10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

June 30, 2004

Commission file number 0-2253

PartnerRe Ltd.

(Exact name of Registrant as specified in its charter)

Bermuda	Not Applicable
(State or other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
96 Pitts Bay Road Pembroke, Bermuda	HM 08
(Address of principal executive offices)	(Zip Code)

(441) 292-0888

Registrant’s telephone number, including area code

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

Yes  x    No  ¨

The number of the Registrant’s common shares (par value $1.00 per share) outstanding as of August 2, 2004 was 53,711,667.

PartnerRe Ltd.

INDEX TO FORM 10-Q

		Page
PART I—FINANCIAL INFORMATION
ITEM 1.	Financial Statements.
	Report of Independent Registered Public Accounting Firm	2
	Unaudited Condensed Consolidated Balance Sheets June 30, 2004 and December 31, 2003	3
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income Six Months and Three Months Ended June 30, 2004 and 2003	4
	Unaudited Condensed Consolidated Statements of Shareholders’ Equity Six Months Ended June 30, 2004 and 2003	5
	Unaudited Condensed Consolidated Statements of Cash Flows Six Months Ended June 30, 2004 and 2003	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	50
ITEM 4.	Controls and Procedures	53
PART II—OTHER INFORMATION
ITEM 1.	Legal Proceedings	54
ITEM 2.	Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities	54
ITEM 3.	Defaults upon Senior Securities	54
ITEM 4.	Submission of Matters to a Vote of Security Holders	54
ITEM 5.	Other Information	55
ITEM 6.	Exhibits and Reports on Form 8-K	55
	Signatures	56
	Exhibit Index	57

Part I — Financial Information

Item 1. Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of PartnerRe Ltd.

We have reviewed the accompanying condensed consolidated balance sheet of PartnerRe Ltd. and subsidiaries as of June 30, 2004, and the related condensed consolidated statements of operations and comprehensive income for the three-month and six-month periods ended June 30, 2004 and 2003 and of shareholders’ equity and of cash flows for the six-month periods ended June 30, 2004 and 2003. These interim condensed consolidated financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of PartnerRe Ltd. and subsidiaries as of December 31, 2003 and the related consolidated statements of operations and comprehensive income, shareholders’ equity and cash flows for the year then ended (not presented herein); and in our report dated February 9, 2004, we expressed an unqualified opinion on those consolidated financial statements, which included an explanatory paragraph relating to the Company’s change in the method of accounting for goodwill, derivative instruments and hedging activities, Mandatorily Redeemable Preferred Securities and Trust Preferred Securities. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2003 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Deloitte & Touche

Hamilton, Bermuda

July 26, 2004

2

PartnerRe Ltd.

Condensed Consolidated Balance Sheets

(Expressed in thousands of U.S. dollars, except parenthetical share data)

(Unaudited)

	June 30, 2004			December 31, 2003
Assets
Investments and cash
Fixed maturities, available for sale, at fair value (amortized cost: 2004, $4,833,567; 2003, $5,241,494)	$	4,859,290		$	5,343,651
Short-term investments, available for sale, at fair value (amortized cost: 2004, $14,459; 2003, $46,271)		14,456			46,307
Equities, available for sale, at fair value (cost: 2004, $671,524; 2003, $614,697)		748,201			713,950
Trading securities, at fair value (cost: 2004, $98,692; 2003, $113,385)		102,148			122,544
Cash and cash equivalents, at fair value, which approximates amortized cost		1,523,567			558,692
Other invested assets		95,532			11,590
Total investments and cash		7,343,194			6,796,734
Accrued investment income		115,540			132,291
Reinsurance balances receivable		1,637,117			1,214,269
Reinsurance recoverable on paid and unpaid losses		191,556			188,706
Funds held by reinsured companies		1,075,870			1,068,432
Deferred acquisition costs		428,535			354,854
Deposit assets		321,294			508,037
Taxes recoverable		94,070			80,835
Goodwill		429,519			429,519
Net receivable for securities sold		10,305			—
Other		124,333			129,337
Total Assets	$	11,771,333		$	10,903,014
Liabilities
Unpaid losses and loss expenses	$	5,056,732		$	4,755,059
Policy benefits for life and annuity contracts		1,145,621			1,162,016
Unearned premiums		1,541,994			1,035,450
Funds held under reinsurance treaties		27,744			27,399
Deposit liabilities		534,668			570,634
Long-term debt		220,000			220,000
Net payable for securities purchased		—			5,389
Accounts payable, accrued expenses and other		124,458			126,675
Debt related to trust preferred securities		206,186			206,000
Mandatorily redeemable preferred securities		200,000			200,000
Total Liabilities		9,057,403			8,308,622
Shareholders’ Equity
Common shares (par value $1.00, issued and outstanding: 2004, 53,692,627; 2003, 53,741,553)		53,693			53,742
Preferred shares (aggregate liquidation preference: $290,000,000; par value $1.00, issued and outstanding: 2004, 11,600,000; 2003, 11,600,000)		11,600			11,600
Additional paid-in capital		1,016,847			1,023,167
Deferred compensation		(302	)		(125	)
Accumulated other comprehensive income:
Net unrealized gains on investments, net of tax		86,030			166,492
Currency translation adjustment		4,090			16,657
Retained earnings		1,541,972			1,322,859
Total Shareholders’ Equity		2,713,930			2,594,392
Total Liabilities and Shareholders’ Equity	$	11,771,333		$	10,903,014

See Accompanying Notes to Condensed Consolidated Financial Statements

3

PartnerRe Ltd.

Condensed Consolidated Statements of Operations and Comprehensive Income

(Expressed in thousands of U.S. dollars, except per share data)

(Unaudited)

	For the three months ended June 30, 2004			For the three months ended June 30, 2003			For the six months ended June 30, 2004			For the six months ended June 30, 2003
Revenues
Gross premiums written	$	841,934		$	837,302		$	2,395,556		$	2,098,892
Net premiums written	$	840,721		$	838,860		$	2,364,422		$	2,073,607
Decrease (increase) in unearned premiums		114,114			23,988			(516,800	)		(404,523	)
Net premiums earned		954,835			862,848			1,847,622			1,669,084
Net investment income		74,926			63,048			148,388			124,178
Net realized investment gains		8,042			15,566			45,856			55,636
Other income		4,122			2,873			7,036			5,150
Total Revenues		1,041,925			944,335			2,048,902			1,854,048
Expenses
Losses and loss expenses and life policy benefits		619,669			554,273			1,189,527			1,110,270
Acquisition costs		226,817			201,599			431,148			371,321
Other operating expenses		67,884			58,078			135,446			109,349
Interest expense		10,168			3,231			20,336			6,426
Net foreign exchange losses (gains)		58			(5,198	)		(1,139	)		(8,932	)
Total Expenses		924,596			811,983			1,775,318			1,588,434
Income before distributions related to trust preferred and mandatorily redeemable preferred securities and taxes		117,329			132,352			273,584			265,614
Distributions related to trust preferred and mandatorily redeemable preferred securities		—			6,815			—			13,630
Income tax (benefit) expense		(2,506	)		3,622			8,105			5,700
Net income		119,835			121,915			265,479			246,284
Preferred dividends		4,894			14,567			9,788			19,567
Net income available to common shareholders	$	114,941		$	107,348		$	255,691		$	226,717
Calculation of comprehensive income, net of tax:
Net income as reported	$	119,835		$	121,915		$	265,479		$	246,284
Change in unrealized gains or losses on investments		(138,405	)		84,324			(80,462	)		52,160
Change in currency translation adjustment		(6,376	)		17,815			(12,567	)		28,047
Comprehensive (loss) income	$	(24,946	)	$	224,054		$	172,450		$	326,491
Per share data:
Earnings per common share:
Basic net income	$	2.14		$	2.02		$	4.76		$	4.29
Weighted average number of common shares outstanding		53,791.5			53,221.8			53,737.5			52,810.3
Diluted net income	$	2.12		$	2.00		$	4.71		$	4.22
Weighted average number of common and common equivalent shares outstanding		54,339.3			53,698.7			54,305.9			53,716.4

See Accompanying Notes to Condensed Consolidated Financial Statements

4

PartnerRe Ltd.

Condensed Consolidated Statements of Shareholders’ Equity

(Expressed in thousands of U.S. dollars)

(Unaudited)

	Common shares			Preferred shares			Additional paid-in capital			Deferred compen- sation			Net unrealized gains on investments, net of tax			Currency translation adjustment			Retained earnings			Total share- holders’ equity
Balance at December 31, 2003	$	53,742		$	11,600		$	1,023,167		$	(125	)	$	166,492		$	16,657		$	1,322,859		$	2,594,392
Issue of common shares		109			—			4,753			—			—			—			—			4,862
Repurchase of common shares		(163	)		—			(8,954	)		—			—			—			—			(9,117	)
Adjustment on purchase contracts for common shares		—			—			(2,390	)		—			—			—			—			(2,390	)
Issue of restricted common shares		5			—			271			(276	)		—			—			—			—
Amortization of deferred compensation		—			—			—			99			—			—			—			99
Net unrealized losses for period		—			—			—			—			(80,462	)		—			—			(80,462	)
Currency translation adjustment		—			—			—			—			—			(12,567	)		—			(12,567	)
Net income		—			—			—			—			—			—			265,479			265,479
Dividends on common shares		—			—			—			—			—			—			(36,578	)		(36,578	)
Dividends on preferred shares		—			—			—			—			—			—			(9,788	)		(9,788	)
Balance at June 30, 2004	$	53,693		$	11,600		$	1,016,847		$	(302	)	$	86,030		$	4,090		$	1,541,972		$	2,713,930
Balance at December 31, 2002	$	52,376		$	10,000		$	977,714		$	(261	)	$	119,605		$	(30,820	)	$	948,568		$	2,077,182
Issue of common shares		1,237			—			7,409			—			—			—			—			8,646
Issue of preferred shares		—			11,600			269,265			—			—			—			—			280,865
Redemption of preferred shares		—			(10,000	)		(232,163	)		—			—			—			—			(242,163	)
Adjustment on purchase contracts for common shares		—			—			(2,390	)		—			—			—			—			(2,390	)
Amortization of deferred compensation		—			—			—			68			—			—			—			68
Net unrealized gains for period		—			—			—			—			52,160			—			—			52,160
Currency translation adjustment		—			—			—			—			—			28,047			—			28,047
Net income		—			—			—			—			—			—			246,284			246,284
Dividends on common shares		—			—			—			—			—			—			(30,737	)		(30,737	)
Dividends on preferred shares		—			—			—			—			—			—			(19,567	)		(19,567	)
Balance at June 30, 2003	$	53,613		$	11,600		$	1,019,835		$	(193	)	$	171,765		$	(2,773	)	$	1,144,548		$	2,398,395

See Accompanying Notes to Condensed Consolidated Financial Statements

5

PartnerRe Ltd.

Condensed Consolidated Statements of Cash Flows

(Expressed in thousands of U.S. dollars)

(Unaudited)

	For the six months ended June 30, 2004			For the six months ended June 30, 2003
Cash Flows From Operating Activities:
Net income	$	265,479		$	246,284
Adjustments to reconcile net income to net cash provided by operating activities:
Accrual of discount on investments, net of amortization of premium		24,139			5,772
Net realized investment gains		(45,856	)		(55,636	)
Changes in:
Unearned premiums		516,800			404,523
Reinsurance balances receivable		(451,883	)		(359,016	)
Unpaid losses and loss expenses including life policy benefits		372,148			372,015
Net taxes recoverable		2,866			4,859
Other changes in assets and liabilities		(82,965	)		(109,924	)
Net sales (purchases) of trading securities		23,762			(4,618	)
Other items, net		(2,956	)		(8,327	)
Net cash provided by operating activities		621,534			495,932
Cash Flows From Investing Activities:
Sales of fixed maturities		5,360,231			4,368,536
Redemptions of fixed maturities		302,765			168,473
Purchases of fixed maturities		(5,204,777	)		(4,690,324	)
Net sales (purchases) of short-term investments		30,925			(20,424	)
Net purchases of equities		(17,412	)		(63,180	)
Other		(71,612	)		(9,656	)
Net cash provided by (used in) investing activities		400,120			(246,575	)
Cash Flows From Financing Activities:
Cash dividends paid to shareholders		(46,366	)		(49,076	)
Net (Repurchase) issue of common shares		(3,979	)		8,646
Issue of preferred shares		—			280,865
Redemption of preferred shares		—			(242,163	)
Adjustment on purchase contract for common shares		(2,390	)		(2,390	)
Net cash used in financing activities		(52,735	)		(4,118	)
Effect of exchange rate changes on cash		(4,044	)		1,770
Increase in cash and cash equivalents		964,875			247,009
Cash and cash equivalents—beginning of period		558,692			710,640
Cash and cash equivalents—end of period	$	1,523,567		$	957,649

See Accompanying Notes to Condensed Consolidated Financial Statements

6

PartnerRe Ltd.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. General

PartnerRe Ltd. (the “Company”) provides reinsurance on a worldwide basis through its wholly owned subsidiaries, Partner Reinsurance Company Ltd. (“Partner Reinsurance Company”), PartnerRe SA, and Partner Reinsurance Company of the U.S. (“PartnerRe U.S.”). Risks reinsured include, but are not limited to, property, casualty, motor, agriculture, aviation/space, catastrophe, credit/surety, engineering/energy, marine, special risk, other lines and life/annuity and health. The Company also offers financial products that provide weather and credit protection to industrial and service companies on a worldwide basis.

The accompanying condensed consolidated financial statements are unaudited and have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. The preparation of financial statements in conformity with U.S. GAAP requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. While Management believes that the amounts included in the condensed consolidated financial statements reflect the best estimates and assumptions, actual results could differ from those estimates. The Company’s principal estimates include:

• Unpaid losses and loss expenses, including policy benefits for life and annuity contracts;

• Gross and net premiums written and net premiums earned;

• Recoverability of deferred acquisition costs;

• Determination of other-than-temporary impairment of investments;

• Recoverability of tax loss carry-forwards;

• Valuation of goodwill; and

• Valuation of certain derivative financial instruments.

In the opinion of Management, all adjustments (which include normal recurring adjustments) necessary for a fair presentation of results for the interim periods have been made. The results for the six-month and three-month periods ended June 30, 2004 are not necessarily indicative of results to be expected for the full fiscal year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003. To facilitate comparison of information across periods, certain reclassifications have been made to prior year amounts to conform to the current year’s presentation.

2. Recent Development

In February 2004, the Company invested $73.2 million in Channel Re, a new financial guarantee reinsurer based in Bermuda, which will assume a portfolio of approximately $27 billion of in-force business from MBIA, participate in new MBIA reinsurance treaties and provide facultative reinsurance support to MBIA. Other shareholders in Channel Re are Renaissance Re, Koch Financial Re and MBIA. The Company’s investment represents 20% of the common stock of Channel Re and this investment is recorded, using the equity method, in the other invested assets line on the Company’s condensed consolidated balance sheet.

7

PartnerRe Ltd.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

3. Stock Options

The following table illustrates the net effect on net income available to common shareholders and net income per share as if the fair value provisions of SFAS 123 had been applied retroactively to all outstanding equity-based compensation for the three-month and six-month periods ended June 30, 2004 and 2003 (in thousands of U.S. dollars, except per share data):

	For the three months ended June 30, 2004			For the three months ended June 30, 2003			For the six months ended June 30, 2004			For the six months ended June 30, 2003
Net income available to common shareholders:
As reported	$	114,941		$	107,348		$	255,691		$	226,717
Add: Stock-related compensation expense included in net income as reported	$	2,264		$	1,062		$	3,495		$	1,325
Less: Total stock-related compensation expense determined under fair-value method for all grants	$	3,632		$	3,150		$	6,660		$	5,689
Pro forma	$	113,573		$	105,260		$	252,526		$	222,353
Net income per common share:
Basic
As reported	$	2.14		$	2.02		$	4.76		$	4.29
Pro forma	$	2.11		$	1.98		$	4.70		$	4.21
Diluted
As reported	$	2.12		$	2.00		$	4.71		$	4.22
Pro forma	$	2.09		$	1.96		$	4.65		$	4.14
Weighted average assumptions used:
Risk-free interest rate		4.5	%		3.7	%		3.7	%		3.7	%
Expected life		7 years			7 years			7 years			7 years
Expected volatility		25	%		25	%		25	%		25	%
Dividend yield		2	%		2	%		2	%		2	%

8

PartnerRe Ltd.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

4. New Accounting Policy

The Company’s investment in Channel Re qualifies as an investment in a corporate joint venture and is accounted for using the equity method. The Company’s share of Channel Re’s net income and other comprehensive income is reported in the Company’s net income and other comprehensive income, respectively. The Company calculates its share of Channel Re’s net income and other comprehensive income on the basis of the Company’s share of Channel Re’s common shares currently outstanding.

5. Recent Accounting Pronouncements

In July 2003, the Accounting Standards Executive Committee (AcSEC) of the American Institute of Certified Public Accountants (AICPA) issued Statement of Position 03-01, “Accounting and Reporting by Insurance Enterprises for Certain Non-traditional Long-Duration Contracts and for Separate Accounts” (SOP 03-01). SOP 03-01 complements the guidance available in SFAS No. 60 “Accounting and Reporting by Insurance Enterprises,” and SFAS No. 97, “Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments” for insurance products introduced since the issuance of these two SFAS. SOP 03-01 is effective for financial statements for fiscal years beginning after December 15, 2003. The Company has adopted SOP 03-01 as of January 1, 2004 and the adoption did not have a significant impact on the Company’s condensed consolidated financial statements.

In March of 2004, the Emerging Issues Task Force (“EITF”) reached consensus on the guidance provided in EITF Issue No. 03-1, The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments (“EITF 03-1”) as applicable to debt and equity securities that are within the scope of SFAS 115 Accounting for Certain Investments in Debt and Equity Securities and equity securities that are accounted for using the cost method specified in Accounting Policy Board Opinion No. 18 The Equity Method of Accounting for Investments in Common Stock. Under this guidance, an investment is considered impaired if the fair value of the investment is less than its cost including adjustments for amortization, accretion, foreign exchange, and hedging. EITF 03-1 outlines that an impairment would be considered other-than-temporary unless a) the investor has the ability and intent to hold an investment for a reasonable period of time sufficient for the recovery of the fair value up to (or beyond) the cost of the investment and b) evidence indicating that the cost of the investment is recoverable within a reasonable period of time outweighs evidence to the contrary. The investor should consider its cash or working capital needs to assess its intent and ability to hold an investment for a reasonable period of time for the recovery of fair value up to or beyond the cost of the investment. In addition, the severity and duration of the impairment should also be considered in determining whether the impairment is other-than-temporary. Adoption of this standard may accelerate the timing of losses from declines in value due to interest rates even if there is no deterioration of the credit of the issuer; however, it is not anticipated to have a significant impact on shareholders’ equity as fluctuations in market value of available for sale securities are already reflected in Accumulated Other Comprehensive Income. This new guidance for determining whether impairment is other-than-temporary is effective for reporting periods beginning after June 15, 2004. The Company is currently evaluating the impact of the new accounting guidance on its process for determining whether other-than-temporary declines exist within its debt and equity investment portfolio as well as the impact on its condensed consolidated financial statements.

6. Financing Arrangement

In June 2004, the Company renewed its syndicated unsecured credit facility on substantially the same terms and conditions except for an increase in the term of the facility, which was extended from 364 days to three years, and an increase in the minimum consolidated tangible net worth (defined as total shareholders’ equity plus mandatorily redeemable preferred shares and trust preferred shares minus goodwill) that the Company is required to maintain from $1,250 million plus 50% of cumulative net income for the period from January 1, 2002 through the end of the most recently ended fiscal year to $1,825 million plus 50% of cumulative net income for the period from January 1, 2004 through the end of the most recently ended fiscal year.

9

PartnerRe Ltd.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

7. Segment Information

The Company monitors the performance of its underwriting operations in three segments, Non-life, Alternative Risk Transfer (ART) and Life. The Non-life segment is further divided into three sub-segments, U.S. Property and Casualty, Global (Non-U.S.) Property and Casualty and Worldwide Specialty. Segments and sub-segments represent markets that are reasonably homogeneous in terms of geography, client types, buying patterns, underlying risk patterns and approach to risk management.

The U.S. Property and Casualty sub-segment includes property, casualty and motor risks generally originating in the United States and written by PartnerRe U.S. The Global (Non-U.S.) Property and Casualty sub-segment includes property, casualty and motor risks generally originating outside of the United States, written by Partner Reinsurance Company and PartnerRe SA. The Worldwide Specialty sub-segment is comprised of business that is generally considered to be specialized due to the sophisticated technical underwriting required to analyze risks, and is global in nature, inasmuch as appropriate risk management for these lines requires a globally diversified portfolio of risks. This sub-segment consists of several lines of business for which the Company believes it has developed specialized knowledge and underwriting capabilities. These lines of business include agriculture, aviation/space, catastrophe, credit/surety, engineering/energy, marine, special risk and other lines. The ART segment includes finite reinsurance, structured finance and weather-related products, and starting in the second quarter of 2004, includes the results of the Company’s investment in Channel Re. The Life segment includes life, health and annuity lines of business.

Because the Company does not manage its assets by segment, investment income is not allocated to the Non-life segment of the reinsurance operations. However, because of the interest-sensitive nature of some of the Company’s Life and ART products, investment income is considered in Management’s assessment of the profitability of the Life and ART segments. The following items are not considered in evaluating the results of each segment: net realized investment gains and losses, interest expense, distributions related to trust preferred and mandatorily redeemable preferred securities, net foreign exchange gains and losses, income tax expense or benefit and preferred share dividends. Segment results are shown net of intercompany transactions. The Company has treated its ART operations as a reportable segment for the first time in the first quarter of 2004. Segment information for prior periods has been reclassified to conform to this new presentation.

Management measures results for the Non-life segment on the basis of the “loss ratio”, “acquisition ratio”, “technical ratio”, “other overhead expense ratio” and “combined ratio.” The “loss ratio” is obtained by dividing losses and loss expenses by net premiums earned, the “acquisition ratio” is obtained similarly by dividing acquisition costs by net premiums earned and the “other overhead expense ratio” is obtained by dividing other operating expenses by net premiums earned. The “technical ratio” is the sum of the loss and acquisition ratios. The “combined ratio” is the sum of the technical and other overhead expense ratios. Management measures results for the Non-life sub-segments on the basis of the loss ratio, acquisition ratio and technical ratio. Management measures segment results for the Life and ART segments on the basis of the “allocated underwriting result”, which includes revenues from net premiums earned, other income, net investment income for ART and allocated net investment income for Life, and expenses from losses and loss expenses, acquisition costs and other operating expenses.

For each of the segments and sub-segments presented, premiums are earned on a basis that is consistent with the risks covered under the terms of the reinsurance contracts, which generally is one to two years. The difference between the gross and net premiums written is attributable to the cost of retrocession protection, as the Company selectively purchases retrocession protection as part of its overall risk management process.

10

PartnerRe Ltd.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The following table provides a summary of the segment revenues and results for the six-month and three-month periods ended June 30, 2004 and 2003 (in millions of U.S dollars except ratios):

For the six months ended June 30, 2004

	US P&C			Global (Non - US P&C)			Worldwide Specialty			Total Non- Life Segment			ART Segment (A)			Life Segment			Corporate			Total
Gross premiums written	$	577		$	666		$	956		$	2,199		$	3		$	194		$	—		$	2,396
Net premiums written	$	577		$	666		$	932		$	2,175		$	2		$	187		$	—		$	2,364
(Increase) decrease in unearned premiums		(120	)		(181	)		(206	)		(507	)		—			(9	)		—			(516	)
Net premiums earned	$	457		$	485		$	726		$	1,668		$	2		$	178		$	—		$	1,848
Losses and loss expenses including life policy benefits		(334	)		(370	)		(346	)		(1,050	)		—			(140	)		—			(1,190	)
Acquisition costs		(95	)		(124	)		(161	)		(380	)		—			(51	)		—			(431	)
Technical Result	$	28		$	(9	)	$	219		$	238		$	2		$	(13	)	$	—		$	227
Other income		n/a			n/a			n/a			—			7			—			—			7
Other operating expenses		n/a			n/a			n/a			(96	)		(8	)		(12	)		(20	)		(136	)
Underwriting Result		n/a			n/a			n/a		$	142		$	1		$	(25	)		n/a		$	98
Net investment income		n/a			n/a			n/a			n/a			—			21			127			148
Allocated Underwriting Result (6)		n/a			n/a			n/a			n/a			n/a		$	(4	)		n/a			n/a
Net realized investment gains		n/a			n/a			n/a			n/a			n/a			n/a			46			46
Interest expense		n/a			n/a			n/a			n/a			n/a			n/a			(20	)		(20	)
Net foreign exchange gains		n/a			n/a			n/a			n/a			n/a			n/a			1			1
Income tax expense		n/a			n/a			n/a			n/a			n/a			n/a			(8	)		(8	)
Net Income		n/a			n/a			n/a			n/a			n/a			n/a			n/a		$	265
Loss ratio (1)		73.1	%		76.2	%		47.7	%		63.0	%
Acquisition ratio (2)		20.9			25.6			22.1			22.7
Technical ratio (3)		94.0	%		101.8	%		69.8	%		85.7	%
Other overhead expense ratio (4)											5.8
Combined Ratio (5)											91.5	%

11

PartnerRe Ltd.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

For the six months ended June 30, 2003

	US P&C			Global (Non -US P&C)			Worldwide Specialty			Total Non- Life Segment			ART Segment (A)			Life Segment			Corporate			Total
Gross premiums written	$	539		$	487		$	918		$	1,944		$	—		$	155		$	—		$	2,099
Net premiums written	$	539		$	491		$	896		$	1,926		$	—		$	148		$	—		$	2,074
Increase in unearned premiums		(128	)		(74	)		(197	)		(399	)		—			(6	)		—			(405	)
Net premiums earned	$	411		$	417		$	699		$	1,527		$	—		$	142		$	—		$	1,669
Losses and loss expenses including life policy benefits		(286	)		(283	)		(409	)		(978	)		—			(132	)		—			(1,110	)
Acquisition costs		(107	)		(106	)		(135	)		(348	)		—			(23	)		—			(371	)
Technical Result	$	18		$	28		$	155		$	201		$	—		$	(13	)	$	—		$	188
Other income		n/a			n/a			n/a			—			5			—			—			5
Other operating expenses		n/a			n/a			n/a			(83	)		(5	)		(8	)		(13	)		(109	)
Underwriting Result		n/a			n/a			n/a		$	118		$	—		$	(21	)		n/a		$	84
Net investment income		n/a			n/a			n/a			n/a			—			24			100			124
Allocated Underwriting Result (6)		n/a			n/a			n/a			n/a			n/a		$	3			n/a			n/a
Net realized investment gains		n/a			n/a			n/a			n/a			n/a			n/a			56			56
Interest expense		n/a			n/a			n/a			n/a			n/a			n/a			(6	)		(6	)
Net foreign exchange gains		n/a			n/a			n/a			n/a			n/a			n/a			8			8
Income tax expense		n/a			n/a			n/a			n/a			n/a			n/a			(6	)		(6	)
Distributions related to trust preferred and mandatorily redeemable preferred securities		n/a			n/a			n/a			n/a			n/a			n/a			(14	)		(14	)
Net Income		n/a			n/a			n/a			n/a			n/a			n/a			n/a		$	246
Loss ratio (1)		69.5	%		68.0	%		58.6	%		64.1	%
Acquisition ratio (2)		26.1			25.2			19.3			22.8
Technical ratio (3)		95.6	%		93.2	%		77.9	%		86.9	%
Other overhead expense ratio (4)											5.4
Combined Ratio (5)											92.3	%

^(A) This segment includes the Company’s share of Channel Re’s net income in the amount of $0.7 million in the 2004 period. The 2003 period includes no income from Channel Re as the Company acquired its equity ownership in the first quarter of 2004.

⁽¹⁾ Loss ratio is obtained by dividing losses and loss expenses by net premiums earned.

⁽²⁾ Acquisition ratio is obtained by dividing acquisition costs by net premiums earned.

⁽³⁾ Technical ratio is defined as the sum of the loss ratio and the acquisition ratio.

⁽⁴⁾ Other overhead expense ratio is obtained by dividing other operating expenses by net premiums earned.

⁽⁵⁾ Combined ratio is the sum of the technical ratio and the other overhead expense ratio.

⁽⁶⁾ Allocated Underwriting Result is defined as net premiums earned, other income and net investment income less losses and loss expenses, acquisition costs and other overhead expenses.

12

PartnerRe Ltd.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

For the three months ended June 30, 2004

	US P&C			Global (Non -US P&C)			Worldwide Specialty			Total Non- Life Segment			ART Segment (A)			Life Segment			Corporate			Total
Gross premiums written	$	201		$	197		$	337		$	735		$	2		$	105		$	—		$	842
Net premiums written	$	201		$	197		$	337		$	735		$	2		$	104		$	—		$	841
(Increase) decrease in unearned premiums		33			33			45			111			(1	)		4			—			114
Net premiums earned	$	234		$	230		$	382		$	846		$	1		$	108		$	—		$	955
Losses and loss expenses including life policy benefits		(168	)		(183	)		(183	)		(534	)		—			(86	)		—			(620	)
Acquisition costs		(53	)		(60	)		(87	)		(200	)		—			(27	)		—			(227	)
Technical Result	$	13		$	(13	)	$	112		$	112		$	1		$	(5	)	$	—		$	108
Other income		n/a			n/a			n/a			—			4			—			—			4
Other operating expenses		n/a			n/a			n/a			(48	)		(4	)		(6	)		(10	)		(68	)
Underwriting Result		n/a			n/a			n/a		$	64		$	1		$	(11	)		n/a		$	44
Net investment income		n/a			n/a			n/a			n/a			—			11			64			75
Allocated Underwriting Result (6)		n/a			n/a			n/a			n/a			n/a		$	—			n/a			n/a
Net realized investment gains		n/a			n/a			n/a			n/a			n/a			n/a			8			8
Interest expense		n/a			n/a			n/a			n/a			n/a			n/a			(10	)		(10	)
Net foreign exchange losses		n/a			n/a			n/a			n/a			n/a			n/a			—			—
Income tax benefit		n/a			n/a			n/a			n/a			n/a			n/a			(3	)		3
Net Income		n/a			n/a			n/a			n/a			n/a			n/a			n/a		$	120
Loss ratio (1)		71.9	%		79.2	%		47.8	%		63.0	%
Acquisition ratio (2)		22.6			26.0			22.8			23.6
Technical ratio (3)		94.5	%		105.2	%		70.6	%		86.6	%
Other overhead expense ratio (4)											5.6
Combined Ratio (5)											92.2	%

13

PartnerRe Ltd.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

For the three months ended June 30, 2003

	US P&C			Global (Non -US P&C)			Worldwide Specialty			Total Non- Life Segment			ART Segment (A)			Life Segment			Corporate			Total
Gross premiums written	$	221		$	182		$	366		$	769		$	—		$	68		$	—		$	837
Net premiums written	$	221		$	186		$	366		$	773		$	—		$	66		$	—		$	839
Increase in unearned premiums		(6	)		29			—			23			—			1			—			24
Net premiums earned	$	215		$	215		$	366		$	796		$	—		$	67		$	—		$	863
Losses and loss expenses including life policy benefits		(148	)		(145	)		(202	)		(495	)		—			(59	)		—			(554	)
Acquisition costs		(57	)		(57	)		(74	)		(188	)		—			(14	)		—			(202	)
Technical Result	$	10		$	13		$	90		$	113		$	—		$	(6	)	$	—		$	107
Other income		n/a			n/a			n/a			—			3			—			—			3
Other operating expenses		n/a			n/a			n/a			(44	)		(3	)		(4	)		(7	)		(58	)
Underwriting Result		n/a			n/a			n/a		$	69		$	—		$	(10	)		n/a		$	52
Net investment income		n/a			n/a			n/a			n/a			—			12			51			63
Allocated Underwriting Result (6)		n/a			n/a			n/a			n/a			n/a		$	2			n/a			n/a
Net realized investment gains		n/a			n/a			n/a			n/a			n/a			n/a			16			16
Interest expense		n/a			n/a			n/a			n/a			n/a			n/a			(3	)		(3	)
Net foreign exchange gains		n/a			n/a			n/a			n/a			n/a			n/a			5			5
Income tax expense		n/a			n/a			n/a			n/a			n/a			n/a			(4	)		(4	)
Distributions related to trust preferred and mandatorily redeemable preferred securities		n/a			n/a			n/a			n/a			n/a			n/a			(7	)		(7	)
Net Income		n/a			n/a			n/a			n/a			n/a			n/a			n/a		$	122
Loss ratio (1)		68.7	%		67.8	%		55.2	%		62.2	%
Acquisition ratio (2)		26.6			26.4			20.0			23.6
Technical ratio (3)		95.3	%		94.2	%		75.2	%		85.8	%
Other overhead expense ratio (4)											5.5
Combined Ratio (5)											91.3	%

^(A) This segment includes the Company’s share of Channel Re’s net income in the amount of $0.7 million in the 2004 period. The 2003 period includes no income from Channel Re as the Company acquired its equity ownership in the first quarter of 2004.

⁽¹⁾ Loss ratio is obtained by dividing losses and loss expenses by net premiums earned.

⁽²⁾ Acquisition ratio is obtained by dividing acquisition costs by net premiums earned.

⁽³⁾ Technical ratio is defined as the sum of the loss ratio and the acquisition ratio.

⁽⁴⁾ Other overhead expense ratio is obtained by dividing other operating expenses by net premiums earned.

⁽⁵⁾ Combined ratio is the sum of the technical ratio and the other overhead expense ratio.

⁽⁶⁾ Allocated Underwriting Result is defined as net premiums earned, other income and net investment income less losses and loss expenses, acquisition costs and other overhead expenses.

14

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion and analysis of the unaudited consolidated financial condition at June 30, 2004 and results of operations of PartnerRe Ltd. (the “Company”) for the six-month and three-month periods ended June 30, 2004 and 2003. This discussion and analysis should be read in conjunction with the attached unaudited condensed consolidated financial statements and notes thereto and the audited consolidated financial statements of the Company at and for the year ended December 31, 2003 and notes thereto included in the Company’s 2003 Annual Report to Shareholders. The unaudited condensed consolidated financial statements at and for the three and six-month periods ended June 30, 2004 and notes thereto have been reviewed by independent accountants in accordance with standards of the Public Company Accounting Oversight Board (United States). This Management’s Discussion and Analysis of Financial Condition and Results of Operations includes references to financial figures prepared in accordance with accounting principles generally accepted in the United States and ratios that are calculated using these figures.

Forward Looking Statements

Certain statements contained in this document, including Management’s Discussion and Analysis, may be considered forward-looking statements as defined in section 27A of the United States Securities Act of 1933 and section 21E of the United States Securities Exchange Act of 1934. Forward-looking statements are made based upon management’s assumptions and expectations concerning the potential effect on the Company of future events and financial performance and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are subject to significant business, economic and competitive risks and uncertainties that could cause actual results to differ materially from those reflected in such forward-looking statements. PartnerRe’s forward-looking statements could be affected by numerous foreseeable and unforeseeable events and developments such as:

(1) the occurrence of catastrophic events or other reinsured events with a frequency or severity exceeding our expectations;

(2) a decrease in the level of demand for reinsurance and/or an increase in the supply of reinsurance capacity;

(3) increased competitive pressures, including the consolidation and increased globalization of reinsurance providers;

(4) actual losses and loss expenses exceeding our loss reserves, which are necessarily based on actuarial and statistical projections of ultimate losses;

(5) acts of terrorism;

(6) changes in the cost, availability and performance of retrocessional reinsurance, including the ability to collect reinsurance recoverables;

(7) concentration risk in dealing with a limited number of brokers;

(8) developments in and risks associated with global financial markets which could affect our investment portfolio;

(9) changing rates of inflation and other economic conditions;

(10) availability of borrowings and letters of credit under the Company’s credit facilities;

(11) losses due to foreign currency exchange rate fluctuations;

(12) restrictions in the issue of work permits which could result in loss of the services of any one of our executives;

(13) changes in the legal or regulatory environments in which we operate, including the passage of federal or state legislation subjecting Partner Reinsurance Company Ltd. or PartnerRe SA to supervision or regulation, including additional tax regulation, in the United States or other jurisdictions in which we operate;

(14) actions by rating agencies that might impact the Company’s ability to continue to write existing business or write new business;

(15) changes in accounting policies, their application or interpretation; and

(16) the other factors set forth in the Company’s other documentation on file with the SEC.

15

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

The foregoing discussion of important factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included herein or elsewhere. The words “believe,” “anticipate,” “estimate,” “project,” “plan,” “expect,” “intend,” “hope,” “forecast,” “evaluate,” “will likely result” or “will continue” or words of similar impact generally involve forward-looking statements. We caution readers not to place undue reliance on these forward-looking statements, which speak only as of their dates. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

General

The Company provides reinsurance on a worldwide basis through its wholly owned subsidiaries, Partner Reinsurance Company Ltd. (“Partner Reinsurance Company”), PartnerRe SA, and Partner Reinsurance Company of the U.S. (“PartnerRe US”). Risks reinsured include, but are not limited to, property, casualty, motor, agriculture, aviation/space, catastrophe, credit/surety, engineering/energy, marine, special risk, other lines and life/annuity and health. The Company also offers financial products that provide weather and credit protection to industrial and service companies on a worldwide basis.

Because of the inherent volatility of some of the lines of business the Company underwrites, the operating results and financial condition of the Company can be adversely impacted by catastrophes and other large losses that may give rise to claims under reinsurance coverages provided by the Company. Catastrophe reinsurance comprises a material portion of the Company’s exposure. Catastrophe losses result from events such as windstorms, earthquakes, floods, hail, tornadoes, severe winter weather, fires, explosions and other man-made or natural disasters, the incidence and severity of which are inherently unpredictable. Because catastrophe reinsurance accumulates large aggregate exposures to man-made and natural disasters, the Company’s loss experience in this line of business could be characterized by low frequency and high severity, particularly since it usually provides reinsurance that pays only after the primary insurer has experienced a specified level of loss, which tends to reduce the Company’s exposure to higher-frequency low-severity losses. This is likely to result in substantial volatility in the Company’s financial results for any fiscal quarter or year and could have a material adverse effect on the Company’s financial condition or results of operations.

The Company writes other lines of business and products that can be affected by large losses, including property, casualty, motor, agriculture, aviation/space, credit/surety, engineering/energy, marine, special risk, other lines, life/annuity and health, finite reinsurance, structured finance and weather-related products. The Company endeavors to manage its exposure to catastrophe and other large losses by (i) attempting to limit its aggregate exposure on catastrophe reinsurance in any particular geographic zone defined by the Company and attempting to limit its exposure to per risk reinsurance, (ii) selective underwriting practices, (iii) diversification of risks by geographic area and by lines and classes of business, and (iv) to a certain extent by purchasing retrocessional reinsurance and credit default swaps. Despite the Company’s efforts to manage its exposure to catastrophe and other large losses, the effect of a single catastrophic event or series of events affecting one or more geographic zones or changes in the relative frequency or severity of catastrophic or other large loss events could have a material adverse effect on the Company’s financial condition or results of operations. Should the Company incur a substantial catastrophe loss, its ability to write future business may be impacted.

Business Environment

The reinsurance industry is both highly competitive and cyclical. Competition in the industry is influenced by several factors including variations in interest rates and financial markets, changes in legal, regulatory and judicial environments, inflation and general economic conditions. Reinsurance cycles vary in length and the up cycle, the profitable years leading to increases in reinsurers’ capital, can result from either strong reinsurance pricing and terms and conditions or strong investment income resulting from high interest rates or the combination of both circumstances. The occurrence of a catastrophic loss or one or a series of large losses would typically influence reinsurance pricing and terms and conditions. Growth in capital is a prime determinant of capacity and competition in the reinsurance industry and ultimately leads to a softening of pricing and terms and conditions. Management believes that reinsurance pricing generally follows loss cost trends, but that the lag between the loss trend cycle and the pricing cycle is ultimately affected by the availability of capital in the industry.

16

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Following the last downturn in the cycle, the reinsurance industry’s expected profitability experienced consistent improvements during years 2001 through 2003 and this trend was further amplified following the event of September 11, 2001. Beginning in 2004 the Company saw a change in this trend and believes that for most lines of business that the industry has seen the peak in the current profitability cycle. Currently we are experiencing a market that is gradually weakening, in terms of price and terms and conditions; however, this is occurring in an orderly and understandable fashion. The short-tailed lines, e.g., property energy, aviation and catastrophe, are currently experiencing the most significant pricing deterioration as the loss experience over the past several years has been excellent and provided the industry with more capital. Pricing in longer tailed lines of business e.g., casualty, continues to improve; however, improvements are at a much slower pace than has been experienced in the last few years. In spite of these changes in the business environment the Company continues to find business opportunities that have adequate pricing and which the Company believes are consistent with its long term goals and objectives.

Looking forward, the Company expects to see a continuation of a slowly weakening market through 2005, assuming the absence of a major industry event, which could lead to a change in the current trends in pricing.

As interest rates continue to rise we expect to see a contraction in the amount of capital available to the industry; however, we also expect to see improved investment income into 2005 as operating cash flows and maturing investments are invested at increasing rates of return.

Critical Accounting Policies

See the discussion of the Company’s Critical Accounting Policies in the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Company’s 2003 Annual Report to Shareholders. The following discussion updates specific information related to the Company’s estimates for unpaid loss and loss expense reserves since December 31, 2003 and March 31, 2004.

The Company performs quarterly reviews of the adequacy of unpaid losses and loss expense reserves, taking into account current and historical reported claims information, industry information and trends, and other factors that could have an impact on the ultimate settlement value of claims incurred by the Company. The claims information reported to the Company in any one period can pertain to the current as well as prior years and can indicate an increase or a decrease in the losses anticipated by the cedant. This new information can influence the Company’s assessment of its ultimate loss ratios as well as the level of required losses and loss expense reserves currently held. Although the dollar value of emerging reported losses may not be significant on an individual basis, the Company monitors the accumulation of such individual losses (referred to as “attritional losses”) to identify trends that may be meaningful from a reserving standpoint. In any given quarter, the Company may increase its reserve estimates relating to claims of prior periods (referred to as “adverse loss development”), or it may reduce its reserves related to prior periods (referred to as “positive loss development”), depending on what information becomes available for consideration during the quarterly evaluation of reserves.

