, or $148.9 million, to negative $18.2 million from $130.7 million for the same period of 2005. This decrease in net premiums written is due to the cancellation and non-renewal of the majority of our reinsurance portfolio following our ratings downgrades by the major rating agencies in February 2006. The negative net written premium in the fourth quarter of 2006 is due to the termination charges of $17.6 million related to the A & W Reinsurance Contract.

Net Premiums Written
	Three Months Ended									Twelve Months Ended
($000's)	December 31,						Change			December 31,						Change
	2006			2005			%			2006			2005			%
Net Premiums Written:
Cat & Risk Excess	$	(18,154	)	$	131,205			(114	)	$	53,934		$	408,271			(87	)
Exited		(15	)		(540	)		(97	)		(425	)		(1,266	)		(66	)
	$	(18,169	)	$	130,665			(114	)	$	53,509		$	407,005			(87	)

     Net investment income for the fourth quarter of 2006 increased 2%, or $0.3 million, to $14.9 million from $14.6 million for the corresponding period of 2005. This increase is primarily as a result of a $5.5 million increase in income from our short-term investment portfolio and a $1.5 million decrease in investment expenses, offset, in part, by a $4.9 million decrease in income from our fixed maturity portfolio and a $1.8 million decrease in income from our hedge funds. The increase in income from our short-term investment portfolio was due to an increase in invested assets attributable to cash flow principally from the proceeds of capital raising activities in the fourth quarter of 2005, the Company’s decision to sell approximately $490 million of fixed maturity securities in February 2006 as a result of our ratings downgrades and reinvest the proceeds in short-term investments and from the redemption of our hedge fund investments during 2006. The net return on the fixed maturity and short-term investment portfolios increased to 5.3% for the quarter, on an annualized basis, compared to 4.2% during the comparable prior year period. As previously communicated, PXRE submitted redemption notices for its entire hedge fund portfolio in February 2006, and as a result income from hedge funds will continue to decrease in future quarters as we receive the remaining proceeds from our various hedge fund investments. As of December 31, 2006, we have received redemption proceeds from 92% of the hedge fund assets held as of December 31, 2005.

2

     The Company had negative incurred losses for the quarter of $0.2 million. This negative incurred loss amount was due to net favorable development of $2.2 million in the 2006 accident year loss reserves which was caused by lower than expected reported losses for the 2006 accident year on a year-to-date basis along with the absence of any significant property catastrophe events in the fourth quarter, offset, in part, by $2.0 million of net adverse development on prior-year losses and loss expenses during the quarter. Losses and loss expenses incurred in the fourth quarter of 2005 were $533.0 million, which was primarily attributable to Hurricane Wilma and increased estimates of losses from Hurricanes Katrina and Rita.

     The expense ratio was negative 78.2% for the fourth quarter of 2006 compared to 17.1% for the fourth quarter of 2005 due to the decrease in net premiums earned to a negative amount in 2006 and an increase in operating expenses of $0.6 million in 2006. The increase in operating expenses was largely related to additional fees to attorneys and financial advisors which have been incurred as a result of our ratings downgrades, the Board of Directors’ decision to explore strategic alternatives for the Company, the class action securities lawsuits filed against the Company during the second quarter of 2006 as well as employee severance and retention expenses.

GAAP Ratios
	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2006			2005			2006			2005
Loss Ratio, All Lines		1.8	%		340.2	%		14.7	%		260.5	%
Expense Ratio		(78.2	)		17.1			73.7			21.9
Combined Ratio		(76.4	%)		357.3	%		88.4	%		282.4	%
Loss Ratio, Cat & Risk Excess		28.6	%		339.0	%		7.6	%		257.9	%

     In the fourth quarter of 2005, PXRE entered into a collateralized catastrophe facility which was determined to be a derivative and recorded at fair value on the Company’s consolidated balance sheet. Other reinsurance related expense increased $6.2 million to $7.1 million in the fourth quarter of 2006 from $0.9 million for the corresponding period of 2005. This increase was due to the change in fair value of this derivative during the quarter ended December 31, 2006.