The allocation of losses to accident years attempts to match losses with the period in which the related premiums were earned and facilitates the review of calendar year results, which typically include results from the current accident year and development on prior accident years. The following table shows the net positive (adverse) loss development for prior accident years in the Non-life segment (in millions of U.S. dollars):

	Three months ended June 30, 2004			Three months ended June 30, 2003			Six months ended June 30, 2004			Six months ended June 30, 2003
Prior year positive (adverse) loss development:
Non-life segment:
U.S. Property and Casualty	$	(6	)	$	(9	)	$	(9	)	$	(16	)
Global (Non-U.S.) Property and Casualty		(13	)		—			(17	)		27
Worldwide Specialty		49			(5	)		115			(22	)
Total prior-year loss development	$	30		$	(14	)	$	89		$	(11	)

17

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

The components making up the net positive loss development for the three-month and six-month periods ended June 30, 2004 and 2003 are described in more detail in the discussion of the individual sub-segments that make up the Non-life segment, below.

At June 30, 2004, the Company had gross Non-life reserves for unpaid losses and loss expenses of $5.1 billion, comprised of outstanding loss reserves (case reserves) of $2.2 billion, incurred but not reported (IBNR) reserves of $2.7 billion and additional case reserves (ACR) of $0.2 billion. The Company had Non-life ceded reserves of $0.2 billion recoverable under retrocessional agreements, resulting in net Non-life reserves of $4.9 billion. At December 31, 2003, the Company had gross Non-life reserves for unpaid losses and loss expenses of $4.8 billion, comprised of case reserves of $2.2 billion, IBNR reserves of $2.5 billion and ACR of $0.1 billion. At March 31, 2004, the Company had gross Non-life reserves for unpaid losses and loss expenses of $4.9 billion, comprised of case reserves of $2.2 billion, IBNR reserves of $2.6 billion and ACR of $0.1 billion.

The Company estimates its unpaid losses and loss expense reserves using single point estimates for each sub-segment. These reserves represent the Company’s best estimate of future losses and loss expense amounts. Ranges around these point estimates are developed using stochastic simulations and techniques and provide an indication as to the degree of variability of the unpaid losses and loss expense reserves. The Company interprets the ranges produced by these techniques as confidence intervals around the best estimates for each sub-segment. However, due to the inherent volatility in the business written by the Company there can be no guarantee that the final settlement of the unpaid losses and loss expense reserves will fall within these ranges. The point estimates recorded by the Company and the range of estimates around these point estimates for net reserves at June 30, 2004, were as follows (in millions of U.S. dollars):

	Recorded Point Estimate		High		Low
U.S. Property and Casualty	$	1,383	$	1,666	$	1,045
Global (Non-U.S.) Property and Casualty		1,851		2,087		1,528
Worldwide Specialty		1,653		1,717		1,299

It is not appropriate to add together the ranges of each sub-segment in an effort to determine a high and low range around the Company’s total carried unpaid losses and loss expense reserves.

Estimates of ultimate liabilities are contingent on many future events. The eventual outcome of these events may be different from the assumptions underlying the reserve estimates. In the event the business environment and social trends diverge from historical trends, the Company may have to adjust its reserves to amounts falling significantly outside its current estimate range. Management believes that the recorded reserves represent the best estimate of future liabilities based on information available as at June 30, 2004. The estimates are continually reviewed and the ultimate liability may be in excess of, or less than, the amounts provided, for which any adjustments will be reflected in the periods in which they become known.

Reserves for policy benefits for ordinary life, accident and health policies have been established based upon information reported by ceding companies supplemented by the Company’s best actuarial estimates of mortality, morbidity, persistency and investment income, with appropriate provision for adverse deviation. Future policy benefit reserves for annuity and universal life products are carried at their accumulated values. Reserves for policy claims and benefits include both mortality and morbidity claims in the process of settlement and claims that are assumed to have been incurred but not yet reported. Interest rate assumptions used to estimate liabilities for policy benefits for life and annuity contracts ranged from 1.5% to 6.7%. Actual experience in a particular period may vary from assumed experience and, consequently, may affect the Company’s results in future periods.

Included in the business that is considered to have a long reporting tail is the Company’s exposure to asbestos and environmental claims. The Company’s reserve for unpaid losses and loss expenses for asbestosis and environmental exposures have not changed significantly since December 31, 2003. (See Note 5 to the consolidated financial statements in the Company’s 2003 Annual Report to Shareholders.)

18

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations—for the Six Months Ended June 30, 2004 and 2003

Results Summary

The Company measures its performance in several ways. Among the performance measures accepted under U.S. GAAP are diluted net income per share and return on beginning common shareholders’ equity (ROE), two measures that focus on the return provided to the Company’s common shareholders. Diluted net income per share is obtained by dividing net income available to common shareholders by the weighted average number of common and common share equivalents outstanding. Net income available to common shareholders is defined as net income less preferred share dividends. Net income available to common shareholders is also used in the calculation of the Company’s ROE, which is calculated by dividing net income available to common shareholders by the net book value of the common shareholders’ equity at the beginning of the year. ROE figures are presented on an annualized basis. The net book value of the common shareholders’ equity is obtained by subtracting the aggregate liquidation value of the preferred shares from total shareholders’ equity.

The Company analyses its net income in four parts: underwriting result, investment income, income and expenses from other operations and fixed charges. Underwriting result is defined as net premiums earned and other income less losses and loss expenses, acquisition costs and other overhead expenses. Investment income includes interest and dividends, net of investment expenses, generated by the Company’s investment portfolio, as well as interest income generated on funds held and certain ART transactions. Income and expenses from other operations include net realized investment gains and losses, net foreign exchange gains and losses, and income tax expense or benefit. Fixed charges are comprised of interest expense and distributions related to Trust Preferred and Mandatorily Redeemable Preferred Securities.

Underwriting result, investment income, income and expenses from other operations, fixed charges, net income available to common shareholders, diluted net income per common share and ROE for the six months ended June 30, 2004 and 2003 were as follows (in millions of U.S. dollars, except per share data and ROE):

	For the six months ended June 30, 2004			% Change 2004 over 2003		For the six months ended June 30, 2003
Underwriting result	$	98		18	%	$	84
Investment income		148		19			124
Income and expenses from other operations		39		(34	)		58
Fixed charges		(20	)	(1	)		(20	)
Net income	$	265		8		$	246
Less: Preferred dividends		9		(50	)		19
Net income available to common shareholders	$	256		13		$	227
Diluted net income per share	$	4.71		12		$	4.22
Annualized return on beginning common shareholders’ equity (ROE)		22.2	%				24.8	%

Net income available to common shareholders and diluted net income per share for the 2004 period improved compared to the equivalent period of 2003 principally as a result of higher underwriting result and increased net investment income. Other operations have partially offset the increase.

Underwriting result increased significantly from $84 million for the six-month period ended June 30, 2003 to $98 million for the same period of 2004. Contributing to the improvement of underwriting result were the strong market conditions as well as favorable development on prior accident year losses as the Company reduced its estimate of losses for certain lines as the “at risk” period for older years expired and updated information was received from cedants.

In addition to higher income generated by the underwriting operations, the Company reported net investment income of $148 million for the six months ended June 30, 2004 compared to $124 million during the equivalent period in 2003. The increase in investment income is attributable to the investment of the Company’s significant cash flow from operations, which amounted to $622 million for the six months ended June 30, 2004 and $1.3 billion since June 30, 2003.

19

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Income and expense from other operations has decreased from $58 million for the six months ended June 30, 2003 to $39 million for the equivalent period in 2004 primarily as a result of lower net realized investment gains. Realized investment gains and losses, which account for most of the decrease, are generally a function of multiple factors with the most significant being the prevailing interest rates and the timing of disposition of available for sale fixed maturities and equity securities, and charges for the recognition of other-than-temporary impairments in the Company’s investment portfolio. As the Company repositions its investment portfolio to take advantage of market conditions, it generates sales of securities that result in the realization of the unrealized market value appreciation or depreciation on the securities. The realization of the unrealized market value appreciation or depreciation does not change the Company’s comprehensive income and shareholders’ equity, as it merely transfers the gain or loss from the accumulated other comprehensive income section of the condensed consolidated balance sheets to the net income on the condensed consolidated statements of operations and the retained earnings section of the condensed consolidated balance sheets.

Preferred dividends for the six months ended June 30, 2003 included a non-recurring charge of $10 million related to the redemption of the Company’s Series A preferred shares and the overlap of preferred dividend on Series A and Series C preferred shares prior to the redemption of the Series A preferred shares in the second quarter of 2003.

Notwithstanding the increase in the net income in the first half of 2004 compared to the same period in 2003, the Company’s annualized ROE declined as the opening equity available to common shareholders increased at a faster rate than net income available to common shareholders.

The next section provides a detailed analysis of the Company’s underwriting result by segment and sub-segment, investment income, income and expenses from other operations and fixed charges for the six-month periods ended June 30, 2004 and 2003.

Results by Segment

See the description of the Company’s segments and sub-segments included in Note 7 to the Condensed Consolidated Financial Statements in Item 1, above.

20

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Non-life Segment

U.S. Property and Casualty

The following table provides the components of the technical result and their corresponding ratios for this sub-segment for the six months ended June 30, 2004 and 2003 (in millions of U.S. dollars):

	For the six months ended June 30, 2004			% Change 2004 over 2003		For the six months ended June 30, 2003
Gross premiums written	$	577		7	%	$	539
Net premiums written		577		7			539
Net premiums earned	$	457		11		$	411
Losses and loss expenses		334		17			286
Acquisition costs		95		(11	)		107
Technical result	$	28		54		$	18
Loss ratio		73.1	%				69.5	%
Acquisition ratio		20.9	%				26.1	%
Technical ratio		94.0	%				95.6	%

Premiums

The U.S. Property and Casualty sub-segment represented 24% of net premiums written in the first six months of 2004. The growth in net premiums written over the equivalent period of 2003 was most pronounced in the casualty and motor lines, where terms and conditions remained strong, while premiums in the property line decreased principally due to the softening of terms and conditions and increased cedant retention. Notwithstanding the strong terms and conditions prevailing in this sub-segment, the Company has remained selective in pursuing business that meets its profitability objectives. The Company continued its controlled expansion in the specialty casualty line as it believes that this line will continue to provide very good terms and conditions. Based on the July 1, 2004 pricing indications and renewal information received from cedants and brokers, gross and net premiums written are expected to grow during the remainder of 2004 in this sub-segment, driven by the casualty line (including specialty casualty business). Net premiums earned are expected to increase modestly for all lines during the remainder of 2004.

Losses and loss expenses

The growth in the losses and loss expense volume in the six months ended June 30, 2004 compared to the equivalent period in 2003, is due to the growth in the Company’s book of business and exposure as evidenced by the increase in net premiums earned for this sub-segment. The technical ratio for the six months ended June 30, 2004 and 2003 included no catastrophe or other significant losses. The increase in loss ratio for the six months ended June 30, 2004 compared to the corresponding 2003 period occurred primarily as a result of the continued expansion of the specialty casualty line that typically tends to have a higher loss ratio due to the long-tail nature of the risk involved. Accordingly, these treaties also typically provide for investment income on invested premiums during a longer period as losses are typically paid later than for other lines. The technical result and ratio for the six months ended June 30, 2004 and 2003 included $9 million and $16 million, respectively, of adverse prior year loss development. The adverse loss development of $9 million recorded in the 2004 period included adverse loss development on the motor and casualty lines, which was partially offset by positive loss development on the shorter-tailed property line. Included in the positive loss development on the property line was a $12 million reduction in the Company’s loss estimate related to the event of September 11, as the Company received information from cedants indicating that certain outstanding loss reserves were no longer necessary. The adverse loss development recorded in the 2003 period pertained principally to the casualty line.

Acquisition costs

The decrease in the acquisition costs and acquisition ratio during the first six months of 2004 is due to the reduction of the acquisition ratio on treaties with experience credits under the form of sliding scale and profit commission adjustments. A shift from proportional to non-proportional business within this sub-segment also reduced the acquisition ratio as non-proportional business typically carries lower acquisition costs.

21

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Global (Non-U.S.) Property and Casualty

The following table provides the components of the technical result and their corresponding ratios for this sub-segment for the six months ended June 30, 2004 and 2003 (in millions of U.S. dollars):

	For the six months ended June 30, 2004			% Change 2004 over 2003		For the six months ended June 30, 2003
Gross premiums written	$	666		37	%	$	487
Net premiums written		666		36			491
Net premiums earned	$	485		17		$	417
Losses and loss expenses		370		31			283
Acquisition costs		124		18			106
Technical result	$	(9	)	NM		$	28
Loss ratio		76.2	%				68.0	%
Acquisition ratio		25.6	%				25.2	%
Technical ratio		101.8	%				93.2	%

NM: not meaningful

Premiums

The Global (Non-U.S.) Property and Casualty sub-segment represented 28% of net premiums written in the six months ended June 30, 2004. The growth in gross and net premiums written over the equivalent period of 2003 was the result of two factors. A substantial portion of the growth related to refinements in the process used for estimating premiums written on certain portfolio treaties that renewed during the first quarter of 2004. As discussed in the Company’s Form 10-Q for the first quarter of 2004, the impact of the refinement was to recognize upfront, gross and net premiums written of approximately $146 million that would have been recognized ratably over the year had this refinement not been made. This increase in premiums written was largely offset by a corresponding increase in unearned premiums. The change will not affect the annual gross and net premiums written volume but will affect comparisons of quarterly and half-year figures over the previous year. As the year progresses, the year to date comparison will be less impacted by the timing issue. The second factor impacting the growth rate was the weaker U.S. dollar during the first six months of 2004 compared to the equivalent period of 2003. As a result, foreign exchange contributed approximately 13 points to the growth in net premiums written. Through the six months ended June 30, 2004, the Company continued to observe strong prices and terms and conditions in the casualty and motor lines and observed that even though pricing in the property line remains at a profitable level, terms and conditions are softening for this line. Notwithstanding the generally strong terms and conditions prevailing in this sub-segment, the Company has seen increased competition but has remained selective in pursuing business that meets its profitability objectives and has declined treaties where terms and conditions did not meet the Company’s objectives. Based on the July 1, 2004 pricing indications and renewal information received from cedants and brokers, and assuming constant foreign exchange rates, gross and net premiums written are expected to have moderate growth in the remainder of 2004 in this sub-segment. Net premiums earned are expected to grow moderately during the remainder of 2004.

Losses and loss expenses

The technical ratio for the six months ended June 30, 2004 and 2003 included no catastrophe or other individually significant losses. The increase in the loss ratio for the six months ended June 30, 2004 compared to the corresponding 2003 period occurred primarily because of weak technical result in the casualty and motor lines which were partially offset by good results in the property line during the first six months of 2004. The technical result and ratio for the six-month periods ended June 30, 2004 and 2003 included $17 million of adverse prior year loss development, or 3.4 points on the loss ratio, and $27 million, or 6.5 points on the loss ratio, of positive loss development, respectively. The adverse loss development recorded in the first six months of 2004 included adverse loss development on the casualty and motor lines, which was partially offset by positive loss development on the property line. The positive loss development recorded in the first six-months of 2003 pertained principally to the property line.

Acquisition costs

The acquisition ratio for the first six months of 2004 and 2003 was comparable.

22

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Worldwide Specialty

The following table provides the components of the technical result and their corresponding ratios for this sub-segment for the six months ended June 30, 2004 and 2003 (in millions of U.S. dollars):

	For the six months ended June 30, 2004			% Change 2004 over 2003		For the six months ended June 30, 2003
Gross premiums written	$	956		4	%	$	918
Net premiums written		932		4			896
Net premiums earned	$	726		4		$	699
Losses and loss expenses		346		(15	)		409
Acquisition costs		161		19			135
Technical result	$	219		42		$	155
Loss ratio		47.7	%				58.6	%
Acquisition ratio		22.1	%				19.3	%
Technical ratio		69.8	%				77.9	%

Premiums

The Worldwide Specialty sub-segment represented 40% of net premiums written in the first six months of 2004. The growth in net premiums written over the equivalent period of 2003 was principally due to the weakening of the U.S. dollar in the first six months of 2004 compared to the first six months of 2003. During the first six months of 2004, the Company has seen no real change in market trends since the second half of 2003 where the pricing for the most profitable lines of business had started to decline and the other lines exhibited a slow but orderly reduction in the rate of price increases as a result of increasing competition. The Company has remained selective in pursuing business that meets its profitability objectives. Based on the July 1, 2004 pricing indications and renewal information received from cedants and brokers, and assuming constant foreign exchange rates, gross and net premiums written for the remainder of the year are expected to be flat or decrease during 2004 for this sub-segment. Net premiums earned are expected to increase modestly during the remainder of 2004.

Losses and loss expenses

While the technical ratio for the six months ended June 30, 2004 included large losses in the marine and energy lines, including the $30 million loss on the Algerian gas plant explosion, the first six months of 2003 included no catastrophe or other significant losses. The decrease in the losses and loss expenses and loss ratio in the six months ended June 30, 2004 compared to June 30, 2003, is principally due to the positive loss development recorded during the first six months of 2004. The technical result and ratio for the periods ended June 30, 2004 and 2003 included $115 million of positive loss development and $22 million of adverse loss development, respectively. The positive loss development of $115 million recorded in the first six months of 2004 included positive loss development on the special risk, catastrophe, aviation, agriculture and engineering/energy lines, which was partially offset by adverse loss development on the marine line. Included in the positive loss development of 2004 was a $21 million reduction in the Company’s loss estimate related to the event of September 11, as the Company received information from cedants indicating that certain outstanding loss reserves were no longer necessary. The adverse loss development recorded in the first six months of 2003 pertained principally to the specialty property line.

Acquisition costs

The increase in the acquisition costs and acquisition ratio compared to the six months ended June 30, 2003 resulted primarily from a shift from treaties previously written on a net basis, where premiums are ceded to the Company net of acquisition costs, to treaties written on a gross basis, where acquisitions costs are reported separately from premiums. This change in the form of the treaty does not affect the net result under the treaty but distorts the quarter over quarter comparison for acquisition costs. Other factors contributing to the increase included intensifying competition in this sub-segment, which tends to increase acquisition costs, and a shift between lines of business where certain lines carry higher acquisition ratios.

23

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

ART Segment

The following table provides the components of the underwriting result for this segment for the six months ended June 30, 2004 and 2003 (in millions of U.S. dollars):

	For the six months ended June 30, 2004			For the six months ended June 30, 2003
Gross premiums written	$	3		$	—
Net premiums written		2			—
Net premiums earned	$	2		$	—
Losses and loss expenses		—			—
Acquisition costs		—			—
Technical result	$	2		$	—
Other Income		7			5
Other operating expenses		(8	)		(5	)
Underwriting result	$	1		$	—

As reinsurance accounting does not apply for much of the business in this segment, premiums alone are not a representative measure of activity in ART. This segment is very transaction driven, and revenues and profit trends will be uneven, especially given the still small size of this segment. The ART segment had good growth in revenues during the first six months of 2004 despite low interest rates, which reduce the attractiveness of finite business for clients, and low credit spreads, which reduce the opportunities in the structured finance business. Finite business had strong accounting results due to the commutation of two large treaties, which accelerated the recognition of the margin on the treaties. Results in the structured finance line included losses arising due to the marking down of derivative positions related to certain securities whose market value had declined due to wider spreads on underlying securities while results in the weather line included losses resulting from higher than normal spring temperature in Japan. The Company’s share of the results of Channel Re for the first six months of 2004, amount to $0.7 million and is included in the ART segment results. The Company expects the ART segment and results to grow during the remainder of the year as this segment continues to expand.

24

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Life Segment

The following table provides the components of the allocated underwriting result for this segment for the six months ended June 30, 2004 and 2003 (in millions of U.S. dollars):

	For the six months ended June 30, 2004			% Change 2004 over 2003		For the six months ended June 30, 2003
Gross premiums written	$	194		25	%	$	155
Net premiums written		187		26			148
Net premiums earned	$	178		25		$	142
Life policy benefits		140		(5	)		132
Acquisition costs		51		117			23
Technical result	$	(13	)	(3	)	$	(13	)
Other operating expenses		(12	)	(44	)		(8	)
Allocated investment income		21		(11	)		24
Allocated underwriting result	$	(4	)	NM		$	3

NM: not meaningful.

Premiums

The Life segment represented 8% of net premiums written in the first six months of 2004. Gross and net premiums written for the first six months of 2004 have grown over the equivalent period of 2003 principally as a result of renewing large treaties in the second quarter of 2004, which the Company wrote for the first time in the fourth quarter of 2003, and the impact of the weaker U.S. dollar in the first six months of 2004. This segment is small and accordingly growth trends may be uneven depending on the timing of individual contracts. The Company continues to expect growth for the year in the mortality and annuity business. Based on the July 1, 2004 pricing indications and renewal information received from cedants and brokers, and assuming constant foreign exchange rates, annual gross and net premiums written for 2004 are expected to increase between 15% to 35% for this segment. Net premiums earned are expected to increase more modestly during the remainder of 2004.

Life policy benefits and acquisition costs

The increase in life policy benefits in the first six months of 2004 over the first six months of 2003, relates principally to the growth in the Company’s book of business and exposure as evidenced by the increase in net premiums earned for this segment. The increase in the acquisition costs during the first six months of 2004 is principally due to a change in the mix of business where certain lines typically carry higher acquisition costs. The Company also recognized a $5.0 million charge in the first six months of 2004 to reduce deferred acquisition costs on annuity treaties retained in the sale of PartnerRe Life Insurance Company of the U.S. during 2000. The prolonged period of low interest rates has had a negative effect on these treaties resulting in a charge reflecting the actual experience to date as well as a revised projection of future results given updated assumptions.

25

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Premium distribution by Line of Business

The distribution of net premiums written by line of business for the six months ended June 30, 2004 and 2003 was as follows (in millions of U.S. dollars):

	For the six months ended June 30, 2004		% Change 2004 over 2003		For the six months ended June 30, 2003
Non-life
Property and Casualty
Property	$	469	12	%	$	418
Casualty		495	23			402
Motor		279	33			210
Worldwide Specialty
Agriculture		72	1			71
Aviation/Space		108	(17	)		131
Catastrophe		283	(1	)		286
Credit/Surety		124	32			94
Engineering/Energy		123	(15	)		145
Marine		51	1			50
Special Risk		165	47			112
Other		6	(17	)		7
ART		2	NM			—
Life		187	26			148
Total	$	2,364	14		$	2,074

NM: not meaningful.

The distribution of premiums is affected by renewal patterns for non-proportional treaties as premiums for those treaties are written at the inception of the treaty rather than over the treaty period. A number of factors affected the amount and distribution of net premiums written during the first six months of 2004 as follows: i) as prices are declining in a number of short-tail lines, the Company has determined to non-renew certain treaties; ii) a number of treaties were non-renewed as a result of the cedant retaining the risk as opposed to ceding it to a reinsurer; iii) an increase in net premiums written related to refinements in the Company’s process used for estimating premiums written on certain portfolio treaties, which affected the half-year over half-year comparison for the property and motor lines; and iv) while the U.S. dollar strengthened during the first six months of 2004, it nonetheless was weaker than it was in the first six months of 2003. As a result, changes in foreign exchange contributed approximately 7 points to the growth in net premiums written and affect the half-year over half-year comparison for all lines.

26

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Premium distribution by Treaty Type

The Company typically writes business on either a proportional or non-proportional basis. On a proportional treaty, the Company shares proportionally in both the premiums and losses of the cedant. In non-proportional business, the Company is typically exposed to loss events in excess of a predetermined dollar amount or loss ratio. In both proportional and non-proportional business, the Company typically reinsures a large group of primary insurance contracts written by the ceding company. In addition, the Company writes business on a facultative basis. Facultative arrangements are generally specific to an individual risk and can be written on either a proportional or non-proportional basis. Generally, the Company has more influence over pricing, as well as terms and conditions, in non-proportional and facultative arrangements.

The distribution of gross premiums written by type of business for the six months ended June 30, 2004 and 2003 was as follows (in millions of U.S. dollars):

	For the six months ended June 30, 2004		% Change 2004 over 2003		For the six months ended June 30, 2003
Non-Life Segment
Proportional	$	1,126	23	%	$	916
Non-Proportional		916	3			885
Facultative		157	10			143
Life Segment
Proportional		166	24			134
Non-Proportional		28	34			21
ART Segment
Proportional		—	NM			—
Non-Proportional		3	NM			—
Total	$	2,396	14		$	2,099

NM: not meaningful.

The distribution of gross premiums written by type of business for the first six months of 2004 is influenced by the previously discussed impact of the refinements in the Company’s process used for estimating premiums written on certain portfolio treaties.

Premium distribution by Geographic Region

The geographic distribution of gross premiums written for the six months ended June 30, 2004 and 2003 was as follows (in millions of U.S. dollars):

	For the six months ended June 30, 2004		% Change 2004 over 2003		For the six months ended June 30, 2003
North America	$	901	(1	)%	$	906
Europe		1,142	34			855
Asia, Australia and New Zealand		237	1			235
Latin America and the Caribbean		93	7			87
Africa		23	44			16
Total	$	2,396	14		$	2,099

Growth in the European market is influenced by the refinements in the process used for estimating premiums written on certain portfolio treaties. In addition, the weakening of the U.S. dollar against the euro and other currencies in the first six months of 2004 compared to the same period in 2003 contributed to the increase in the European market for the 2004 period. These two factors distort the half-year over half-year comparison.

27

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Premium Distribution by Production Source

The Company produces its business, or gross premiums written, both through brokers and through direct relationships with cedants. The distribution of gross premiums written by production source for the six months ended June 30, 2004 and 2003 was as follows:

	For the six months ended June 30, 2004		For the six months ended June 30, 2003
Broker	65	%	67	%
Direct	35	%	33	%

The Company’s U.S. Property and Casualty sub-segment generates business predominantly through brokers, and other Non-life sub-segments generate business predominantly through direct relationships with cedants. The distribution of gross premiums by production source was comparable for both periods presented. Based on July 1, 2004 pricing indications and renewal information from cedants and brokers, and assuming constant foreign exchange rates, the Company expects only modest changes in the production source of gross premiums written during the remainder of 2004.

Investment Income

Net investment income for the six-month periods ended June 30, 2004 and 2003 were as follows (in millions of U.S. dollars):

	For the six months ended June 30, 2004		% Change 2004 over 2003		For the six months ended June 30, 2003
Net investment income	$	148	19	%	$	124

The increase in net investment income is primarily due to the investment of cash flows from operations that has outpaced the reduction in yields since the first quarter of 2003, and the effect of the decline of the U.S. dollar against the euro and other currencies, which contributed approximately 5% to the growth in the first six months of 2004. In the first six months of 2004, the Company had a larger volume of invested assets resulting from the investment of $1.3 billion of operating cash flow since June 30, 2003. The average yield to maturity on the Company’s fixed income investment portfolio was 4.0% at June 30, 2004 compared to 3.5% at June 30, 2003 and 3.8% at December 31, 2003. The increase in interest rates during the second quarter of 2004 has not affected the Company’s investment income yet. The Company expects that higher interest rates will contribute to growth in its investment income as operating cash flows are invested at increasingly higher interest rates.

The table below provides the components of net investment income for the six-month periods ended June 30, 2004 and 2003 (in millions of U.S. dollars):

	For the six months ended June 30, 2004			% Change 2004 over 2003		For the six months ended June 30, 2003
Fixed maturities, short-term investments, cash and cash equivalents	$	127		27	%	$	100
Equities		10		22			8
Funds held and other		20		(8	)		22
Investment expense		(9	)	39			(6	)
Net investment income	$	148		19		$	124

Net investment income from fixed maturities, short-term investments, cash and cash equivalents, and equities has increased compared to the first six months of 2003 primarily due to the increase in the asset base resulting from the reinvestment of significant positive cash flow from operations during the last twelve months. Net investment income from fixed maturities has also increased due to the lower rate of prepayments on mortgage-backed securities.

28

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

The decrease in investment income on funds held and other is primarily attributable to one life annuity treaty, which reported lower investment income and lower losses during the first half-year of 2004 compared to the same period of 2003.

The increase in investment expense in 2004 over 2003 is primarily a result of the Company’s larger asset base upon which expenses are incurred.

Current economic indicators continue to suggest moderate global economic growth led by the U.S. economy. Based on the prevailing economic indicators, and assuming constant foreign exchange rates, the Company expects market interest rates to continue to rise in the United States and to rise more modestly in Europe during the remainder of 2004, and this combined with the larger asset base as at June 30, 2004, as well as expected positive cash flow from operations, should contribute to higher investment income for the Company during 2004 compared to 2003.

Income and Expenses from Other Operations

Income and expenses from other operations for the six-month periods ended June 30, 2004 and 2003 were as follows (in millions of U.S. dollars):

	For the six months ended June 30, 2004			% Change 2004 over 2003		For the six months ended June 30, 2003
Net realized investment gains	$	46		(18	)%	$	56
Net foreign exchange gains		1		(87	)		8
Income tax expense		(8	)	42			(6	)
Income from other operations	$	39		(34	)	$	58

The net realized gains of $46 million recorded during the first six months of 2004 included gross realized losses in the amount of $35 million as portfolio managers performed some repositioning in the portfolio in anticipation of further rises in interest rates. Of these total amounts, losses realized on sales of fixed maturities and equity securities were approximately $31 million and $4 million, respectively. The aggregate fair value of fixed maturities and equity securities sold at a loss were approximately $2.3 billion and $26 million, respectively.

The components of net realized investment gains or losses for the six-month periods ended June 30, 2004 and 2003 were as follows (in millions of U.S. dollars):

	2004			2003
Net realized gains on available-for-sale securities, excluding other-than-temporary impairments	$	42		$	71
Other-than-temporary impairments		(1	)		(30	)
Net realized gains on trading securities		8			3
Change in net unrealized holding (losses) gains on trading securities		(6	)		5
Net realized losses on designated hedging activity		(3	)		(6	)
Net gains on other invested assets		7			14
Other realized and unrealized investment losses		(1	)		(1	)
Net realized investment gains	$	46		$	56

Net realized investment gains and losses are a function of the timing of disposition of available for sale fixed maturities and equity securities as the Company repositions its investment portfolio to take advantage of market conditions, charges for the recognition of other-than-temporary impairments in the Company’s investment portfolio, changes in the market value of trading securities and the net ineffectiveness of the Company’s designated hedges.

29

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

The general decline in interest rates in the prior two years has resulted in a significant increase in the fair value of the Company’s fixed income portfolio, as the prevailing market interest rates were lower than the average coupon rate of the Company’s fixed income portfolio. During the normal course of its operations, the Company bought and sold securities to take advantage of market conditions. Since most of the securities in the fixed income portfolio carried unrealized gains until interest rates began to increase in the second quarter of 2004, the sale of securities generated realized investment gains and reduced the unrealized investment gains recorded in the shareholders’ equity section of the condensed consolidated balance sheets. The increase in interest rates during 2004 has resulted in a reduction of the Company’s unrealized gains on its investment portfolio. If interest rates continue to rise, the Company will see a reduction of the value of its fixed income portfolio. Refer to Quantitative and Qualitative Disclosures about Market Risk in Item 3 below for a further discussion of the Company’s exposure to interest rate risk.

During the six-month periods ended June 30, 2004 and 2003, the Company recorded other-than-temporary impairments of $0.5 million and $29.9 million, respectively.

The Company hedges a significant portion of its currency risk exposure as discussed in the Quantitative and Qualitative Disclosures about Market Risk in Item 3 below. The decrease in net foreign exchange gains over the six months ended June 30, 2003 results from a smaller ineffectiveness of the Company’s undesignated hedges during the first half of 2004.

The Company’s income tax expense or benefit is contingent on the distribution of the Company’s results in each tax jurisdiction. Although the income tax expense is comparable for the six months ended June 30, 2004 and 2003, the 2004 period includes a tax recovery in the amount of $6 million related to the settlement of a tax arbitration in France.

30

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations – for the Three Months Ended June 30, 2004 and 2003

Underwriting result, investment income, income and expenses from other operations, fixed charges, net income available to common shareholders, diluted net income per common share and ROE for the three months ended June 30, 2004 and 2003 were as follows (in millions of U.S. dollars, except per share data and ROE):

	For the three months ended June 30, 2004			% Change 2004 over 2003		For the three months ended June 30, 2003
Underwriting result	$	44		(14	)%	$	52
Investment income		75		19			63
Income and expenses from other operations		11		(38	)		17
Fixed charges		(10	)	(1	)		(10	)
Net income	$	120		(2	)	$	122
Less: Preferred dividends		5		(66	)		15
Net income available to common shareholders	$	115		7		$	107
Diluted net income per share	$	2.12		6		$	2.00
Annualized return on beginning common shareholders’ equity (ROE)		20.0	%				23.5	%

Net income available to common shareholders and diluted net income per share for the 2004 period improved compared to the equivalent period of 2003 principally as a result of increased net investment income, lower net realized investment gains and lower preferred dividends. The underwriting result and income and expenses from other operations have partially offset the increase.

The underwriting result decreased from $52 million for the three-month period ended June 30, 2003 to $44 million for the same period of 2004. Contributing to the decrease in underwriting result were the underwriting loss in the Global (Non-U.S.) Property & Casualty sub-segment following modest increases to reserves for prior years in the motor and casualty lines and an increase in operating expenses since the second quarter of 2003, resulting from the Company’s continued investment in its infrastructure. The strong market conditions as well as other favorable development on prior accident year losses partially offset the decrease in underwriting result during the second quarter of 2004.

In addition to higher income generated by the underwriting operations, the Company reported net investment income of $75 million for the three months ended June 30, 2004 compared to $63 million during the equivalent period in 2003. The increase in investment income is attributable to the investment of the Company’s significant cash flow from operations, which amounted to $287 million for the three months ended June 30, 2004 and $1.3 billion for the 12 months ended June 30, 2004.

31

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Income and expense from other operations has decreased from $17 million for the three months ended June 30, 2003 to $11 million for the equivalent period in 2004 primarily as a result of lower realized investment gains. Realized investment gains and losses, which account for most of the decrease, are generally a function of multiple factors with the most significant being the combination of prevailing interest rates and the timing of disposition of available for sale fixed maturities and equity securities, and charges for the recognition of other-than-temporary impairments in the Company’s investment portfolio. As the Company repositions its investment portfolio to take advantage of market conditions, it generates sales of securities that result in the realization of the unrealized market value appreciation or depreciation on the securities. The realization of the unrealized market value appreciation or depreciation does not change the Company’s comprehensive income and shareholders’ equity, as it merely transfers the gain or loss from the accumulated other comprehensive income section of the condensed consolidated balance sheets to the net income on the condensed consolidated statements of operations and the retained earnings section of the condensed consolidated balance sheets.

Preferred dividends for the three months ended June 30, 2003 included a non-recurring charge of $10 million related to the redemption of the Company’s Series A preferred shares and the overlap of preferred dividend on Series A and Series C preferred shares prior to the redemption of the Series A preferred shares in the second quarter of 2003.

Notwithstanding the increase in the net income in the second quarter of 2004 compared to the same period in 2003, the Company’s annualized ROE declined as the opening equity available to common shareholders increased at a faster rate than net income available to common shareholders.

The next section provides a detailed analysis of the Company’s underwriting result by segment and sub-segment, investment income, income and expenses from other operations and fixed charges for the three-month periods ended June 30, 2004 and 2003.

Results by Segment

Non-life Segment

32

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

U.S. Property and Casualty

The following table provides the components of the technical result and their corresponding ratios for this sub-segment for the three months ended June 30, 2004 and 2003 (in millions of U.S. dollars):

	For the three months ended June 30, 2004			% Change 2004 over 2003		For the three months ended June 30, 2003
Gross premiums written	$	201		(9	)%	$	221
Net premiums written		201		(9	)		221
Net premiums earned	$	234		9		$	215
Losses and loss expenses		168		14			148
Acquisition costs		53		(7	)		57
Technical result	$	13		27		$	10
Loss ratio		71.9	%				68.7	%
Acquisition ratio		22.6	%				26.6	%
Technical ratio		94.5	%				95.3	%

Premiums

The U.S. Property and Casualty sub-segment represented 24% of net premiums written in the second quarter of 2004. The decrease in net premiums written over the second quarter of 2003 had two principal causes. First, the increase in the proportion of Minimum and Deposit premiums written during the first quarter of 2004 has resulted in the recording of the entire premium written at the inception of the treaty rather than ratably during the treaty period. Second, a number of large treaties that were renewed in the first quarter of 2004 were renewed in the second quarter of 2003, and that distorts quarter over quarter comparisons. Through the three months ended June 30, 2004, the Company continued to observe strong prices and terms and conditions in the casualty and motor lines and a softening of terms and conditions in the property line. Notwithstanding the strong terms and conditions prevailing in this sub-segment, the Company has remained selective in pursuing business that meets its profitability objectives. The Company continued its controlled expansion in the specialty casualty line as it believes that this line will continue to provide very good terms and conditions.

Losses and loss expenses

The growth in the losses and loss expense volume in the quarter ended June 30, 2004 compared to June 30, 2003, is due to the growth in the Company’s book of business and exposure as evidenced by the increase in net premiums earned for this sub-segment. The technical ratio for the quarters ended June 30, 2004 and 2003 included no catastrophe or other significant losses. The increase in loss ratio for the three months ended June 30, 2004 compared to the corresponding 2003 period occurred primarily as a result of the continued expansion of the specialty casualty line that typically tends to have a higher loss ratio due to the long-tail nature of the risk involved. Accordingly, these treaties also typically provide for investment income on invested premiums during a longer period as losses are typically paid later than for other lines. The technical result and ratio for the quarters ended June 30, 2004 and 2003 included $6 million and $9 million, respectively, of adverse prior year loss development. The adverse loss development of $6 million recorded in the second quarter of 2004 included adverse loss development on the motor and casualty lines, which was partially offset by positive loss development on the property line. Included in the positive loss development on the property line was a $6 million reduction in the Company’s loss estimate related to the event of September 11. The adverse loss development recorded in the second quarter of 2003 pertained principally to the casualty line.

Acquisition costs

The decrease in the acquisition costs and acquisition ratio during the second quarter of 2004 is due to the reduction of the acquisition ratio on treaties with experience credits under the form of sliding scale and profit commission adjustments.

33

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Global (Non-U.S.) Property and Casualty

The following table provides the components of the technical result and their corresponding ratios for this sub-segment for the three months ended June 30, 2004 and 2003 (in millions of U.S. dollars):

	For the three months ended June 30, 2004			% Change 2004 over 2003		For the three months ended June 30, 2003
Gross premiums written	$	197		8	%	$	182
Net premiums written		197		6			186
Net premiums earned	$	230		7		$	215
Losses and loss expenses		183		26			145
Acquisition costs		60		5			57
Technical result	$	(13	)	NM		$	13
Loss ratio		79.2	%				67.8	%
Acquisition ratio		26.0	%				26.4	%
Technical ratio		105.2	%				94.2	%

NM: not meaningful

Premiums

The Global (Non-U.S.) Property and Casualty sub-segment represented 24% of net premiums written in the second quarter of 2004. The growth in gross and net premiums written over the second quarter of 2003 was the result of two opposing factors. As discussed in the Company’s six-month results for this sub-segment, comparison of net premiums written for the second quarter of 2004 and 2003 are distorted as a result of the refinements in the process used for estimating premiums written on certain portfolio treaties during 2004. The second factor impacting the growth rate was the weaker U.S. dollar during the second quarter of 2004 compared to the equivalent period of 2003. As a result, foreign exchange contributed approximately 8 points to the growth in net premiums written. Through the three months ended June 30, 2004, the Company continued to observe strong prices and terms and conditions in the casualty and motor lines and observed that even though pricing in the property line remains at a profitable level, terms and conditions are softening for this line. Notwithstanding the generally strong terms and conditions prevailing in this sub-segment, the Company has seen increased competition but has remained selective in pursuing business that meets its profitability objectives and has declined treaties where terms and conditions did not meet the Company’s objectives.

Losses and loss expenses

The technical ratio for the quarters ended June 30, 2004 and 2003 included no catastrophe or other individually significant losses. The increase in the loss ratio for the three months ended June 30, 2004 compared to the corresponding 2003 period occurred primarily because of weak technical result in the casualty and motor lines which were partially offset by good results in the property line during the second quarter of 2004. The technical result and ratio for the quarters ended June 30, 2004 and 2003 included $13 million and less than $1 million of adverse prior year loss development, respectively. The adverse loss development recorded in the second quarter of 2004 included adverse loss development in the casualty and motor lines, which was partially offset by positive loss development on the property line.

Acquisition costs

The acquisition costs and acquisition ratios for the second quarters of 2004 and 2003 were comparable.

34

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Worldwide Specialty

The following table provides the components of the technical result and their corresponding ratios for this sub-segment for the three months ended June 30, 2004 and 2003 (in millions of U.S. dollars):

	For the three months ended June 30, 2004			% Change 2004 over 2003		For the three months ended June 30, 2003
Gross premiums written	$	337		(8	)%	$	366
Net premiums written		337		(8	)		366
Net premiums earned	$	382		4		$	366
Losses and loss expenses		183		(10	)		202
Acquisition costs		87		18			74
Technical result	$	112		24		$	90
Loss ratio		47.8	%				55.2	%
Acquisition ratio		22.8	%				20.0	%
Technical ratio		70.6	%				75.2	%

Premiums

The Worldwide Specialty sub-segment represented 40% of net premiums written in the second quarter of 2004. The decrease in net premiums written over the second quarter of 2003 was most evident in the aviation, catastrophe and energy lines and was principally due to increased competition in these profitable short-tail lines. This decrease was partially offset by the weaker U.S. dollar in the second quarter of 2004 compared to the second quarter of 2003, which contributed approximately 5 points of growth during the second quarter of 2004. The Company has seen no real change in market trends in this sub-segment since the second half of 2003 where the pricing for the most profitable lines of business had started to decline and the other lines exhibited a slow but orderly reduction in the rate of price increases as a result of increasing competition. The Company has remained selective in pursuing business that meets its profitability objectives.

Losses and loss expenses

The technical ratio for the second quarter ended June 30, 2004 and 2003 included no catastrophe or other significant losses. The decrease in the losses and loss expenses and loss ratio in the quarter ended June 30, 2004 compared to June 30, 2003, is principally due to the positive loss development recorded during the second quarter of 2004 and a shift toward longer-tailed lines, which typically carry a higher loss ratio. The technical result and ratio for the quarters ended June 30, 2004 and 2003 included $49 million of positive loss development and $5 million of adverse loss development, respectively. The positive loss development of $49 million recorded in the second quarter of 2004 included positive loss development on the special risk, aviation, agriculture, catastrophe and engineering/energy lines. Included in the positive loss development of 2004 was a $21 million reduction in the Company’s loss estimate related to the event of September 11, as the Company received information from cedants indicating that certain outstanding loss reserves were no longer necessary.

Acquisition costs

The increase in the acquisition costs and acquisition ratio compared to the three months ended June 30, 2003 resulted primarily from a shift from treaties previously written on a net basis, whereby premiums are ceded to the Company net of acquisition costs, to treaties written on a gross basis, whereby acquisitions costs are reported separately from premiums. This change in the form of the treaty does not affect the net result under the treaty but distorts the quarter over quarter comparison for acquisition costs. Other factors contributing to the increase included intensifying competition in this sub-segment, which tends to increase acquisition costs, and a shift between lines of business where certain lines carry higher acquisition ratios.

35

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

ART Segment

The following table provides the components of the underwriting result for this segment for the three months ended June 30, 2004 and 2003 (in millions of U.S. dollars):

	For the three months ended June 30, 2004			For the three months ended June 30, 2003
Gross premiums written	$	2		$	—
Net premiums written		2			—
Net premiums earned	$	1		$	—
Losses and loss expenses		—			—
Acquisition costs		—			—
Technical result	$	1		$	—
Other Income		4			3
Other operating expenses		(4	)		(3	)
Underwriting result	$	1		$	—

As reinsurance accounting does not apply for much of the business in this segment, premiums alone are not a representative measure of activity in ART. This segment is very transaction driven, and revenues and profit trends will be uneven, especially given the still small size of this segment. The ART segment had good growth in revenues during the second quarter of 2004 despite low interest rates, which reduce the attractiveness of finite business for clients, and low credit spreads, which reduce the opportunities in the structured finance business. Finite business had strong accounting results due to the commutation of one large treaty, which accelerated the recognition of the margin on the treaty. Results in the structured finance line included losses due to the marking down of derivative positions related to certain securities whose market value had declined due to wider spreads on underlying securities while results in the weather line included losses resulting from higher than normal spring temperatures in Japan. The Company’s share in the results of Channel Re for the second quarter of 2004 amounts to $0.7 million and is included in this segment’s results.

Life Segment

The following table provides the components of the allocated underwriting result for this segment for the three months ended June 30, 2004 and 2003 (in millions of U.S. dollars):

	For the three months ended June 30, 2004			% Change 2004 over 2003		For the three months ended June 30, 2003
Gross premiums written	$	105		54	%	$	68
Net premiums written		104		57			66
Net premiums earned	$	108		60		$	67
Life policy benefits		86		46			59
Acquisition costs		27		86			14
Technical result	$	(5	)	17		$	(6	)
Other operating expenses		(6	)	40			(4	)
Allocated investment income		11		(7	)		12
Allocated underwriting result	$	—		NM		$	2

NM: not meaningful.

36

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Premiums

The Life segment represented 12% of net premiums written in the second quarter of 2004. Gross and net premiums written for the second quarter of 2004 have grown over the equivalent period of 2003 principally as a result of renewing large treaties in the second quarter of 2004, which the Company wrote for the first time in the fourth quarter of 2003, and the impact of the weaker U.S. dollar in the second quarter of 2004. This segment is small and accordingly growth trends may be uneven depending on the timing of individual contracts.

Life policy benefits and acquisition costs

The increase in life policy benefits and acquisition costs in the second quarter of 2004 over the same period in 2003, relates principally from the growth in the Company’s book of business and exposure as evidenced by the increase in net premiums earned for this segment.

Premium distribution by Line of Business

The distribution of net premiums written by line of business for the three months ended June 30, 2004 and 2003 was as follows (in millions of U.S. dollars):

	For the three months ended June 30, 2004		% Change 2004 over 2003		For the three months ended June 30, 2003
Non-life
Property and Casualty
Property	$	157	(14	)%	$	183
Casualty		160	3			155
Motor		81	18			69
Worldwide Specialty
Agriculture		42	(3	)		44
Aviation/Space		61	(14	)		71
Catastrophe		52	(14	)		60
Credit/Surety		62	11			55
Engineering/Energy		65	(12	)		74
Marine		16	(18	)		19
Special Risk		36	(6	)		39
Other		3	(20	)		4
ART		2	NM			—
Life		104	57			66
Total	$	841	—		$	839

NM: not meaningful

The distribution of premiums is affected by renewal patterns for non-proportional treaties as premiums for those treaties are written at the inception of the treaty rather than over the treaty period. A number of factors affected the amount and distribution of net premiums written during the second quarter of 2004 as follows: i) as prices are declining in a number of short-tail lines, the Company has determined to non-renew certain treaties; ii) a number of treaties were non-renewed as a result of the cedant retaining the risk as opposed to ceding it to a reinsurer; iii) a decrease in net premiums written related to refinements in the Company’s process used for estimating premiums written on certain portfolio treaties, which affected the quarter over quarter comparison for the property and motor lines; and iv) the U.S. dollar was weaker than it was in the second quarter of 2003. As a result, changes in foreign exchange contributed approximately 5 points to the growth in net premiums written in the second quarter of 2004 and affect the quarter over quarter comparison for all lines.

37

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Premium distribution by Treaty Type

The Company typically writes business on either a proportional or non-proportional basis. On a proportional treaty, the Company shares proportionally in both the premiums and losses of the cedant. In non-proportional business, the Company is typically exposed to loss events in excess of a predetermined dollar amount or loss ratio. In both proportional and non-proportional business, the Company typically reinsures a large group of primary insurance contracts written by the ceding company. In addition, the Company writes business on a facultative basis. Facultative arrangements are generally specific to an individual risk and can be written on either a proportional or non-proportional basis. Generally, the Company has more influence over pricing, as well as terms and conditions, in non-proportional and facultative arrangements.

The distribution of gross premiums written by type of business for the three months ended June 30, 2004 and 2003 was as follows (in millions of U.S. dollars):

	For the three months ended June 30, 2004		% Change 2004 over 2003		For the three months ended June 30, 2003
Non-Life Segment
Proportional	$	520	13	%	$	462
Non-Proportional		158	(32	)		234
Facultative		57	(19	)		73
Life Segment
Proportional		101	60			63
Non-Proportional		4	(23	)		5
ART Segment
Proportional		—	—			—
Non-Proportional		2	NM			—
Total	$	842	1		$	837

NM:  not meaningful

The distribution of gross premiums written by type of business for the second quarter of 2004 is influenced by the refinements in the Company’s process used for estimating premiums written on certain portfolio treaties as discussed above. Additionally, the U.S. dollar was weaker than it was in the second quarter of 2003. As a result, changes in foreign exchange contributed approximately 5 points to the growth in net premiums written in the second quarter of 2004 and affect the quarter over quarter comparison for all treaty types.

38

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Premium distribution by Geographic Region

The geographic distribution of gross premiums written for the three months ended June 30, 2004 and 2003 was as follows (in millions of U.S. dollars):

	For the three months ended June 30, 2004		% Change 2004 over 2003		For the three months ended June 30, 2003
North America	$	330	(12	)%	$	374
Europe		392	30			301
Asia, Australia and New Zealand		85	(27	)		117
Latin America and the Caribbean		28	(28	)		38
Africa		7	(2	)		7
Total	$	842	1		$	837

A number of factors distorted the quarterly distribution of gross premiums written by geographic area as follows: i) the increase in the proportion of Minimum and Deposit premiums written during the first quarter of 2004 in North America has resulted in the recording of the entire premium written at the inception of the treaty rather than ratably during the treaty period; ii) a number of large treaties in North America were renewed in the first quarter of 2004 while they were renewed in the second quarter of 2003; iii) the comparison for Europe is affected by the refinements in the Company’s process used for estimating premiums written on certain portfolio treaties as discussed above; iv) the weakening of the U.S. dollar against the euro and other currencies contributed to increases in all markets for the 2004 period.

Premium Distribution by Production Source

The Company produces its business, or gross premiums written, both through brokers and through direct relationships with cedants. The distribution of gross premiums written by production source for the three months ended June 30, 2004 and 2003 was as follows:

	For the three months ended June 30, 2004		For the three months ended June 30, 2003
Broker	62	%	66	%
Direct	38	%	34	%

The Company’s U.S. Property and Casualty sub-segment generates business predominantly through brokers, and other Non-life sub-segments generate business predominantly through direct relationships with cedants. The distribution of gross premiums by production source was comparable for both periods presented.

39

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Investment Income

Net investment income for the three-month periods ended June 30, 2004 and 2003 were as follows (in millions of U.S. dollars):

	For the three months ended June 30, 2004		% Change 2004 over 2003		For the three months ended June 30, 2003
Net investment income	$	75	19	%	$	63

The increase in net investment income is primarily due to the investment of cash flows from operations that has outpaced the reduction in yields since the second quarter of 2003, and the effect of the decline of the U.S. dollar against the euro and other currencies, which contributed approximately 4% to the growth in the second quarter of 2004. In the second quarter of 2004, the Company had a larger volume of invested assets resulting from the investment of $1.3 billion of operating cash flow since June 30, 2003.

The table below provides the components of net investment income for the three-month periods ended June 30, 2004 and 2003 (in millions of U.S. dollars):

	For the three months ended June 30, 2004			% Change 2004 over 2003		For the three months ended June 30, 2003
Fixed maturities, short-term investments, cash and cash equivalents	$	63		24	%	$	51
Equities		6		32			4
Funds held and other		10		(5	)		11
Investment expense		(4	)	38			(3	)
Net investment income	$	75		19		$	63

Net investment income from fixed maturities, short-term investments, cash and cash equivalents, and equities has increased compared to the second quarter of 2003 primarily due to the increase in the asset base resulting from the reinvestment of significant positive cash flow from operations during the last twelve months. Net investment income from fixed maturities has also increased due to the lower rate of prepayments on mortgage-backed securities.

The investment income on funds held is comparable for both periods.

The increase in investment expenses in 2004 over 2003 is a result of the Company’s larger asset base upon which expenses are incurred.

Income and Expenses from Other Operations

Income and expenses from other operations for the three-month periods ended June 30, 2004 and 2003 were as follows (in millions of U.S. dollars):

	For the three months ended June 30, 2004		% Change 2004 over 2003		For the three months ended June 30, 2003
Net realized investment gains	$	8	(48	)%	$	16
Net foreign exchange gains		—	NM			5
Income tax benefit (expense)		3	NM			(4	)
Income from other operations	$	11	(39	)	$	17

NM: not meaningful

The net realized gains of $8 million recorded during the second quarter of 2004 included gross realized losses in the amount of $29 million. Of these total amounts, losses realized on sales of fixed maturities and equity securities were approximately $25 million and $4 million, respectively. The aggregate fair value of fixed maturities and equity securities sold at a loss were approximately $1.7 billion and $24 million, respectively.

40

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

The components of net realized investment gains or losses for the three-month periods ended June 30, 2004 and 2003 were as follows (in millions of U.S. dollars):

	2004			2003
Net realized gains on available-for-sale securities, excluding other-than-temporary impairments	$	7		$	31
Other-than-temporary impairments		—			(24	)
Net realized gains on trading securities		2			3
Change in net unrealized holding (losses) gains on trading securities		(5	)		4
Net realized losses on designated hedging activity		(1	)		(7	)
Net gains on other invested assets		4			9
Other realized and unrealized investment gains		1			—
Net realized investment gains	$	8		$	16

Net realized investment gains and losses are a function of the timing of disposition of available for sale fixed maturities and equity securities as the Company repositions its investment portfolio to take advantage of market conditions, charges for the recognition of other-than-temporary impairments in the Company’s investment portfolio, changes in the market value of trading securities and the net ineffectiveness of the Company’s designated hedges.

The general decline in interest rates in the prior two years has resulted in a significant increase in the fair value of the Company’s fixed income portfolio, as the prevailing market interest rates were lower than the average coupon rate of the Company’s fixed income portfolio. During the normal course of its operations, the Company bought and sold securities to take advantage of market conditions. Since most of the securities in the fixed income portfolio carried unrealized gains until interest rates began to increase in the second quarter of 2004, the sale of securities generated realized investment gains and reduced the unrealized investment gains recorded in the shareholders’ equity section of the condensed consolidated balance sheets. The increase in interest rates during 2004 has resulted in a reduction of the Company’s unrealized gains on its investment portfolio. If interest rates continue to rise, the Company will see a reduction of the value of its fixed income portfolio. Refer to Quantitative and Qualitative Disclosures about Market Risk in Item 3 below for a further discussion of the Company’s exposure to interest rate risk.

During the quarters ended June 30, 2004 and 2003, the Company recorded other-than-temporary impairments of $0.4 million and $23.9 million, respectively.

The Company hedges a significant portion of its currency risk exposure as discussed in the Quantitative and Qualitative Disclosures about market Risk in Item 3 below. The decrease in net foreign exchange gains over the three months ended June 30, 2003 results from a smaller ineffectiveness on the Company’s undesignated hedges during the second quarter of 2004.

The Company’s income tax expense or benefit is contingent on the distribution of the Company’s results in each tax jurisdiction. The second quarter of 2004 includes a tax recovery in the amount of $6 million related to the settlement of a tax arbitration in France.

Financial Condition and Liquidity and Capital Resources

Investments

Total invested assets, including cash and cash equivalents, were $7.3 billion as at June 30, 2004 compared to $6.8 billion at December 31, 2003. The major factors influencing the change in cash and invested assets in the six-month period ended June 30, 2004 were:

• net cash provided by operating activities of $622 million;

• the conversion of a finite reinsurance treaty within the ART segment from a deposit basis where the cedant retains the invested assets underlying the treaty to a funds transfer basis where the invested assets are held by the Company adding $164 million to invested assets;

• the issuance of the Company’s common shares under the Company’s equity plans for $5 million; offset by

• the repurchase of the Company’s common shares under the Company’s repurchase program for $9 million;

• the decrease in unsettled security trades payables of $16 million;

• the decrease in the net unrealized gains on investments of $52 million driven by an increase in interest rates;

• dividend payments on common and preferred shares and interest payments on debt related to trust preferred securities and mandatorily redeemable preferred securities totaling $62 million;

• net negative influence of the effect of a stronger U.S. dollar relative to the euro and other currencies as it relates to the conversion of invested assets and cash balances into U.S. dollars.

The Company employs a conservative investment philosophy. It maintains a high-quality, well-balanced and liquid portfolio having the dual objectives of optimizing current income and achieving capital appreciation. The Company’s investment strategy allows the use of derivative securities, subject to strict limitations. Derivatives instruments may be used to replicate investment positions or market exposures that would be allowed under the Company’s investment policy if implemented in other ways. The increase in cash and cash equivalents at June 30, 2004 compared to December 31, 2003 resulted from the use of TBA future deliveries (to be announced mortgage-backed securities) and cash rather than actual mortgage-backed securities to maintain the Company’s exposure to mortgage-backed securities.

41

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

From a risk management perspective, the Company divides its invested assets, which are comprised of total investments and cash, accrued investment income and net receivable (payable) for securities sold (purchased), into two categories, liability funds and capital funds. Liability funds represent invested assets supporting the net reinsurance assets and liabilities and are invested entirely in high-quality fixed income securities. The preservation of liquidity and protection of capital are the primary investment objectives for these assets. The portfolio managers are required to follow strict investment guidelines as to minimum ratings, and issuer and sector concentrations. Capital fund assets represent the capital of the Company and are invested to maximize total return, subject to strict risk assumption and portfolio diversification guidelines, including issuer and sector concentration limitations. Capital funds may be invested in investment-grade fixed income securities, less-than-investment-grade bonds, convertible securities, preferred stocks and common stocks. The Company believes that an allocation of a portion of its investments to equities is both prudent and desirable inasmuch as it helps to achieve broader asset diversification and maximization of the portfolio’s total return over time. Since the Company’s allocation to equities is predicated on a long-term strategic investment in this asset class, the Company has the ability to and fully expects to withstand the effects of cyclical market value swings of the broader equity markets on its portfolio.

At June 30, 2004, the liability funds totaled $4.7 billion and were comprised of cash and cash equivalents, short-term investments, AAA, AA and A rated securities. The capital funds, which totaled $2.8 billion, were comprised of investment-grade fixed maturities, below-investment-grade fixed maturities and equities.

Approximately 97% of the invested assets currently held by the Company are publicly traded and, accordingly, market valuations for such securities are readily available. For those securities not publicly traded (3% of the Company’s invested assets or approximately $241 million), consisting primarily of bank loan portfolios, non-publicly traded real estate funds, private placement equity investments and other specialty asset classes, valuation techniques depend on the nature of the individual asset. The valuation techniques used by the Company’s investment managers are reviewed by the Company and are generally commensurate with standard valuation techniques for each asset class.

As at June 30, 2004, fixed maturities, short-term investments and cash and cash equivalents had an average yield to maturity at market of 4.0% compared to 3.8% as at December 31, 2003. The increase in the average yield to maturity was the result of the increase in interest rates seen during the first six months of 2004. At the same time, the duration of the Company’s investment portfolio shifted from 3.6 years at December 31, 2003 to 3.5 years at June 30, 2004. As at June 30, 2004, approximately 94% of the fixed income securities were rated investment grade (BBB- or higher) by Standard & Poor’s (or estimated equivalent) compared to 93% as at December 31, 2003.

For accounting purposes, the Company’s investment portfolio is categorized according to two distinct classifications – “available for sale” and “trading” securities. For a description of the different accounting treatments afforded to these separate accounting classifications, refer to Note 3(f) to the consolidated financial statements in the Company’s 2003 Annual Report to Shareholders.

At June 30, 2004, investments classified as available for sale comprised 98% of the Company’s total portfolio (excluding cash and cash equivalents and other invested assets) with 2% being classified as trading securities. Included in the available for sale category is the Company’s portfolio of fixed maturity investments, which are comprised primarily of investment grade securities issued by the U.S. government or U.S. government sponsored agencies, state and foreign governments and corporations. In addition, as part of its investment strategy, the Company invests a small percentage of its portfolio in less-than-investment-grade bonds, which are also classified as available for sale. The Company also invests in equity securities of both U.S. and non-U.S. publicly traded corporations. Finally the Company has an allocation to convertible securities and equities in its investment portfolio and these are classified as trading securities.

42

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

The cost, market value, gross unrealized gains and gross unrealized losses on investments classified as available for sale at June 30, 2004 were as follows (in millions of U.S. dollars):

	Cost (1)		Gross Unrealized Gains		Gross Unrealized Losses			Market Value
June 30, 2004
Fixed maturities
- U.S. government	$	572	$	7	$	(3	)	$	576
- states or political subdivisions of states of the U.S.		6		—		—			6
- other foreign governments		1,191		9		(10	)		1,190
- corporate		2,762		50		(26	)		2,786
- mortgage/asset-backed securities		303		1		(3	)		301
Total fixed maturities		4,834		67		(42	)		4,859
Short-term investments		14		—		—			14
Equities		672		87		(10	)		749
Total	$	5,520	$	154	$	(52	)	$	5,622

⁽¹⁾ Cost is amortized cost for fixed maturities and short-term investments and original cost for equity securities, net of other-than-temporary impairments.

The market value of those investment securities classified as trading was $102 million and $123 million at June 30, 2004 and December 31, 2003, respectively. For the six months ended June 30, 2004 and 2003, the change in net unrealized investment gains and losses on trading securities resulted in a net loss of $6 million and a net gain of $5 million, respectively, being recognized in net realized investment gains and losses in the condensed consolidated statements of operations.

The following table provides a breakdown of the credit quality of the Company’s fixed income securities at June 30, 2004:

Rating Category	% of Total Fixed Income Securities
AAA	59	%
AA	3	%
A	18	%
BBB	14	%
Below investment grade/unrated	6	%

At June 30, 2004, the Company had gross unrealized losses on its fixed maturities of $42 million, of which $31 million was attributable to investment-grade securities and $11 million was attributable to securities rated less than investment grade.

The gross unrealized losses recorded on the Company’s portfolio of fixed maturity securities at June 30, 2004 related primarily to the impact of rising interest rates, which tend to result in a reduction of the market value of fixed income securities. The Company believes that these decreases in value are temporary, under current accounting guidance, and additional analysis of individual securities for potential other-than-temporary impairments was carried out by the Company to validate its belief. Additionally, the Company has the intent and ability to retain such investments for a period of time sufficient to allow for any recovery in market value or to hold the securities to their maturity. The tables below (see section titled “Maturity Distribution”) show the distribution by contractual maturity date of available for sale fixed maturity investments at June 30, 2004.

43

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

The following table presents an analysis of the continuous periods during which the Company has held investment positions that were carried at an unrealized loss (excluding investments classified as trading securities) as at June 30, 2004 (in millions of U.S. dollars):

	Less than 12 months					12 months or more					Total
	Market Value		Unrealized Loss			Market Value		Unrealized Loss			Market Value		Unrealized Loss
Fixed maturities	$	2,733	$	(37	)	$	92	$	(5	)	$	2,825	$	(42	)
Equities		122		(8	)		113		(2	)		235		(10	)
Total	$	2,855	$	(45	)	$	205	$	(7	)	$	3,060	$	(52	)

The majority of the Company’s total unrealized losses is due to changes in interest rates. Typically, as interest rates rise, market values of fixed income portfolios fall, and vice versa. As at June 30, 2004, the Company had no significant unrealized losses, for which an other-than-temporary impairment charge has not been taken, caused by other factors and circumstances, including an issuer’s specific corporate risk or due to industry or geographic risk.

Maturity Distribution

The distribution of available for sale fixed maturities and short-term investments at June 30, 2004, by contractual maturity date is shown below (in millions of U.S. dollars):

	Amortized Cost		Market Value
One year or less	$	507	$	508
More than one year through five years		2,068		2,088
More than five years through ten years		1,571		1,567
More than ten years		399		409
Subtotal		4,545		4,572
Mortgage/asset-backed securities		303		301
Total	$	4,848	$	4,873

The maturity distribution for those available for sale fixed maturities that were in an unrealized loss position as at June 30, 2004 was as follows (in millions of U.S. dollars):

	Amortized Cost		Market Value		Unrealized Losses
One year or less	$	297	$	296	$	(1	)
More than one year through five years		1,137		1,127		(10	)
More than five years through ten years		1,115		1,091		(24	)
More than ten years		145		141		(4	)
Subtotal		2,694		2,655		(39	)
Mortgage/asset-backed securities		173		170		(3	)
Total	$	2,867	$	2,825	$	(42	)

As discussed above, the Company generally has the intent and ability to hold its fixed maturity investments for a period of time sufficient to allow for any recovery in market value or to their maturity.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Realized Gains and Losses

Proceeds from the sale of investments classified as available for sale for the six months ended June 30, 2004 were $5,703 million. Realized investment gains and losses on securities classified as available for sale for the six months ended June 30, 2004 and 2003 were as follows (in millions of U.S. dollars):

	For the six months ended June 30, 2004			For the six months ended June 30, 2003
Gross realized gains	$	77		$	92
Gross realized losses excluding other-than-temporary impairments		(35	)		(21	)
Other-than-temporary impairments		(1	)		(30	)
Total net realized investment gains	$	41		$	41

(Refer to the income and expense from other operations in the Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 2 above for a reconciliation between net realized investment gains on investments classified as available for sale and net realized investment gains on the condensed consolidated statements of operations.)

The Company recorded charges for other-than-temporary impairments relating to its investment portfolio in the aggregate amount of $0.5 million and $29.9 million, for the six months ended June 30, 2004 and 2003, respectively. Typically, the Company considers impairment related to any specific issuer of a security to have occurred when events specific to a particular issuer have occurred that are likely to prevent the Company from recovering its initial investment in the security. In the determination of other-than-temporary impairments, the Company considers several factors and circumstances, including the issuer’s overall financial condition, the issuer’s credit and financial strength ratings, general market conditions in the industry or geographic region in which the issuer operates, general economic and financial market conditions, the length of time for which the fair value of an issuer’s securities remains below cost or amortized cost on a continuous basis, and factors that may raise doubt about the issuer’s ability to continue as a going concern. (See Note 5 to condensed consolidated financial statements in Item I for a discussion of EITF Issue No. 03-1. Adoption of EITF No. 03-1 may accelerate the timing of losses from declines in value due to interest rates; however, it is not anticipated to have a significant impact on shareholders’ equity as fluctuations in market value of available for sale securities are already reflected in Accumulated Other Comprehensive Income.) Other-than-temporary impairments are recorded as realized investment losses in the condensed consolidated statements of operations, which reduces net income and net income per share. Temporary losses are recorded as unrealized investment losses, which do not impact net income and net income per share but reduce accumulated other comprehensive income, except for those related to trading securities, which are recorded immediately in net income.

As mentioned above, the Company’s asset managers have the dual investment objectives of optimization of current income and achieving capital appreciation. To meet these objectives, it is often desirable to sell securities when opportunities for superior expected returns are identified. Accordingly, recognition of realized gains and losses is considered by the Company to be a typical consequence of the ongoing investment management activities.

Funds Held by Reinsured Companies

The Company, in order to be competitive in certain markets, writes business on a funds held basis. As at June 30, 2004 and December 31, 2003, the Company recorded $1,076 million and $1,068 million, respectively, of funds held assets on its condensed consolidated balance sheets, representing 9% and 10%, respectively, of the Company’s total assets. Under such contractual arrangements, the reinsured retains the net funds that would have otherwise been remitted and credits the net fund balance with investment income. In general, the purpose of the funds held balances is to provide the reinsured with additional security that the Company will honor its obligations. The Company is subject to the credit risk of the reinsured in the event of insolvency or the reinsured’s failure to honor the value of the funds held balances for any other reason. However, the Company’s credit risk is somewhat mitigated by the fact that the Company has the contractual ability to offset any shortfall in the payment of the funds held balances with amounts owed by the Company to the reinsured for losses payable and other amounts contractually due.

Approximately half of the funds held assets as at June 30, 2004, earns investment income based upon a predetermined interest rate, either fixed contractually at the inception of the contract or based upon a recognized market index (e.g., LIBOR). Interest rates as at June 30, 2004, ranged from 1.5% to 5.3%. Under these contractual arrangements, there are no specific assets linked to the funds held balances and the Company is exposed only to the credit risk of the reinsured.

With respect to the remainder of the funds held assets as at June 30, 2004, the Company receives an investment return based upon either the results of a pool of assets held by the reinsured (generally used as collateral for the funds held assets), or the investment return earned by the reinsured on its entire investment portfolio. The Company does not legally own or directly control the investments underlying its funds held assets and only has recourse to the reinsured for the receivable balances and has no claim to the underlying securities that support the balances. Decisions as to purchases and sales of assets underlying the funds held balances are

45

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

made by the reinsured; in some circumstances, investment guidelines regarding the minimum quality of the underlying assets may be agreed upon between the reinsured and the Company as part of the reinsurance agreement or the Company may participate in an investment oversight committee regarding the investment of the net funds, but investment decisions are not otherwise influenced by the Company.

Within this portion of the funds held assets, the Company has several annuity treaties, which are structured such that the return on the funds held balances is tied to the performance of an underlying group of assets held by the reinsured, including fluctuations in the market value of the underlying assets (one such treaty is a retrocessional agreement under which the Company receives less data than is generally received under a direct reinsurance agreement). In these arrangements, the objective of the reinsurance agreement is to provide for the covered longevity risk and to earn a net investment return on an underlying pool of assets, greater than is contractually due to the annuity holders. While the Company is also exposed to the creditworthiness of the reinsured, the risk of loss to the Company is somewhat mitigated, as the Company has the ability to offset a shortfall in the funds held assets with amounts owed to the reinsured. The Company also has several property and casualty treaties in which the investment performance of the net funds corresponds to the interest income on the assets held by the reinsured; however, the Company is not directly exposed to the underlying credit risk of these investments, as they serve only as collateral for the Company’s receivables. That is, the amount owed to the Company is unaffected by changes in the market value of the investments underlying the funds.

In those cases where the Company is exposed to the credit or interest rate risk of an underlying pool of assets the Company has applied the guidance of Derivative Implementation Issue No. B36. Accordingly, the Company has recognized as a realized gain or loss the value of the credit and/or interest rate derivative embedded within the funds held balance. In the case of the Company’s annuity contracts there is also a resulting offsetting adjustment to deferred acquisition costs related to this business. At June 30, 2004, the cumulative value of such embedded derivatives was determined to be $15 million, all of which was offset by an equivalent adjustment to deferred acquisition costs.

Unpaid losses and loss expenses

At June 30, 2004 and December 31, 2003, the Company has recorded gross Non-life reserves for unpaid losses and loss expenses of $5,057 million and $4,755 million, respectively, and net Non-life reserves for unpaid losses and loss expenses of $4,888 million and $4,579 million, respectively. During the first six months of 2004, the Company incurred net Non-life losses and loss expenses of $1,050 million and net Non-life paid losses of $669 million. Additionally, the weakening of most European currencies against the U.S. dollar during the first six months resulted in a decrease of the Non-life reserves for unpaid losses and loss expenses of $72 million. The Non-life ratio of paid loss to net premiums earned was 41% and 40% for the three months and six months ended June 30, 2004, respectively. Policy benefits for life and annuity contracts were $1,146 million and $1,162 million at June 30, 2004 and December 31, 2003, respectively. The increase in the value of reserves for unpaid losses and loss expenses relates primarily to the overall growth in business.

The Company’s reserves for unpaid losses and loss expenses include an estimate for its net ultimate liability for asbestos and environmental claims. Ultimate values for such claims cannot be estimated using traditional reserving techniques. There are significant uncertainties in estimating the amount of the Company’s potential losses for these claims and these uncertainties are not likely to be resolved in the near future. The Company actively evaluates potential exposure to asbestos and environmental claims and establishes additional reserves as appropriate. The Company believes that it has made a reasonable provision for these exposures and is unaware of any specific issues that would materially affect its estimates.

In the normal course of its business the Company is a party to a variety of contractual obligations as summarized in the Company’s 2003 Annual Report to Shareholders. These contractual obligations are considered by the Company when assessing its liquidity requirements and the Company is confident in its ability to meet all of its obligations. Contractual obligations at June 30, 2004 did not change significantly since December 31, 2003.

46

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Shareholders’ Equity and Capital Management

Shareholders’ equity at June 30, 2004 was $2.7 billion compared to $2.6 billion at December 31, 2003. The major factors contributing to the increase in shareholders’ equity in the six-month period ended June 30, 2004 were:

• net income of $265 million;

• dividends declared on both the Company’s common and preferred shares of $46 million; offset by

• a net decrease in common shares and additional paid-in capital of $4 million, due to the issuance of common shares under the Company’s equity plan of $5.1 million and the repurchase of $9.1 million of common shares under the Company’s share repurchase program;

• payments of $2 million under the purchase contracts for common shares relating to the Company’s Premium Equity Participating Security Units (“PEPS units”);

• the $13 million negative effect of the currency translation adjustment resulting from a stronger U.S. dollar relative to the euro as it relates to the conversion of PartnerRe SA’s financial statements into U.S dollars; and

• a $80 million decrease in net unrealized gains on investments, net of deferred taxes, recorded in equity resulting from both changes in market value as well as the strengthening of the U.S. dollar.

The Company continuously evaluates the capital needed to support its operations. During the three months ended June 30, 2004, the Company repurchased 163,300 common shares for a total cost of $9.1 million. As of June 30, 2004, approximately 4.8 million common shares remain authorized for repurchase under the Company’s current repurchase program.

During 2003, the Company issued $290 million of 6.75% Series C cumulative redeemable preferred shares (“Series C preferred shares”). Proceeds of $250 million from this issuance were used to redeem the Company’s 8.0% Series A cumulative redeemable preferred shares, while the remaining proceeds were used in the normal course of the Company’s operations. Dividends on the Series C preferred shares are payable quarterly and are cumulative. The Series C preferred shares have no stated maturity and are redeemable at the option of the Company at any time after May 8, 2008.

In addition, the Company has $400 million of capital in the form of trust preferred and mandatorily redeemable preferred securities. $200 million is in the form of trust preferred securities, which have a 30-year maturity with an option to extend to 49 years. The trust preferred securities were issued out of a subsidiary of the Company’s U.S. operations, which does not meet the consolidation requirements of FIN 46(R). (See Note 3(p) to the consolidated financial statements in the Company’s 2003 Annual Report to Shareholders.) Accordingly, the Company reflects the intercompany debt of $206.2 million associated with the issuance of these securities on its condensed consolidated balance sheets. For purposes of discussion, the Company refers to both the trust preferred securities and the related debt as the trust preferred securities. Additionally, the Company has outstanding $200 million of Premium Equity Participating Security Units (“PEPS units”), where each PEPS unit consists of a purchase contract to buy common shares of the Company prior to December 31, 2004, and one of the Company’s Series B preferred shares. Series B preferred shares are redeemable on June 30, 2005, and are pledged as collateral to secure the holder’s obligations under the purchase contract.

The table below sets forth the capital structure of the Company at June 30, 2004 and December 31, 2003 (in millions of U.S dollars):

	June 30, 2004		%	December 31, 2003		%
Capital Structure:
Long-term debt	$	220	7	$	220	7
Trust preferred securities (1)		200	6		200	6
Series B cumulative redeemable preferred shares (PEPS units)		200	6		200	6
6.75% Series C cumulative preferred shares, aggregate liquidation		290	9		290	9
Common shareholders’ equity		2,424	72		2,304	72
Total Capital	$	3,334	100	$	3,214	100

⁽¹⁾ Neither the Trust that issued the securities nor PartnerRe Finance, which owns the Trust, meets the consolidation requirements of FIN 46(R). Accordingly, the Company shows the related intercompany debt of $206.2 million on its condensed consolidated balance sheet.

47

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Liquidity

Cash flow from operations for the six months ended June 30, 2004 increased to $622 million from $496 million in the same period in 2003. This increase in cash flow is primarily attributable to the significant increase in business written by the Company and a first half-year of 2004 relatively free from catastrophic or other large loss payments.

As a holding company, the Company relies primarily on cash dividends from its reinsurance subsidiaries for its cash flow. Although the payment of dividends by the reinsurance subsidiaries to the Company is limited under Bermuda and French laws and certain insurance statutes of various U.S. states in which PartnerRe U.S. is licensed to transact business, there are presently no significant restrictions on the payment of dividends by the reinsurance subsidiaries, except that PartnerRe U.S. may not pay cash dividends without prior regulatory approval.

The Company has cash outflows in the form of operating expenses and dividends to both common and preferred shareholders. Holding company operating expenses were $20 million, common dividends paid were $36.6 million and preferred dividends paid were $9.8 million for the first half-year of 2004. The Company also paid $8 million on the PEPS units during the first half-year of 2004.

PartnerRe U.S. Corporation and its subsidiaries have $220 million in outstanding third party debt as well as $200 million of trust preferred stock outstanding. Interest payments on the long-term debt are made semiannually. PartnerRe U.S. Corporation and its subsidiaries have paid interest on the long-term debt and on the trust preferred stock during the first half-year of 2004.

The reinsurance subsidiaries of the Company depend upon cash flow from the collection of premiums as well as investment income to meet their obligations. Cash outflows are in the form of claims payments, operating expenses as well as dividend payments to the holding company, and additionally, in the case of PartnerRe U.S., interest payments on the long-term debt and distributions related to the trust preferred securities. Historically, the operating subsidiaries of the Company have generated sufficient cash flow to meet all of their obligations. Because of the inherent volatility of the business written by the Company, cash flows from operating activities may vary significantly between periods.

Some of the Company’s reinsurance treaties contain special funding and termination clauses that are triggered in the event the Company or one of its subsidiaries is downgraded by one of the major rating agencies to levels specified in the treaties, or the Company’s capital is significantly reduced. If such an event were to happen, the Company would be required, in certain instances, to post collateral in the form of letters of credit and/or trust accounts against existing outstanding losses, if any, related to the treaty. In a limited number of instances, the subject treaties could be cancelled retroactively or commuted by the cedant.

The long-term debt and capital securities issued by the Company and its subsidiaries contain various customary default, cross payment and acceleration provisions. These include, but are not limited to, failure to make interest and principal payments, breaches of various covenants, payment defaults or acceleration of indebtedness, certain events of bankruptcy and changes in control of the Company. As at June 30, 2004, the Company was in compliance with all required covenants and no conditions of default existed related to any of the Company’s debt or capital securities.

Credit Agreements

In the normal course of its operations, the Company enters into agreements with financial institutions to provide unsecured credit facilities. These facilities are used primarily for the issuance of letters of credit. Under the terms of certain reinsurance agreements, irrevocable letters of credit are issued on an unsecured basis in respect of reported loss and unearned premium reserves.

Included in the total credit facilities available to the Company at June 30, 2004, is a new $700 million three year syndicated, unsecured credit facility to replace its maturing 364-day credit facility. This new facility was executed in June 2004 on substantially the same terms and conditions as the maturing facility except for the term of the facility, which was extended from 364 day to three year, and an increase in the minimum consolidated tangible net worth (defined as total shareholders’ equity plus mandatorily redeemable preferred shares and trust preferred shares minus goodwill) from $1,250 million plus 50% of cumulative net income for the period from January 1, 2002 through the end of the most recently ended fiscal year to $1,825 million plus 50% of cumulative net income for the period from January 1, 2004 through the end of the most recently ended fiscal year.

48

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Some of the credit facilities contain customary default and cross default provisions and require that the Company maintains certain covenants, including the following:

i. a financial strength rating from A.M. Best Company of at least “A-” (for our material reinsurance subsidiaries which are rated by A.M. Best Company);

ii. maximum ratio of total debt to total capitalization of 35%. For the purposes of this covenant, “debt” does not include trust preferred and mandatorily redeemable preferred shares; and

iii. a minimum consolidated tangible net worth of $1,825 million plus 50% of cumulative net income for the period from January 1, 2004 through the end of the most recently ended fiscal year. For the purpose of this covenant, “consolidated tangible net worth” includes trust preferred and mandatorily redeemable preferred shares and excludes goodwill. Minimum consolidated tangible net worth required at June 30, 2004 was $1,825 million.

Additionally, the facilities allow for an adjustment to the level of pricing should the Company experience a change in its senior unsecured credit rating. The pricing grid provides the Company greater flexibility and simultaneously provides capital participants under the facility some price protection. As long as the Company maintains a minimum rating of BBB or better, the pricing on the facility will not significantly change.

The Company’s breach of any of these covenants would result in an event of default, upon which the Company would likely be required to repay any outstanding borrowings and replace letters of credit issued under these facilities. At June 30, 2004, the Company met all the covenants. Its total debt to total capitalization ratio was 6.6% and its consolidated tangible net worth (as defined under the terms of these facilities) was $2,684 million.

Off-Balance Sheet Arrangements

The Company is not party to any off-balance sheet arrangements that Management believes are reasonably likely to have a current or future effect on the Company’s financial condition, change in condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Currency

The Company’s functional currency is the U.S. dollar. The Company has exposure to foreign currency risk due to its ownership of PartnerRe SA, whose functional currency is the euro and due to PartnerRe SA and Partner Reinsurance Company (including the Swiss branch) underwriting reinsurance exposures and collecting premiums in currencies other than the U.S. dollar and holding certain net assets in such currencies. The Company’s most significant foreign currency exposure is to the euro. The euro decreased in value by 4% against the U.S. dollar in the first six months of 2004 (from 1.25 to 1.21 U.S. dollar per euro) thereby decreasing the aggregate currency translation gain of $17 million at December 31, 2003 to a gain of $4 million at June 30, 2004.

The value of the U.S. dollar strengthened approximately 4% against the Canadian dollar, 4% against the euro, 2% against the Swiss franc, 1% against the Japanese yen and weakened approximately 2% against the British pound in the first six months of 2004. Since a large proportion of the Company’s assets and liabilities is expressed in these currencies, there was a net decrease in the U.S. dollar value of the assets and liabilities denominated in Canadian dollars, euro, Swiss franc and Japanese yen and a net increase in the U.S. dollar value of the assets and liabilities denominated in British pound in the first six months of 2004.

Net foreign exchange gains amounted to $1 million for the six months ended June 30, 2004 and $9 million for the corresponding 2003 period. Foreign exchange gains and losses are a function of i) the relative value of the U.S. dollar against other currencies in which the Company does business, ii) the difference between the period-end exchange rates which are used to revalue the balance sheet and the average exchange rates which are used to revalue the income statement and iii) the classification on the Company’s condensed consolidated statements of operations of the exchange gain or loss resulting from revaluing a reinsurance subsidiary’s transactions into that subsidiary’s functional currency, the euro. In accordance with SFAS 52 “Foreign Currency Translation”, the foreign exchange gain or loss resulting from the subsequent translation of this subsidiary’s financial statements (expressed in the euro functional currency) into U.S. dollars, is classified in the currency translation adjustment account, which is a balance sheet equity account.

49

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Effects of Inflation

The effects of inflation are considered implicitly in pricing and estimating reserves for unpaid losses and loss expenses. The actual effects of inflation on the results of operations of the Company cannot be accurately known until claims are ultimately settled.

Recent Accounting Pronouncements

See Note 5 to condensed consolidated financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Overview

Management believes that the Company is principally exposed to four types of market related risk: interest rate risk, foreign currency risk, credit risk and equity price risk. How these risks relate to the Company, and the process used to manage them, is discussed below.

As discussed previously, the Company’s investment philosophy distinguishes between assets that are generally matched against the estimated net reinsurance assets and liabilities (“liability funds”) and those assets that represent shareholder capital (“capital funds”). Liability funds are invested in a way that matches them to the corresponding liabilities in both duration and currency composition. This procedure seeks to immunize the Company against changes in interest rates and currency exchange rates. As the focus of this disclosure is to identify risk exposures that impact the market value of assets alone, it is important for the reader to recognize that the risks discussed herein are significantly mitigated to the extent that the Company’s investment strategy allows market forces to influence the economic valuation of both assets and liabilities in generally the same way. At June 30, 2004, liability funds represented 62% (or $4.7 billion) of the Company’s total invested assets.