3

     Operating results reflect a tax expense of $0.6 million for the fourth quarter of 2006 compared to a tax expense of $39.5 million for the fourth quarter of 2005. The tax expense in the fourth quarter of 2005 reflected the decision to recognize a full valuation allowance on the Company’s deferred tax asset due to uncertainty with respect to the amount of future taxable income following downgrades of the Company’s credit ratings.

     On a fully diluted basis, book value per share decreased for the fourth quarter of 2006 by $0.24 to $6.41 at December 31, 2006. During the fourth quarter of 2006, PXRE recorded a change in net after-tax unrealized appreciation in investments of $0.1 million in other comprehensive income. In addition, PXRE recorded a $1.2 million increase in other comprehensive income due to a reduction in additional minimum pension liability and the effect of adoption of FAS 158 on its pension obligations.

     PXRE — with operations in Bermuda, Europe and the United States — provides reinsurance products and services to a worldwide marketplace. The Company’s primary focus is providing property catastrophe reinsurance and retrocessional coverage. The Company also provides marine, aviation and aerospace products and services. The Company’s shares trade on the New York Stock Exchange under the symbol “PXT.”

     PXRE Group Ltd. and Argonaut Group, Inc. will conduct a joint investor call to discuss the merger on Thursday, March 15, 2007 at 9:00 a.m. Eastern Time. The conference call can be accessed by visiting the investor relations section of PXRE Group’s Web page, which can be found at www.pxre.com. The dial-in numbers are (800) 659-2037 , passcode 60496582, for U.S. and Canadian callers and (617) 614-2713 for international callers, passcode 60496582. Following the conclusion of the presentation, the webcast replay of the conference call will be available online approximately one hour after the call’s completion at www.pxre.com or by telephone at (888) 286-8010, passcode 56228008. International callers can access the conference call replay by dialing (617) 801-6888, passcode 56228008.

     Quarterly financial statements are expected to be available on the Company’s website under the press release section of News and Events on March 14, 2006. To request other printed investor material from PXRE or additional copies of this news release, please call (441) 296-5858, send e-mail to Investor.Relations@pxre.com, or visit www.pxre.com.