At June 30, 2004, capital funds represented 38% (or $2.8 billion) of the Company’s total invested assets. These assets represent shareholder capital and they are invested in a diversified portfolio that has the objective of maximizing investment return, subject to prudent risk constraints. Capital funds contain most of the asset classes typically viewed as offering a higher risk, higher return profile: primarily longer duration fixed income securities, common stock, convertible and high-yield bonds and real estate, in addition to high-quality investment-grade securities. The Company’s investment philosophy is to reduce foreign currency risk on capital funds by investing primarily in U.S. dollar investments. In considering the market risk of capital funds, it is important to recognize the benefits of portfolio diversification. Although these asset classes in isolation may introduce more risk into the portfolio, market forces have a tendency to influence each class in different ways and at different times. Consequently, the aggregate risk introduced by a portfolio of these assets should be less than might be estimated by summing the individual risks.

The Company’s investment strategy allows the use of derivative securities, subject to strict limitations. Derivative instruments may be used to hedge market risk, or to replicate investment positions or market exposures that would be allowed under the Company’s investment policy if implemented in other ways. The use of financial leverage, whether achieved through derivatives or margin borrowing, is prohibited without the express approval of the Board of Directors. The Company also imposes a high standard for the credit quality of counterparties in all derivative transactions. (See Note 3(k) to the consolidated financial statements in the Company’s 2003 Annual Report to Shareholders for additional disclosure concerning derivatives.)

The following comments address those areas where the Company believes it has exposure to material market risk in its operations.

Interest Rate Risk

The Company’s fixed income portfolio is exposed to interest rate risk. Fluctuations in interest rates have a direct impact on the market valuation of these securities. As interest rates rise, market values of fixed income portfolios fall, and vice versa. The Company manages interest rate risk on liability funds by constructing bond portfolios in which the economic impact of a general interest rate shift is comparable to the impact on the related liabilities. This process involves matching the duration of the portfolio to the estimated duration of the liabilities. For loss reserves and policy benefits related to Non-life and traditional Life business, the estimated duration of the Company’s liabilities is based on projected claims payout patterns. For policy benefits related to life and annuity business, the Company estimates duration based on its commitment to annuitants. The Company believes that this matching process mitigates the overall interest rate risk on an economic basis.

While this matching of duration insulates the Company from the economic impact of interest rate changes, it does impact the net equity of the Company. The Company’s liabilities are carried at their nominal value and their value is not adjusted for changes in interest rates; however, the Company’s invested assets are carried at fair market value, which is adjusted for such changes. As a result, a decrease in interest rates will result in an increase in the fair value of the Company’s investments and a corresponding increase, net of applicable taxes, to the Company’s equity. An increase in interest rates would have the opposite effect.

50

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Continued)

As discussed above, a proportion of the fixed income portfolio is designated as capital funds. The Company manages the exposure to interest rate volatility on capital funds by choosing a duration profile that it believes will optimize the risk-reward relationship.

The Company holds approximately $301 million of its total invested assets in mortgage/asset-backed securities. These assets are exposed to prepayment risk, the adverse impact of which is more evident in a declining interest rate environment. In such an environment, holders of individual mortgages increase the frequency with which they prepay the outstanding principal before the maturity date and refinance at lower interest cost. This can cause an acceleration of cash payments from the securities and a diminution of future investment income (relative to an equivalent fixed income security without prepayment risk).

The Company estimates that a 100 basis point increase or decrease in interest rates (across all currencies) would result in a $214 million decline or increase, respectively, in the market value of its fixed income portfolio (including mortgage-related securities). This change does not take into account taxes or the corresponding reduction or increase, respectively, in the economic value of its reinsurance liabilities, which, as noted above, would substantially offset the negative effect on invested assets as an economic matter, although the offset would not be reflected in the Company’s condensed consolidated financial statements.

As noted above, the Company strives to match the currency exposure in its fixed income portfolio to its multicurrency liabilities. The Company believes that this matching process creates a diversification benefit. Consequently, the exact market value effect of a change in interest rates will depend on which countries experience interest rate changes and the currency mix of the Company’s fixed income portfolio at the time of rate changes. See “Foreign Currency Risk.” Interest rate movements also affect the economic value of the Company’s outstanding fixed-rate debt obligation and preferred securities in the same way that they affect the Company’s fixed income investments, and this can result in a liability whose economic value is different from the value reported in the condensed consolidated financial statements. The Company believes that the economic fair values and carrying values of its outstanding fixed-rate debt and preferred securities obligations as at June 30, 2004, were as follows (in millions of U.S. dollars):

	Carrying Value		Fair Value
Long-term debt	$	220	$	231
Trust preferred securities (1)		200		207
Mandatorily Redeemable preferred securities and Purchase Contracts (PEPS)		200		211
Series C Cumulative preferred shares		290		276

⁽¹⁾ Neither the Trust that issued the securities nor PartnerRe Finance, which owns the Trust, meets the consolidation requirements of FIN 46(R). Accordingly, the Company shows the related intercompany debt of $206.2 million on its condensed consolidated balance sheets.

Fair value of the outstanding fixed-rate debt has been calculated as the present value of estimated future cash flows using a discount rate reflective of market interest rates, which is lower than the original interest rate on the debt of 5.81%. For the Company’s Trust preferred securities, PEPS Units and Series C Cumulative preferred shares, fair value is based on quoted market prices, while carrying value is based on the liquidation value of the securities.

Foreign Currency Risk

Through its multinational reinsurance operations, the Company conducts business in a variety of non-U.S. currencies, with the principal exposures being the euro, the British pound, the Swiss franc, the Canadian dollar and the Japanese yen. Assets and liabilities denominated in foreign currencies are exposed to changes in currency exchange rates. As the Company’s functional currency is the U.S. dollar, exchange rate fluctuations may materially impact the Company’s condensed consolidated statements of operations and financial position. However, the Company employs several strategies to manage its exposure to foreign currency exchange risk.

Even though the Company is able to match its liability funds against its insurance-related liabilities both by currency and duration, resulting in a natural hedge, it does enter into designated hedges to protect the value of its investment portfolio. Additionally, the Company does not maintain invested assets in currencies for which its liability exposures are immaterial or in countries where it is unable or impractical to maintain investments. In such cases, the Company does not have such a natural hedge and is exposed to currency risk. However, the Company does not believe that the currency risks corresponding to these unhedged positions are material. For the main non–U.S. dollar currencies identified above in which the Company transacts business, the Company employs a hedging strategy utilizing derivative financial instruments, as appropriate, to ensure that its liability funds are matched by currency. To the extent that the Company has net asset positions invested in non–U.S. dollar currencies, forward currency contracts and other derivatives may be used to hedge these non–U.S. dollar currency exposures. (See Note 3(k) to the consolidated financial statements in the Company’s 2003 Annual Report to Shareholders for additional information about the Company’s currency hedging activities.)

As a second strategy, the Company maintains capital funds primarily in U.S. dollar investments.

51

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Continued)

An additional factor mitigating the Company’s foreign currency risk is the ongoing nature of its reinsurance operations. Cash receipts in foreign currencies from premiums can be used to pay claims and expenses incurred in the same currency.

As at June 30, 2004, 67% of the Company’s total investments were in U.S. dollar denominated instruments and 33% were non–U.S. dollar investments.

The table below summarizes the Company’s gross and net exposure on its June 30, 2004, condensed consolidated balance sheets to foreign currency as well as the associated foreign currency derivatives the Company has put in place to manage this exposure (in millions of U.S. dollars):

	Euro			GBP			CAD			CHF			JPY			Other			Total (1)
Invested assets	$	1,725		$	152		$	314		$	18		$	37		$	203		$	2,449
Other net liabilities		(1,347	)		(238	)		(183	)		(26	)		(26	)		(271	)		(2,091	)
Total currency risk		378			(86	)		131			(8	)		11			(68	)		358
Total derivative amount		5			99			33			26			7			(5	)		165
Net currency exposure	$	383		$	13		$	164		$	18		$	18		$	(73	)	$	523

⁽¹⁾ The U.S. dollar currency, the Company’s reporting currency, accounts for the difference between the Company’s gross exposure in this table and the invested assets and other liabilities on the Company’s condensed consolidated balance sheet.

The Company’s investment in PartnerRe SA, carried in euro, and its Canadian branch, carried in Canadian dollar, accounted for $520 million of the combined euro and Canadian exposure of $547 million noted above which the Company does not hedge.

Assuming all other variables are held constant, a 10% change in the U.S. dollar relative to the other currencies held by the Company would result in a $52 million change in the net assets held by the Company, net of the effect of the derivative hedges.

Credit Risk

The Company has exposure to credit risk primarily as a holder of fixed income securities. The Company controls this exposure by emphasizing investment-grade credit quality in the fixed income securities it purchases. At June 30, 2004, approximately 59% of the Company’s fixed income portfolio was rated AAA (or equivalent rating) and 80% was rated A- or better. At June 30, 2004, 6% of the Company’s fixed income portfolio was rated below investment grade. The Company believes this high-quality concentration significantly reduces its exposure to credit risk on these fixed income investments to an acceptable level. To a lesser extent, the Company also has credit risk exposure as a party to foreign currency forward contracts and other derivative contracts. To mitigate this risk, the Company monitors its exposure by counterparty and ensures that counterparties to these contracts are high-credit-quality international banks or counterparties. The total gross counterparty exposure relating to foreign currency as at June 30 2004 was $968 million.

The Company is also exposed to credit risk in its underwriting operations, most notably in the credit/surety line and in the business written by the Company’s Alternative Risk Transfer operations. The Company provides its clients in these lines of business with reinsurance protection against credit deterioration, defaults or other types of financial performance of or by the underlying credits that are the subject of the reinsurance provided and, accordingly, the Company is exposed to the credit risk of those credits. As with all of the Company’s business, these risks are subject to rigorous underwriting and pricing standards. In addition, the Company strives to mitigate the risks associated with these credit-sensitive lines of business through the use of risk management techniques such as risk diversification, careful monitoring of risk aggregations and accumulations and, at times, through the use of retrocessional reinsurance protection and the purchase of credit default swaps. Loss experience in these lines of business is cyclical and is affected by the state of the general economic environment. As part of its ongoing risk management process and loss scenario modeling, the Company estimates that the maximum gross loss in the credit/surety line that could be incurred by the Company in the event of a widespread and prolonged recession is approximately $150 million.

The Company is subject to the credit risk of the reinsured in the event of insolvency or the reinsured’s failure to honor the value of the funds held balances for any other reason. However, the Company’s credit risk is mitigated by the fact that the Company has the contractual ability to offset any shortfall in the payment of the funds held balances with amounts owed by the Company to the reinsured for losses payable and other amounts contractually due. Funds held balances due to the Company in its Life segment are also exposed to credit risk. The Company is exposed to a limited extent to the underlying financial market risk of the pool of assets, inasmuch as the underlying policies may have guaranteed minimum returns. While the Company is also exposed to the creditworthiness of the reinsured, the risk of loss to the Company is somewhat mitigated, as the Company has the ability to offset a shortfall in the funds held assets with amounts owed to the reinsured.

52

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Continued)

The Company has exposure to credit risk as it relates to its trade balances receivable, namely reinsurance balances receivable and reinsurance recoverable on paid and unpaid losses.

Reinsurance balances receivable from the Company’s clients as at June 30, 2004, were $1,637 million. The Company believes that credit risk exposure related to these balances is mitigated by several factors, including but not limited to credit checks performed as part of the underwriting process and monitoring of aged receivable balances. In addition, as the vast majority of the reinsurance agreements permit the Company the right to offset premiums receivable from the clients against losses payable to them, the Company believes that the credit risk in this area is substantially reduced.

The Company does not rely heavily on retrocessional reinsurance, but the Company requires the reinsurers to have very high financial strength ratings. The Company evaluates the financial condition of its reinsurers and monitors concentration of credit risk on an ongoing basis. Provisions are made, as necessary, for amounts considered potentially uncollectible. The balance for reinsurance recoverable on paid and unpaid losses at June 30, 2004, was $192 million.

Equity Price Risk

The Company invests a portion of its capital funds in marketable equity securities ($748 million at June 30, 2004). These assets include equity investments as well as bank loans. These assets are exposed to equity price risk, defined as the potential for loss in market value owing to a decline in equity prices. The Company reviews this class of assets on a regular basis to ensure that diversification strategies to manage this risk continue to be in place. The Company believes that effects of diversification and the relatively small size of the existing investment in equities mitigate its exposure to equity price risk. The Company estimates that its equity investment portfolio has a beta versus the S&P 500 Index of approximately 0.69. Beta measures the response of an individual’s stock performance relative to a market return, where a beta of 1 would be an equivalent return to the index. Given the estimated beta for the Company’s portfolio, a 10% movement in the S&P 500 would result in an approximately 6.9% increase or decrease in the market value of the Company’s equity portfolio.

ITEM 4. CONTROLS AND PROCEDURES

The Company has carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2004, the Company’s disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company and its subsidiaries.

There have been no significant changes in the Company’s internal controls over the financial reporting identified in connection with such evaluation that occurred during the three months ended June 30, 2004 that has materially affected, or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.

53

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

The Company’s reinsurance subsidiaries, in common with the insurance and reinsurance industry in general, are subject to litigation and arbitration in the normal course of their business operations. In addition to claims litigation, the Company and its subsidiaries are subject to lawsuits and regulatory actions in the normal course of business that do not arise from or directly relate to claims on reinsurance treaties. This category of business litigation typically involves, inter alia, allegations of underwriting errors or misconduct, employment claims or regulatory activity. While the outcome of the business litigation cannot be predicted with certainty, the Company is disputing and will continue to dispute all allegations against the Company and/or its subsidiaries that management believes are without merit.

As of June 30, 2004 the Company was not a party to any material litigation or arbitration other than as part of the ordinary course of business. Whilst none of this is expected by management to have a significant adverse effect on the Company’s results of operations, financial condition and liquidity for a year, it does have the potential to adversely impact the results of a quarter.

ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES.

The following table provides information about purchases by the Company during the quarter ended June 30, 2004 of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act.

Issuer Purchases of Equity Securities
Period	(a) Total number of shares purchased (1)	(b) Average price paid per share		(c) Total number of shares purchased as part of publicly announced program (1)(2)	(d) Maximum number of shares that may yet be purchased under the program
04/01/2004-04/30/2004	—		—	—	—
05/01/2004-05/31/2004	24,000	$	54.75	24,000	4,976,000
06/01/2004-06/30/2004	139,300	$	55.98	139,300	4,836,700
Total	163,300	$	55.80	163,300

(1) The Company repurchased an aggregate of 163,300 shares of the common stock pursuant to the repurchase program that the Company publicly announced on May 17, 2004.

(2) The Company’s board of directors approved the repurchase by the Company up to an aggregate of 5 million shares of the common shares pursuant to the program. Unless terminated earlier by resolution of the Company’s board of directors, the program will expire when the Company has repurchased all shares authorized for repurchase thereunder.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

The annual General Meeting of Shareholders of the Company was held on May 13, 2004. The shareholders re-elected the existing Class II Directors, Jean-Paul Montupet, John A. Rollwagen, Vito H. Baumgartner and Lucio Stanca to hold office until the Annual General Meeting of shareholders in the year 2007 or until their successors are elected or appointed.

The number of votes cast For and Withheld for each of the above is set forth below:

	For	Withheld
Jean-Paul Montupet	47,874,131	653,601
John A. Rollwagen	47,773,155	754,577
Vito H. Baumgartner	47,873,280	654,452
Lucio Stanca	47,874,399	653,333

The term of office of the Company’s Class I Directors (Robert Baylis, Kevin Twomey and Jan H. Holsboer), and its Class III Directors (Jürgen Zech, Rémy Sautter and Patrick A. Thiele), continue until the Company’s 2006 and 2005 Annual General Meetings, respectively.

54

The shareholders voted in favor of increasing the number of Directors from ten to eleven with the minimum number of Directors set at three, and for the Board to be authorized to fill any vacancies as and when they deem expedient by a vote of 47,773,155 For and 754,577 Abstaining.

The shareholders voted in favor of amending the Bye-laws of the Company in order to remove the exemption that allows Swiss Reinsurance Company to exercise more than 9.9% of the voting rights attached to the Company’s issued common shares by a vote of 47,746,227 For, 748,072 Against, 33,433 Abstaining.

The shareholders voted in favor of increasing the number of common shares reserved for issuance under the PartnerRe Ltd. Employee Incentive plan from 3,500,000 to 5,000,000 by a vote of 37,042,623 For, 2,415,052 Against, 50,304 Abstaining, 9,019,753 no vote.

The shareholders also re-appointed Deloitte & Touche to serve as the Company’s auditor until the 2005 Annual General Meeting of shareholders by a vote of 48,507,197 For, 13,049 Against, 7,486 Abstaining.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits—The following exhibits are filed as part of this report on Form 10-Q:

3.1	Amended Memorandum of Association.
3.2	Amended and Restated Bye-laws.
4.1	Specimen Common Share Certificate.
4.2	Specimen of Unit Certificate for the PEPS Units.
4.3	Certificate of Designation of the Company’s 5.61% Series B cumulative redeemable preferred shares.
4.4	Certificate of Designation of the Company’s 6.75% Series C cumulative redeemable preferred shares.
4.5	Specimen Share Certificate for the 6.75% Series C cumulative preferred shares.
10.1	Credit Agreement.
10.2	Capital Management Maintenance Agreement.
11.1	Statements Regarding Computation of Net Income Per Common and Common Equivalent Share.
15	Letter Regarding Unaudited Interim Financial Information.
31.1	302 Certification of Patrick A. Thiele
31.2	302 Certification of Albert A. Benchimol
32.1	Section 906 Certifications

(b) Reports on Form 8-K.

Current Report on Form 8-K filed on May 7, 2004, under Item 9.

Current Report on Form 8-K filed on July 27, 2004 under Item 12.

55

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.

PartnerRe Ltd.
(Registrant)
By:	/s/ PATRICK A. THIELE
Name:	Patrick A. Thiele
Title:	President & Chief Executive Officer

Date: August 6, 2004

By:	/s/ ALBERT A. BENCHIMOL
Name:	Albert A. Benchimol
Title:	Executive Vice-President & Chief Financial Officer

Date: August 6, 2004

56

EXHIBIT INDEX

Exhibit Number	Exhibit	Sequentially Numbered Page
3.1	Amended Memorandum of Association.*
3.2	Amended and Restated Bye-laws.
4.1	Specimen Common Share Certificate.**
4.2	Specimen of Unit Certificate for the PEPS Units.‡
4.3	Certificate of Designation of the Company’s 5.61% Series B cumulative redeemable preferred shares.‡
4.4	Certificate of Designation of the Company’s 6.75% Series C cumulative redeemable preferred shares.‡‡
4.5	Specimen Share Certificate for the 6.75% Series C cumulative redeemable preferred shares.‡‡
10.1	Credit Agreement.
10.2	Capital Management Maintenance Agreement.
11.1	Statements Regarding Computation of Net Income Per Common and Common Equivalent Share.
15	Letter Regarding Unaudited Interim Financial Information.
31.1	302 Certification of Patrick A. Thiele
31.2	302 Certification of Albert A. Benchimol
32.1	Section 906 Certifications

* Incorporated by reference to the Registration Statement on Form F-3 of the Company, as filed with the Securities and Exchange Commission on June 20, 1997 (Registration No. 333-7094).

** Incorporated by reference to the Annual Report on Form 10-K of the Company for the year ended December 31, 1996, as filed with the Securities and Exchange Commission on March 26, 1997.

‡ Incorporated by reference to the Annual Report on Form 10-K of the Company for the year ended December 31, 2001, as filed with the Securities and Exchange Commission on March 29, 2002.

‡‡ Incorporated by reference to the Form 8-A, as filed with the Securities and Exchange Commission on May 2, 2003.

57

EX-3.2

Exhibit 3.2

I N D E X

Bye-Law	Subject	Page
1	Interpretation	1-3
2	Registered Office	3
3,4	Share Rights	3,4
5,6	Modification of Rights	4,5
7-10	Shares	5,6
11-13	Certificates	6,7
14-16	Lien	7,8
17-22	Calls of Shares	8,9
23-29	Forfeiture of Shares	10,11
30	Register of Shareholders	11,12
31	Register of Directors and Officers	12
32-37	Transfer of Shares	12-14
38-41	Transmission of Shares	14,15
42-44	Increase of Capital	15,16
45,46	Alteration of Capital	16,17
47,48	Reduction of Capital	17,18
49	General Meetings	18
50,51	Notice of General Meetings	18,19
52-58	Proceedings at General Meetings	19-21
59-70	Voting	21-23

Bye-Law	Subject	Page
71-76	Proxies and Corporate Representatives	24,25
77-80	Appointments and Removal of Directors	25-27
81	Resignation and Disqualification of Directors	27
82-84	Alternate Directors	27,28
85	Directors’ Fees and Additional Remuneration and Expenses	28,29
86	Directors’ Interests	29,30
87-91	Powers and Duties of the Board	30-32
92-94	Delegation of the Board’s Powers	32,33
95-103	Proceedings of the Board	33-35
104	Officers	35,36
105	Minutes	36
106,107	Secretary	36,37
108	The Seal	37
109-114	Dividends and other Payments	37-39
115	Reserves	39
116,117	Capitalization of Profits	39,40
118	Record Dates	41
119-122	Accounting Records	41-44
123	Audit	44
124-126	Service of Notices and Other Documents	44,45

Bye-Law	Subject	Page
127	Winding Up	45
128-130	Indemnity	46
131	Alteration of Bye-Laws	47

BYE-LAWS

of

PartnerRe Holdings Ltd.

INTERPRETATION

1. In these Bye-Laws unless the context otherwise requires:-

“Bermuda” means the Islands of Bermuda;

“Board” means the Board of Directors of the Company or the Directors present at a meeting of Directors at which there is a quorum;

“Company” means the company incorporated in Bermuda under the name of PartnerRe Holdings Ltd. On the 24^th day of August 1993;

“the Companies Acts” means every Bermuda statute from the time to time in force concerning companies insofar as the same applies to the Company;

“Controlled Shares” means shares of the Company (i) that would be deemed owned by a Shareholder under the rules set forth in section 958 of the U.S. Internal Revenue Code of 1986 (which includes shares directly owned, indirectly owned through the ownership of another entity and constructively owned because of certain relationships (such as family relationship or ownership relationships) and (ii) beneficially owned directly or as a result of the possession of sole or shared voting power within the meaning of section 13 (d)(3) of the U.S. Securities Exchange Act of 1934.

“Own or Control” means, with respect to the Company’s shares, (i) own under the rules set forth in section 958 of the U.S. Internal Revenue Code of 1986 (which includes shares directly owned, indirectly owned through the ownership of another entity and constructively owned because of certain relationships (such as family relationships or ownership relationships) and (ii) beneficially owned directly or indirectly as a result of the

1

possession of sole or shared voting power within the meaning of section 13 (d)(3) of the U.S. Securities Exchange Act of 1934.

“paid up” means paid up or credited as paid up;

“Register” means the Register of Shareholders of the Company;

“Registered Office” means the registered office for the time being of the Company;

“Seal” means the common seal of the Company and includes any duplicate thereof;

“Secretary” includes a temporary or assistant Secretary and any person appointed by the Board to perform any of the duties of the Secretary;

“Shareholder” means a shareholder or member of the Company;

“these Bye-Laws” means these Bye-Laws in their present form or as from time to time amended;

“Ten Percent Shareholder” means a person who the Board determines Owns or Controls more than 9.9% of the total combined voting power of all classes of shares entitled to vote at a general meeting of the Company’s Shareholders.

“9.9% limitation” means the requirement and restriction that no person shall be permitted to Own or Control more than 9.9% of the total combined voting power of all classes of shares entitled to vote at a general meeting of the Company’s Shareholders, except as provided for herein or as permitted by the Board.

for the purposes of these Bye-Laws a corporation shall be deemed to be present in person if its representative duly authorised pursuant to the Companies Acts is present;

words importing the singular number only include the plural number and vice versa;

words importing the masculine gender only include the feminine and neuter genders respectively;

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words importing persons include companies or associations or bodies of persons, whether corporate or un-incorporate;

reference to writing shall include typewriting, printing, lithography, photography and other modes of representing or reproducing words in a legible and non-transitory form;

any words or expressions defined in the Companies Acts in force at the date when theses Bye-Laws or any part thereof are adopted shall bear the same meaning in these Bye-Laws or such part (as the case may be).

REGISTERED OFFICE

2. The Registered Office shall be at such place in Bermuda as the Board shall from time to time appoint.

SHARE RIGHTS

3. Subject to any special rights conferred on the holders of any share or class of shares, any share in the Company may be issued with or have attached thereto such preferred, deferred, qualified or other special rights or such restriction, whether in regard to dividend, voting, return of capital or otherwise, as the Board may determine.

4. (a) The Board is expressly authorized at any time, and from time to time, without any vote or action by the Shareholder, to issue preference shares, including, without limitation, redeemable preference shares, in one or more classes or series and to determine the rights, designations, powers, preferences and relative, participating optional or other special rights, and such qualification, limitation or restrictions thereof, including without limitations, consideration, dividends rights, conversion rights, voting powers (full or limited, or no voting powers), terms and manner of redemption (including without limitation sinking fund provisions), redemption dates, redemption prices, liquidations preferences, conditions

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and the number of shares constituting and the designation of any class or series of such preference shares. Any such determination shall be made by resolution adopted by the Board. The designation and issue by the Board of any class or series of preference shares and the establishment of the rights and preferences thereof shall not be deemed to constitute an alteration or abrogation of the special rights attached to any class of shares for the purpose of Bye-Law 5 except as may be explicitly provided in the terms of issue of any shares for time being issued.

(b) The Company may issue preference shares which are to be redeemed, or are to be liable to be redeemed, at the option of the Company, at the option of the holder or at the option of both the Company and the holder. The redemption of any such preference shares shall be effected on such terms and in such manner as the Board shall determine pursuant to the authority conferred on it by Bye-Law 4(a).

MODIFICATION OF RIGHTS

5. Subject to the Companies Acts, all or any of the special rights for the time being attached to any class of shares for the time being issued may from time to time (whether or not the Company is being wound up) be altered or abrogated with the consent in writing of the holders of not less than seventy-five percent of the issued shares of that class or with the sanction of a resolution passed by the holders of not less than seventy five percent of the issued shares of that class at a separate general meeting of the holders of such shares voting in person or by proxy. To any such separate general meeting, all the provisions of these Bye-Laws as to general meetings of the Company shall mutatis mutandis apply, but so that the necessary quorum shall be two or more persons holding or representing by proxy any of the shares of the relevant class, that every holder of shares of the relevant class shall be entitled on a poll to one vote for every such share held by him and that any holder of shares of the relevant class present in person or by proxy may demand a poll.

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6. The special rights conferred upon the holders of any shares or class of shares shall not, unless otherwise expressly provided in the rights attaching to or the terms of issue of such shares, be deemed to be altered by the creation or issue of further shares ranking pari passu therewith.

SHARES

7. Subject to the provisions of these Bye-Laws, the unissued shares of the Company (whether forming part of the original capital or any increased capital) shall be at the disposal of the Board, which may offer, allot, grant options over or otherwise dispose of them to such persons, at such times and for such consideration and upon such terms and conditions as the Board may determine.

8. Subject to Bye-Law 32, no person shall be permitted to Own or Control shares in the Company to the extent that such holder or any person will be considered to Own or Control Controlled Shares, as the Board may determine in excess of 9.9% of the outstanding shares of the Company, nor shall any person be permitted to Own or Control Controlled Shares in the Company if the result thereof would be to render such a person or any other person a Ten Percent Shareholder. Nor may any shares be issued or any transfer of shares be made if the effect of such issuance or transfer would be to cause a violation of the prohibition of this paragraph. To the extent that, for any reason whatsoever and by any method howsoever, a person, whether an existing Member or not of the Company, shall Own or Control Controlled Shares in the Company in excess of the 9.9% limitation, then all shares which such person may Own or Control in excess of the 9.9% limitation shall carry no voting rights whatsoever,

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and shall be discounted in respect of such Member for the purpose of the calculation of any majority requirements which may or which is required to be taken at any general meeting of the Company for any purpose SAVE THAT the Controlled Shares of such Member in excess of the 9.9% limitation shall be allocated for voting purposes to all other Members of the Company pro rata to the common shareholdings of such other Members PROVIDED ALWAYS that no other Member shall be allocated voting rights pursuant to this saving if to do so would render such other Member a Ten Percent Shareholder. In the event that a reallocation of voting rights pursuant to this Bye-Law would result in the creation of additional Ten Percent Shareholders, the reallocation to be made shall only be made to such Members who, after the reallocation, would not be Ten Percent Shareholders.

9. The Board may in connection with the issue of any shares exercise all powers of paying commission and brokerage conferred or permitted by law.

10. Except as ordered by the a court of competent jurisdiction or as required by law, no person shall be recognised by the Company as holding any share upon trust and the Company shall not be bound by or required in any way to recognise (even when having noticed thereof) any equitable, contingent, future or partial interest in any share or any interest in any fractional part of a share or (except only as provided in these Bye-Laws or by law) any other right in respect of any share except an absolute right to the entirety thereof in the registered holder.

CERTIFICATES

11. The preparation, issue and delivery of certificates shall be governed by the Companies Acts. In the case of a share held jointly by several persons, delivery of a certificate to one of several joint holders shall be sufficient delivery to all.

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12. If a share certificate is defaced, lost or destroyed it may be replaced without fee but on such terms (if any) as to evidence and indemnity and to payment of the costs and out of pocket expenses of the Company in investigating such evidence and preparing such indemnity as the Board may think fit and, in case of defacement, on delivery of the old certificate to the Company.

13. All certificates for share or loan capital or other securities of the Company (other than letters for allotment, scrip certificates and other like documents) shall, except to the extent that the terms and conditions for the time being relating thereto otherwise provided, be issued under the Seal. The Board may by resolution determine, either generally or in any particular case, that any signatures on any such certificates need not be autographic but may be affixed to such certificates by some mechanical means or may be printed thereon or that such certificates need not be signed by any persons.

LIEN

14. The Company shall have a first and paramount lien on every share (not being a fully paid share) for all moneys, whether presently payable or not, called or payable, at a date fixed by or in accordance with the terms of issue of such share in respect of such share, and the Company shall also have a first and paramount lien on every share (other than a fully paid share) standing registered in the name of a Shareholder, whether singly or jointly with any other person, for all the debts and liabilities of such Shareholder or his estate to the Company, whether the same shall have been incurred before or after notice to the Company of any interest of any person other than such Shareholder, and whether the time for the payment or discharge of the same shall have actually arrived or not, and not withstanding that the same are joint debts or liabilities of such Shareholder or his estate and any other person,

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whether a Shareholder or not. The Company’s lien on a share shall extend to all dividends payable thereon. The Board may at any time, either generally or in any particular case, waive any lien that has arisen or declare any share to be wholly or in part exempt from the provision of this Bye-Law.

15. The Company may sell, in such manner as the Board may think fit, any share on which the Company has a lien but no sale shall be made unless some sum in respect of which the lien exists is presently payable nor until the expiration of fourteen days after a notice in writing, stating and demanding payment of the sum presently payable and giving notice of their intention to sell in default of such payment, has been served on the holder for the time being of the share.

16. The net proceeds of the sale by the Company of any shares on which it has a lien shall be applied in or towards payment or discharge of the debt or liability in respect of which the lien exists so far as the same is presently payable, and any residue shall (subject to a like lien for debts or liabilities not presently payable as existed upon the share prior to the sale) be paid to the holder of the share immediately before such sale. For giving effect to any such sale the Board may authorise some person to transfer the share sold to the purchaser thereof. The purchaser shall be registered as the holder of the share and he shall not be bound to see the application of the purchase money, nor shall his title to the share be affected by any irregularity or invalidity in the proceedings relating to the sale.

CALLS ON SHARES

17. The Board may from time to time make calls upon the Shareholders in respect of any moneys unpaid on their shares (whether on account of the par value of the shares or by way of premium) and not by the terms of the issue thereof made payable at a date fixed by or in

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accordance with such terms of issue, and each Shareholder shall (subject to the Company serving upon him at least fourteen days notice specifying the time or times and place of payment) pay to the Company at the time or times and place so specified the amount called on his shares. A call may be revoked or postponed as the Board may determine.

18. A call may be made payable by installments and shall be deemed to have been made at the time when the resolution of the Board authorizing the call was passed.

19. The joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof.

20. If a sum called in respect of the share shall not be paid before or on the day appointed for payment thereof the person from whom the sum is due shall pay interest on the sum from the day appointed for the payment thereof to the time of actual payment at such rate as the Board may determine, but the Board shall be at liberty to waive payment of such interest wholly or in part.

21. Any sum which, by the terms of the issue of a share, becomes payable on allotment or at any date fixed by or in accordance with such terms of issue, whether on account of the nominal amount of the share or by way of premium, shall for all purposes of these Bye-Laws be deemed to be a call duly made, notified and payable on the date on which, by the terms of issue, the same becomes payable and, in case of non-payment, all the relevant provisions of these Bye-Laws as to payment of interest, forfeiture or otherwise shall apply as if such sum had become payable by virtue of a call duly made and notified.

22. The Board may on the issue of shares differentiate between the allottees or holders as to the amount of calls to be paid and the times of payment.

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FORFEITURE OF SHARES

23. If a shareholder fails to pay any call or installment of a call on the day appointed for payment thereof, the Board may at any time thereafter during such time as any part of such call or installment remains unpaid serve a notice on him requiring payment of so much of the call or installment as is unpaid, together with any interest which may have accrued.

24. The notice shall name a further day (not being less than fourteen days from the date of the notice) on or before which, and the place where, the payment required by the notice is to be made and shall state that, in the event of non-payment on or before the day and at the place appointed, the shares in respect of which such call is made or installment is payable will be liable to be forfeited. The Board may accept the surrender of any share liable to be forfeited hereunder and, in such case, references in these Bye-Laws to forfeiture shall include surrender.

25. If the requirements of any such notice as aforesaid are not complied with, any share in respect of which such notice has been given may at any time thereafter, before payment of all calls or installments and interest due in respect thereof has been made, be forfeited by a resolution of the Board to that effect. Such forfeiture shall include all dividends declared in respect of the forfeited shares and not actually paid before the forfeiture.

26. When any share has been forfeited, notice of the forfeiture shall be served upon the person who was before forfeiture the holder of the share; but no forfeiture shall be in any manner invalidated by any omission or neglect to give such notice as aforesaid.

27. A forfeited share shall be deemed the property of the Company and may be sold, reoffered or otherwise disposed of either to the person who was, before forfeiture, the holder thereof or entitled thereto or to any person upon such terms and in such manner as the Board shall think fit, and at any time before sale, reallotment or disposition the forfeiture may be cancelled on such terms as the Board may think fit.

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28. A person whose shares have been forfeited shall thereupon cease to be a Shareholder in respect of the forfeited shares but shall, notwithstanding the forfeiture, remain liable to pay to the Company all moneys which at the date of forfeiture were presently payable by him to the Company in respect of the shares with interest thereon at such rate as the Board may determine from the date of forfeiture until payment, and the Company may enforce payment without being under any obligation to make any allowance for the value of the shares forfeited.

29. An affidavit in writing that the deponent is a Director or the Secretary and that a share has been duly forfeited on the date stated in the affidavit shall be conclusive evidence of the facts therein stated as against all persons claiming to be entitled to the share. The Company may receive the consideration (if any) given for the share on the sale, reallotment or disposition thereof and the Board may authorise some person to transfer the share to the person to whom the same is sold, realloted or disposed of, and he shall thereupon be registered as the holder of the share and shall not be bound to see the application of the purchase money (if any) nor shall his title to the share be affected by any irregularity or invalidity in the proceedings relating to the forfeiture, sale, reallotment or disposal of the share.

REGISTER OF SHAREHOLDERS

30. The Secretary shall establish and maintain the Register of Shareholders at the Registered Office in the manner prescribed by the Companies Acts. Unless the Board otherwise determines, the Register of Shareholders shall be open to inspection in the manner

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prescribed by the Companies Acts between 10:00 a.m. and 12:00 noon on every working day. Unless the Board so determines, no Shareholder or intending Shareholder shall be entitled to have entered in the Register any indication of any trust or any equitable, contingent, future or partial interest in any share or any interest in any fractional part of a share and if any such entry exists or is permitted by the Board it shall not be deemed to abrogate any of the provisions of the Bye-Law 9.

REGISTER OF DIRECTORS AND OFFICERS

31. The Secretary shall establish and maintain a register of the Directors and Officers of the Company as required by the Companies Acts. The register of Directors and Officers shall be open to inspection in the manner prescribed by the Companies Acts between 10:00 a.m. and 12:00 noon on every working day.

TRANSFER OF SHARES

32. No transfer (including a repurchase by the Company) may be made if the effect of such transfer would result in the transferee or any other Shareholder of the Company controlling in excess of nine and nine tenths per cent (9.9 percent) of all of the issued and outstanding shares of the Company. Notwithstanding the foregoing, the Board may waive the restrictions set forth in this Bye-Law, in its discretion and on a case by case basis. One of the purposes of the 9.9% limitation is to prevent the Company from being characterized as a foreign personal holding company within the meaning of the Internal Revenue Code of 1986 of the United States, as amended. Nevertheless, the Board will not be liable to the Company, its Shareholders or any person whatsoever for any errors in judgment made by it in granting any waiver or waivers to the foregoing restrictions in any case so long as it has acted in good faith.

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33. Subject to the Companies Acts and to such of the restrictions contained in these Bye-Laws as may be applicable, any Shareholder may transfer all or any of his shares by an instrument of transfer in the usual common form or in any other form which the Board may approve.

34. The instrument of transfer of a share shall be signed by or on behalf of the transferor and where any share is not fully-paid the transferee, and the transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the Register in respect thereof. All instruments of transfer when registered may be retained by the Company. The Board may, in its absolute discretion and without assigning any reason therefore, decline to register any transfer of any share which is not a fully-paid share.

35. The Board may also decline to register any transfer unless:-

(a) the instrument of transfer is duly stamped and lodged with the Company, or any transfer agent appointed by the Company, accompanied by the certificate for the shares to which it relates, and such other evidence as the Board may reasonably require to show the right of the transferor to make the transfer,

(b) the instrument of transfer is in respect of only one class of share,

(c) where applicable, the permission of the Bermuda Monetary Authority with respect thereto has been obtained.

Subject to any directions of the Board from time to time in force, the Secretary may exercise the powers and discretions of the Board under this Bye-Law and Bye-Laws 31 and 33.

36. If the Board declines to register a transfer it shall, within three months after the date on which the instrument of transfer was lodged, send to the transferee notice of such refusal.

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37. No fee shall be charged by the Company for registering any transfer, probate, letters of administration, certificate of death or marriage, power of attorney, distringas or stop notice, order of court or other instruments relating to or affecting the title to any share, or otherwise making an entry in the Register relating to any share.

TRANSMISSION OF SHARES

38. In the case of the death of a Shareholder, the survivor or survivors, where the deceased was a joint holder, and the estate representative, where he was a sole holder, shall be the only person recognised by the Company as having any title to his shares; but nothing herein contained shall release the estate of a deceased holder (whether the sole or joint) from any liability in respect of shares held by him solely or jointly with other persons. For the purpose of this Bye-Law, estate representative means the person to whom probate or letters of administration has or have been granted in Bermuda or, failing any such person, such other person as the Board may in its absolute discretion determine to be the person recognized by the Company for the purpose of this Bye-Law.

39. Any person becoming entitled to a share in consequence of the death of a Shareholder or otherwise by operation of applicable law may, subject as hereafter provided and upon such evidence being produced as may from time to time be required by the Board as to his entitlement, either be registered himself as the holder of the share or elect to have some person nominated by him registered as the transferee thereof. If the person so becoming entitled elects to be registered himself, he shall deliver or send to the Company a notice in writing signed by him stating that he so elects. If he shall elect to have his nominee registered, he shall signify his election by signing an instrument of transfer of such share in favour of his nominee. All the limitations, restrictions and provisions of these Bye-Laws

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relating to the right to transfer and the registration of transfer of shares shall be applicable to any such notice or instrument of transfer as aforesaid as if the death of the Shareholder or other event giving rise to the transmission had not occurred and the notice or instrument of transfer was an instrument of transfer signed by such Shareholder. Accordingly, no person shall be registered as the holder of a share if the result would be that such person would Own or Control shares in excess of the 9.9% limitation.

40. A person becoming entitled to a share in consequence of the death of a Shareholder or otherwise by operation of applicable law shall (upon such evidence being produced as may from time to time be required by the Board as to his entitlement) be entitled to receive and may give a discharge for any dividends or other moneys payable in respect of the share, but he shall not be entitled in respect of the share to receive notices of or to attend or vote at general meetings of the Company or, save as aforesaid, to exercise in respect of the share any of the rights or privileges of a Shareholder until he shall have become registered as the holder thereof. The Board may at any time give notice requiring such person to elect either to be registered himself or to transfer the share and if the notice is not complied with within sixty days the Board may thereafter withhold payment of all dividends and other moneys payable in respect of the shares until the requirements of the notice have been complied with.

41. Subject to any direction of the Board from time to time in force, the Secretary may exercise the powers and discretions of the Board under Bye-Laws 35, 36 and 37.

INCREASE OF CAPITAL

42. The Company may from time to time increase its capital by such sum to be divided into shares of such par value as the Company in general meeting shall prescribe.

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43. The Company may, by the resolution increasing the capital, direct that the new shares or any of them shall be offered in the first instance either at par or at a premium or (subject to the provisions of the Companies Acts) at a discount to all holders for the time being of shares of any class or classes in proportion to the number of such shares held by them respectively or make any other provisions as to the issue of the new shares.

44. The new shares shall be subject to all the provisions of these Bye-Laws with reference to lien, the payment of calls, forfeiture, transfer, transmission and otherwise.