4

     Statements in this release that are not strictly historical are forward-looking and are based upon current expectations and assumptions of management. Statements included herein, as well as statements made by or on behalf of PXRE in its communications and discussions with investors and analysts in the normal course of business through meetings, phone calls and conference calls, which are not historical in nature are intended to be, and are hereby identified as, “forward-looking statements” for purposes of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934 as amended. These forward-looking statements, identified by words such as “intend,” “believe,” “anticipate,” or “expects” or variations of such words or similar expressions are based on current expectations, speak only as of the date thereof, and are subject to risk and uncertainties. In light of the risks and uncertainties inherent in all future projections, the forward-looking statements in this report should not be considered as a representation by us or any other person that the Company’s objectives or plans will be achieved. The Company cautions investors and analysts that actual results or events could differ materially from those set forth or implied by the forward-looking statements and related assumptions, depending on the outcome of certain important factors including, but not limited to, the following: (i) we face risks related to our proposed merger with Argonaut; (ii) if the merger with Argonaut is not completed, unless the Board of Directors identifies and implements a different operating strategic solution, we will not write or earn any material premiums in the future and, as a result, we expect to incur material operating losses since our remaining revenue is insufficient to cover our projected operating and other expenses; (iii) if the merger is not consummated, we may not be able to identify or implement a strategic alternative for PXRE; (iv) if the merger is not consummated and our Board of Directors concludes that no other feasible strategic alternative would be in the best interests of our shareholders, it may determine that the best course of action is to place the reinsurance operations of PXRE into runoff and eventually commence an orderly winding up and liquidation of PXRE operations over some period of time that is not currently determinable; (v) if the merger is not consummated and the Board of Directors elects to pursue a strategic alternative that does not involve the continuation of meaningful property catastrophe reinsurance business, there is a risk that the Company could incur additional material charges or termination fees in connection with our collateralized catastrophe facility and certain multiyear ceded reinsurance agreements; (vi) our ability to continue to operate our business, consummate the merger and to identify, evaluate and complete any other strategic alternative is dependent on our ability to retain our management and other key employees, and we may not be able to do so; (vii) adverse events in 2006 negatively have affected the market price of our common shares, which may lead to further securities litigation, administrative proceedings or both being brought against us; (viii) reserving for losses includes significant estimates, which are also subject to inherent uncertainties; (ix) because of potential exposure to catastrophes in the future, our financial results may vary significantly from period to period; (x) we operate in a highly competitive environment and no assurance can be given that we will be able to compete effectively in this environment; (xi) reinsurance prices may decline, which could affect our profitability; (xii) we may require additional capital in the future; (xiii) our investment portfolio is subject to significant market and credit risks which could result in an adverse impact on our financial position or results; (xiv) we have exited the finite reinsurance business, but claims in respect of finite reinsurance could have an adverse effect on our results of operations; (xv) our reliance on reinsurance brokers exposes us to their credit risk; (xvi) we may be adversely affected by foreign currency fluctuations; (xvii) retrocessional reinsurance subjects us to credit risk and may become unavailable on acceptable terms; (xviii) we have exhausted our retrocessional coverage with respect to Hurricane Katrina, leaving us exposed to further losses; (xix) recoveries under our collateralized facility are triggered by modeled loss to a notional portfolio, rather than our actual losses arising from a catastrophe event, which creates a potential mismatch between the risks assumed through our inwards reinsurance business and the protection afforded by this facility; (xx) our inability to provide the necessary collateral could affect our ability to offer reinsurance in certain markets; (xxi) the insurance and reinsurance business is historically cyclical, and we may experience periods with excess underwriting capacity and unfavorable premium rates; conversely, we may have a shortage of underwriting capacity when premium rates are strong; (xxii) regulatory constraints may restrict our ability to operate our business; (xxiii) any determination by the United States Internal Revenue Service (“IRS”) that we or our offshore subsidiaries are subject to U.S. taxation could result in a material adverse impact on the our financial position or results; and (xxiv) any changes in tax laws, tax treaties, tax rules and interpretations could result in a material adverse impact on our financial position or results. In addition to the factors outlined above that are directly related to PXRE’s business, PXRE is also subject to general business risks, including, but not limited to, adverse state, federal or foreign legislation and regulation, adverse publicity or news coverage, changes in general economic factors, the loss of key employees and other factors set forth in PXRE’s SEC filings. The factors listed above should not be construed as exhaustive. Therefore, actual results or outcomes may differ materially from what is expressed or forecasted in such forward-looking statements.

     PXRE undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events (including catastrophe events), or otherwise.

5

EX-99.2

PXRE Group Ltd.
Unaudited Financial Highlights
(Dollars in thousands except per share amounts)

	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2006			2005			2006			2005
Gross premiums written	$	6,952		$	114,617		$	138,776		$	542,325
Net premiums written	$	(18,169	)	$	130,665		$	53,509		$	407,005
Revenues	$	1,776		$	157,097		$	137,802		$	419,821
Losses and expenses		(20,889	)		(564,052	)		(108,703	)		(1,111,472	)
(Loss) income before income taxes and convertible preferred share dividends		(19,113	)		(406,955	)		29,099			(691,651	)
Income tax expense		(597	)		(39,510	)		(597	)		(5,907	)
Net (loss) income before convertible preferred share dividends	$	(19,710	)	$	(446,465	)	$	28,502		$	(697,558	)
Net (loss) income per diluted common share	$	(0.29	)	$	(8.45	)	$	0.37		$	(21.65	)
Average diluted shares outstanding (000’s)		77,156			73,555			77,072			43,517
Average diluted shares outstanding when antidilutive (000’s)		72,006			52,987			—			32,541