ALTERATION OF CAPITAL

45. Without prejudice to the powers of the Board pursuant to Bye-Law 3, and in contemplation of the provisions of Section 45 of the Companies Act, the Company from time to time in general meeting:-

(a) divide its shares into several classes and attach thereto respectively any preferential, deferred, qualified or special rights, privileges or conditions;

(b) consolidate and divide all or any of its share capital into shares of larger par value than its existing shares;

(c) sub-divide its shares or any of them into shares of smaller par value than is fixed by its memorandum, so, however, that in the sub-division the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived;

(d) make provisions for the issue and allotment of shares which do not carry any voting rights;

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(e) cancel shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled; and

(f) change the currency denomination of its share capital. PROVIDED THAT, no such action shall be taken except as authorized by a vote of a majority of the members, and, provided further, that no such action shall be taken if it were to result in any Shareholder violating the 9.9% limitation unless all of the Shareholders of the Company unanimously consent.

Where any difficulty arises in regard to any division, consolidation, or sub-division under this Bye-Law, the Board may settle the same as it thinks expedient and, in particular, may arrange for the sale of the shares representing fractions and the distribution of the net proceeds of sale in due proportion amongst the Shareholders who would have been entitled to the fractions, and for this purpose the Board may authorise some person to transfer the shares representing fractions to the purchaser thereof, who shall not be bound to see to the application of the purchase money nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings relating to the sale.

46. Subject to the Companies Acts and to any confirmation or consent required by law or these Bye-Laws, the Company may by resolution in general meeting from time to time convert any preference shares into redeemable preference shares.

REDUCTION OF CAPITAL

47. Subject to the Companies Acts, its memorandum and any confirmation or consent required by law or these Bye-Laws, the Company may from time to time in general meeting authorise the reduction of its issued share capital or any capital redemption reserve fund or any share premium or contributed surplus account in any manner.

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48. In relation to any such reduction, the Company may in general meeting determine the terms upon which such reduction is to be effected including in the case of a reduction of part only of a class of shares, those shares to be affected.

GENERAL MEETINGS

49. The Board shall convene and the Company shall hold general meetings as Annual General Meetings in accordance with the requirements of the Companies Acts at such times and places as the Board shall appoint. The Board may, whenever it thinks fit, and shall, when required by the Companies Acts, convene general meetings other than Annual General Meetings which shall be called Special General Meetings.

NOTICE OF GENERAL MEETINGS

50. An Annual General Meeting shall be called by not less than thirty (30) days notice in writing and a Special General Meeting shall be called by not less than seven (7) days notice in writing. The notice shall be exclusive of the day on which it is served or deemed to be served and of the day for which it is given, and shall specify the place, day and time of the meeting, and, in the case of a Special General Meeting, the general nature of the business to be considered. Notice of every general meeting shall be given in any manner permitted by Bye-Laws 124, 125 and 126 to all Shareholders other than such as, under the provisions of these Bye-Laws or of the terms of issue of the shares they hold, are not entitled to receive such notice from the Company. Notwithstanding that a meeting of the Company is called by shorter notice than that specified in this Bye-Law, it shall be deemed to have been duly called if it is so agreed:-

(a) in the case of a meeting called as an Annual General Meeting, by all the Shareholders entitled to attend and vote thereat;

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(b) in the case of any other meeting, by a majority in number of the Shareholders having the right to attend and vote at the meeting, being a majority together holding not less than 95 percent in nominal value of the shares giving that right.

51. The accidental omission to give notice of a meeting or (in cases where instruments of proxy are sent out with the notice) the accidental omission to send such instruments of proxy to, or the non-receipt of notice of a meeting or such instrument of proxy by, any person entitled to receive such notice shall not invalidate the proceedings at that meeting.

PROCEEDINGS AT GENERAL MEETINGS

52. No business shall be transacted at any general meeting unless a quorum is present when the meeting proceeds to business, but the absence of a quorum shall not preclude the appointment, choice or election of a chairman which shall not be treated as part of the business of the meeting. Save as otherwise provided by these Bye-Laws, Shareholders Owning and Controlling not less than 25% of the shares of the Company entitled to vote at any general meeting and present in person or by proxy, shall be a quorum for all purposes.

53. If within five minutes (or such time as the chairman of the meeting may determine to wait) after the time appointed for the meeting, a quorum is not present, the meeting, if convened on the requisition of Shareholders, shall be dissolved. In any other cases, it shall stand adjourned to such other day and such other time and place as the chairman of the meeting may determine and at such adjourned meeting two Shareholders present in person (whatever the number of shares held by them) shall be a quorum. The Company shall not give less than seven (7) days notice of any meeting adjourned through want of a quorum and such notice shall state that two Shareholders present in person (whatever the number of shares held by them) shall be a quorum.

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54. A meeting of the Shareholders or any class thereof may be held by means of such telephone, electronic or other communication facilities as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously and participation in such a meeting shall constitute presence in person at such meeting.

55. Each Director shall be entitled to attend and speak at any general meeting of the Company.

56. The Chairman (if any) of the Board or, in his absence, the President shall preside as chairman at every general meeting. If there is no such Chairman or President, or if at any meeting neither of the Chairman nor the President is present within five minutes after the time appointed for holding the meeting, or if neither of them is willing to act as chairman, the Directors present shall choose one of their number to act or if one Director only is present he shall preside as chairman if willing to act. If no Director is present or, if each of the Directors present declines to take the chair, the persons present and entitled to vote on a poll shall elect one of their number to be chairman.

57. The chairman of the meeting may, with the consent of any meeting at which a quorum is present (and shall if so directed by the meeting), adjourn the meeting from time to time and from place to place but no business shall be transacted at any adjourned meeting except business which might lawfully have been transacted at the meeting from which the adjournment took place. When a meeting is adjourned for three months or more, notice of the adjourned meeting shall be given as in case of an original meeting.

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58. Save as expressly provided by these Bye-Laws, it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting.

VOTING

59. Save where a greater majority is required by the Companies Acts or these Bye-Laws, any question proposed for consideration at any general meeting shall be decided on by a simple majority of votes cast. However, no Shareholder shall, unless the Board otherwise determines, be entitled to vote at any general meeting in respect of any shares which such Shareholder shall hold in excess of the 9.9% limitation for whatever reason.

60. At any general meeting, a resolution put to the vote of the meeting shall be decided on a show of hands unless (before or on the declaration of the result of the show of hands or on the withdrawal of any other demand for a poll) a poll is demanded by:-

(a) the chairman of the meeting; or

(b) at least three Shareholders present in person or represented by proxy; or

(c) any Shareholder or Shareholders present in person or represented by proxy and holding between them not less than one tenth of the total voting rights of all the Shareholders having the right to vote at such meeting; or

(d) a Shareholder or Shareholders present in person or represented by proxy holding shares conferring the right to vote at such meeting, being shares on which an aggregate sum has been paid up equal to not less than one tenth of the total sum paid up on all such shares conferring such right.

Unless a poll is so demanded and the demand is not withdrawn, a declaration by the chairman that a resolution has, on a show of hands, been carried or carried unanimously or by a particular majority or not carried by a particular majority or lost shall be final and conclusive, and an entry to that effect in the minute book of the Company shall be conclusive evidence of the fact without proof of the number of votes recorded for or against such resolution.

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61. If a poll is duly demanded, the result of the poll shall be deemed to be the resolution of the meeting at which the polled is demanded.

62. A poll demanded on the election of a chairman, or on a question of adjournment, shall be taken forthwith. A poll demanded on any other question shall be taken in such manner and either forthwith or at such time (being not later than three months after the date of the demand) and place as the chairman shall direct. It shall not be necessary (unless the chairman otherwise directs) for notice to be given of a poll.

63. The demand for a poll shall not prevent the continuance of a meeting for the transaction for any business other than the question on which the poll has been demanded and it may be withdrawn at any time before the close of the meeting or the taking of the poll, whichever is the earlier.

64. On a poll, votes may be cast either personally or by proxy.

65. A person entitled to more than one vote on a poll need not use all his votes or cast all the votes he uses in the same way.

66. In the case of an equality of votes at a general meeting, whether on a show of hands or on a poll, the chairman of such meeting shall not be entitled to a second or casting vote.

67. In the case of joint holders of a share, the vote of the senior who tenders the vote, whether in person or by proxy, shall be excepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the Register in respect of the joint holding.

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68. A Shareholder who is a patient for any purpose of any statute or applicable law relating to mental health or in respect of whom an order has been made by any Court having jurisdiction for the protection or management of the affairs of persons incapable of managing their own affairs may vote, whether on a show of hands or a poll, by his receiver, committee, curator bonis or other person in the nature of a receiver, committee or curator bonis appointed by such Court and such receiver, committee, curator bonis or other person may vote on a poll by proxy, and may otherwise act and be treated as such Shareholder for the purpose of general meetings.

69. Unless the Board otherwise determines, every Shareholder shall be entitled to vote at any general meeting notwithstanding that certain calls or other sum presently payable by him in respect of shares in the Company have not yet been paid.

70. If (i) any objection shall be raised to the qualification of any voter or (ii) any votes have been counted which ought not to have been counted or which might have been rejected or (iii) any votes are not counted which ought to have been counted, the objection or error shall not vitiate the decision of the meeting or adjourned meeting on any resolution unless the same is raised or pointed out at the meeting or, as the case may be, the adjourned meeting at which the vote objected to is given or tendered or at which the error occurs. Any objection or error shall be referred to the chairman of the meeting and shall only vitiate the decision of the meeting on any resolution if the Chairman decides that the same may have affected the decision of the meeting. The decision of the chairman on such matters shall be final and conclusive.

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PROXIES AND CORPORATE REPRESENTATIVES

71. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney authorised by him in writing or, if the appointor is a corporation, either under its seal or under the hand of an officer, attorney or other person authorised to sign the same.

72. Any Shareholder may appoint a standing proxy or (if a corporation) representative by depositing at the Registered Office a proxy or (if a corporation) an authorisation and such proxy or authorisation shall be valid for all general meetings and adjournments thereof until notice of revocation is received at the Registered Office. Where a standing proxy or authorisation exists, its operation shall be deemed to have been suspended at any general meeting or adjournment thereof at which the Shareholder present or in respect to which the Shareholder has specially appointed a proxy or representative. The Board may from time to time require such evidence as it shall deem necessary as to the due execution and continuing validity of any such standing proxy or authorisation and the operation of any such standing proxy or authorisation shall be deemed to be suspended until such time as the Board determines that it has received the requested evidence or other evidence satisfactory to it.

73. Subject to Bye-Law 69, the instrument appointing a proxy together with such other evidence as to its due execution as the Board may from time to time require, shall be delivered at the Registered Office (or at such place as may be specified in the notice convening the meeting or in any notice of any adjournment or, in either case, in any document sent therewith) prior to the holding of the meeting or adjourned meeting at which the person named in the instrument proposes to vote or, in the case of a poll taken subsequently to the date of a meeting or adjourned meeting, before the time appointed for the taking of the poll and in default the instrument of proxy shall not be treated as valid.

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74. Instruments of proxy shall be in any common form or in such other form as the Board may approve and the Board may, if it thinks fit, send out with the notice of any meeting forms of instruments of proxy for use at that meeting. The instruments of proxy shall be deemed to confer authority to demand or join in demanding a poll and to vote on any amendment of a resolution put to the meeting for which it is given as the proxy thinks fit. The instrument of proxy shall unless the contrary is stated therein be valid as well for any adjournment of the meeting as for the meeting to which it relates.

75. A vote given in accordance with the terms of an instrument of proxy shall be valid notwithstanding the previous death or insanity of the principal, or revocation of the instrument of proxy or of the authority under which it was executed, provided that no intimation in writing of such death, insanity or revocation shall have been received by the Company at the Registered Office (or such other place as may be specified for the delivery of instruments of proxy in the notice convening the meeting or other documents sent therewith) one hour at least before the commencement of the meeting or adjourned meeting, or the taking of the poll, at which the instrument of proxy is used.

76. Subject to the Companies Acts, the Board may at its discretion waive any of the provisions of these Bye-Laws related to proxies or authorisations and, in particular, may accept such verbal or other assurances as it thinks fit as to the right of any person to attend and vote on behalf of any Shareholder at general meetings.

APPOINTMENT AND REMOVAL OF DIRECTORS

77. There shall be three classes of directors, with various terms of office, with the result that there shall be a rotating board. The classes of directors shall be known as Class 1, Class

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2 and Class 3. Each class shall have a minimum of one director and a maximum of four directors. The directors elected during the first year of existence of the Company shall serve in office as follows. Class 1 shall retire at the Second Annual General Meeting (the Statutory Meeting being deemed to be also the First Annual General Meeting). Class 2 shall retire at the Third Annual General Meeting, and Class 3 shall retire at the Fourth Annual General Meeting. Each class of director shall be eligible for re-election at the Annual General Meeting of the Company at which such Class shall retire, to hold office for three years or until its successors are elected or appointed.

78. The number of Directors shall be such number not less than three as the Company in general meeting may from time to time determine and, subject to the Companies Acts and these Bye-Laws, shall serve until re-elected or their successors are appointed at the next Annual General Meeting.

79. The Company shall at the Annual General Meeting and may in general meeting determine the minimum and the maximum number of Directors and may in general meeting determine that one or more vacancies in the Board shall be deemed casual vacancies for the purposes of these Bye-Laws. Without prejudice to the power of the Company in general meeting in pursuance of any of the provisions of these Bye-Laws to appoint any person to be a Director, the Board, so long as a quorum of Directors remains in office, shall have power at any time and from time to time to appoint any individual to be a Director so as to fill a casual vacancy.

80. The Company may in a Special General Meeting called for that purpose remove a Director provided notice of any such meeting shall be served upon the Director concerned not less than fourteen (14) days before the meeting and he shall be entitled to be heard at that

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meeting. Any vacancy created by the removal of a Director at a Special General Meeting may be filled at the Meeting by the election of another Director in his place or, in the absence of any such election, by the Board

RESIGNATION AND DISQUALIFICATION OF DIRECTORS

81. The office of a Director shall be vacated upon the happening of any of the following events:-

(a) if he resigns his office by notice in writing delivered to the Registered Office or tendered at a meeting of the Board;

(b) if he becomes of unsound mind or a patient for any purpose of any statute or applicable law relating to mental health and the Board resolves that his office is vacated;

(c) if he becomes bankrupt or compounds with his creditors;

(d) if he is prohibited by law from being a Director;

(e) if he ceases to be a Director by virtue of the Companies Acts or is removed from office pursuant to these Bye-Laws.

ALTERNATE DIRECTORS

82. The Company may in general meeting elect any person or persons to act as Directors in the alternative to any of the Directors or may authorise the Board to appoint such Alternate Directors. Any Alternate Director may be removed by the Company in general meeting and, if appointed by the Board, may be removed by the Board and, subject thereto, the office of Alternate Director shall continue until the next annual election of Directors or, if earlier, the date on which the relevant Director ceases to be a Director. An Alternate Director may also be a Director in his own right and may act as alternate to more than one Director.

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83. An Alternate Director shall be entitled to receive notices of all meetings of Directors, to attend, to be counted in the quorum and vote at any such meetings at which any Director to whom he is alternate is not personally present, and generally to perform all the functions of any Director to whom he is alternate in his absence.

84. Every person acting as Alternate Director shall (except as regards powers to appoint an alternate and remuneration) be subject in all respects to the provisions of these Bye-Laws relating to Directors and shall alone be responsible to the Company for his acts and defaults and shall not be deemed to be the agent of or for any Director for whom he is alternate. An Alternate Director may be paid expenses and shall be entitled to be indemnified by the Company to the same extent mutatis mutandis as if he were a Director. Every person acting as an Alternate Director shall have one vote for each Director for whom he acts as alternate (in addition to his own vote if he is also a Director). The signature of an Alternate Director to any resolution in writing of the Board or a committee of the Board shall, unless the terms of his appointment provides to the contrary, be as effective as the signature of the Director or Directors to whom he is alternate.

DIRECTORS’ FEES AND ADDITIONAL REMUNERATION AND EXPENSES

85. The amount, if any, of Directors’ fees shall from time to time be determined by the Board (subject always to disclosure to the Auditors) and in the absence of a determination to the contrary in general meeting, such fees shall be deemed to accrue from day to day. Each Director may be paid his reasonable traveling, hotel and incidental expenses in attending and returning from meetings of the Board or committees constituted pursuant to these Bye-Laws or general meetings and shall be paid all expenses properly and reasonably incurred by him in the conduct of the Company’s business or in the discharge of his duties as a Director. Any

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Director who, by request, goes or resides abroad for any purposes of the Company or who performs services which in the opinion of the Board go beyond the ordinary duties of a Director may be paid such extra remuneration (whether by way of salary, commission, participation in profits or otherwise) as the Board may determine, and such extra remuneration shall be in addition to any remuneration provided for by or pursuant to any other Bye-Law.

DIRECTORS’ INTERESTS

86. (a) A Director may hold any other office or place of profit with the Company (except that of auditor) in conjunction with his office of Director for such period and upon such terms as the Board may determine, and may be paid such extra remuneration therefore (whether by way of salary, commission, participation in profits or otherwise) as the Board may determine, and such extra remuneration shall be in addition to any remuneration provided for by or pursuant to any other Bye-Law.

(b) A Director may act by himself or his firm in a professional capacity for the Company (otherwise than as auditor) and he or his firm shall be entitled to remuneration for professional services as if he were not a Director.

(c) Subject to the provisions of the Companies Acts, a Director may notwithstanding his office be a party to, or otherwise interested in, any transaction or arrangement with the Company or in which the Company is otherwise interested; and be a Director or other officer of, or employed by, or a party to any transaction or arrangement with, or otherwise interested in, any body corporate promoted by the Company or in which the Company is interested. The Board may also cause the voting power conferred by the shares in any other company held or owned by the Company to be exercised in such manner

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in all respects as it thinks fit, including the exercise thereof in favour of any resolution appointing the Directors or any of them to be directors or officers of such other company, or voting or providing for the payment of remuneration to the directors of officers of such other company.

(d) So long as, where it is necessary, he declares the nature of his interest at the first opportunity at a meeting of the Board or by writing to the Directors as required by the Companies Acts, a Director shall not by reason of his office be accountable to the Company for any benefit which he derives from any office or employment to which these Bye-Laws allow him to be appointed or from any transaction or arrangement in which these Bye-Laws allow him to be interested, and no such transaction or arrangement shall be liable to be avoided on the ground of any interest or benefit.

(e) Subject to the Companies Acts and any further disclosure required thereby, a general notice to the Directors by a Director or officer declaring that he is a director or officer or has an interest in a person and is to be regarded as interested in any transaction or arrangement made with that person, shall be a sufficient declaration of interest in relation to any transaction or arrangement so made.

POWERS AND DUTIES OF THE BOARD

87. Subject to the provisions of the Companies Acts and these Bye-Laws and to any directions given by the Company in general meeting, the Board shall manage the business of the Company and may pay all expenses incurred in promoting and incorporating the Company and may exercise all the powers of the Company. No alteration of these Bye-Laws and no such direction shall invalidate any prior act of the Board which would have been valid if that alteration had not been made or that direction had not been given. The powers given

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by this Bye-Law shall not be limited by any special power given to the Board by these Bye-Laws and a meeting of the Board at which a quorum is present shall be competent to exercise all the powers, authorities and discretions for the time being vested in or exercisable by the Board.

88. The Board may exercise all the powers of the Company to borrow money and to mortgage or charge all or any part of the undertaking, property and assets (present and future) and uncalled capital of the Company and to issue debentures and other securities, whether outright or as collateral security for any debt, liability or obligation of the Company or of any other persons.

89. All cheques, promissory notes, drafts, bills of exchange and other instruments, whether negotiable or transferable or not, and all receipts for money paid to the Company shall be signed, drawn, accepted, endorsed or otherwise executed, as the case may be, in such manner as the Board shall from time to time by resolution determine.

90. The Board on behalf of the Company may provide benefits, whether by the payment of gratuities or pensions or otherwise, for any person including any Director or former Director who has held any executive office or employment with the Company or with any body corporate which is or has been a subsidiary or affiliate of the Company or a predecessor in the business of the Company or of any such subsidiary or affiliate, and to any member of his family or any person who is or was dependant on him, and may contribute to any fund and pay premiums for the purchase or provision of any such gratuity, pension or other benefit, or for the insurance of any such person.

91. The Board may from time to time appoint one or more of its body to be a managing director, joint managing director or an assistant managing director or to hold any other

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employment or executive office with the Company for such period and upon such terms as the Board may determine and may revoke or terminate any such appointments. Any such revocation or termination as aforesaid shall be without prejudice to any claim for damages that such Director may have against the Company or the Company may have against such Director for any breach of any contract of service between him and the Company which may be involved in such revocation or termination. Any person so appointed shall receive such remuneration (if any) (whether by way of salary, commission, participation in profits or otherwise) as the Board may determine, and either in addition to or in lieu of his remuneration as a Director.

DELEGATION OF THE BOARD’S POWERS

92. The Board may by power of attorney appoint any company, firm or person or any fluctuating body of persons, whether nominated directly or indirectly by the Board, to be the attorney or attorneys of the Company for such purposes and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Board under these Bye-Laws) and for such period and subject to such conditions as it may think fit, and any such power of attorney may contain such provisions for the protection and convenience of persons dealing with any such attorney and of such attorney as the Board may think fit, and may also authorise any such attorney to sub-delegate all or any of the powers, authorities and discretions vested in him.

93. The Board may entrust to and confer upon any Director or officer any of the powers exercisable by it upon such terms and conditions with such restrictions as it thinks fit, and either collaterally with, or to the exclusion of, its own powers, and may from time to time revoke or vary all or any of such powers but no person dealing in good faith and without notice of such revocation or variation shall be affected thereby.

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94. The Board may delegate any of its powers, authorities and discretions to committees, consisting of such person or persons (whether a member or members of its body or not) as it thinks fit. Any committee so formed shall, in the exercise of the powers, authorities and discretion so delegated, conform to any regulations which may be imposed upon it by the Board.

PROCEEDINGS OF THE BOARD

95. The Board may meet for the dispatch of business, adjourn and otherwise regulate its meetings as it thinks fit. Questions arising at any meeting shall be determined by a majority of votes. In the case of an equality of votes the motion shall be deemed to have been lost. A Director may, and the Secretary on the requisition of a Director shall, at any time summon a board meeting.

96. Notice of a board meeting shall be deemed to be duly given to a Director if it is given to him personally or by word of mouth or sent to him by post, cable, telex, telecopier or other mode or representing or reproducing words in a legible and non-transitory form at his last known address or any other address given by him to the Company for this purpose. A Director may waive notice of any meeting either prospectively or retrospectively.

97. (a) The quorum necessary for the transaction of the business of the Board may be fixed by the Board and, unless so fixed at any other number, shall be two individuals. Any Director who ceases to be a Director at a board meeting may continue to be present and to act as a Director and be counted in the quorum until the termination of the board meeting if no other Director objects and if otherwise a quorum of Directors would not be present.

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(b) A Director who to his knowledge is in any way, whether directly or indirectly, interested in a contract or proposed contract, transaction or arrangement with the Company and has complied with the provisions of the Companies Acts and these Bye-Laws with regard to disclosure of his interest shall be entitled to vote in respect of any contract, transaction or arrangement in which he is also interested and if he shall do so his vote shall be counted, and he shall be taken into account in ascertaining whether a quorum is present.

98. So long as a quorum of Directors remains in office, the continuing Directors may act notwithstanding any vacancy in the Board but, if no such quorum remains, the continuing Directors or a sole continuing Director may act only for the purpose of calling a general meeting.

99. The Chairman (if any) of the Board or, in his absence, the President shall preside as chairman at every meeting of the Board. If there is no such Chairman or President, or if at any meeting neither the Chairman nor the President is present within five minutes after the time appointed for holding the meeting, or if neither of them is willing to act as chairman, the Directors present may chose one of their number to be chairman of the meeting.

100. The meetings and proceedings of any committee consisting of two or more members shall be governed by the provisions contained in these Bye-Laws for regulating the meetings and proceedings of the Board so far as the same are applicable and are not superseded by any regulations imposed by the Board.

101. A resolution in writing signed by all the Directors for the time being entitled to receive notice of a meeting of the Board or by all the members of a committee for the time being shall be as valid and effectual as a resolution passed at a meeting of the Board or, as the case may be, of such committee duly called and constituted. Such resolution may be contained in one document or in several documents in the like form each signed by one or more of the Directors or members of the committee concerned.

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102. A meeting of the Board or a committee appointed by the Board may be held by means of such telephone, electronic or other communication facilities as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously and participation in such a meeting shall constitute presence in person at such meeting.

103. All acts done by the Board or by any committee or by any person acting as a Director or member of a committee or any person duly authorised by the Board or any committee, shall, notwithstanding that it is afterwards discovered that there was some defect in the appointment of any member of the Board or such committee or person acting as aforesaid or that they or any of them were disqualified or had vacated their office, be as valid as if every such person had been duly appointed and was qualified and had continued to be a Director, member of such committee or person so authorised.

OFFICERS

104. The officers of the Company shall include a President and a Vice-President who shall be Directors and shall be elected by the Board as soon as possible after the statutory meeting and each annual general meeting. In addition, the Board may appoint one of the Directors to be Chairman of the Board and any person whether or not he is a Director to hold such other office (including any additional Vice-Presidencies) as the Board may from time to time determine. Any person elected or appointed pursuant to this Bye-Law shall hold office for such period and upon such terms as the Board may determine and the Board may revoke or terminate any such election or appointment. Any such revocation or termination shall be

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without prejudice to any claim for damages that such officer may have against the Company or the Company may have against such officer for any breach of any contract of service between him and the Company which may be involved in such revocation or termination. Save as provided in the Companies Acts or these Bye-Laws, the powers and duties of the officers of the Company shall be such (if any) as are determined from time to time by the Board.

MINUTES

105. The Directors shall cause minutes to be made and books kept for the purpose of recording:-

(a) all appointments of officers made by the Directors;

(b) the names of the Directors and other persons (if any) present at each meeting of Directors and of any committees;

(c) of all proceedings at meetings of the Company, of the holders of any class of shares in the Company, and of committees;

(d) of all proceedings of managers (if any).

SECRETARY

106. The Secretary shall be appointed by the Board at such remuneration (if any) and upon such terms as it may think fit and any Secretary so appointed may be removed by the Board. The duties of the Secretary shall be those prescribed by the Companies Acts together with such other duties as shall from time to time be prescribed by the Board.

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107. A provision of the Companies Acts or these Bye-Laws requiring or authorising a thing to be done by or to a Director and the Secretary shall not be satisfied by its being done by or to the same person acting both as Director and as, or in the place of, the Secretary.

THE SEAL

108. (a) The Seal shall consist of a circular metal device with the name of the Company around the outer margin thereof and the country and year of incorporation across the center thereof. Should the seal not have been received at the Registered Office in such form at the date of adoption of this Bye-Law then, pending such receipt, any document requiring to be sealed with the Seal shall be sealed by affixing a red wafer seal to the document with the name of the Company, and the country and year of incorporation type written across the center thereof.

(b) The Board shall provide for the custody of every Seal. A Seal shall only be used by authority of the Board or of a committee of the Board authorised by the Board in that behalf. Subject to these Bye-Laws, any instrument to which a Seal is affixed shall be signed by a Director and by the Secretary or by a second Director; provided that the Secretary or a Director may affix a Seal over his signature only to authenticate copies of these Bye-Laws, the minutes of any meeting or any other documents requiring authentication.

DIVIDENDS AND OTHER PAYMENTS

109. The Board may from time to time declare cash dividends or distributions out of contributed surplus to be paid to the Shareholders according to their rights and interests including such interim dividends as appear to the Board to be justified by the position of the Company. The Board may also pay any fixed cash dividend which is payable on any shares of the Company half yearly or on such other dates, whenever the position of the Company, in the opinion of the Board, justifies such payment.

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110. The Board may deduct from any dividend, distribution or other moneys payable to a Shareholder by the Company on or in respect of any shares all sums of money (if any) presently payable by him to the Company on account of calls or otherwise in respect of shares of the Company.

111. No dividend, distribution or other moneys payable by the Company on or in respect of any share shall bear interest against the Company.

112. Any dividend, distribution, interest or other sum payable in cash to the holder of shares may be paid by cheque or warrant sent through the post addressed to the holder at his address in the Register or, in the case of joint holders, addressed to the holder whose names stands first in the Register in respect of the shares at his registered address appearing in the Register or addressed to such person at such address as the holder or joint holders may in writing direct. Every such cheque or warrant shall, unless the holder or joint holders otherwise direct, be made payable to the order of the holder or, in the case of joint holders, to the order of the holder whose name stands first in the Register in respect of such shares, and shall be sent at his or their risk and payment of the cheque or warrant by the bank on which it is drawn shall constitute a good discharge to the Company. Any one of two or more joint holders may give effectual receipts for any dividends, distributions or other moneys payable or property distributable in respect of the shares held by such joint holders.

113. Any dividend or distribution out of contributed surplus unclaimed for a period of six years from the date of declaration of such dividend or distribution shall be forfeited and shall revert to the Company and the payment by the Board of any unclaimed dividend, distribution, interest or other sum payable on or in respect of the share into a separate account shall not constitute the Company a trustee in respect thereof.

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114. The Board may direct payment or satisfaction of any dividend or distribution out of contributed surplus wholly or in part by the distribution of specific assets, and in particular of paid-up shares or debentures of any other company, and where any difficulty arises in regard to such distributions or dividend the Board may settle it as it thinks expedient, and in particular, may authorise any person to sell and transfer any fractions or may ignore fractions altogether, and may fix the value for distribution or dividend purposes of any such specific assets and may determine that cash payments shall be made to any Shareholders upon the footing of the values so fixed in order to secure equality of distribution and may vest any such specific assets in trustees as may seem expedient to the Board.

RESERVES

115. The Board may, before recommending or declaring any dividend or distribution out of contributed surplus, set aside such sums as it thinks proper as reserves which shall, at the discretion of the Board, be applicable for any purpose of the Company and pending such application may, also at such discretion, either be employed in the business of the Company or be invested in such investments as the Board may from time to time think fit. The Board may also without placing the same to reserve carry forward any sums which it may think it prudent not to distribute.

CAPITALIZATION OF PROFITS

116. The Board may at any time and from time to time resolve to the effect that it is desirable to capitalize all or any part of any amount for the time being standing to the credit of any reserve or fund which is available for distribution or to the credit of any share

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premium account or any capital redemption reserve fund and accordingly that such amount be set free for distribution amongst the Shareholders or any class of Shareholders who would be entitled thereto if distributed by way of dividend and in the same proportions, on the footing that the same be not paid in cash but be applied either in or towards paying up amounts for the time being unpaid on any shares in the Company held by such Shareholders respectively or in payment up in full of unissued shares, debentures, or other obligations of the Company, to be allotted and distributed credited as fully paid amongst such Shareholders, or partly in one way and partly in the other, and the Board shall give effect to such resolution, provided that for the purpose of this Bye-Law, a share premium account and a capital redemption reserve fund may be applied only in paying up of unissued shares to be issued to such Shareholders credited as fully paid and provided further that any sum standing to the credit of a share premium account may only be applied in crediting as fully paid shares of the same class as that from which the relevant share premium was derived.

117. Where any difficulty arises in regard to any distribution under the last preceding Bye-Law, the Board may settle the same as it thinks expedient and, in particular, may authorise any person to sell and transfer any fractions or may resolve that the distribution should be as nearly as may be practicable in the correct proportion but not exactly so or may ignore fractions altogether, and may determine that cash payments should be made to any Shareholders in order to adjust the rights of all parties, as may seem expedient to the Board. The Board may appoint any person to sign on behalf of the persons entitled to participate in the distribution any contract necessary or desirable for giving effect thereto and such appointment shall be effective and binding upon the Shareholders.

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RECORD DATES

118. Notwithstanding any other provisions of these Bye-Laws, the Company in general meeting or the Board may fix any date as the record date for any dividend, distribution, allotment or issue and for the purpose of identifying the persons entitled to receive notices of general meetings. Any such record date must be on or at any time before the date on which any such dividend, distribution, allotment or issue is paid or made or such notice is dispatched.

ACCOUNTING RECORDS

119. The Board shall cause to be kept accounting records sufficient to give a true and fair view of the state of the Company’s affairs and to show and explain its transactions, in accordance with the Companies Acts.

120. The records of account shall be kept at the Registered Office or at such other place or places as the Board thinks fit, and shall at all times be open to inspection by the Directors: PROVIDED that if the records of account are kept at some place outside Bermuda, there shall be kept at an office of the Company in Bermuda such records as will enable the Directors to ascertain with reasonable accuracy the financial position of the Company at the end of each three month period. No Shareholder (other than an officer of the Company) shall have any right to inspect any accounting record or book or document of the Company except as conferred by law or authorised by the Board or the Company in general meeting.

121. A copy of every balance sheet and statement of income and expenditure, including every document required by law to be annexed thereto, which is to be laid before the Company in general meeting, together with a copy of the auditor’s report, shall be sent to each person entitled thereto in accordance with the requirements of the Companies Acts.

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122. So long as the Company is required to maintain the registration if its Common Shares under section 12 of the United States Securities Exchange Act of 1934 but continues to be exempt (by virtue of its qualification as a “foreign private issuer”, as defined in rule 3b-4 under the Exchange Act, or for any other reason):-

(i) from the periodic filing and reporting requirements under Regulation 13A under the Exchange Act that are applicable to a private issuer of equity securities registered under the Exchange Act that is not a foreign private issuer (a “U.S. private issuer”), then the Company shall nevertheless comply with the periodic reporting provisions and related disclosure requirements, including filing requirements with the U.S. Securities and Exchange Commission (the “SEC”), that are applicable to a U.S. private issuer whose equity securities are registered under Section 12 of the

Exchange Act; or

(ii) from the requirements imposed upon U.S. private issuers pursuant to sections 14(a), (b) and (c) of the Exchange Act with regard to the preparation and dissemination of proxy and information statements, then the Company shall nevertheless be required to comply, and all record or beneficial owners of Common Shares shall be required to comply, in connection with any dissemination of information or solicitation of proxies relating to action at a meeting of Shareholders or a solicitation of consents for Shareholder action, with all provisions of Regulations 14A and 14C under the Exchange Act other than those that relate to (a) filing requirements with the U.S. SEC, (b) requirements to include Shareholder proposals in proxy materials pursuant to rule 14a-8, and (c) requirements with respect to the approval of certain transactions pursuant to item 14 of the Schedule 14A, PROVIDED

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THAT, in lieu of the application of the provisions of rule 14a-9 and 14c-6, the following provision shall apply, interpreted under Bermuda law:

(1) No dissemination of information or solicitation of proxies shall be made by the Company or any record or beneficial owner of Common Shares containing any statement that, at the time and under the circumstances under which it is made, is false or misleading with respect to any material fact or that omits to state any material fact necessary in order to make the statements therein not misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of a proxy for the same meeting or with respect to the same matter that has become false or misleading.

(2) The following rules and items under the Exchange Act shall be applicable to the Company and its record and beneficial Shareholders in compliance with the foregoing principles:

Rules: 14a-1, 14a-2, 14a-3(a) (but, with regard to specific matters, only to the extent specified below with respect to specific disclosures required by Schedule 14A), (b), (d), (e), and (f) (1), 14a-4, 14a-5, 14a-7, 14a-10, 14a-11(a), (b) and (f), 14a-12a, 14a-13, 14a-14, 14c-1, 14c-2(a) (but, with regard to specific matters, only to the extent specified below with respect to specific disclosures required by Schedule 14C) and (b), 14c-3(a), 14c-4 and 14c-7. Schedule 14A: Items 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 15, 16, 17, 18, 19, 20 (but not with respect to matters analogous to those governed by items 14) and 21. Schedule 14C: Items 1 (to the extent required by the items specified with respect to Schedule 14A above), 2, 3, 4 and 7.

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(3) All reference to U.S. laws, regulations, rules and schedules in this Bye-Law are to such provisions as in effect on 26^th August 1993 and to any successor provisions thereto.

(4) No amendment to this Bye-Law 122 shall be effective without the approval of 66 ²/3% of the Common Shares outstanding from time to time.

AUDIT

123. Save and to the extent that an audit is waived in the manner permitted by the Companies Acts, auditors shall be appointed and their duties regulated in accordance with the Companies Acts, any other applicable law and such requirements not inconsistent with the Companies Acts as the Board may from time to time determine.

SERVICE OF NOTICES AND OTHER DOCUMENTS

124. Any notice or other document (including a share certificate) may be served on or delivered to any Shareholder by the Company either personally or by sending it through the post (by airmail where applicable) in a pre-paid letter addressed to such Shareholder at his address as appearing in the Register or by delivering it to or leaving it at such registered address. In the case of joint holders of a share, service or delivery of any notice or other document on or to one of the joint holders shall for all purposes be deemed as sufficient service on or delivery to all the joint holders. Any notice or other document if sent by post shall be deemed to have been served or delivered seven days after it was put in the post, and in proving such service or delivery, it shall be sufficient to prove that the notice or document was properly addressed, stamped and put in the post.

125. Any notice of a general meeting of the Company shall be deemed to be duly given to a Shareholder if it is sent to him by cable, telex, telecopier or other mode of representing or

44

reproducing words in legible and non-transitory form at his address as appearing in the Register or any other address given by him to the Company for this purpose. Any such notice shall be deemed to have been served twenty-four hours after its dispatch.

126. Any notice or other document delivered, sent or given to a Shareholder in any manner permitted by these Bye-Laws shall, notwithstanding that such Shareholder is then dead or bankrupt or that any other event has occurred, and whether or not the Company has notice of the death or bankruptcy or other event, be deemed to have been duly served or delivered in respect of any share registered in the name of such Shareholder as sole or joint holder unless his name shall, at the time of the service or delivery of the notice or document, have been removed from the Register as the holder of the share, and such service or delivery shall for all purposes be deemed as sufficient service or delivery of such notice or document on all persons interested (whether jointly with or as claiming through or under him) in the share.

WINDING UP

127. If the Company shall be wound up, the liquidator may, with the sanction of a resolution of the Company and any other sanction required by the Companies Acts, divide amongst the Shareholders in specie or kind the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may for such purposes set such values as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the Shareholders or different classes of Shareholders. The liquidator may, with the like sanction, vest the whole or any part of such assets in trustees upon such trust for the benefit of the contributories as the liquidator, with the like sanction, shall think fit, but so that no Shareholder shall be compelled to accept any shares or other assets upon which there is any liability.

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INDEMNITY

128. Subject to the proviso below, every Director, officer of the Company and a member of a committee constituted under Bye-Law 94 shall be indemnified out of the funds of the Company against all civil liabilities loss damage or expense (including but not limited to liabilities under contract, tort and statute or any applicable foreign law or regulation and all reasonable legal and other costs and expenses properly payable) incurred or suffered by him as such Director, officer or committee member and the indemnity contained in this Bye-Law shall extend to any person acting as a Director, officer or committee member in the reasonable belief that he has been so appointed or elected notwithstanding any defect in such appointment or election PROVIDED ALWAYS that the indemnity contained in this Bye-Law shall not extend to any matter which would render it void pursuant to the Companies Acts.

129. Every Director, officer and member of a committee duly constituted under Bye-Law 94 of the Company shall be indemnified out of the funds of the Company against all liabilities incurred by him as such Director, officer or committee member in defending any proceedings, whether civil or criminal, in which judgment is given in his favour, or in which he is acquitted, or in connection with any application under the Companies Acts in which relief from liability is granted to him by the court.

130. To the extent that any Director, officer or member of a committee duly constituted under Bye-Law 94 is entitled to claim an indemnity pursuant to these Bye-Laws in respect of amounts paid or discharged by him, the relative indemnity shall take effect as an obligation of the Company to reimburse the person making such payment or effecting such discharge.

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ALTERATION OF BYE-LAWS

131. These Bye-Laws may be amended from time to time in the manner provided for in the Companies Acts.

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EX-10.1

Exhibit 10.1

CREDIT AGREEMENT

among

PARTNERRE LTD.

VARIOUS DESIGNATED SUBSIDIARY BORROWERS,

VARIOUS LENDING INSTITUTIONS,

and

JPMORGAN CHASE BANK,

as ADMINISTRATIVE AGENT,

Dated as of June 17, 2004

$700,000,000

J.P. MORGAN SECURITIES INC.,

as SOLE LEAD ARRANGER AND SOLE BOOKRUNNER,

and

WACHOVIA BANK, NATIONAL ASSOCIATION,

as CO-ARRANGER and SYNDICATION AGENT

and

BARCLAYS BANK PLC,

CREDIT SUISSE

and

HSBC BANK U.S.A.,

as CO-DOCUMENTATION AGENTS

CREDIT AGREEMENT, dated as of June 17, 2004, among PARTNERRE LTD., a company organized under the laws of Bermuda (the “Company”) the Designated Subsidiary Borrowers (as hereinafter defined) from time to time party hereto, the lenders from time to time party hereto (each, a “Lender” and, collectively, the “Lenders”) and JPMORGAN CHASE BANK, as Administrative Agent (in such capacity, the “Administrative Agent”). Unless otherwise defined herein, all capitalized terms used herein and defined in Section 10 are used herein as so defined.

W I T N E S S E T H:

WHEREAS, subject to and upon the terms and conditions herein set forth, the Lenders are willing to make available to the Borrowers the credit facilities provided for herein;

NOW, THEREFORE, IT IS AGREED:

SECTION 1. Amount and Terms of Credit.

1.01 Commitment. (a) Subject to and upon the terms and conditions herein set forth, each Lender severally agrees, at any time and from time to time on and after the Effective Date and prior to the Final Maturity Date, to make a loan or loans (each, a “Revolving Loan” and, collectively, the “Revolving Loans”) to one or more of the Borrowers (on a several basis), which Revolving Loans (i) may be made and maintained in such Approved Currency as is requested by the applicable Borrower; (ii) may be repaid and reborrowed in accordance with the provisions hereof; (iii) except as hereinafter provided, may, at the option of each Borrower, be incurred and maintained as, and/or converted into, Base Rate Loans or Eurodollar Loans, provided that all Revolving Loans made as part of the same Borrowing shall, unless otherwise specified herein, consist of Revolving Loans of the same Type; and (iv) shall not exceed in aggregate Principal Amount outstanding at any time either (x) $350,000,000 or (y) when added to the sum of the aggregate Principal Amount of all Competitive Bid Loans then outstanding and all Letter of Credit Outstandings at such time, the Total Commitment at such time.

(b) Subject to and upon the terms and conditions herein set forth, each Lender severally agrees that one or more Borrowers may (on a several basis) incur a loan or loans (each, a “Competitive Bid Loan” and, collectively, the “Competitive Bid Loans”) from one or more Bidder Lenders pursuant to a Competitive Bid Borrowing at any time and from time to time on and after the Effective Date and prior to the date which is three Business Day preceding the date which is 10 days prior to the Final Maturity Date, provided that after giving effect to any Competitive Bid Borrowing and the use of the proceeds thereof, the aggregate Principal Amount of Competitive Bid Loans outstanding shall not exceed either (x) when added to the aggregate Principal Amount of Revolving Loans then outstanding, $350,000,000 or (y) when added to the aggregate Principal Amount of all Revolving Loans then outstanding and the Letter of Credit Outstandings at such time, the Total Commitment at such time.

1.02 Minimum Borrowing Amounts, etc. The aggregate Principal Amount of each Borrowing shall not be less than the Minimum Borrowing Amount. More than one

Borrowing may be incurred on any day, provided that at no time shall there be outstanding more than 10 Borrowings of Eurodollar Loans.

1.03 Notice of Borrowing of Revolving Loans. (a) Whenever a Borrower desires to incur Revolving Loans, it shall give the Administrative Agent at its Notice Office, (x) prior to 11:00 A.M. (New York time) at least three Business Days’ prior written notice (or telephonic notice promptly confirmed in writing) of each Borrowing of Eurodollar Loans in Dollars, (y) prior to 11:00 A.M. (London time) at least four Business Days prior written notice (or telephonic notice promptly confirmed in writing) of each Borrowing of Eurodollar Loans constituting Alternate Currency Loans and (z) written notice (or telephonic notice promptly confirmed in writing) prior to 10:00 A.M. (New York time) on the date of Borrowing in the case of each Borrowing of Base Rate Loans. Each such notice (each, a “Notice of Borrowing”) shall be in the form of Exhibit A-1 and shall be irrevocable and shall specify (i) the identity of the applicable Borrower, (ii) in the case of Alternate Currency Loans, the Approved Currency for such Loans (iii) the aggregate principal amount of the Revolving Loans to be made pursuant to such Borrowing, (iv) the date of Borrowing (which shall be a Business Day), (v) whether the respective Borrowing shall consist of Base Rate Loans or Eurodollar Loans and (vi) if such Borrowing consists of Eurodollar Loans, the Interest Period to be initially applicable thereto. The Administrative Agent shall promptly give each Lender written notice (or telephonic notice promptly confirmed in writing) of each proposed Borrowing, of the portion thereof to be funded by such Lender and of the other matters covered by the Notice of Borrowing.

(b) Without in any way limiting the obligation of each Borrower to confirm in writing any telephonic notice permitted to be given hereunder, the Administrative Agent may prior to receipt of written confirmation act without liability upon the basis of such telephonic notice, believed by it in good faith to be from an Authorized Officer of such Borrower. In each such case, each Borrower hereby waives the right to dispute the Administrative Agent’s record of the terms of such telephonic notice absent manifest error.

1.04 Competitive Bid Borrowings. (a) Whenever a Borrower desires to incur a Competitive Bid Borrowing, it shall deliver to the Administrative Agent, prior to 11:00 A.M. (New York time) (x) at least four Business Days prior to the date of such proposed Competitive Bid Borrowing, in the case of a Spread Borrowing, and (y) at least one Business Day prior to the date of such proposed Competitive Bid Borrowing, in the case of an Absolute Rate Borrowing which is Dollar-denominated and at least three Business Days prior to the date of such proposed Competitive Bid Borrowing, in the case of Absolute Rate Borrowing which is an Alternate Currency Loan, a written notice substantially in the form of Exhibit A-2 hereto (a “Notice of Competitive Bid Borrowing”), which notice shall specify in each case (i) the identity of the applicable Borrower, (ii) the date (which shall be a Business Day) and the aggregate amount of the proposed Competitive Bid Borrowing, (iii) the maturity date for repayment of each and every Competitive Bid Loan to be made as part of such Competitive Bid Borrowing (which maturity date may be (A) up to six months after the date of such Competitive Bid Borrowing in the case of a Spread Borrowing and (B) no fewer than seven days and no more than 180 days after the date of such Competitive Bid Borrowing in the case of an Absolute Rate Borrowing, provided that in no event shall the maturity date of any Competitive Bid Borrowing be later than the tenth Business Day preceding the Final Maturity Date), (iv) the interest payment date or dates relating thereto, (v) whether the proposed Competitive Bid Borrowing is to be an Absolute Rate

2

Borrowing or a Spread Borrowing, (vi) in the case of an Alternate Currency Loan, the Alternate Currency for such Competitive Bid Borrowing, and (vii) any other terms to be applicable to such Competitive Bid Borrowing. The Administrative Agent shall promptly notify each Bidder Lender by telephone or facsimile of each such request for a Competitive Bid Borrowing received by it from a Borrower and of the contents of the related Notice of Competitive Bid Borrowing.

(b) Each Bidder Lender shall, if, in its sole discretion, it elects to do so, irrevocably offer to make one or more Competitive Bid Loans to the applicable Borrower as part of such proposed Competitive Bid Borrowing at a rate or rates of interest specified by such Bidder Lender in its sole discretion and determined by such Bidder Lender independently of each other Bidder Lender, by notifying the Administrative Agent (which shall give prompt notice thereof to such Borrower by facsimile), before 9:30 A.M. (New York time) on the date (the “Reply Date”) which is (x) in the case of an Absolute Rate Borrowing which is Dollar-denominated, the date of such proposed Competitive Bid Borrowing and in the case of an Absolute Rate Borrowing which is an Alternate Currency Loan, two Business Days before the date of such Competitive Bid Borrowing or (y) in the case of a Spread Borrowing, three Business Days before the date of such proposed Competitive Bid Borrowing, of the minimum amount and maximum amount of each Competitive Bid Loan which such Bidder Lender would be willing to make as part of such proposed Competitive Bid Borrowing (which amounts may, subject to the proviso contained in Section 1.01(b), exceed such Bidder Lender’s Commitment), the rate or rates of interest therefor and such Bidder Lender’s lending office with respect to such Competitive Bid Loan; provided that if the Administrative Agent in its capacity as a Bidder Lender shall, in its sole discretion, elect to make any such offer, it shall notify the respective Borrower of such offer before 9:15 A.M. (New York time) on the Reply Date. If any Bidder Lender shall elect not to make such an offer, such Bidder Lender shall so notify the Administrative Agent, before 9:30 A.M. (New York time) on the Reply Date, and such Bidder Lender shall not be obligated to, and shall not, make any Competitive Bid Loan as part of such Competitive Bid Borrowing; provided that the failure by any Bidder Lender to give such notice shall not cause such Bidder Lender to be obligated to make any Competitive Bid Loan as part of such proposed Competitive Bid Borrowing.

(c) The applicable Borrower shall, in turn, before 10:30 A.M. (New York time) on the Reply Date, either:

(i) cancel such Competitive Bid Borrowing by giving the Administrative Agent notice to such effect (it being understood and agreed that if such Borrower gives no such notice of cancellation and no notice of acceptance pursuant to clause (ii) below, then such Borrower shall be deemed to have canceled such Competitive Bid Borrowing), or

(ii) accept one or more of the offers made by any Bidder Lender or Bidder Lenders pursuant to clause (b) above by giving notice (in writing or by telephone confirmed in writing) to the Administrative Agent of the amount of each Competitive Bid Loan (which amount shall be equal to or greater than the minimum amount, and equal to or less than the maximum amount, notified to the applicable Borrower by the Administrative Agent on behalf of such Bidder Lender for such Competitive Bid Borrowing pursuant to clause (b) above) to be made by each Bidder Lender as part of such Competitive Bid Borrowing, and reject any remaining offers made by Bidder Lenders pursuant to

3

clause (b) above by giving the Administrative Agent notice to that effect; provided that the acceptance of offers may only be made on the basis of ascending Absolute Rates (in the case of an Absolute Rate Borrowing) or Spreads (in the case of a Spread Borrowing), in each case commencing with the lowest rate so offered; provided further, however, that if offers are made by two or more Bidder Lenders at the same rate and acceptance of all such equal offers would result in a greater principal amount of Competitive Bid Loans being accepted than the aggregate principal amount requested by the applicable Borrower, if such Borrower elects to accept any such offers such Borrower shall accept such offers pro rata from such Bidder Lenders (on the basis of the maximum amounts of such offers) unless any such Bidder Lender’s pro rata share would be less than the minimum amount specified by such Bidder Lender in its offer, in which case such Borrower shall have the right to accept one or more such equal offers in their entirety and reject the other equal offer or offers or to allocate acceptance among all such equal offers (but giving effect to the minimum and maximum amounts specified for each such offer pursuant to clause (b) above), as such Borrower may elect in its sole discretion.

(d) If any Competitive Bid Borrowing is cancelled or deemed cancelled pursuant to clause (c)(i) above, the Administrative Agent shall give prompt notice thereof to the Bidder Lenders and such Competitive Bid Borrowing shall not be made.

(e) If the applicable Borrower accepts one or more of the offers made by any Bidder Lender or Bidder Lenders pursuant to clause (c)(ii) above, the Administrative Agent shall in turn promptly notify (x) each Bidder Lender that has made an offer as described in clause (b) above, of the date and aggregate amount of such Competitive Bid Borrowing and whether or not any offer or offers made by such Bidder Lender pursuant to clause (b) above have been accepted by the Borrower and (y) each Bidder Lender that is to make a Competitive Bid Loan as part of such Competitive Bid Borrowing, of the amount of each Competitive Bid Loan to be made by such Bidder Lender as part of such Competitive Bid Borrowing.

1.05 Disbursement of Funds. (a) No later than 12:00 Noon (New York time) (or (i) 12:00 Noon (London time) in the case of a Borrowing of Eurodollars constituting Alternate Currency Loans, (ii) 1:00 P.M. (New York time) in the case of a Borrowing of Base Rate Loans for which the applicable Notice of Borrowing was given on the date of borrowing and (iii) 3:00 P.M. (New York time) in the case of a Competitive Bid Borrowing) on the date specified in each Notice of Borrowing or Notice of Competitive Bid Borrowing, each Lender will make available its pro rata share, if any, of such Borrowing requested to be made on such date. All such amounts shall be made available to the Administrative Agent in the relevant Approved Currency, as the case may be, and immediately available funds at the Payment Office and the Administrative Agent promptly will make available to the applicable Borrower by depositing to the account designated by such Borrower, which account shall be at an institution in the same city as the respective Payment Office, the aggregate of the amounts so made available in the type of funds received. Unless the Administrative Agent shall have been notified by any Lender participating in a Borrowing prior to the date of such Borrowing that such Lender does not intend to make available to the Administrative Agent its portion of the Borrowing or Borrowings to be made on such date, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on such date of Borrowing, and the Administrative Agent, in reliance upon such assumption, may (in its sole discretion and without any obligation

4

to do so) make available to the applicable Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent by such Lender and the Administrative Agent has made available same to the applicable Borrower, the Administrative Agent shall be entitled to recover such corresponding amount from such Lender. If such Lender does not pay such corresponding amount forthwith upon the Administrative Agent’s demand therefor, the Administrative Agent shall promptly notify the applicable Borrower, and such Borrower shall pay such corresponding amount to the Administrative Agent within three Business Days of receipt of such notice unless previously paid by such Lender. The Administrative Agent shall also be entitled to recover on demand from such Lender or such Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to such Borrower to the date such corresponding amount is recovered by the Administrative Agent, at a rate per annum equal to (x) if paid by such Lender, the overnight Federal Funds Effective Rate or (y) if paid by such Borrower, the then applicable rate of interest, calculated in accordance with Section 1.09, for the respective Loans.

(b) Nothing herein shall be deemed to relieve any Lender from its obligation to fulfill its commitments hereunder or to prejudice any rights which each Borrower may have against any Lender as a result of any default by such Lender hereunder.

1.06 Notes. (a) To the extent requested by a Lender, each Borrower’s obligation to pay the principal of, and interest on, the Loans made to it by each Lender shall be evidenced (i) if Revolving Loans, by a promissory note substantially in the form of Exhibit B-1 with blanks appropriately completed (each, a “Revolving Note” and, collectively, the “Revolving Notes”) and (ii) if Competitive Bid Loans, by a promissory note substantially in the form of Exhibit B-2 with blanks appropriately completed (each a “Competitive Bid Note” and, collectively, the “Competitive Bid Notes”).

(b) Each Lender will note on its internal records the amount of each Loan made by it and each payment in respect thereof and will, prior to any transfer of any of its Notes, endorse on the reverse side thereof the outstanding Principal Amount of Loans evidenced thereby. Failure to make any such notation shall not affect a Borrower’s obligations in respect of such Loans.

1.07 Conversions. Each Borrower shall have the option to convert on any Business Day all or a portion at least equal to the applicable Minimum Borrowing Amount of its Revolving Loans denominated in a single Approved Currency and constituting Base Rate Loans or Eurodollar Loans into a Borrowing or Borrowings of Revolving Loans denominated in such Approved Currency and constituting Eurodollar Loans or Base Rate Loans, respectively, provided that (i) Eurodollar Loans denominated in a currency other than Dollars may not be converted into Base Rate Loans, (ii) no partial conversion shall reduce the outstanding principal amount of the Eurodollar Loans made pursuant to a Borrowing to less than the Minimum Borrowing Amount applicable thereto, (iii) Base Rate Loans may not be converted into Eurodollar Loans when a Default or Event of Default is then in existence if the Administrative Agent or the Required Lenders shall have determined in its or their sole discretion not to permit such conversion and (iv) Borrowings of Eurodollar Loans resulting from this Section 1.07 shall be limited in number as provided in Section 1.02. Each such conversion shall be effected by the

5

respective Borrower giving the Administrative Agent at the Notice Office, prior to 12:00 Noon (New York time), at least three Business Days’ (or one Business Day in the case of a conversion into Base Rate Loans) prior written notice (or telephonic notice promptly confirmed in writing) (each, a “Notice of Conversion”) specifying the Revolving Loans to be so converted, the Type of Loans (as to interest option) to be converted into and, if to be converted into a Borrowing of Eurodollar Loans, the Interest Period to be initially applicable thereto. The Administrative Agent shall give each Lender prompt notice of any such proposed conversion affecting any of its Loans.

1.08 Pro Rata Borrowings, etc. All Revolving Loans incurred pursuant to a Borrowing shall be made by the Lenders pro rata on the basis of their respective Commitments. It is understood that no Lender shall be responsible for any default by any other Lender in its obligation to make Revolving Loans hereunder, and that each Lender shall be obligated to make the Revolving Loans provided to be made by it hereunder, regardless of the failure of any other Lender to fulfill its commitments hereunder and regardless of whether such Lender has made any Competitive Bid Loans hereunder.

1.09 Interest. (a) The unpaid principal amount of each Base Rate Loan shall bear interest from the date of the Borrowing thereof until maturity (whether by acceleration or otherwise) or conversion at a rate per annum which shall at all times be equal to the sum of the Base Rate plus the Applicable Margin each as in effect from time to time.

(b) The unpaid principal amount of each Eurodollar Loan shall bear interest from the date of the Borrowing thereof until maturity (whether by acceleration or otherwise) or conversion at a rate per annum which shall at all times during each Interest Period applicable thereto be equal to the sum of LIBOR for such Interest Period plus the Applicable Margin.

(c) The unpaid principal amount of each Competitive Bid Loan shall bear interest from the date of the Borrowing thereof until maturity (whether by acceleration or otherwise) at a rate or rates per annum specified by a Bidder Lender or Bidder Lenders, as the case may be, pursuant to Section 1.04(b) and accepted by the respective Borrower pursuant to Section 1.04(c).

(d) All overdue principal and, to the extent permitted by law, overdue interest in respect of any Loans shall be payable on demand and shall bear interest at the Base Rate in effect from time to time plus 2%, provided that principal in respect of Eurodollar Loans and Competitive Bid Loans shall bear interest from the date same becomes due (whether by acceleration or otherwise) until the end of the Interest Period applicable thereto at a rate per annum equal to 2% plus the rate of interest applicable on the due date therefor.

(e) Interest shall accrue from and including the date of any Borrowing to but excluding the date of any repayment thereof, and shall be payable (i) in respect of each Base Rate Loan, quarterly in arrears on the last Business Day of each calendar quarter, (ii) in respect of each Eurodollar Loan, on the last day of each Interest Period applicable thereto and, in the case of an Interest Period in excess of three months, on each date occurring at three month intervals after the first day of such Interest Period, (iii) in respect of each Competitive Bid Loan, at such times as specified in the Notice of Competitive Bid Borrowing relating thereto, and (iv) in respect of each Loan, on any prepayment or conversion (other than the prepayment or conversion

6

of any Base Rate Loan) (on the amount prepaid or converted), at maturity (whether by acceleration or otherwise) and, after such maturity, on demand.

(f) All computations of interest hereunder shall be made in accordance with Section 12.07(b).

(g) The Administrative Agent, upon determining the interest rate for any Borrowing for any Interest Period, shall promptly notify the applicable Borrower and the Lenders thereof.

1.10 Interest Periods. (a) At the time a Borrower gives a Notice of Borrowing or a Notice of Conversion in respect of the making of, or conversion into, a Borrowing of Eurodollar Loans (in the case of the initial Interest Period applicable thereto) or prior to 12:00 Noon (New York Time) on the third Business Day prior to the expiration of an Interest Period applicable to a Borrowing of Eurodollar Loans, it shall have the right to elect by giving the Administrative Agent written notice (or telephonic notice promptly confirmed in writing) of the Interest Period applicable to such Borrowing, which Interest Period shall, at the option of such Borrower, be a one, two, three or six month period or such other period available to all Lenders. Notwithstanding anything to the contrary contained above:

(i) the initial Interest Period for any Borrowing shall commence on the date of such Borrowing (including, where relevant, the date of any conversion from a Borrowing of Base Rate Loans) and each Interest Period occurring thereafter in respect of such Borrowing shall commence on the day on which the next preceding Interest Period expires;

(ii) if any Interest Period begins on (x) the last Business Day of a month, it shall end on the last Business Day of the month in which it is to end and (y) a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period, such Interest Period shall end on the last Business Day of such calendar month;

(iii) if any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day, provided that if any Interest Period would otherwise expire on a day which is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day;

(iv) no Interest Period may be elected that would extend beyond the Final Maturity Date;

(v) at any time when a Default or an Event of Default is then in existence (x) in the case of Eurodollar Loans denominated in Dollars, no Interest Period may be elected if the Administrative Agent or the Required Lenders shall have determined in its or their sole discretion not to permit such election and (y) in the case of Eurodollar Loans denominated in a currency other than Dollars, no Interest Period longer than one month may be elected if the Administrative Agent or the Required Lenders shall have determined in its or their sole discretion not to permit such election; and

7

(vi) all Eurodollar Loans comprising a Borrowing shall at all times have the same Interest Period.

(b) If upon the expiration of any Interest Period, the applicable Borrower has failed to (or may not) elect a new Interest Period to be applicable to the Loans subject to the expiring Interest Period as provided above, such Borrower shall be deemed to have elected, in the case of Eurodollar Loans, to convert such Borrowing into a Borrowing of Base Rate Loans effective as of the expiration date of such current Interest Period, provided that if such Eurodollar Loans are denominated in a currency other than Dollars, then such Eurodollar Loans shall not convert to Base Rate Loans but shall instead be pre-paid by the applicable Borrower on the last day of such Interest Period.

1.11 Increased Costs, Illegality, etc. (a) In the event that (x) in the case of clause (i) or (iv) below, the Administrative Agent or (y) in the case of clause (ii) or (iii) below, any Lender shall have determined (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto):

(i) on any date for determining LIBOR for any Interest Period that, by reason of any changes arising after the date of this Agreement affecting the relevant interbank market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of LIBOR;

(ii) at any time, that such Lender shall actually incur increased costs or reductions in the amounts received or receivable hereunder with respect to any Eurodollar Loans or Competitive Bid Loans (other than any increased cost or reduction in the amount received or receivable resulting from the imposition of or a change in the rate of taxes or similar charges) because of any change since the Effective Date (or, in the case of any Competitive Bid Loan, since the making of such Competitive Bid Loan) in any applicable law, governmental rule, regulation, guideline or order (or in the interpretation or administration thereof and including the introduction of any new law or governmental rule, regulation, guideline or order) (such as, for example, but not limited to, a change in official reserve requirements, but, in all events, excluding amounts payable pursuant to Section 1.11(c), 1.11(d) or 1.11(e));

(iii) at any time, that the making or continuance of any Eurodollar Loans or Competitive Bid Loans has become unlawful by compliance by such Lender in good faith with any law, governmental rule, regulation or guideline, or has become impracticable as a result of a contingency occurring after the Effective Date which adversely affects the relevant interbank market; or

(iv) at any time that any Alternate Currency is not available in sufficient amounts, as determined in good faith by the Administrative Agent, to fund any Borrowing of Loans denominated in such Alternate Currency;

then, and in any such event, such Lender (or the Administrative Agent in the case of clause (i) or (iv) above) shall (x) on such date and (y) within ten Business Days of the date on which such event no longer exists give notice (by telephone confirmed in writing) to the respective Borrower

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and, except in the case of clause (i) or (iv) above, to the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to each of the other Lenders). Thereafter, and for so long as the applicable circumstance continues to exist, (w) in the case of clause (i) above, Eurodollar Loans (and Competitive Bid Loans constituting a Spread Borrowing priced by reference to LIBOR) shall no longer be available until such time as the Administrative Agent notifies the respective Borrower and the Lenders that the circumstances giving rise to such notice by the Administrative Agent no longer exist in accordance with clause (y) of the preceding sentence, and any Notice of Borrowing, Notice of Competitive Bid Borrowing or Notice of Conversion given by a Borrower with respect to such Loans which have not yet been incurred shall be deemed rescinded by the relevant Borrower, (x) in the case of clause (ii) above, the applicable Borrower shall pay to such Lender, upon written demand therefor, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender in its sole discretion shall determine) as shall be required to compensate such Lender for such increased costs or reductions in amounts receivable hereunder (a written notice as to the additional amounts owed to such Lender, showing the basis for the calculation thereof in reasonable detail, submitted to the applicable Borrower by such Lender shall, absent manifest error, be final and conclusive and binding upon all parties hereto), (y) in the case of clause (iii) above, the applicable Borrower shall take one of the actions specified in Section 1.11(b) as promptly as possible and, in any event, within the time period required by law and (z) in the case of clause (iv) above, Loans in the affected Alternate Currency shall no longer be available until such time as the Administrative Agent notifies the respective Borrower and the Lenders that the circumstances giving rise to such notice by the Administrative Agent no longer exist in accordance with clause (y) of the preceding sentence, and any Notice of Borrowing, Notice of Competitive Bid Borrowing or Notice of Conversion given by a Borrower with respect to such Alternate Currency Loans which have not yet been incurred shall be deemed rescinded by such Borrower.

(b) At any time when any Eurodollar Loan or Competitive Bid Loan is affected by the circumstances described in Section 1.11(a)(ii) or (iii), the applicable Borrower may (and in the case of a Eurodollar Loan or Competitive Bid Loan affected pursuant to Section 1.11(a)(iii), the applicable Borrower shall) either (i) if the affected Eurodollar Loan or Competitive Bid Loan is then being made pursuant to a Borrowing, cancel said Borrowing by giving the Administrative Agent telephonic notice (confirmed promptly in writing) thereof on the same date that the respective Borrower was notified by a Lender pursuant to Section 1.11(a)(ii) or (iii), or (ii) if the affected Eurodollar Loan or Competitive Bid Loan is then outstanding, upon at least three Business Days’ notice to the Administrative Agent, (A) in the case of a Eurodollar Loan denominated in Dollars, require the affected Lender to convert each such Eurodollar Loan into a Base Rate Loan, and (B) in the case of a Eurodollar Loan denominated in an Alternate Currency and in the case of a Competitive Bid Loan, repay all such Eurodollar Loans or Competitive Bid Loans in full, provided that if more than one Lender is affected at any time, then all affected Lenders must be treated the same pursuant to this Section 1.11(b).

(c) If any Lender shall have determined that after the Effective Date, the adoption or effectiveness of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Lender or any corporation controlling such Lender with any

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request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender’s or such corporation’s capital or assets as a consequence of its commitments or obligations hereunder to a level below that which such Lender or such other corporation could have achieved but for such adoption, effectiveness, change or compliance (taking into consideration such Lender’s or such other corporation’s policies with respect to capital adequacy), then from time to time, within 10 days after written demand by such Lender (with a copy to the Administrative Agent), the Borrowers jointly and severally agree to pay to such Lender such additional amount or amounts as will compensate such Lender or such other corporation for such reduction. In determining such additional amounts, each Lender will act reasonably and in good faith and will use averaging and attribution methods that are commercially reasonable. Each Lender, upon so determining that any additional amounts will be payable pursuant to this Section 1.11(c), will give prompt written notice thereof to the Borrowers, which notice shall set forth in reasonable detail the basis of the calculation of such additional amounts, although the failure to give any such notice shall not release or diminish each Borrower’s obligations to pay additional amounts pursuant to this Section 1.11(c) upon the subsequent receipt of such notice.

(d) In the event that any Lender shall in good faith determine (which determination shall, absent manifest error, be final and conclusive and binding on all parties hereto) at any time that such Lender is required to maintain reserves (including, without limitation, any marginal, emergency, supplemental, special or other reserves required by applicable law) which have been established by any Federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body with jurisdiction over such Lender (including any branch, Affiliate or funding office thereof) in respect of any Loans or any category of liabilities which includes deposits by reference to which the interest rate on any Loan is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Lender to non-United States residents, then, unless such reserves are included in Section 1.11(a)(ii), 1.11(c) or 1.11(e), such Lender shall promptly notify the Borrowers in writing specifying the additional amounts required to indemnify such Lender against the cost of maintaining such reserves (such written notice to provide in reasonable detail a computation of such additional amounts) and each Borrower shall, and shall be obligated to, pay to such Lender such specified amounts as additional interest at the time that such Borrower is otherwise required to pay interest in respect of such Loan or, if later, on written demand therefor by such Lender.

(e) In the event that any Lender shall in good faith determine (which determination shall, absent manifest error, be final and conclusive and binding on all parties hereto) at any time that such Lender has incurred Additional Costs in respect of any Loans then, unless such Additional Costs are included in Section 1.11(a)(ii) or 1.11(c) or 1.11(d) such Lender shall promptly notify the Borrowers and the Administrative Agent in writing specifying the additional amounts required to indemnify such Lender against such Additional Costs (such written notice to provide in reasonable detail a computation of such additional amounts) and each Borrower shall, and shall be obligated to, pay to such Lender such specified amounts as additional interest at the time that such Borrower is otherwise required to pay interest in respect of such Loan or, if later, on written demand therefor by such Lender.

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(f) The Borrowers shall not be obligated to pay any additional amounts arising pursuant to Sections 1.11(a)(ii), 1.11(c), 1.11(d) or 1.11(e) that are attributable to the Excluded Period with respect to such additional amount; provided, that if an applicable law, rule, regulation, guideline or request shall be adopted or made on any date and shall be applicable to the period prior to the date on which such law, rule, regulation, guideline or request is adopted or made (a “Retroactive Period”), the limitation on each Borrower’s obligations to pay such additional amounts hereunder shall not apply to the additional amounts payable in respect of such period.

1.12 Compensation. Each Borrower shall compensate each Lender, upon its written request (which request shall set forth the basis for requesting such compensation), for all reasonable losses, expenses and liabilities (including, without limitation, any loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by such Lender to fund any Eurodollar Loans or Competitive Bid Loans made, or to be made, by it to such Borrower but excluding in any event the loss of anticipated profits) which such Lender may actually sustain: (i) if for any reason (other than a default by such Lender or the Administrative Agent) a Borrowing of Eurodollar Loans or Competitive Bid Loans does not occur on a date specified therefor in a Notice of Borrowing, a Notice of Competitive Bid Borrowing or a Notice of Conversion, given by such Borrower (whether or not withdrawn by such Borrower or deemed withdrawn pursuant to Section 1.11(a)); (ii) if any prepayment, repayment or conversion of any such Eurodollar Loans or Competitive Bid Loans occurs on a date which is not the last day of an Interest Period applicable thereto; (iii) if any prepayment of any such Eurodollar Loans or Competitive Bid Loans is not made on any date specified in a notice of prepayment given by such Borrower; (iv) if such Lender is required pursuant to Section 1.14 to assign any such Eurodollar Loans or Competitive Bid Loans as of a date which is not the last day of an Interest Period applicable thereto; or (v) as a consequence of (x) any other default by such Borrower to repay its Eurodollar Loans or Competitive Bid Loans when required by the terms of this Agreement or (y) an election made pursuant to Section 1.11(b).

1.13 Change of Lending Office. Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Section 1.11(a)(ii), (iii) or (iv) 1.11(c), 1.11(d), 2.04 or 4.04 with respect to such Lender, it will, if requested by the applicable Borrower, use commercially reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans or Commitments affected by such event, provided that such designation is made on such terms that such Lender and its lending office suffer no economic, legal or regulatory disadvantage, with the object of avoiding or materially mitigating the consequence of the event giving rise to the operation of any such Section. Nothing in this Section 1.13 shall affect or postpone any of the obligations of each Borrower or the right of any Lender provided in Section 1.11 or 4.04.

1.14 Replacement of Lenders. (a) Upon the occurrence of any event giving rise to the operation of Section 1.11(a)(ii) or (iii), Section 1.11(c), Section 1.11(d), Section 2.04 or Section 4.04 with respect to any Lender which results in such Lender charging to each Borrower increased costs in excess of those being generally charged by the other Lenders, (b) if a Lender becomes a Defaulting Lender, (c) if a Lender becomes a Non-Continuing Lender, and/or (d) in the case of a refusal by a Lender to consent to a proposed change, waiver, discharge or termination with respect to this Agreement which has been approved by the Required Lenders,

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the Company shall have the right, if no Default or Event of Default then exists, to replace such Lender (the “Replaced Lender”), upon prior written notice to the Administrative Agent and such Replaced Lender, with one or more Person or Persons, none of whom shall be a Defaulting Lender at the time of such replacement (collectively, the “Replacement Lender”) reasonably acceptable to the Administrative Agent, provided that (i) at the time of any replacement pursuant to this Section 1.14, the Replacement Lender and the Replaced Lender shall enter into one or more Assignment Agreements pursuant to Section 12.04(b) (and with all fees payable pursuant to said Section 12.04(b) to be paid by the Replacement Lender) pursuant to which the Replacement Lender shall acquire all of the Commitments and outstanding Loans of the Replaced Lender and, in connection therewith, shall pay to the Replaced Lender in respect thereof an amount equal to the sum of (A) an amount equal to the principal amount of, and all accrued but unpaid interest on, all outstanding Loans of the Replaced Lender, (B) an amount equal to all Unpaid Drawings that have been funded by (and not reimbursed to) such Replaced Lender, together with all then unpaid interest with respect thereto at such time and (C) an amount equal to all accrued, but theretofore unpaid, Fees owing to the Replaced Lender pursuant to Section 3.01; (ii) all obligations of the Borrowers under the Credit Documents owing to the Replaced Lender (other than those specifically described in clause (i) above in respect of which the assignment purchase price has been, or is concurrently being, paid), including without limitation all amounts owing to the Replaced Lender under Section 1.12 as a result of the assignment of its Loans under clause (i) above, shall be paid in full to such Replaced Lender concurrently with such replacement; and (iii) no assignment pursuant to this Section 1.14 shall be effective until all of the then outstanding Letters of Credit are returned by each respective beneficiary to the Issuing Agent for cancellation in exchange for new or amended Letters of Credit which give effect to such assignment (it being understood that to the extent the respective beneficiaries do not consent to such assignment, such assignment cannot occur). Upon the execution of the respective Assignment Agreements, the payment of amounts referred to in clauses (i) and (ii) above and the return, cancellation and exchange of each then outstanding Letter of Credit as provided above and, if so requested by the Replacement Lender, delivery to the Replacement Lender of the appropriate Note or Notes executed by the relevant Borrowers, the Replacement Lender shall become a Lender hereunder and the Replaced Lender shall cease to constitute a Lender hereunder, except with respect to indemnification provisions applicable to the Replaced Lender under this Agreement, which shall survive as to such Replaced Lender.

1.15 Designated Subsidiary Borrowers. The Company may from time to time designate one or more Persons as an additional Designated Subsidiary Borrower, subject to the following terms and conditions:

(a) each such Person shall be a 90%-Owned Subsidiary of the Company;

(b) each such Person shall be a Material Subsidiary;

(c) each such Designated Subsidiary Borrower shall enter into an appropriately completed DSB Assumption Agreement in the form of Exhibit G hereto on or prior to the date of designation hereof.

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(d) on or prior to the date of designation, such 90%-Owned Subsidiary shall execute and deliver to each Lender a Revolving Note and a Competitive Bid Note to evidence the Loans to be incurred by such Person;

(e) on or prior to the date of designation, the Administrative Agent shall have received from such Person a certificate, signed by an Authorized Officer of such Person in the form of Exhibit E with appropriate insertions or deletions, together with (x) copies of its certificate of incorporation, by laws or other organizational documents and (y) the resolutions relating to the Credit Documents which shall be satisfactory to the Administrative Agent; and

(f) on or prior to the date of designation, the Administrative Agent shall have received an opinion, addressed to the Administrative Agent and each of the Lenders and dated the date of designation, from counsel to such Person which opinion shall be substantially in the form of Exhibit H hereto.

SECTION 2. Letters of Credit.

2.01 Letters of Credit. (a) Subject to and upon the terms and conditions set forth herein, each Borrower may request the Issuing Agent at any time and from time to time on or after the Effective Date and prior to the Final Maturity Date to issue, for the account of such Borrower and in support of, on a standby basis, Letter of Credit Supportable Obligations of such Borrower to any other Person and subject to and upon the terms and conditions herein set forth the Issuing Agent agrees to issue at any time and from time to time on or after the Effective Date and prior to the Final Maturity Date one or more irrevocable standby letters of credit in such form as may be approved by the Issuing Agent (each such letter of credit, a “Letter of Credit” and, collectively, the “Letters of Credit”). Notwithstanding the foregoing, the Issuing Agent shall be under no obligation to issue any Letter of Credit if at the time of such issuance:

(i) any order, judgment or decree of any Governmental Authority or arbitrator shall purport by its terms to enjoin or restrain the Issuing Agent from issuing such Letter of Credit or any requirement of law applicable to such Issuing Agent or any Lender or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the Issuing Agent or any Lender shall prohibit, or request that the Issuing Agent or any Lenders refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the Issuing Agent or any Lender with respect to such Letter of Credit any restriction or reserve or capital requirement (for which such Letter of Credit Issuer is not otherwise compensated) not in effect on the Effective Date, or any unreimbursed loss, cost or expense which was not applicable, in effect or known to such Letter of Credit Issuer as of the Effective Date;

(ii) the conditions precedent set forth in Section 5.02 are not satisfied at that time; or

(iii) the Issuing Agent shall have received notice from any Borrower or the Required Lenders prior to the issuance of such Letter of Credit of the type described in clause (iv) of Section 2.01(b).

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(b) Notwithstanding the foregoing, (i) no Letter of Credit shall be issued the Stated Amount of which, when added to (x) the Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and prior to the issuance of, the respective Letter of Credit) at such time, and (y) the aggregate Principal Amount of all Loans then outstanding, would exceed the Total Commitment at such time; (ii) each Letter of Credit shall have an expiry date occurring not later than one year after such Letter of Credit’s date of issuance, provided that each such Letter of Credit may by its terms automatically renew annually for one additional year unless the Issuing Agent notifies the beneficiary thereof, in accordance with the terms of such Letter of Credit, that such Letter of Credit will not be renewed; (iii) each Letter of Credit may be denominated in any Approved Currency as determined by each such Borrower at the time of issuance; and (iv) the Issuing Agent will not issue any Letter of Credit after it has received written notice from any Borrower or the Required Lenders stating that a Default or an Event of Default exists until such time as the Issuing Agent shall have received a written notice of (x) rescission of such notice from the party or parties originally delivering the same or (y) a waiver of such Default or Event of Default by the Required Lenders.

(c) Each Letter of Credit will be issued by the Issuing Agent on behalf of the Lenders and each Lender will participate in each Letter of Credit pro rata in accordance with its Percentage. The obligations of each Lender under and in respect of each Letter of Credit are several, and the failure by any Lender to perform its obligations hereunder or under any Letter of Credit shall not affect the obligations of the respective Borrower toward any other party hereto nor shall any other such party be liable for the failure by such Lender to perform its obligations hereunder or under any Letter of Credit.

(d) Subject to and on the terms and conditions set forth herein, the Issuing Agent is hereby authorized by each Borrower and the Lenders to arrange for the issuance of any Letter of Credit pursuant to Section 2.01(a) and the amendment of any Letter of Credit pursuant to Section 2.06 and/or 12.04(b) by:

(i) completing the commencement date and the expiry date of such Letter of Credit;

(ii) (in the case of an amendment increasing or reducing the amount thereof) amending such Letter of Credit in such manner as the Issuing Agent and the respective beneficiary may agree;

(iii) completing such Letter of Credit with the participation of each Lender as allocated pursuant to the terms hereof; and

(iv) executing such Letter of Credit on behalf of each Lender and following such execution delivering such Letter of Credit to the beneficiary of such Letter of Credit.

(e) Each Letter of Credit shall be executed and delivered by the Issuing Agent in the name and on behalf of, and as attorney-in-fact for, each Lender party to such Letter of Credit, and the Issuing Agent shall act under each Letter of Credit, and each Letter of Credit shall expressly provide that the Issuing Agent shall act, as the agent of each Lender to (a) receive drafts, other demands for payment and other documents presented by the beneficiary under such

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Letter of Credit, (b) determine whether such drafts, demands and documents are in compliance with the terms and conditions of such Letter of Credit and (c) notify such Lender and such Borrower that a valid drawing has been made and the date that the related Unpaid Drawing is to be made; provided that the Issuing Agent shall have no obligation or liability for any Unpaid Drawing under such Letter of Credit, and each Letter of Credit shall expressly so provide. Each Lender hereby irrevocably appoints and designates the Issuing Agent as its attorney-in-fact, acting through any duly authorized officer of JPMorgan Chase Bank, to execute and deliver in the name and on behalf of such Lender each Letter of Credit to be issued by such Lender hereunder. Promptly upon the request of the Issuing Agent, each Lender will furnish to the Issuing Agent such powers of attorney or other evidence as any beneficiary of any Letter of Credit may reasonably request in order to demonstrate that the Issuing Agent has the power to act as attorney-in-fact for such Lender to execute and deliver such Letter of Credit.

2.02 Letter of Credit Requests. (a) Whenever a Borrower desires that a Letter of Credit be issued, such Borrower shall give the Administrative Agent and the Issuing Agent written notice (including by way of facsimile transmission, immediately confirmed in writing by submission of the original of such request by mail to the Issuing Agent) thereof prior to 12:00 Noon (New York time) at least five Business Days (or such shorter period as may be acceptable to the Issuing Agent) prior to the proposed date of issuance (which shall be a Business Day), which written notice shall be in the form of Exhibit I (each, a “Letter of Credit Request”). Each Letter of Credit Request shall include any other documents as the Issuing Agent customarily requires in connection therewith.

(b) The making of each Letter of Credit Request shall be deemed to be a representation and warranty by the Borrower that such Letter of Credit may be issued in accordance with, and it will not violate the requirements of, Section 2.01(a).

(c) Upon its issuance of or amendment to any Letter of Credit, the Issuing Agent shall promptly notify the respective Borrower and the Lenders of such issuance or amendment, which notice shall include a summary description of the Letter of Credit actually issued and any amendments thereto.

2.03 Agreement to Repay Letter of Credit Drawings. (a) Each Borrower agrees to reimburse each Lender, by making payment to the Administrative Agent in immediately available funds at the Payment Office, for any payment or disbursement made by such Lender under any Letter of Credit (each such amount so paid or disbursed until reimbursed, an “Unpaid Drawing”) no later than three Business Days following the date of such payment or disbursement, with interest on the amount so paid or disbursed by such Lender, to the extent not reimbursed prior to 1:00 P.M. (New York time) on the date of such payment or disbursement, from and including the date paid or disbursed to but not including the date such Lender is reimbursed therefor at a rate per annum which shall be the Base Rate plus the Applicable Margin for Base Rate Loans as in effect from time to time (plus an additional 2% per annum, payable on demand, if not reimbursed by the third Business Day after the date on which the respective Borrower receives notice from the Issuing Agent of such payment or disbursement).

(b) Each Borrower’s obligation under this Section 2.03 to reimburse each Lender with respect to Unpaid Drawings (including, in each case, interest thereon) shall be absolute and

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unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which such Borrower may have or have had against such Lender, or the Issuing Agent, including, without limitation, any defense based upon the failure of any drawing under a Letter of Credit to conform to the terms of the Letter of Credit or any non-application or misapplication by the beneficiary of the proceeds of such drawing; provided, however, that no Borrower shall be obligated to reimburse any Lender for any wrongful payment made by such Lender under a Letter of Credit as a result of acts or omissions constituting willful misconduct or gross negligence on the part of such Lender (as determined by a court of competent jurisdiction in a final and non-appealable decision).