Financial Position:	Dec. 31, 2006			Dec. 31, 2005
Cash and investments	$	1,216,392		$	1,660,996
Total assets		1,401,343			2,116,047
Reserve for losses and loss expenses		603,241			1,320,126
Shareholders’ equity		496,767			465,318
Book value per common share (1)		6.41			6.01
Statutory surplus:
PXRE Reinsurance Ltd.		564,209	(2)		530,775	(3)
PXRE Reinsurance Company		137,974	(4)		126,991

	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2006			2005			2006			2005
GAAP Ratios:
Loss ratio		1.8	%		340.2	%		14.7	%		260.5	%
Expense ratio		(78.2	%)		17.1	%		73.7	%		21.9	%
Combined ratio		(76.4	%)		357.3	%		88.4	%		282.4	%
Losses Incurred by Segment:
Cat & Risk Excess	$	(3,847	)	$	532,815		$	6,490		$	1,004,771
Exited		3,606			187			5,953			6,752
	$	(241	)	$	533,002		$	12,443		$	1,011,523
Commission and Brokerage, Net of Fee Income by Segment:
Cat & Risk Excess	$	806		$	17,831		$	18,697		$	49,256
Exited		—			(114	)		186			(297	)
	$	806		$	17,717		$	18,883		$	48,959
Underwriting (Loss) Income by Segment: (5)
Cat & Risk Excess	$	(10,428	)	$	(393,453	)	$	59,761		$	(664,445	)
Exited		(3,620	)		(613	)		(6,558	)		(7,713	)
	$	(14,048	)	$	(394,066	)	$	53,203		$	(672,158	)

6

	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2006			2005			2006			2005
Underwriting (Loss) Income Reconciled to (Loss) Income Before Income Taxes and Convertible Preferred Share Dividends:
Underwriting (loss) income (5)	$	(14,048	)	$	(394,066	)	$	53,203		$	(672,158	)
Net investment income		14,893			14,643			60,654			45,292
Net realized investment gains (losses)		172			(14,370	)		(7,809	)		(14,736	)
Other fee income		185			—			185			—
Other reinsurance related expense		(7,124	)		(936	)		(17,862	)		(936	)
Operating expenses		(9,732	)		(9,105	)		(43,373	)		(36,208	)
Foreign exchange gains (losses)		168			494			(1,444	)		1,547
Interest expense		(3,627	)		(3,615	)		(14,455	)		(14,452	)
(Loss) income before income taxes and convertible preferred share dividends	$	(19,113	)	$	(406,955	)	$	29,099		$	(691,651	)

(1)	After considering convertible preferred shares.
(2)	Estimated and before inter-company eliminations.
(3)	Before inter-company eliminations.
(4)	Estimated.
(5)	Underwriting Income (Loss) by Segment (a GAAP financial measure): The Company’s reported underwriting results are its best measure of profitability for its individual underwriting segments and accordingly are disclosed in the footnotes to the Company’s financial statements required by SFAS 131, Disclosures about Segments of an Enterprise and Related Information. Underwriting Income (Loss) by Segment is calculated by subtracting losses and loss expenses incurred and commission and brokerage, net of fee income from net earned premiums. PXRE does not allocate net investment income, net realized investment gains (losses), other fee income, other reinsurance related expense, operating expenses, foreign exchange gains or losses, or interest expense to its respective underwriting segments.
	These preliminary financial statements are unaudited and do not include footnotes that customarily accompany a complete set of financial statements; these footnotes will be furnished when the Company makes its filing on Form 10-K for the year ended December 31, 2006.

7

Exhibit 99.2

PXRE	Consolidated Balance Sheets
Group Ltd.	(Dollars in thousands, except par value per share)

	December 31,
	2006			2005
Assets
Investments:
Fixed maturities, at fair value:
Available-for-sale (amortized cost $502,307 and $1,212,299, respectively)	$	502,254		$	1,208,248
Trading (cost $14,794 and $28,225, respectively)		15,497			25,796
Short-term investments, at fair value		671,197			261,076
Hedge funds, at fair value (cost $11,583 and $132,690, respectively)		12,766			148,230
Other invested assets, at fair value (cost $1,717 and $2,806, respectively)		2,427			3,142
Total investments		1,204,141			1,646,492
Cash		12,251			14,504
Accrued investment income		3,830			10,809
Premiums receivable, net		93,325			217,446
Other receivables		7,321			17,000
Reinsurance recoverable on paid losses		3,324			4,223
Reinsurance recoverable on unpaid losses		35,327			107,655
Ceded unearned premiums		—			1,379
Deferred acquisition costs		8			5,487
Income tax recoverable		—			6,295
Other assets		41,816			84,757
Total assets	$	1,401,343		$	2,116,047
Liabilities
Losses and loss expenses	$	603,241		$	1,320,126
Unearned premiums		113			32,512
Subordinated debt		167,089			167,081
Reinsurance balances payable		34,649			30,244
Deposit liabilities		54,425			68,270
Income tax payable		597			—
Other liabilities		44,462			32,496
Total liabilities		904,576			1,650,729
Shareholders’ Equity
Serial convertible preferred shares, $1.00 par value, $10,000 stated value — 30 million shares authorized, 0.01 million and 0.01 million shares issued and outstanding, respectively		58,132			58,132
Common shares, $1.00 par value — 350 million shares authorized, 72.4 million and 72.3 million shares issued and outstanding, respectively		72,351			72,281
Additional paid-in capital		873,142			875,224
Accumulated other comprehensive loss		(100	)		(5,468	)
Accumulated deficit		(503,711	)		(527,349	)
Restricted shares at cost (0.4 million and 0.5 million shares, respectively)		(3,047	)		(7,502	)
Total shareholders’ equity		496,767			465,318
Total liabilities and shareholders’ equity	$	1,401,343		$	2,116,047

PXRE	Consolidated Statements of Operations and Comprehensive Operations
Group Ltd.	(Dollars in thousands, except per share amounts)

	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2006			2005			2006			2005
Revenues
Net premiums earned	$	(13,483	)	$	156,653		$	84,529		$	388,324
Net investment income		14,893			14,643			60,654			45,292
Net realized investment gains (losses)		172			(14,370	)		(7,809	)		(14,736	)
Fee income		194			171			428			941
		1,776			157,097			137,802			419,821
Losses and Expenses
Losses and loss expenses incurred		(241	)		533,002			12,443			1,011,523
Commission and brokerage		815			17,888			19,126			49,900
Other reinsurance related expense		7,124			936			17,862			936
Operating expenses		9,732			9,105			43,373			36,208
Foreign exchange (gains) losses		(168	)		(494	)		1,444			(1,547	)
Interest expense		3,627			3,615			14,455			14,452
		20,889			564,052			108,703			1,111,472
(Loss) income before income taxes and convertible preferred share dividends		(19,113	)		(406,955	)		29,099			(691,651	)
Income tax provision		597			39,510			597			5,907
Net (loss) income before convertible preferred share dividends	$	(19,710	)	$	(446,465	)	$	28,502		$	(697,558	)
Convertible preferred share dividends		1,163			1,162			4,864			7,040
Net (loss) income to common shareholders	$	(20,873	)	$	(447,627	)	$	23,638		$	(704,598	)
Comprehensive Operations, Net of Tax
Net (loss) income before convertible preferred share dividends	$	(19,710	)	$	(446,465	)	$	28,502		$	(697,558	)
Net change in unrealized appreciation (depreciation) on investments		84			(4,435	)		(3,929	)		(12,061	)
Reclassification adjustments for losses included in net (loss) income		20			11,952			7,996			12,164
Minimum additional pension liability		1,847			(716	)		1,970			(716	)
Comprehensive (loss) income	$	(17,759	)	$	(439,664	)	$	34,539		$	(698,171	)
Per Share
Basic:
(Loss) income before convertible preferred share dividends	$	(0.27	)	$	(8.43	)	$	0.40		$	(21.43	)
Convertible preferred share dividends		(0.02	)		(0.02	)		(0.07	)		(0.22	)
Net (loss) income to common shareholders	$	(0.29	)	$	(8.45	)	$	0.33		$	(21.65	)
Average shares outstanding (000’s)		72,006			52,987			71,954			32,541
Diluted:
Net (loss) income before cumulative effect of accounting change	$	(0.29	)	$	(8.45	)	$	0.37		$	(21.65	)
Cumulative effect of accounting change		—			—			—			—
Net (loss) income	$	(0.29	)	$	(8.45	)	$	0.37		$	(21.65	)
Average shares outstanding (000’s)		72,006			52,987			77,072			32,541