2.04 Increased Costs. If after the Effective Date, the adoption or effectiveness of any applicable law, rule or regulation, order, guideline or request or any change therein after the Effective Date, or any change adopted or effective after the Effective Date in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender with any request or directive (whether or not having the force of law) by any such authority, central bank or comparable agency shall either (i) impose, modify or make applicable any reserve, deposit, capital adequacy or similar requirement against letters of credit issued by or participated in by such Lender, or (ii) impose on such Lender any other conditions directly or indirectly affecting this Agreement or any Letter of Credit; and the result of any of the foregoing is to increase the cost to such Lender of issuing, maintaining or participating in any Letter of Credit, or to reduce the amount of any sum received or receivable by such Lender hereunder or reduce the rate of return on its capital with respect to Letters of Credit, then, upon written demand to the applicable Borrower by such Lender (with a copy to the Administrative Agent), pay to such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduction. The preceding sentence shall not apply to increased costs with respect to taxes imposed on or measured by the net income or net profits of a Lender pursuant to the laws of the jurisdiction in which it is organized or the jurisdiction in which the principal office or applicable lending office of such Lender is located or any subdivision thereof or therein or with respect to Taxes to the extent that a Lender received additional amounts (or otherwise was indemnified) for such Taxes pursuant to Section 4.04 (or would have received additional amounts pursuant to Section 4.04(a) but for a failure to comply with Section 4.04(b) or Section 4.04(c)). A certificate submitted to the applicable Borrower by such Lender (with a copy to the Administrative Agent), setting forth the basis for the determination of such additional amount or amounts necessary to compensate such Lender as aforesaid shall be final and conclusive and binding on the applicable Borrower absent manifest error, although the failure to deliver any such certificate shall not release or diminish the Borrower’s obligations to pay additional amounts pursuant to this Section 2.04 upon subsequent receipt of such certificate. The Borrowers shall not be obligated to pay any additional amounts arising pursuant to this Section 2.04 that are attributable to the Excluded Period with respect to such additional amount; provided, that if an applicable law, rule, regulation, guideline or request shall be adopted or made on any date and shall be applicable to the period prior to the date on which such law, rule, regulation, guideline or request is adopted or made, the limitation on each Borrower’s obligations to pay such additional amounts hereunder shall not apply to the additional amounts payable in respect of such period.

2.05 Letter of Credit Expiration Extensions. Each Lender acknowledges that to the extent provided under the terms of any Letter of Credit, the expiration date of such Letter of

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Credit will be automatically extended for an additional year, without written amendment, unless at least 30 days prior to the expiration date of such Letter of Credit, notice is given by the Issuing Agent in accordance with the terms of the respective Letter of Credit (a “Notice of Non-Extension”) that the expiration date of such Letter of Credit will not be extended beyond its current expiration date. The Issuing Agent will give Notices of Non-Extension as to any or all outstanding Letters of Credit if requested to do so by the Required Lenders pursuant to Section 9.01. The Issuing Agent will give Notices of Non-Extension as to all outstanding Letters of Credit if the Final Maturity Date has occurred. The Issuing Agent will send a copy of each Notice of Non-Extension to the Company concurrently with delivery thereof to the respective beneficiary, unless prohibited by law from doing so.

2.06 Changes to Stated Amount. At any time when any Letter of Credit is outstanding, at the request of the respective Borrower, the Issuing Agent will enter into an amendment increasing or reducing the Stated Amount of such Letter of Credit, provided that (i) in no event shall the Stated Amount of such Letter of Credit be increased to an amount which, when added to the Letter of Credit Outstanding at such time and the aggregate Principal Amount of all Loans then outstanding, would exceed the Total Commitment, (ii) the Stated Amount of a Letter of Credit may not be increased at any time if the conditions precedent set forth in Section 5.02 are not satisfied at such time, and (iii) the Stated Amount of a Letter of Credit may not be increased at any time after the Final Maturity Date.

2.07 Representations and Warranties of Lenders. Each Lender represents and warrants that each Letter of Credit constitutes a legal, valid and binding obligation of such Lender enforceable in accordance with its terms, provided that the enforceability thereof is subject to general principles of equity and to bankruptcy, insolvency and similar laws affecting the enforcement of creditors’ rights generally.

2.08 Confirming Letters of Credit. Notwithstanding anything contained herein, to the extent a Letter of Credit has been requested by a Borrower subject to and upon the terms and conditions set forth herein, and the Borrower has requested that the Issuing Agent have such Letter of Credit confirmed by a confirming bank, each Lender hereby makes, constitutes, and appoints the Issuing Agent its true and lawful attorney-in-fact, in its name, place and stead, giving the Issuing Agent the full power to request, on behalf of each Lender, a confirmation by such confirming bank relating to such Letter of Credit and to take any other action with respect to the confirmation of such Letter of Credit as the Issuing Agent deems necessary; provided that the Issuing Agent shall have no liability for any reimbursement or other obligations to any confirming bank. Promptly upon request of the Issuing Agent, each Lender will furnish to the Issuing Agent such powers of attorney or other evidence as any confirming bank may reasonably request in order to demonstrate that the Issuing Agent has the power to act as attorney-in-fact for such Lender to have such Letter of Credit confirmed by such confirming bank.

2.09 Existing Letters of Credit. (a) Each Letter of Credit outstanding as of the Effective Date is listed on Annex VI hereto (each such Letter of Credit an “Existing Letter of Credit”). Each Existing Letter of Credit shall constitute a “Letter of Credit” for all purposes of this Agreement and each Existing Letter of Credit shall be deemed issued for the purposes of this Agreement on the Effective Date. As soon as possible following the Effective Date, each Existing Letter of Credit shall be amended to replace each Lender on such Existing Letter of

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Credit (each such Lender an “Existing Lender”) with each Lender party to this Agreement at the time of such amendment in accordance with each such Lender’s Percentage. Until an Existing Letter of Credit has been amended in accordance with this Section 2.09, each Existing Lender shall be deemed to have sold and transferred to each Lender, and each such Lender (each, a “Participant”) shall be deemed irrevocably and unconditionally to have purchased and received from such Existing Lender, without recourse or warranty, an undivided interest and participation, to the extent of such Participant’s Percentage, in such Existing Letter of Credit, each substitute Existing Letter of Credit, each drawing made thereunder, the obligations of any Borrower under this Agreement with respect thereto and any security therefore or guaranty pertaining thereto. Upon any change in the Commitments of the Lenders pursuant to Section 1.14 or 12.04(b), it is hereby agreed that, with respect to all outstanding Existing Letters of Credit and Unpaid Drawings with respect thereto, there shall be an automatic adjustment to the participations pursuant to this Section 2.09 to reflect the new Percentages of the assigning and assignee Lender.

(b) In determining whether to pay under any Existing Letter of Credit, no Existing Lender shall have any obligation relative to the Participants other than to determine that any documents required to be delivered under such Existing Letter of Credit have been delivered and that they appear to substantially comply on their face with the requirements of such Existing Letter of Credit, which obligation, it is understood, is being performed by the Issuing Agent, and upon whom each Existing Lenders shall be entitled to rely. Any action taken or omitted to be taken by any Existing Lender under or in connection with any Existing Letter of Credit issued by it shall not create for such Existing Lender any resulting liability to any Borrower, any Lender or any other Person unless such action is taken or omitted to be taken with gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final and non-appealable decision).

(c) In the event that any Existing Lender makes any payment under any Existing Letter of Credit issued by it and the respective Borrower shall not have reimbursed such amount in full to each Existing Lender pursuant to Section 2.03(a), such Existing Lender shall promptly notify the Administrative Agent, and the Administrative Agent shall promptly notify each Participant of such failure, and each such Participant shall promptly and unconditionally pay to the Administrative Agent for the account of such Existing Lender, the amount of such Participant’s Percentage of such payment in U.S. Dollars and in same day funds. If the Administrative Agent so notifies any Participant required to fund a payment under an Existing Letter of Credit prior to 11:00 A.M. (New York time) on any Business Day, such Participant shall make available to the Administrative Agent at the Payment Office for the account of the respective Existing Lender such Participant’s Percentage of the amount of such payment on such Business Day in same day funds (and, to the extent such notice is given after 11:00 A.M. (New York time) on any Business Day, such Participant shall make such payment on the immediately following Business Day). If and to the extent such Participant shall not have so made its Percentage of the amount of such payment available to the Administrative Agent for the account of the respective Existing Lender, such Participant agrees to pay to the Administrative Agent for the account of such Existing Lender, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Administrative Agent for the account of the Existing Lender at the overnight Federal Funds Rate for the first three days and at the interest rate applicable to Revolving Loans that are maintained as Base Rate Loans for each day thereafter. The failure of any Participant to make available to

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the Administrative Agent for the account of the respective Existing Lender its Percentage of any payment under any Existing Letter of Credit issued by it shall not relieve any other Participant of its obligation hereunder to make available to the Administrative Agent for the account of such Existing Lender its applicable Percentage of any payment under any such Letter of Credit on the date required, as specified above, but no Participant shall be responsible for the failure of any other Participant to make available to the Administrative Agent for the account of such Existing Lender such other Participant’s Percentage of any such payment.

(d) Whenever any Existing Lender receives a payment of a reimbursement obligation as to which the Administrative Agent has received for the account of such Existing Lender any payments from the Participants pursuant to clause (c) above, such Existing Lender shall pay to the Administrative Agent and the Administrative Agent shall promptly pay to each Participant which has paid its Percentage thereof, in the respective Approved Currency and in same day funds, an amount equal to such Participant’s Percentage of the principal amount thereof and interest thereon accruing after the purchase of the respective participations.

(e) The obligations of the Participants to make payments to the Administrative Agent for the account of the respective Existing Lender with respect to Existing Letters of Credit issued by it shall be irrevocable and not subject to counterclaim, set-off or other defense or any other qualification or exception whatsoever and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including, without limitation, any of the following circumstances:

(i) any lack of validity or enforceability of this Agreement or any of the other Credit Documents;

(ii) the existence of any claim, set-off, defense or other right which the Company or any of its Subsidiaries may have at any time against a beneficiary named in an Existing Letter of Credit, any transferee of any Existing Letter of Credit (or any Person for whom any such transferee may be acting), the Administrative Agent, any Existing Lender, or other Person, whether in connection with this Agreement, any Existing Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between the Company or any of its Subsidiaries and the beneficiary named in any such Existing Letter of Credit);

(iii) any draft, certificate or other document presented under the Existing Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect;

(iv) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Credit Documents; or

(v) the occurrence of any Default or Event of Default.

SECTION 3. Fees; Commitments.

3.01 Fees. (a) The Company agrees to pay to the Administrative Agent a facility fee (the “Facility Fee”) for the account of the Lenders pro rata on the basis of their respective

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Commitments for the period from and including the Effective Date to but not including the date the Total Commitment has been terminated computed at a rate per annum equal to the Applicable Facility Fee Percentage of the Total Commitment, regardless of utilization, as in effect from time to time. Accrued Facility Fees shall be due and payable quarterly in arrears on the last Business Day of each calendar quarter, on the Final Maturity Date or upon such earlier date as the Total Commitment shall be terminated and, with respect to any Facility Fee owing to any Lender whose Commitment is terminated pursuant to Section 1.14, on the date on which such Lender’s Commitment is terminated.

(b) The Company agrees to pay to the Administrative Agent a utilization fee (the “Utilization Fee”) for the account of the Lenders pro rata on the basis of, their respective Commitments, for the period from and including the Effective Date to but not including the Final Maturity Date computed at a rate per annum equal to the Applicable Utilization Fee Percentage of the aggregate amount of Revolving Loans outstanding at any time when the aggregate outstanding amount of Revolving Loans is greater than $175,000,000. Accrued Utilization Fees shall be due and payable quarterly in arrears on the last Business Day of each calendar quarter and on the Final Maturity Date and, with respect to any Utilization Fee owing to any Lender whose Commitment is terminated pursuant to Section 1.14, on the date on which such Lender’s Commitment is terminated.

(c) Each Borrower shall pay to the Administrative Agent for pro rata distribution to each Lender (based on their respective Percentages), a fee in respect of each Letter of Credit issued for the account of such Borrower (the “Letter of Credit Fee”) computed at a rate per annum equal to the Applicable L/C Percentage then in effect on the daily Stated Amount of such Letter of Credit. Accrued Letter of Credit Fees shall be due and payable quarterly in arrears on the last Business Day of each calendar quarter and upon the first day on or after the termination of the Total Commitment upon which no Letters of Credit remain outstanding.

(d) Each Borrower shall pay directly to the Issuing Agent upon each issuance of and/or amendment of, a Letter of Credit issued for the account of such Borrower such amount as shall at the time of such issuance or amendment be the administrative charge which the Issuing Agent is customarily charging for issuances of or amendments of letters of credit issued by it (it being understood and agreed that, for purposes of this Agreement, such charges shall not increase more than once every six months).

(e) The Borrowers jointly and severally agree to pay to the Administrative Agent, for the account of the Administrative Agent, when and as due, such fees as have been, or are from time to time, separately agreed upon.

(f) All computations of Fees shall be made in accordance with Section 12.07(b).

3.02 Voluntary Reduction of Commitments. Upon at least three Business Days’ prior written notice (or telephonic notice confirmed in writing) to the Administrative Agent at the Notice Office (which notice shall be deemed to be given on a certain day only if given before 12:00 Noon (New York time) on such day and shall be promptly transmitted by the Administrative Agent to each of the Lenders), the Company shall have the right, without premium or penalty, to terminate or partially reduce the Total Unutilized Commitment, provided

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that (x) any such termination shall apply to proportionately and permanently reduce the Commitment of each Lender and (y) any partial reduction pursuant to this Section 3.02 shall be in the amount of at least $10,000,000.

3.03 Mandatory Reduction of Commitments. (a) The Total Commitment shall terminate in its entirety on June 30, 2004, unless the Effective Date has occurred on or before such date.

(b) The Total Commitment shall terminate in its entirety on the Final Maturity Date.

SECTION 4. Payments.

4.01 Voluntary Prepayments. Each Borrower shall have the right to prepay Revolving Loans made to it in whole or in part, without premium or penalty, from time to time on the following terms and conditions: (i) such Borrower shall give the Administrative Agent at the Payment Office written notice (or telephonic notice promptly confirmed in writing) of its intent to prepay the Revolving Loans, the amount of such prepayment, the currency in which such Loans are denominated and the specific Borrowing(s) pursuant to which such Loans were made, which notice shall be given by such Borrower (x) prior to 12:00 Noon (New York time) at least one Business Day prior to the date of such prepayment in the case of Base Rate Loans and (y) at least three Business Days prior to the date of such prepayment in the case of Eurodollar Loans, and which notice shall promptly be transmitted by the Administrative Agent to each of the Lenders; (ii) each partial prepayment shall be in an aggregate principal amount of at least $1,000,000, or the Dollar Equivalent thereof, provided that no partial prepayment of any Revolving Loans shall reduce the aggregate principal amount of the Revolving Loans outstanding to an amount less than the Minimum Borrowing Amount applicable thereto; (iii) each prepayment in respect of any Revolving Loans made pursuant to a Borrowing shall be applied pro rata among such Revolving Loans; and (iv) prepayments of Eurodollar Loans made pursuant to this Section 4.01 may only be made on the last day of an Interest Period applicable thereto unless concurrently with such prepayment any payments required to be made pursuant to Section 1.12 as a result of such prepayment are made. No Borrower shall have the right under this Section 4.01 to prepay any principal amount of any Competitive Bid Loans.

4.02 Mandatory Prepayments. (a) If on any date prior to the Final Maturity Date (including, without limitation, any date on which Dollar Equivalents are determined pursuant to Section 12.07(b)), the sum of the aggregate outstanding Principal Amount of Loans (all the foregoing, collectively, the “Aggregate Loan Outstandings”) plus the Letter of Credit Outstandings exceeds 105% of the Total Commitment as then in effect, the Company shall cause one or more Borrowers to repay on such day the principal amount of the outstanding Revolving Loans in an aggregate Principal Amount equal to the amount by which the Aggregate Loan Outstandings plus the Letter of Credit Outstandings exceed the Total Commitment as then in effect. If, after giving effect to the prepayment of all outstanding Revolving Loans, as set forth above, the sum of the remaining Aggregate Loan Outstandings plus the Letter of Credit Outstandings exceed the Total Commitment, the Company shall cause one or more Borrowers to pay to the Administrative Agent at the Payment Office on such date an amount of cash and/or Cash Equivalents equal to the amount of such excess (up to a maximum amount equal to the sum

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of the outstanding Competitive Bid Loans plus the Letter of Credit Outstandings at such time), such cash and/or Cash Equivalents to be held as security for all obligations of the Borrowers to the Lenders hereunder in a cash collateral account to be established by the Administrative Agent on terms reasonably satisfactory to the Administrative Agent.

(b) If on any date prior to the Final Maturity Date (including, without limitation, any date on which Dollar Equivalents are determined pursuant to Section 12.07(b)), the aggregate Principal Amount of Revolving Loans exceed $367,500,000, then the Company shall cause one or more Borrowers to repay Revolving Loans incurred by them in an aggregate amount equal to the amount by which the Aggregate Loan Outstandings exceed $350,000,000.

(c) If on any date after the Final Maturity Date (including, without limitation, any date on which Dollar Equivalents are determined pursuant to Section 12.07(b)), the Letter of Credit Outstandings exceed 105% of the L/C FMD Amount, the Company shall cause one or more Borrowers to pay to the Administrative Agent at the Payment Office on such date an amount of cash and/or Cash Equivalents equal to the amount by which the Letter of Credit Outstandings exceed the L/C FMD Amount, such cash and/or Cash Equivalents to be held as security for all obligations of the Borrowers to the Lenders hereunder in a cash collateral account to be established by the Administrative Agent on terms reasonably satisfactory to the Administrative Agent.

(d) On the maturity date specified pursuant to Section 1.04(a) with respect to each Competitive Bid Loan, the applicable Borrower shall repay such Competitive Bid Loan to the applicable Bidder Lender or Bidder Lenders. Notwithstanding anything to the contrary contained herein, all Competitive Bid Loans shall be repaid in full on the Final Maturity Date unless paid in full prior to such date.

(e) Notwithstanding anything to the contrary contained elsewhere in this Agreement, all outstanding Revolving Loans shall be repaid in full on the Final Maturity Date.

(f) With respect to each prepayment of Loans required by Section 4.02(a), (b), (c) or (d), the applicable Borrower may designate the Types of Loans which are to be prepaid and the specific Borrowing(s) pursuant to which made, provided that (i) if any prepayment of Eurodollar Loans denominated in Dollars made pursuant to a single Borrowing shall reduce the outstanding Loans made pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount for such Borrowing, then all Loans outstanding pursuant to such Borrowing shall be immediately converted into Base Rate Loans and (ii) each prepayment of any Loans made pursuant to a Borrowing shall be applied pro rata among such Loans. In the absence of a designation by a Borrower as described in the preceding sentence, the Administrative Agent shall, subject to the above, make such designation in its sole discretion with a view, but no obligation, to minimize breakage costs owing under Section 1.12.

4.03 Method and Place of Payment. Except as otherwise specifically provided herein, all payments under this Agreement shall be made to the Administrative Agent for the ratable (based on its pro rata share) account of the Lenders entitled thereto, not later than 12:00 Noon (New York time) on the date when due and shall be made in immediately available funds at the Payment Office in (x) Dollars, if such payment is made in respect of any obligation of the

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Borrowers under this Agreement except as otherwise provided in the immediately succeeding clause (y); and (y) the appropriate Alternate Currency, if such payment is made in respect of principal of or interest on Alternate Currency Loans, it being understood that written notice by a Borrower to the Administrative Agent to make a payment from the funds in such Borrower’s account at the Payment Office shall constitute the making of such payment to the extent of such funds held in such account. Any payments under this Agreement which are made later than 12:00 Noon (New York time) shall be deemed to have been made on the next succeeding Business Day. Whenever any payment to be made hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable during such extension at the applicable rate in effect immediately prior to such extension. The Administrative Agent will promptly make available to each Lender its pro rata share (if any) of each payment so received by the Administrative Agent in the funds and currency so received.

4.04 Net Payments. (a) All payments made by each Borrower hereunder or under any Note will be made without setoff, counterclaim or other defense. Except as provided in Section 4.04(b), all such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein with respect to such payments (but excluding, except as provided in the second succeeding sentence, any tax imposed on or measured by the net income or net profits of a Lender pursuant to the laws of the jurisdiction in which it is organized or the jurisdiction in which the principal office or applicable lending office of such Lender is located or any subdivision thereof or therein) and all interest, penalties or similar liabilities with respect to such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges (all such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges being referred to collectively as “Taxes”). If any Taxes are so levied or imposed, the relevant Borrower agrees to pay the full amount of such Taxes, and such additional amounts as may be necessary so that every payment of all amounts due under this Agreement or under any Note, after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein or in such Note. If any amounts are payable in respect of Taxes pursuant to the preceding sentence, the relevant Borrower agrees to reimburse each Lender lending to such Borrower, upon the written request of such Lender, for taxes imposed on or measured by the net income or net profits of such Lender pursuant to the laws of the jurisdiction in which such Lender is organized or in which the principal office or applicable lending office of such Lender is located or under the laws of any political subdivision or taxing authority of any such jurisdiction in which such Lender is organized or in which the principal office or applicable lending office of such Lender is located and for any withholding of taxes as such Lender shall determine are payable by, or withheld from, such Lender, in respect of such amounts so paid to or on behalf of such Lender pursuant to the preceding sentence and in respect of any amounts paid to or on behalf of such Lender pursuant to this sentence. Each Borrower will furnish to the Administrative Agent within 45 days after the date the payment of any Taxes is due pursuant to applicable law certified copies of tax receipts (or if it has been established to the satisfaction of the applicable taxing authority that it is impossible to furnish such receipts, such other evidence reasonably satisfactory to the Administrative Agent) evidencing such payment by the Borrower. Each Borrower agrees to indemnify and hold harmless each Lender, and reimburse such Lender

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upon its written request, for the amount of any Taxes so levied or imposed and paid by such Lender.

(b) Each Lender that is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes agrees to deliver to each Borrower organized under the laws of the United States (“U.S. Borrower”) and the Administrative Agent on or prior to the Effective Date, or in the case of a Lender that is an assignee or transferee of an interest under this Agreement pursuant to Section 1.14 or 12.04 (unless the respective Lender was already a Lender hereunder immediately prior to such assignment or transfer), on the date of such assignment or transfer to such Lender, (i) two accurate and complete original signed copies of Internal Revenue Service Form W-8ECI or Form W-8BEN (with respect to a complete exemption under an income tax treaty) (or successor forms) certifying to such Lender’s entitlement as of such date to a complete exemption from United States withholding tax with respect to payments to be made under this Agreement and under any Note, or (ii) if the Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue Service Form W-8ECI or Form W-8BEN (with respect to a complete exemption under an income tax treaty) pursuant to clause (i) above, (x) a certificate substantially in the form of Exhibit C (any such certificate, a “Section 4.04(b)(ii) Certificate”) and (y) two accurate and complete original signed copies of Internal Revenue Service Form W-8BEN (with respect to the portfolio interest exemption)(or successor form) certifying to such Lender’s entitlement to a complete exemption from United States withholding tax with respect to payments of interest to be made under this Agreement and under any Note. In addition, each Lender agrees that from time to time after the Effective Date, when a lapse in time or change in circumstances renders the previous certification obsolete or inaccurate in any material respect, it will deliver to the U.S. Borrower and the Administrative Agent two new accurate and complete original signed copies of Internal Revenue Service Form W-8ECI, Form W-8BEN (with respect to the benefits of any income tax treaty), or Form W-8BEN (with respect to the portfolio interest exemption) and a Section 4.04(b)(ii) Certificate, as the case may be, and such other forms as may be required in order to confirm or establish the entitlement of such Lender to a continued exemption from or reduction in United States withholding tax with respect to payments under this Agreement and any Note, or it shall immediately notify the U.S. Borrower and the Administrative Agent of its inability to deliver any such Form or Certificate, in which case such Lender shall not be required to deliver any such Form or Certificate pursuant to this Section 4.04(b). Notwithstanding anything to the contrary contained in Section 4.04(a), but subject to Section 12.04(b) and the immediately succeeding sentence, (x) each U.S. Borrower shall be entitled, to the extent it is required to do so by law, to deduct or withhold income or similar taxes imposed by the United States (or any political subdivision or taxing authority thereof or therein) from interest, Fees or other amounts payable hereunder for the account of any Lender which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes to the extent that such Lender has not provided to the U.S. Borrower U.S. Internal Revenue Service Forms that establish a complete exemption from such deduction or withholding and (y) the U.S. Borrower shall not be obligated pursuant to Section 4.04(a) hereof to gross-up payments to be made to a Lender in respect of income or similar taxes imposed by the United States if (I) such Lender has not provided to the U.S. Borrower the Internal Revenue Service Forms required to be provided to the U.S. Borrower pursuant to this Section 4.04(b) or (II) in the case of a payment, other than interest, to a Lender described in clause (ii) above, to the extent that such Forms do not establish a complete exemption from

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withholding of such taxes. Notwithstanding anything to the contrary contained in the preceding sentence or elsewhere in this Section 4.04 and except as set forth in Section 12.04(b), each Borrower agrees to pay any additional amounts and to indemnify each Lender in the manner set forth in Section 4.04(a) (without regard to the identity of the jurisdiction requiring the deduction or withholding) in respect of any Taxes deducted or withheld by it as described in the immediately preceding sentence as a result of any changes that are effective after the Effective Date in any applicable law, treaty, governmental rule, regulation, guideline or order, or in the interpretation thereof, relating to the deducting or withholding of such Taxes.

(c) Each Lender agrees to use reasonable efforts (consistent with legal and regulatory restrictions and subject to overall policy considerations of such Lender) to file any certificate or document or to furnish to a Borrower that is not a U.S. Borrower any information as reasonably requested by such Borrower that may be necessary to establish any available exemption from, or reduction in the amount of, any Taxes; provided, however, that nothing in this Section 4.04(c) shall require a Lender to disclose any confidential information (including, without limitation, its tax returns or its Tax calculations). A Borrower that is not a U.S. Borrower shall not be obligated pursuant to Section 4.04(a) hereof to gross-up payments to be made to a Lender in respect of income or similar taxes imposed if such Lender has not used reasonable efforts to provide a certificate, document or information to the extent required pursuant to this Section 4.04(c).

(d) If the Borrower pays any additional amount under this Section 4.04 and such Lender determines in its sole discretion that it has actually received in connection therewith any refund of its Tax liabilities in or with respect to the taxable year in which the additional amount is paid (a “Tax Refund”), such Lender shall pay to the Borrower an amount that the Lender shall, in its sole discretion, determine is equal to the net benefit, after tax, which was obtained by the Lender in such year as a consequence of such Tax Refund; provided, however, that (i) any Lender may determine, in its sole discretion consistent with the policies of such Lender, whether to seek a Tax Refund; (ii) any Taxes that are imposed on a Lender as a result of a disallowance or reduction (including through the expiration of any tax credit carryover or carryback of such Lender that otherwise would not have expired) of any Tax Refund with respect to which such Lender has made a payment to the Borrower pursuant to this Section 4.04(d) shall be treated as a Tax for which the Borrower is obligated to indemnify such Lender pursuant to this Section 4.04 without any exclusions or defenses; (iii) nothing in this Section 4.04(d) shall require the Lender to disclose any confidential information to the Borrower (including, without limitation, its tax returns); and (iv) no Lender shall be required to pay any amounts pursuant to this Section 4.04(d) at any time during which a Default or Event of Default exists.

SECTION 5. Conditions Precedent.

5.01 Conditions Precedent to Effective Date. This Agreement shall become effective on the date (the “Effective Date”) on which each of the following conditions shall be satisfied:

(a) Execution of Agreement; Notes. (i) Each of the Company, the initial Designated Subsidiary Borrowers, the Administrative Agent and each of the Lenders shall have signed a copy hereof (whether the same or different copies) and shall have delivered the same to

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the Administrative Agent at its Notice Office or, in the case of the Lenders and the Agents, shall have given to the Administrative Agent telephonic (confirmed in writing), written or facsimile transmission notice (actually received) at such office that the same has been signed and mailed to it; and (ii) there shall have been delivered to the Administrative Agent for the account of each Lender requesting the same, Notes executed by each Borrower, as applicable, in each case in the amount, maturity and as otherwise provided herein.

(b) No Default; Representations and Warranties. The Administrative Agent shall have received a certificate, dated the Effective Date, signed by an Authorized Officer of the Company certifying that (i) no Default or Event of Default exists and (ii) all representations and warranties made by each Borrower contained herein or in any other Credit Document are true and correct in all material respects.

(c) Corporate Proceedings. (i) The Administrative Agent shall have received from each Borrower a certificate, dated the Effective Date, signed by an Authorized Officer thereof in the form of Exhibit E with appropriate insertions and deletions, together with (x) copies of its certificate of incorporation, by-laws or other organizational documents and (y) the resolutions relating to the Credit Documents which shall be satisfactory to the Administrative Agent.

(ii) The Administrative Agent shall have received all information and copies of all certificates, documents and papers, including good standing certificates and any other records of corporate proceedings and governmental approvals, if any, which the Administrative Agent may have requested in connection therewith, such documents and papers, where appropriate, to be certified by proper corporate or governmental authorities.

(d) A.M. Best Rating. On the Effective Date, each Regulated Insurance Company which is a Material Subsidiary and which has an A.M. Best financial strength rating shall have an A.M. Best financial strength rating of at least A-.

(e) Opinions of Counsel. The Administrative Agent shall have received legal opinions reasonably acceptable to the Administrative Agent and addressed to the Administrative Agent and each of the Lenders and dated the Effective Date, from (a) Christine Patton, Esq., General Counsel of the Company, substantially in the form of Exhibit D-1, (b) Cathy A. Hauck, Esq., Executive Vice President, General Counsel and Corporate Secretary of Partner Reinsurance Company of the U.S. substantially in the form of Exhibit D-2, (c) Davis Polk & Wardwell, substantially in the form of Exhibit D-3, and (d) Bredin Prat, substantially in the form of Exhibit D-4.

(f) Fees. The Borrowers shall have paid to the Administrative Agent and the Lenders all fees, expenses (including, without limitation, legal fees and expenses) and other compensation contemplated by this Agreement and the other Credit Documents, agreed upon by such parties to be paid on or prior to such date.

(g) Repayment and Termination of Commitments under the Existing Credit Agreement. On the Effective Date, the total commitments under the Existing Credit Agreement shall have been terminated, and all loans thereunder shall have been repaid in cash in full,

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together with all accrued interest and fees thereon, all letters of credit (other than the Existing Letters of Credit, if any) issued thereunder shall have been terminated, and all other amounts owing pursuant to the Existing Credit Agreement shall have been repaid in full. The Administrative Agent shall have received evidence in form, scope and substance reasonably satisfactory to it that the matters set forth in this Section 5.01(g) have been satisfied on such date.

(h) Non-Continuing Lender Agreement. On the Effective Date, any Existing Lender that will not be a Lender under this Agreement shall have executed a Non-Continuing Lender Agreement.

The occurrence of the Effective Date shall constitute a representation and warranty by each Borrower to the Agents and each of the Lenders that (i) all the conditions specified in Section 5.01 exist as of that time and (ii) the representation and warranty set forth in Section 6.04(b) is true and correct in all material respects as of such date. All the Notes, certificates, legal opinions and other documents and papers referred to in this Section 5.01, unless otherwise specified, shall be delivered to the Administrative Agent at the Administrative Agent’s Notice Office for the account of each of the Lenders and, except for the Notes, in sufficient counterparts for each of the Lenders and shall be satisfactory in form and substance to the Lenders. The Administrative Agent shall give the Company and each Lender written notice that the Effective Date has occurred.

5.02 Conditions Precedent to All Loans and Letters of Credit. The obligation of each Lender to make any Loan and the obligation of the Issuing Agent to issue or increase the Stated Amount of any Letter of Credit is subject, at the time of each such Loan made or Letter of Credit issued or increased, to the satisfaction of the following conditions:

(a) Effective Date. The Effective Date shall have occurred.

(b) Notice of Borrowing. The Administrative Agent shall have received, as applicable, (i) a Notice of Borrowing meeting the requirements of Section 1.03(a) with respect to each incurrence of Revolving Loans, (ii) a Notice of Competitive Bid Borrowing meeting the requirements of Section 1.04(a) with respect to each incurrence of Competitive Bid Loans or (iii) a Letter of Credit Request meeting the Requirements of Section 2.02 with respect to each Letter of Credit to be issued.

(c) No Default; Representations and Warranties. At the time of the incurrence of each Loan or issuance or increase in any Letter of Credit, and also after giving effect thereto, (i) there shall exist no Default or Event of Default, (ii) all representations and warranties made by each Borrower contained herein or in any other Credit Documents (other than the representation and warranty made in Section 6.04(b)) shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of such Loan and (iii) as of the date of the most recently required Annual Compliance Certificate the representation and warranty made in Section 6.04(b) was true and correct in all material respects.

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The acceptance of the benefits of each Loan and Letter of Credit shall constitute a representation and warranty by the respective Borrower to the Agents and each of the Lenders that all of the applicable conditions specified in Section 5.02 exist as of that time.

SECTION 6. Representations, Warranties and Agreements. In order to induce the Lenders to enter into this Agreement and to make the Loans and issue Letters of Credit provided for herein, the Company makes the following representations and warranties to, and agreements with, the Lenders, all of which shall survive the execution and delivery of this Agreement and the making of the Loans and the issuance of any Letter of Credit:

6.01 Corporate Existence and Power. (a) Each of the Company and its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, is duly qualified to transact business in every jurisdiction where, such qualification is necessary except where the failure to be so qualified would not reasonably be expected to have a Material Adverse Effect, and (b) each of the Company and its Subsidiaries has all corporate powers and all governmental licenses, authorizations, consents and approvals required to carry on its businesses as now conducted except where the failure to have such governmental licenses, authorizations, consents and approvals would not reasonably be expected to have a Material Adverse Effect.

6.02 Corporate and Governmental Authorization; No Contravention. The execution, delivery and performance by the Borrowers of this Agreement and the other Credit Documents, (i) are within each of the Borrower’s corporate powers, (ii) have been duly authorized by all necessary corporate action and if required, by all necessary shareholder action, (iii) require no consent approval of (including any exchange control approval) or action by or in respect of, or registration or filing with, any Governmental Authority, agency or official, except such as have been obtained or made and are in full force and effect, (iv) do not contravene, or constitute a default under, any provision of applicable law, regulation or order of any Governmental Authority, the charter, by-laws or other organizational documents of any of the Borrowers or of any judgment, injunction, order or decree binding upon the Borrowers or any of their Subsidiaries, (v) do not result in the creation or imposition of any Lien on any asset of the Borrowers or any of their Subsidiaries and (vi) will not violate or result in a default under any indenture, loan agreement or other material agreement or instrument binding upon the Borrowers or their assets, or give rise to a right thereunder to require any payment to be made by any such Person.

6.03 Enforceability. Each Credit Document constitutes a legal, valid and binding agreement of each of the Borrowers enforceable against each of the Borrowers in accordance with its terms, and the other Credit Documents, when executed and delivered in accordance with this Agreement, will constitute valid and binding obligations of each of the Borrowers enforceable in accordance with their respective terms, provided that the enforceability hereof and thereof is subject in each case to general principles of equity and to bankruptcy, insolvency and similar laws affecting the enforcement of creditors’ rights generally.

6.04 Financial Information. (a) The consolidated balance sheet of the Company and its Consolidated Subsidiaries as of December 31, 2003 and the related consolidated statements of income, shareholders’ equity and cash flows for the Fiscal Year then ended, reported on

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by Deloitte & Touche copies of which have been delivered to each of the Lenders, and the unaudited consolidated financial statements of the Company and its Consolidated Subsidiaries for the fiscal quarter ended March 31, 2004, copies of which have been delivered to each of the Lenders, fairly present, in conformity with GAAP consistently applied, the consolidated financial position and results of operations and cash flows of the Company and its Consolidated Subsidiaries as of such dates and their consolidated results of operations and cash flows for such periods stated, subject to normal year-end audit adjustments and the absence of footnotes in the case of such unaudited financial statements.

(b) Since December 31, 2003, there has been no event, act, condition or occurrence that has had or is reasonably likely to have a Material Adverse Effect.

6.05 Litigation. There is no action, suit or proceeding pending or threatened against or affecting the Company or any of its Subsidiaries before any court or arbitrator or any Governmental Authority, agency or official which is reasonably likely to have a Material Adverse Effect or which in any manner draws into question the validity or enforceability of, or which is reasonably likely to impair the ability of the Borrowers to perform their obligations under, this Agreement or any of the other Credit Documents.

6.06 Tax Returns and Payments. (a) Each of the Borrower and each of its Subsidiaries has filed all material federal income tax returns and all other material tax returns, domestic and foreign, required to be filed by it and has paid all material taxes and assessments payable by it which have become due, except for those contested in good faith and adequately disclosed and fully provided for on the financial statements of the Borrower and its Subsidiaries in accordance with GAAP principles. The Borrower and each of its Subsidiaries have at all times paid, or have provided adequate reserves (in the good faith judgment of the management of the Borrower) for the payment of, all federal, state and foreign income taxes applicable for all prior fiscal years and for the current fiscal year to date. There is no material action, suit, proceeding, investigation, or claim now pending or, to the knowledge of the Borrower or any of its Subsidiaries, threatened by any authority regarding any taxes relating to the Borrower or any of its Subsidiaries. Neither the Borrower nor any of its Subsidiaries has entered into an agreement or waiver or been requested to enter into an agreement or waiver extending any statute of limitations relating to the payment or collection of taxes of the Borrower or any of its Subsidiaries, or is aware of any circumstances that would cause the taxable years or other taxable periods of the Borrower or any of its Subsidiaries not to be subject to the normally applicable statute of limitations.

(b) To ensure the legality, validity, enforceability or admissibility in evidence of this Agreement or any Notes evidencing Loans made (or to be made), it is not necessary that any stamp or similar tax be paid on or in respect of this Agreement or such Notes, or any other document other than such stamp or similar taxes that have already been paid.

6.07 Indebtedness. The Company does not have any Debt on the Effective Date other than that which is listed on Annex IV.

6.08 Insurance Licenses. Each Regulated Insurance Company has obtained and maintains in full force and effect all licenses and permits from all regulatory authorities

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necessary to operate in the jurisdictions in which such Regulated Insurance Company operates, in each case other than such licenses and permits the failure of which to obtain or maintain, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.

6.09 Intellectual Property. The Company and its Subsidiaries own, or are licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to their business, and the use thereof by the Company and/or its Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect.

6.10 Not an Investment Company. Neither the Company nor any of its Subsidiaries is an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

6.11 Public Utility Holding Company Act. Neither the Company nor any of its Subsidiaries is a “holding company”, or a “subsidiary company” of a “holding company”, or an “affiliate” of a “holding company” or of a “subsidiary company” of a “holding company”, as such terms are defined in the Public Utility Holding Company Act of 1935, as amended.

6.12 Ownership of Property; Liens. The Company and its Subsidiaries have good and valid title to, or a valid leasehold interest in, all of their real and personal properties sufficient for the conduct of their respective businesses and none of such property is subject to any Lien except as permitted in Section 8.01.

6.13 No Default. No Default or Event of Default has occurred and is continuing.

6.14 Full Disclosure. All information heretofore furnished by the Borrowers to the Administrative Agent or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all such information hereafter furnished by the Borrowers to the Administrative Agent or any Lender will be, true, accurate and complete in all material respects on the date as of which such information is stated or certified, provided that, with respect to projected financial information, the Borrowers represent only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.

6.15 Compliance with Laws. The Company and each of its Subsidiaries is in compliance with all applicable laws, regulations, rules and orders of any Governmental Authority, except where any failure to comply with any such laws would not reasonably be expected to, alone or in the aggregate, have a Material Adverse Effect.

6.16 Capital Stock. All Capital Stock, debentures, bonds, notes and all other securities of the Company and its Subsidiaries presently issued and outstanding have been validly and properly issued in accordance with all applicable laws, including, but not limited to, the “Blue Sky” laws of all applicable states and the federal securities laws. The issued shares of Capital Stock of each of the Company’s Wholly-Owned Subsidiaries are owned by the Company free and clear of any Lien or adverse claim.

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6.17 Compliance with ERISA. (a) Each Borrower and its Subsidiaries and ERISA Affiliates have fulfilled their respective obligations (if any) under the minimum funding standards of ERISA and the Code with respect to each Plan and are in compliance in all material respects with the applicable provisions of ERISA and the Code, and have not incurred any liability to the PBGC or any Plan or Multiemployer Plan (other than to make contributions in the ordinary course of business).

(b) Each Foreign Pension Plan has been maintained in substantial compliance with its terms and with the requirements of any and all applicable laws, statutes, regulations and orders and has been maintained, where required, in good standing with applicable regulatory authorities. All contributions required to be made with respect to a Foreign Pension Plan have been timely made. Neither the Borrower nor any of its Subsidiaries has incurred any obligation in connection with the termination of, or withdrawal from, any Foreign Pension Plan. The present value of the accrued benefit liabilities (whether or not vested) under each Foreign Pension Plan, determined as of the end of the Borrower’s most recently ended fiscal year on the basis of actuarial assumptions, each of which is reasonable, did not exceed the current value of the assets of such Foreign Pension Plan allocable to such benefit liabilities.

6.18 Margin Stock. No Borrower nor any of its Subsidiaries is engaged principally in the business of purchasing or carrying any Margin Stock, and no part of the proceeds of any Loan hereunder will be used to purchase or carry any Margin Stock, or be used for any purpose which violates, or which is inconsistent with the provisions of Regulation U or X.

6.19 Subsidiaries. Set forth in Annex III is a complete and correct list of all of the Subsidiaries of the Company as of the Effective Date, together with, for each such Subsidiary, (i) the jurisdiction of organization of such Subsidiary, (ii) each Person holding direct ownership interests in such Subsidiary and (iii) the percentage of ownership of such Subsidiary represented by such ownership interests. Except as disclosed in Annex III, as of the Effective Date (y) each of the Company and its Subsidiaries owns, free and clear of Liens, and has the unencumbered right to vote, all outstanding ownership interests in each Person shown to be held by it in Annex III and (z) all of the issued and outstanding Capital Stock of each such Person organized as a corporation is validly issued, fully paid and nonassessable.

6.20 Use of Proceeds. All proceeds of the Loans shall be utilized for the general corporate purposes of the Company and its Subsidiaries.