PXRE	Consolidated Statements of Shareholders’ Equity
Group Ltd.	(Dollars in thousands)

	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2006			2005			2006			2005
Convertible Preferred Shares
Balance at beginning of period	$	58,132		$	58,132		$	58,132		$	163,871
Conversion of convertible preferred shares		—			—			—			(109,108	)
Dividends to convertible preferred shareholders		—			—			—			3,369
Balance at end of period	$	58,132		$	58,132		$	58,132		$	58,132
Common Shares
Balance at beginning of period	$	72,346		$	29,395		$	72,281		$	20,469
Issuance of common shares, net		5			42,886			70			51,812
Balance at end of period	$	72,351		$	72,281		$	72,351		$	72,281
Additional Paid-in Capital
Balance at beginning of period	$	873,009		$	445,425		$	875,224		$	329,730
Issuance (cancellation) of common shares, net		133			429,799			(2,082	)		544,430
Tax effect of stock options exercised		—			—			—			1,064
Balance at end of period	$	873,142		$	875,224		$	873,142		$	875,224
Accumulated Other Comprehensive Operations
Balance at beginning of period	$	(1,382	)	$	(12,269	)	$	(5,468	)	$	(4,855	)
Change in unrealized gains on investments		104			7,517			4,067			103
Change in minimum additional pension liability		1,847			(716	)		1,970			(716	)
Incremental effect of applying FAS 158		(669	)		—			(669	)		—
Balance at end of period	$	(100	)	$	(5,468	)	$	(100	)	$	(5,468	)
(Accumulated Deficit)/Retained Earnings
Balance at beginning of period	$	(482,838	)	$	(71,041	)	$	(527,349	)	$	194,081
Net (loss) income before convertible preferred share dividends		(19,710	)		(446,465	)		28,502			(697,558	)
Dividends to convertible preferred shareholders		(1,163	)		(1,162	)		(4,864	)		(7,040	)
Dividends to common shareholders		—			(8,681	)		—			(16,832	)
Balance at end of period	$	(503,711	)	$	(527,349	)	$	(503,711	)	$	(527,349	)
Restricted Shares
Balance at beginning of period	$	(3,598	)	$	(9,683	)	$	(7,502	)	$	(6,741	)
Cancellation (issuance) of restricted shares, net		—			1,503			2,376			(4,566	)
Amortization of restricted shares		551			678			2,079			3,805
Balance at end of period	$	(3,047	)	$	(7,502	)	$	(3,047	)	$	(7,502	)
Total Shareholders’ Equity
Balance at beginning of period	$	515,669		$	439,959		$	465,318		$	696,555
Conversion of convertible preferred shares		—			—			—			(109,108	)
Issuance (cancellation) of common shares, net		138			472,685			(2,012	)		596,242
Restricted shares, net		551			2,181			4,455			(761	)
Unrealized appreciation on investments		104			7,517			4,067			103
Minimum additional pension liability and effect of applying FAS 158		1,178			(716	)		1,301			(716	)
Net (loss) income before convertible preferred share dividends		(19,710	)		(446,465	)		28,502			(697,558	)
Dividends to convertible preferred shareholders		(1,163	)		(1,162	)		(4,864	)		(3,671	)
Dividends to common shareholders		—			(8,681	)		—			(16,832	)
Tax effect of stock options exercised		—			—			—			1,064
Balance at end of period	$	496,767		$	465,318		$	496,767		$	465,318

PXRE	Consolidated Statements of Cash Flows
Group Ltd.	(Dollars in thousands)

	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2006			2005			2006			2005
Cash Flows from Operating Activities
Premiums collected, net of reinsurance	$	17,302		$	10,147		$	182,035		$	301,982
Losses and loss adjustment expenses paid, net of reinsurance		(123,585	)		(67,112	)		(620,947	)		(229,295	)
Commission and brokerage received (paid), net of fee income		412			(14,617	)		(7,154	)		(28,727	)
Operating expenses paid		(11,213	)		(6,971	)		(45,967	)		(31,666	)
Net investment income received		14,191			13,825			57,180			37,788
Interest paid		(1,385	)		(1,374	)		(14,338	)		(14,338	)
Income taxes (paid) recovered		(31	)		(144	)		6,295			18,328
Trading portfolio purchased		(8,499	)		—			(38,392	)		(17,685	)
Trading portfolio disposed		7,222			—			50,139			3,369
Deposit paid		(1,736	)		(2,060	)		(13,845	)		(3,873	)
Other		473			(11,464	)		10,747			(8,608	)
Net cash (used) provided by operating activities		(106,849	)		(79,770	)		(434,247	)		27,275
Cash Flows from Investing Activities
Fixed maturities available for sale purchased		(23,068	)		(360,140	)		(90,510	)		(733,076	)
Fixed maturities available for sale disposed or matured		50,178			58,747			794,485			209,763
Hedge funds purchased		—			(9,500	)		(4,000	)		(129,388	)
Hedge funds disposed		6,017			8,170			145,097			123,219
Other invested assets purchased		—			—			(35	)		—
Other invested assets disposed		186			1,494			1,577			3,738
Net change in short-term investments		65,998			(86,850	)		(410,121	)		35,242
Net cash provided (used) by investing activities		99,311			(388,079	)		436,493			(490,502	)
Cash Flows from Financing Activities
Proceeds from issuance of common shares		138			474,222			628			483,169
Cash dividends paid to common shareholders		—			(8,681	)		—			(16,832	)
Cash dividends paid to preferred shareholders		(1,163	)		(1,162	)		(4,864	)		(3,671	)
Cost of shares repurchased		—			(36	)		(263	)		(603	)
Net cash (used) provided by financing activities		(1,025	)		464,343			(4,499	)		462,063
Net change in cash		(8,563	)		(3,506	)		(2,253	)		(1,164	)
Cash, beginning of period		20,814			18,010			14,504			15,668
Cash, end of period	$	12,251		$	14,504		$	12,251		$	14,504
Reconciliation of net (loss) income to net cash (used) provided by operating activities:
Net (loss) income before convertible preferred share dividends	$	(19,710	)	$	(446,465	)	$	28,502		$	(697,558	)
Adjustments to reconcile net (loss) income to net cash (used) provided by operating activities:
Losses and loss expenses		(124,525	)		334,684			(716,885	)		860,041
Unearned premiums		(4,709	)		(25,989	)		(31,020	)		18,681
Deferred acquisition costs		1,316			2,249			5,479			(3,742	)
Receivables		17,229			(35,115	)		133,800			(106,015	)
Reinsurance balances payable		18,504			(91,242	)		4,405			19,307
Reinsurance recoverable		698			166,359			73,228			(42,661	)
Income taxes		566			39,365			6,892			24,507
Equity in earnings of limited partnerships		(264	)		(2,432	)		(6,460	)		(13,000	)
Trading portfolio purchased		(8,499	)		—			(38,392	)		(17,685	)
Trading portfolio disposed		7,222			—			50,139			3,369
Deposit liability		(1,736	)		(2,060	)		(13,845	)		(3,873	)
Receivable on commutation		—			(35,154	)		35,154			(35,154	)
Other		7,059			16,030			34,756			21,058
Net cash (used) provided by operating activities	$	(106,849	)	$	(79,770	)	$	(434,247	)	$	27,275