SECTION 7. Affirmative Covenants. The Borrowers hereby covenant and agree that on and as of the Effective Date and thereafter until the Commitments have terminated, no Letters of Credit or Notes are outstanding and the Loans and Unpaid Drawings, together with interest, Fees and all other obligations (other than any indemnities described in Section 12.12 which are not then owing) incurred hereunder, are paid in full:

7.01 Information Covenants. The Company will furnish to each Lender:

(a) as soon as available and in any event within 45 days after the end of each of the first three quarterly fiscal periods in each Fiscal Year of the Company, a consolidated

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balance sheet of the Company and its Subsidiaries as at the end of such period and the related consolidated statements of income, changes in stockholders’ equity and cash flows of the Company for such period and (in the case of the second and third quarterly periods) for the period from the beginning of the current Fiscal Year to the end of such quarterly period, setting forth in each case in comparative form the consolidated figures for the corresponding periods of the previous Fiscal Year, all in reasonable detail and certified by an Authorized Officer of the Company as presenting fairly, in accordance with GAAP (except as specifically set forth therein; provided any exceptions or qualifications thereto must be acceptable to the Required Lenders) on a basis consistent with such prior fiscal periods, the information contained therein, subject to changes resulting from normal year-end audit adjustments;

(b) as soon as available and in any event within 90 days after the end of each Fiscal Year of the Company, the consolidated balance sheet of the Company and its Subsidiaries as at the end of such year and the related consolidated statements of income, operations, changes in stockholders’ equity and cash flows of the Company for such Fiscal Year, setting forth in comparative form the consolidated figures for the previous fiscal year, all in reasonable detail and accompanied by a report thereon of Deloitte & Touche or other independent public accountants of recognized national standing selected by the Company, which report shall state that such consolidated financial statements present fairly the consolidated financial position of each of the Company and its Subsidiaries as at the dates indicated and the consolidated results of its operations and cash flows for the periods indicated in conformity with GAAP applied on a basis consistent with prior years (except as otherwise specified in such report; provided any exceptions or qualifications thereto must be acceptable to the Required Lenders) and that the audit by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards;

(c) within five Business Days after any senior officer of any Borrower becomes aware of the occurrence of any Default and/or any event or condition constituting, or which in such Borrower’s reasonable judgment is reasonably likely to have a Material Adverse Effect, a certificate of an Authorized Officer of each of the Borrowers setting forth the details thereof and the action which the Borrowers are taking or propose to take with respect thereto;

(d) promptly upon the mailing thereof to the security holders of the Borrowers generally, copies of all financial statements, reports and proxy statements so mailed;

(e) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and annual, quarterly or monthly reports which the Company shall have filed with the Securities and Exchange Commission or any national securities exchange;

(f) promptly after any Borrower knows of the commencement thereof, notice, of any litigation, dispute or proceeding involving a claim against any of the Borrowers and/or any Subsidiary which claim could reasonably be expected to have a Material Adverse Effect;

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(g) at the request of any Lender, promptly after the filing thereof, a copy of the annual statements for each calendar year and quarterly statements for each calendar quarter (if any) as filed with any Applicable Insurance Regulatory Authority of any jurisdiction in which any Regulated Insurance Company is qualified to do business;

(h) at the time of the delivery of the financial statements provided for in Sections 7.01(a) and (b), a compliance certificate from the chief financial officer or treasurer of the Company in the form of Exhibit K (I) certifying on behalf of the Company that, to the best of such officer’s knowledge after due inquiry, no Default or Event of Default has occurred and is continuing or, if any Default or Event of Default has occurred and is continuing, specifying the nature and extent thereof and (II) setting forth in reasonable detail the calculations required to establish whether the Company and its Subsidiaries were in compliance with the provisions of Sections 8.10 and 8.11; and

(i) from time to time such additional information regarding the financial position or business of the Borrowers and their Subsidiaries as the Administrative Agent, at the request of any Lender, may reasonably request.

Reports and financial statements required to be delivered by the Company pursuant to paragraphs (a), (b) and (e) of this Section 7.01 shall be deemed to have been delivered on the date on which the Company posts such reports, or reports containing such financial statements, on its website on the Internet at www.partnerre.com or when such reports, or reports containing such financial statements are posted on the SEC’s website at www.sec.gov; provided that the Company shall deliver paper copies of the reports and financial statements referred to in paragraphs (a), (b) and (e) of this Section 7.01 to the Administrative Agent or any Lender who requests it to deliver such paper copies until written notice to cease delivering paper copies is given by the Administrative Agent or such Lender.

7.02 Books, Records and Inspections. The Borrowers will (i) keep, and will cause each Subsidiary to keep, proper books of record and account in which full, true and correct entries in conformity with GAAP or Statutory Accounting Principles, as applicable, shall be made of all dealings and transactions in relation to its business and activities; and (ii) permit, and will cause each Subsidiary to permit, representatives of any Lender at such Lender’s expense prior to the occurrence and during the continuance of an Event of Default and at the Borrowers’ expense after the occurrence of an Event of Default to visit and inspect any of their respective properties, to examine their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants. The Borrowers agree to cooperate and assist in such visits and inspections, in each case at such reasonable times and as often as may reasonably be desired.

7.03 Maintenance of Existence. Each of the Borrowers shall maintain its existence, and will qualify and remain qualified as a foreign corporation in each jurisdiction in which failure to receive or retain such qualifications would have a Material Adverse Effect.

7.04 ERISA. As soon as possible and, in any event, within (10) days after a Borrower, any of its Subsidiaries or any of its ERISA Affiliates knows or has reason to know that any of the events or conditions specified below with respect to any Plan or Multiemployer

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Plan have occurred or exist, a statement signed by the chief financial officer of such Borrower setting forth details respecting such event or condition and the action if any, that such Borrower, such Subsidiary or such ERISA Affiliate proposes to take with respect thereto (and a copy of any report or notice required to be filed with or given to PBGC by such Borrower, such Subsidiary or such ERISA Affiliate with respect to such event or condition):

(i) any reportable event, as defined in subsections (c)(1), (2), (5) and (6), and subsection (d)(2) of Section 4043 of ERISA and the regulations issued thereunder, with respect to a Plan;

(ii) the filing under Section 4041(c) of ERISA of a notice of intent to terminate any Plan under a distress termination or the distress termination of any Plan;

(iii) the institution by PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by a Borrower, any of its Subsidiaries or any of its ERISA Affiliates of a notice from a Multiemployer Plan that such action has been taken by PBGC with respect to such Multiemployer Plan;

(iv) the receipt by a Borrower, any of its Subsidiaries or any of its ERISA Affiliates of notice from a Multiemployer Plan that a Borrower, any of its Subsidiaries or any of its ERISA Affiliates has incurred withdrawal liability under Section 4201 of ERISA in excess of $10,000,000 or that such Multiemployer Plan is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated under Section 4041A of ERISA whereby a deficiency or additional assessment is levied or threatened to be levied against a Borrower, any of its Subsidiaries or any of its ERISA Affiliates; and

(v) the institution of a proceeding by a fiduciary of any Plan or Multiemployer Plan against a Borrower, any of its Subsidiaries or any of its ERISA Affiliates to enforce Section 515 or 4219(c)(5) of ERISA, which proceeding is not dismissed within 30 days.

7.05 Insurance. The Borrowers will maintain, and will cause each of their Subsidiaries to maintain (either in the name of the Borrowers or in such Subsidiary’s own name) with financially sound and reputable insurance companies, insurance on all their property in at least such amounts and against at least such risks as are usually insured against in the same general area by companies of established repute engaged in the same or similar businesses.

7.06 Maintenance of Property. The Borrowers shall, and will cause each of their Subsidiaries to, maintain all of their properties and assets in good condition, repair and working order, ordinary wear and tear excepted.

7.07 Payment of Taxes. Each Borrower will pay and discharge, and will cause each of its Subsidiaries to pay and discharge, all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any properties belonging to it, prior to the date on which penalties attach thereto, and all lawful claims for sums that have become due and payable which, if unpaid, might become a Lien not otherwise permitted under Section 8.01; provided, that neither the Borrower nor any of its Subsidiaries shall be required to pay any

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such tax, assessment, charge, levy or claim which is being contested in good faith and by proper proceedings if it has maintained adequate reserves with respect thereto in accordance with GAAP.

SECTION 8. Negative Covenants. The Borrowers hereby covenant and agree that on and as of the Effective Date and thereafter until the Commitments have terminated, no Letters of Credit or Notes are outstanding and the Loans and Unpaid Drawings, together with interest, Fees and all other obligations (other than any indemnities described in Section 12.12 which are not then owing) incurred hereunder, are paid in full:

8.01 Liens. Neither the Company nor any of its Subsidiaries will permit, create, assume, incur or suffer to exist any Lien on any asset tangible or intangible now owned or hereafter acquired by it, except:

(i) Liens existing on the date hereof and listed on Annex V hereto;

(ii) Liens not securing Debt which are incurred in the ordinary course of business;

(iii) Liens securing repurchase agreements constituting a borrowing of funds by the Company or any Subsidiary of the Company in the ordinary course of business for liquidity purposes and in no event for a period exceeding 90 days in each case; and

(iv) Liens existing on any asset of any Person at the time such Person becomes a Subsidiary and not created in contemplation of such event;

(v) Liens on any asset securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring such asset, provided that such Lien attaches to such asset concurrently with or within 90 days after the acquisition thereof;

(vi) Liens on any asset of any Person existing at the time such Person is merged or consolidated with or into the Company or a Subsidiary and not created in contemplation of such event;

(vii) Liens existing on any asset prior to the acquisition thereof by the Company or a Subsidiary and not created in contemplation of such acquisition;

(viii) Liens arising out of the refinancing, extension, renewal or refunding of any Debt secured by any Lien permitted by any of the foregoing clauses of this Section 8.01, provided that such Debt is not increased and is not secured by any additional assets;

(ix) Liens securing obligations owed by any Borrower to any other Borrower or owed by any Subsidiary of the Company (other than a Borrower) to the Company or any other Subsidiary;

(x) Liens incurred in the ordinary course of business in favor of financial intermediaries and clearing agents pending clearance of payments for investment or in the nature of set-off, banker’s lien or similar rights as to deposit accounts or other funds;

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(xi) Liens consisting of deposits made by any Regulated Insurance Company with an Applicable Insurance Regulatory Authority or other statutory Liens or Liens or claims imposed or required by applicable insurance laws or regulations against the assets of any Regulated Insurance Company, in each case in favor of policyholders of such Regulated Insurance Company or an Applicable Insurance Regulatory Authority and in the ordinary course of such Regulated Insurance Company’s business;

(xii) Judgment or judicial attachment Liens, provided that no Event of Default arises under Section 9.01(k);

(xiii) Liens, now or in the future, arising in the ordinary course of business of (and solely on assets of) New Solutions or any other Subsidiary securing the obligations of New Solutions or such other Subsidiary, as the case may be; provided that (A) New Solutions or such other Subsidiary is not a Borrower or a Regulated Insurance Company and (B) New Solutions or such Subsidiary is primarily in the business of dealing in securities interest rate swaps and other derivative transactions; and

(xiv) Liens not otherwise permitted by the foregoing clauses of this Section 8.01 securing Debt in an aggregate principal amount not at any time exceeding 12% of Consolidated Tangible Net Worth.

8.02 Dissolution. No Borrower shall suffer or permit dissolution or liquidation either in whole, except through corporate reorganization to the extent permitted by Section 8.03.

8.03 Consolidations, Mergers, Sales of Assets and Acquisitions. (a) The Borrowers will not consolidate or merge with or into any other Person, provided that (i) any Borrower may merge with another Person if (x) one of the Borrowers is the corporation surviving such merger or, if such Person is the survivor, such Person is a corporation or company organized and existing under the laws of the United States of America, any state thereof or the District of Columbia, Bermuda or any country which is, on the date of such merger, a member of the Organization of Economic Cooperation and Development, such Person will expressly and unconditionally assume the due and punctual payment of the principal of, any premium and interest on and other amounts of such Borrower hereunder, and the performance of such Borrower’s obligations hereunder and such Person delivers an opinion from counsel in the jurisdiction of such person’s organization in form and substance satisfactory to the Administrative Agent covering matters in connection with such consolidation or merger, and (y) immediately after giving effect to such merger, no Default or Event of Default shall have occurred and be continuing; and (ii) Subsidiaries of the Company may merge with one another (subject, in the case of mergers involving Designated Subsidiary Borrowers, to compliance with the requirements of preceding clause (x)).

(b) No Borrower will, nor will it permit any of its Subsidiaries to, sell, convey, assign, lease, abandon or otherwise transfer or dispose of, voluntarily or involuntarily (any of the foregoing (subject to the exclusions hereinafter set forth) being referred to in this Section as a “Disposition”), any of its properties or assets, tangible or intangible (including but not limited to any sale, assignment, discount or other disposition of accounts, contract rights, chattel paper or general intangibles with or without recourse, but excluding (i) restricted payments permitted

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under Section 8.08 below, (ii) sales of portfolio securities in the ordinary course of business and (iii) cash payments to discharge obligations or for goods or services or to acquire assets), provided that the Borrowers and their Subsidiaries may make Dispositions in any fiscal year so long as the aggregate amount of such Dispositions made in such fiscal year does not exceed $200,000,000.

(c) No Borrower will, nor will it permit any of its Subsidiaries to, acquire all or substantially all of the capital stock or assets of another Person (other than a Person which is already a Wholly-Owned Subsidiary of such Borrower or Subsidiary) unless at such time and immediately after giving effect thereto no Default or Event of Default exists or would result therefrom.

8.04 Use of Proceeds. Each Borrower will use the proceeds of all Loans for its general corporate purposes. No portion of the proceeds of the Loans will be used by the Borrowers or any Subsidiary (i) directly or indirectly, for the purpose, whether immediate, incidental or ultimate, of purchasing or carrying any Margin Stock, or (ii) for any purpose in violation of any applicable law or regulation.

8.05 Transactions with Affiliates. Neither the Company nor any of its Subsidiaries shall enter into or be a party to, any transaction with any Affiliate of the Company or such Subsidiary (which Affiliate is not one of the Borrowers or a Subsidiary), except transactions with Affiliates in good faith and on terms no less favorable to such Borrower or Subsidiary than those that could have been obtained in a comparable transaction on an arm’s length basis from an unrelated Person.

8.06 Indebtedness. No Borrower will at any time create, incur, assume or permit to exist any Debt, or agree, become or remain liable (contingent or otherwise) to do any of the foregoing, except for Debt which is either pari passu with, or subordinated in right of payment to, the Obligations.

8.07 Private Act. No Borrower will become subject to a Private Act.

8.08 Restricted Payments. The Company will not declare or pay any dividends, purchase, redeem, retire, defease or otherwise acquire for value any of its Equity Interests now or hereafter outstanding, return any capital to its stockholders, partners or members (or the equivalent Persons thereof) as such, make any distribution of assets, Equity Interests, obligations or securities to its stockholders, partners or members (or the equivalent Persons thereof) as such, or permit any of its Subsidiaries to purchase, redeem, retire, defease or otherwise acquire for value any Equity Interests in the Company, if in any case referred to above, a Default or Event of Default shall have occurred and be continuing at the time of such action or would result therefrom; provided that notwithstanding the foregoing, the Company may declare and pay dividends payable solely in Equity Interests of the Company and may redeem, return or defease any of its Equity Interests by issuing new Equity Interests.

8.09 Business. The Company will not, and will not permit any of its Subsidiaries to, engage (directly or indirectly) in any business other than substantially the same lines of

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business in which they are engaged on the Effective Date and reasonable extensions thereof and other businesses that are complimentary or reasonably related thereto.

8.10 Leverage Ratio. The Company will not permit the ratio of Consolidated Total Debt to Consolidated Total Capitalization at any time to exceed 0.35:1.00.

8.11 Minimum Consolidated Tangible Net Worth. The Company will not permit Consolidated Tangible Net Worth to be less than (i) during the period from and including the Effective Date to but not including the Financial Statement Delivery Date immediately following the Company’s fiscal year ending December 31, 2004, $1,825,000,000 and (ii) thereafter, an amount equal to the sum of (x) $1,825,000,000 plus (y) 50% of the Cumulative Consolidated Net Income (if positive) for the period from and including January 1, 2004 through the last day of the most recently ended fiscal year for which the Financial Statement Delivery Date has occurred.

8.12 Claims Paying Ratings. Each Regulated Insurance Company which is a Material Subsidiary and which has a financial strength rating from A.M. Best Co. (or its successor) will maintain at all times a financial strength rating of at least “A-” from A.M. Best & Co. (or its successor); provided that if the rating system of A.M. Best Co. (or its successors) shall change, or if it (or its successors) shall cease to be in the business of rating the financial strength of insurance companies like the Regulated Insurance Companies, the Company and the Lenders shall negotiate in good faith to amend the references to specific A.M. Best Co. ratings in this Agreement to reflect such changed rating system or the non-availability of ratings from such rating agency (it being understood that any such amendment to such specific ratings shall in no event be effective without the approval of the Required Lenders).

SECTION 9. Defaults.

9.01 Events of Default. Upon the occurrence of any of the following specified events (each, an “Event of Default”):

(a) any Borrower shall fail to pay when due any principal of any Loan, or shall fail to pay any interest on any Loan within three Business Days after such interest shall become due, or shall fail to pay any fee or other amount payable hereunder within five Business Days after such fee or other amount becomes due; or

(b) any Borrower shall fail to observe or perform any covenant contained in Sections 7.01(c), 7.02(ii), 7.03, 7.06 or Section 8; or

(c) any Borrower shall fail to observe or perform any covenant or agreement contained herein (other than those covered by clause (a) or (b) above) for 30 days after the earlier of (i) the first day on which any Borrower has knowledge of such failure or (ii) written notice thereof has been given to the Company by the Administrative Agent at the request of any Lender; or

(d) any representation, warranty, certification or statement made or deemed made by any Borrower in Section 6 of this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect or misleading in any material respect when made (or deemed made); or

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(e) the Company or any Subsidiary shall default in any payment in respect of Debt outstanding in an aggregate principal amount equal to or in excess of $50,000,000 (other than the Obligations) (after giving effect to any applicable grace period); or

(f) any event or condition shall occur which results in the acceleration of the maturity of any Debt outstanding in an aggregate amount equal to or in excess of $50,000,000 of the Company or any Subsidiary or the mandatory prepayment or purchase of such Debt by the Company (or its designee) or such Subsidiary (or its designee) prior to the scheduled maturity thereof; or

(g) The Company or any Material Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization, rehabilitation, conservation, supervision or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, rehabilitator, conservator, custodian or other similar official of them or any substantial part of their property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against them, or shall make a general assignment for the benefit of creditors, or shall fail generally, or shall admit in writing their inability, to pay their debts as they become due, or shall take any corporate action to authorize any of the foregoing, or shall become or be declared by a court of competent jurisdiction to be insolvent; or

(h) an involuntary case or other proceeding shall be commenced against the Company or any Material Subsidiary seeking liquidation, reorganization, rehabilitation, conservation, supervision or other relief with respect to them or their debts under any bankruptcy, insolvency or other similar law or the Bermuda Companies Law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, rehabilitator, conservator, custodian or other similar official of them or any substantial part of their property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Company or any Material Subsidiary under the federal bankruptcy laws as now or hereafter in effect;

(i) an event or condition specified in Section 7.04 shall occur or exist with respect to any Plan or Multiemployer Plan, a Borrower, any of its Subsidiaries or any of its ERISA Affiliates shall fail to pay when due any material amount which they shall have become liable to pay to the PBGC or to a Plan or a Multiemployer Plan under Title IV of ERISA, or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Plan must be terminated, and as a result of such event or condition, together with all such other events or conditions, a Borrower, any of its Subsidiaries or any of its ERISA Affiliates shall be reasonably likely in the opinion of the general counsel of such Borrower to incur a liability to a Plan, a Multiemployer Plan or PBGC (or any combination of the foregoing); or

(j) the Company Guaranty shall terminate or cease, in whole or part, to be a legally valid and binding obligation of the Company or any Person acting for or on behalf

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of the Company shall contest such validity or binding nature of such Company Guaranty, or any other Person shall assert any of the foregoing;

(k) one or more judgments or orders for the payment of money in an aggregate amount in excess of $50,000,000 shall be rendered against the Company or any Subsidiary and such judgment or order shall continue unsatisfied and unstayed for a period of 30 days; or

(l) a Change of Control shall occur;

then, and in every such event, the Administrative Agent shall (i) if requested by the Required Lenders, by notice to the Company to terminate the Commitments and they shall thereupon terminate, (ii) if requested by the Required Lenders, by notice to the Company to declare the principal of and any accrued interest in respect of all Loans and all other Obligations owing hereunder and under the other Credit Documents to be, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrowers, (iii) if requested by the Required Lenders, terminate any Letter of Credit or give a Notice of Non-Extension in respect thereof if permitted in accordance with its terms, and (iv) if requested by the Required Lenders, direct the applicable Borrower to pay (and the applicable Borrower hereby agrees upon receipt of such notice, or upon the occurrence of any Event of Default specified in Section 9.01(g) and 9.01(h), to pay) to the Administrative Agent at the Payment Office an amount of cash to be held as security for respective Borrower’s reimbursement obligations in respect of all Letters of Credit then outstanding which were issued for the account of such Borrower, equal to the aggregate Stated Amount of all such Letters of Credit at such time; provided that if any Event of Default specified in clause (g) or (h) above occurs with respect to the Company without any notice to the Company or any other act by the Administrative Agent or the Lenders, the Total Commitment shall thereupon automatically terminate and the Notes (together with accrued interest thereon) and all other amounts payable hereunder and under the other Credit Documents shall automatically become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrowers. Notwithstanding the foregoing, the Administrative Agent shall have available to it all other remedies at law or equity, and shall exercise any one or all of them at the request of the Required Lenders.

9.02 Notice of Default. The Administrative Agent shall give notice to the Company of any Default under Section 9.01(c) promptly upon being requested to do so by any Lender and shall thereupon notify all the Lenders thereof.

SECTION 10. Definitions. As used herein, the following terms shall have the meanings herein specified unless the context otherwise requires. Defined terms in this Agreement shall include in the singular number the plural and in the plural the singular:

“Absolute Rate” shall mean an interest rate (rounded to the nearest .0001) expressed as a decimal.

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“Absolute Rate Borrowing” shall mean a Competitive Bid Borrowing with respect to which a Borrower has requested that the Bidder Lenders offer to make Competitive Bid Loans at Absolute Rates.

“Additional Costs” shall mean, with respect to any Lender lending from an office in the United Kingdom or a Participating Member State, the amount notified by such Lender to the Borrowers and the Administrative Agent as its reasonable determination of the proportion of the cost attributable to the Loans made by such Lender from that office of complying with the fee and minimum reserve requirements of the Bank of England and the UK Financial Services Authority or the European Central Bank in respect of loans made from that office.

“Administrative Agent” shall have the meaning provided in the first paragraph of this Agreement.

“Affiliate” shall mean, with respect to any Person, any other Person directly or indirectly controlling (including but not limited to all directors and officers of such Person), controlled by, or under direct or indirect common control with such Person. A Person shall be deemed to control a corporation if such Person possesses, directly or indirectly, the power (i) to vote 10% or more of the securities having ordinary voting power for the election of directors of such corporation or (ii) to direct or cause the direction of the management and policies of such corporation, whether through the ownership of voting securities, by contract or otherwise.

“Aggregate Loan Outstandings” shall have the meaning provided in Section 4.02(a).

“Agreement” shall mean this Credit Agreement, as the same may be from time to time modified, amended and/or supplemented.

“Alternate Currency” shall mean each Primary Alternate Currency and each Other Alternate Currency.

“Alternate Currency Letter of Credit” shall mean any Letter of Credit to the extent denominated in an Alternate Currency.

“Alternate Currency Loan” shall mean each Loan denominated in an Alternate Currency.

“Annual Compliance Certificate” means the compliance certificate required to be delivered pursuant to Section 7.01(h) at the time of delivery of the financial statements provided for in Section 7.01(b).

“Applicable Credit Rating” shall mean (i) the Moody’s Credit Rating and the S&P Credit Rating, if the same; (ii) if the Moody’s Credit Rating and the S&P Credit Rating differ by one rating level, the higher of such Ratings; and (iii) if the Moody’s Credit Rating and the S&P Credit Rating differ by two or more rating levels, the Applicable Credit Rating shall be one rating level below the higher of such Ratings; provided that if only one Rating Agency rates the senior unsecured debt of the Company, such rating shall be the Applicable Credit Rating unless

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the other Rating Agency ceased rating such senior unsecured debt at the request of the Company, in which case the Applicable Credit Rating shall be deemed to be below A-/A3.

“Applicable Insurance Regulatory Authority” shall mean, when used with respect to any Regulated Insurance Company, (x) the insurance department or similar administrative authority or agency located in each state or other jurisdiction (foreign or domestic) in which such Regulated Insurance Company is domiciled, (y) the insurance department, authority or agency in each state or other jurisdiction (foreign or domestic) in which such Regulated Insurance Company is licensed, to the extent it has regulatory jurisdiction over such Regulated Insurance Company, and (z) any Federal or national insurance regulatory department, authority or agency that may be created and that has regulatory jurisdiction over such Regulated Insurance Company.

“Applicable Facility Fee Percentage” shall mean, for any day, the rate per annum set forth below opposite the Applicable Period then in effect:

Applicable Period	Applicable Facility Fee Percentage
Category A Period	0.070	%
Category B Period	0.080	%
Category C Period	0.090	%
Category D Period	0.125	%

“Applicable L/C Percentage” shall mean the percentage set forth below opposite the Applicable Period then in effect:

Applicable Period	Applicable L/C Percentage
Category A Period	0.305	%
Category B Period	0.345	%
Category C Period	0.385	%
Category D Period	0.625	%

“Applicable Margin” shall mean the rate per annum set forth below opposite the Applicable Period then in effect:

	Applicable Margin
Applicable Period	Eurodollar Loans		Base Rate Loans
Category A Period	0.230	%	0.00	%
Category B Period	0.245	%	0.00	%
Category C Period	0.285	%	0.00	%
Category D Period	0.500	%	0.00	%

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“Applicable Period” shall mean, at any time, the period set forth below then in effect:

Applicable Period	Criteria
Category A Period	The Applicable Credit Rating is A+, A1 or above.
Category B Period	The Applicable Credit Rating is A or A2.
Category C Period	The Applicable Credit Rating is A- or A3.
Category D Period	None of a Category A Period, a Category B Period or a Category C Period is in effect at such time.

Notwithstanding anything to the contrary set forth above, if neither Rating Agency rates the unsecured senior debt of the Company, then the Applicable Period shall be a Category D Period.

“Applicable Utilization Fee Percentage” shall mean, for any day, the percentage set forth below opposite the Applicable Period then in effect:

Applicable Period	Applicable Utilization Fee Percentage
Category A Period	0.075	%
Category B Period	0.100	%
Category C Period	0.100	%
Category D Period	0.125	%

“Approved Currency” shall mean each of Dollars, each Primary Alternate Currency and each Other Alternate Currency.

“Assignment Agreement” shall mean the Assignment Agreement in the form of Exhibit F (appropriately completed).

“Authorized Officer” shall mean any senior officer of a Borrower designated as such in writing to the Administrative Agent by such Borrower.

“Base Rate” shall mean, at any time, the higher of (i) the rate which is ½ of 1% in excess of the Federal Funds Effective Rate as published by the Federal Reserve Bank of New York and (ii) the Prime Commercial Lending Rate of JPMorgan Chase Bank as announced from time to time at its head office.

“Base Rate Loan” shall mean each Revolving Loan or Term Loan that is not a Eurodollar Loan.

“Bidder Lender” shall mean each Lender that has notified in writing (and has not withdrawn such notice) the Administrative Agent that it desires to participate generally in the bidding arrangements relating to Competitive Bid Borrowings.

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“Borrower” or “Borrowers” shall mean the Company and each Designated Subsidiary Borrower. For the purposes of Sections 5, 6, 7, 8 and 9 (including defined terms used therein) any reference to “Borrower” shall also mean, and include, the Company in its capacity as guarantor under Section 13.

“Borrowing” shall mean (i) the incurrence by a single Borrower of Revolving Loans denominated in Dollars that are Base Rate Loans on a pro rata basis from all Lenders; (ii) the incurrence by a single Borrower of Revolving Loans of a single Approved Currency that are Eurodollar Loans on a pro rata basis from all Lenders, on a given date (or resulting from conversions on a given date), having the same Interest Period, provided that Base Rate Loans incurred pursuant to Section 1.11(b) shall be considered part of any related Borrowing of Eurodollar Loans; and (iii) a Competitive Bid Borrowing.

“Business Day” shall mean (i) for all purposes other than as covered by clause (ii) below, any day excluding Saturday, Sunday and any day which shall be in the City of New York a legal holiday or a day on which banking institutions are authorized by law or other governmental actions to close, (ii) with respect to all notices and determinations in connection with, and payments of principal and interest on, Eurodollar Loans and Competitive Bid Loans made pursuant to a Spread Borrowing, any day which is a Business Day described in clause (i) and which is also a day for trading by and between banks in the London interbank Eurodollar market and, with respect to any notices or determinations in respect of Euros, which is customarily a “Business Day” for such notices or determinations.

“Canadian Dollars” shall mean freely transferable lawful money of Canada.

“Canadian Dollar Equivalent” shall mean, at any time for the computation thereof, the amount of Canadian Dollars which could be purchased with the amount of Dollars involved in such computation at the spot exchange rate therefor as quoted by the Administrative Agent as of 11:00 A.M. (London time) on the date three Business Days prior to the date of any determination thereof for purchase on such date.

“Capital Stock” shall mean any capital stock of the Company or any Consolidated Subsidiary (to the extent issued to a Person other than the Borrowers), whether common or preferred.

“Cash Equivalents” shall mean, as to any Person, (i) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof) having maturities of not more than one year from the date of acquisition, (ii) time deposits and certificates of deposit of any commercial bank having, or which is the principal banking subsidiary of a bank holding company organized under the laws of the United States, any State thereof, the District of Columbia or any foreign jurisdiction having, capital, surplus and undivided profits aggregating in excess of $200,000,000, with maturities of not more than one year from the date of acquisition by such Person, (iii) repurchase obligations with a term of not more than 90 days for underlying securities of the types described in clause (i) above entered into with any bank meeting the qualifications specified in clause (ii) above, (iv) commercial paper rated at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody’s and in each

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case maturing not more than one year after the date of acquisition by such Person, (v) investments in money market funds substantially all of whose assets are comprised of securities of the types described in clauses (i) through (iv) above.

“Change of Control” shall mean the occurrence of any of the following events or conditions: (a) any Person or group of Persons (as used in Sections 13 and 14 of the Securities Exchange Act of 1934, and the rules and regulations thereunder) shall have become the beneficial owner (as defined in rules promulgated by the SEC) of more than 40% of the voting securities of the Company; or (b) a majority of the members of the Company’s board of directors are persons who are then serving on the board of directors without having been elected by the board of directors or having been nominated for election by its shareholders.

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder. Section references to the Code are to the Code, as in effect at the date of this Agreement and any subsequent provisions of the Code, amendatory thereof, supplemental thereto or substituted therefor.

“Commitment” shall mean, with respect to each Lender, at any time, the amount set forth opposite such Lender’s name on Annex I, as the same may be reduced pursuant to Sections 3.02, 3.03 or 9.01.

“Company” shall have the meaning provided in the first paragraph of this Agreement.

“Company Guaranty” shall mean the guaranty of the Company provided in Section 13.

“Competitive Bid Borrowing” shall mean a Borrowing by a Borrower of Competitive Bid Loans pursuant to Section 1.04.

“Competitive Bid Loan” shall have the meaning specified in Section 1.01(b).

“Competitive Bid Note” shall have the meaning provided in Section 1.06(a).

“Consolidated Net Worth” shall mean, as of any date of determination, the Net Worth of the Company and its Subsidiaries on such date determined on a consolidated basis, plus, to the extent not otherwise included in Net Worth, the then issued and outstanding amount of all Qualified Trust Preferred Securities and Qualified Mandatorily Convertible Preferred Securities.

“Consolidated Subsidiary” shall mean at any date any Subsidiary or other entity the accounts of which, in accordance with GAAP, would be consolidated with those of the Company in its consolidated financial statements as of such date.

“Consolidated Tangible Net Worth” shall mean, as of the date of any determination, Consolidated Net Worth of the Company on such date less the amount of all intangible items included therein, including, without limitation, goodwill, franchises, licenses, patents, trademarks, trade names, copyrights, service marks, brand names and write-ups of assets.

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“Consolidated Total Capitalization” shall mean, as of any date of determination, the sum of (i) Consolidated Total Debt and (ii) Consolidated Net Worth.

“Consolidated Total Debt” shall mean, as of any date of determination, all Debt of the Company and its Subsidiaries on such date determined on a consolidated basis.

“Credit Documents” shall mean this Agreement and any Notes.

“Cumulative Consolidated Net Income” shall mean, for any period, an amount equal to the net income of the Company and its Subsidiaries (determined on a consolidated basis in accordance with GAAP) for such period.

“DSB Assumption Agreement” shall mean an assumption agreement in the form of Exhibit G.

“Debentures” shall mean subordinated debt securities issued by the Company or any Subsidiary to a Special Purpose Trust in exchange for proceeds of Qualified Preferred Securities and common securities of such Special Purpose Trust.

“Debt” of any Person shall mean at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee under capital leases, (v) all obligations of such Person to reimburse any bank or other Person in respect of amounts payable under a banker’s acceptance, (vi) all Redeemable Preferred Stock of such Person (in the event such Person is a corporation), (vii) all obligations (absolute or contingent) of such Person to reimburse any bank or other Person in respect of amounts paid under a letter of credit or similar instrument, (viii) all Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person, and (ix) all Debt of others Guaranteed by such Person; provided, that (A) for the avoidance of doubt, insurance payment liabilities, as such, and liabilities arising in the ordinary course of such Person’s business as an insurance or reinsurance company (including GICs) or a corporate member of The Council of Lloyd’s or as a provider of financial or investment services or contracts (in each case other than in connection with the provision of financing to such Person or any of such Person’s Affiliate) shall not constitute Debt, and (B) solely for purposes of Section 8.10 and the definition of “Consolidated Total Debt,” “Debt” shall not include (I) any contingent obligations of any Person under or in connection with acceptance, letter of credit or similar facilities so long as no drawings or payments have been made in respect thereof, (II) obligations of the Company or any Subsidiary under any Debentures or under any subordinated guaranty of any Qualified Trust Preferred Securities or obligations of a Special Purpose Trust under any Qualified Trust Preferred Securities or (III) obligations of the Company in respect of any Redeemable Preferred Stock that is part of a unit which constitutes Qualified Mandatorily Convertible Preferred Securities, but only up until such time as such Redeemable Preferred Securities are remarketed in connection with the settlement of the related contract for the purchase and sale of the Company’s ordinary common shares.

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“Default” shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default.

“Defaulting Lender” shall mean any Lender with respect to which a Lender Default is in effect.

“Designated Subsidiary Borrower” shall mean Partner Reinsurance Company Ltd., PartnerRe S.A., Partner Reinsurance Company of the U.S., PartnerRe Insurance Company of New York and each 90% Owned Subsidiary of the Company which is designated as a Designated Subsidiary Borrower in accordance with Section 1.15.

“Dispositions” shall have the meaning provided for in Section 8.03(b).

“Dollar Equivalent” shall mean, at any time for the determination thereof in accordance with Section 12.07(b), the amount of Dollars which could be purchased with the amount of the relevant Alternate Currency involved in such computation at the spot exchange rate therefor as quoted by the Administrative Agent as of 11:00 A.M. (London time) on the date two Business Days prior to the date of any determination thereof for purchase on such date.

“Dollar” and the sign “$” shall each mean freely transferable lawful money of the United States.

“Effective Date” shall have the meaning provided in Section 5.01.

“Effective Overall Rate” shall mean the rate designated as such in the TEG Letter.

“EMU Legislation” shall mean the legislative measures of the European Council for the introduction of, changeover to or operation of a single or unified European currency.

“Equity Interests” shall mean, with respect to any Person, shares of capital stock of (or other ownership or profit interests in) such Person, warrants, options or other rights for the purchase or other acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or other acquisition from such Person of such shares (or such other interests), and other ownership or profit interests in such Person (including, without limitation, partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are authorized or otherwise existing on any date of determination.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. Section references to ERISA are to ERISA, as in effect as of the Effective Date and any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor.

“ERISA Affiliate” shall mean any corporation or trade or business which is a member of the same controlled group of corporations (within the meaning of Section 414(b) of

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the Code) as a Borrower or any of its Subsidiaries or is under common control (within the meaning of Section 414(c) of the Code) with the Borrower or any of its Subsidiaries.

“Euro” shall mean the lawful currency of each of the Participating Member States.

“Euro Equivalent” shall mean, at any time for the determination thereof, the amount of Euros which could be purchased with the amount of Dollars involved in such computation at the spot exchange rate therefor as quoted by JPMorgan Chase Bank as of 11:00 A.M. (London time) on the date two Business Days prior to the date of any determination thereof for purchase on such date.

“Eurodollar Loan” shall mean each Loan that at the election of each Borrower is bearing interest by reference to LIBOR.

“Event of Default” shall have the meaning specified in Section 9.01.

“Exchange Act” shall mean the U.S. Securities Exchange Act of 1934, as amended.

“Excluded Period” shall mean, with respect to any additional amount payable under Section 1.11(a)(ii), 1.11(c), 1.11(d), 1.11(e) or 2.04, the period ending 180 days prior to the applicable Lender’s delivery of the written notice referenced in 1.11(a)(ii), 1.11(c), 1.11(d) or 2.04, as applicable, with respect to such additional amount.

“Existing Credit Agreement” shall mean the Credit Agreement dated as of June 19, 2002, among the Company, the lenders party thereto from time to time and the JPMorgan Chase Bank, as administrative agent, as amended, modified or supplemented through, but not including, the Effective Date.

“Existing Lender” shall have the meaning provided in Section 2.09.

“Existing Letter of Credit” shall have the meaning provided in Section 2.09.

“Facility Fees” shall have the meaning specified in Section 3.01(a).

“Federal Funds Effective Rate” shall mean, for any period, a fluctuating interest rate equal for each day during such period to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three Federal Funds brokers of recognized standing selected by the Administrative Agent.

“Fees” shall mean all amounts payable pursuant to, or referred to in, Section 3.01.

“Final Maturity Date” shall mean June 17, 2007.

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“Financial Statement Delivery Date” shall mean each date upon which the Company’s audited annual financial statements are delivered pursuant to Section 7.01(b).

“Fiscal Year” means any fiscal year of the Borrowers.

“Foreign Pension Plan” shall mean any plan, fund (including, without limitation, any superannuation fund) or other similar program established or maintained outside the United States of America by the Borrower or any of its Subsidiaries primarily for the benefit of employees of the Borrower or such Subsidiaries residing outside the United States of America, which plan, fund or other similar program provides, or results in, retirement income, a deferral of income in contemplation of retirement or payments to be made upon termination of employment, and which plan is not subject to ERISA or the Code.

“GAAP” shall mean generally accepted accounting principles in the United States of America as in effect from time to time.

“Governmental Authority” means the government of the United States of America, or of any other nation, or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing regulatory or administrative powers or functions of or pertaining to government including, without limitation, any Applicable Insurance Regulatory Authority.

“Guarantee” by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to secure, purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to provide collateral security, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part), provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term “Guarantee” used as a verb has a corresponding meaning.

“Guaranteed Creditors” shall mean and include each of the Administrative Agent, the Lenders and the Issuing Agent.

“Guaranteed Obligations” shall mean the principal and interest on each Note issued by each Designated Subsidiary Borrower to each Lender, and Loans made to each Designated Subsidiary Borrower, under this Agreement and all reimbursement obligations and Unpaid Drawings with respect to Letters of Credit issued for the account of each Designated Subsidiary Borrower, together with all the other obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities (including, without limitation, indemnities, fees and interest thereon) of each Designated Subsidiary Borrower to such Lender, the Administrative Agent and the Issuing Agent

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now existing or hereafter incurred under, arising out of or in connection with this Agreement and each other Credit Document for which each Designated Subsidiary Borrower is a party and the due performance and compliance by any such Designated Subsidiary Borrower with all the terms, conditions and agreements contained in this Agreement and each such other Credit Document.

“Insurance Business” shall mean one or more aspects of the business of selling, issuing or underwriting insurance or reinsurance.

“Interest Period” shall mean (a) with respect to any Eurodollar Loan, the interest period applicable thereto, as determined pursuant to Section 1.10 and (b) with respect to any Competitive Bid Loan, the period beginning on the date of incurrence thereof and ending on the stated maturity date thereof.

“Interest Rate Basis” shall mean LIBOR and/or such other basis for determining an interest rate as the Borrowers and the Administrative Agent may agree upon from time to time.

“Issuing Agent” shall mean JPMorgan Chase Bank.

“Issuing Country” shall have the meaning specified in Section 12.17(a).

“Judgment Currency” shall have the meaning provided in Section 12.16(a).

“Judgment Currency Conversion Date” shall have the meaning provided in Section 12.16(a).

“L/C FMD Amount” shall mean the Letter of Credit Outstandings as of the Final Maturity Date.

“Lender” or “Lenders” shall have the meaning provided in the first paragraph of this Agreement.

“Lender Default” shall mean (i) the refusal (which has not been retracted) of a Lender to make available its portion of any Borrowing that it is required to make or (ii) a Lender having notified the Administrative Agent and/or each Borrower that it does not intend to comply with its obligations under Section 1.01, in the case of either clause (i) or (ii) above as a result of the appointment of a receiver or conservator with respect to such Lender at the direction or request of any regulatory agency or authority.

“Lender Register” shall have the meaning provided in Section 12.15.

“Letter of Credit” shall have the meaning provided in Section 2.01(a).

“Letter of Credit Fee” shall have the meaning provided in Section 3.01(c).

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“Letter of Credit Outstandings” shall mean, at any time, the sum of, without duplication (i) the aggregate Stated Amount of all Letters of Credit and (ii) the aggregate amount of all Unpaid Drawings in respect of all Letters of Credit.

“Letter of Credit Request” shall have the meaning provided in Section 2.02(a).

“Letter of Credit Supportable Obligations” shall mean obligations of the Borrowers or any of their Subsidiaries which are permitted to exist pursuant to the terms of this Agreement.

“LIBOR” shall mean, for each Interest Period applicable to any Loan (or other period for determination), the British Bankers Association Interest Settlement Rate that appears on page 3750 (or other appropriate page if the relevant currency does not appear on such page) of the Dow Jones Telerate Screen (or any successor page) for deposits in the relevant currency with maturities comparable to such Interest Period (or other period for determination) as of 11:00 A.M. (London time) on the date which is two Business Days prior to the commencement of such Interest Period (or other period for determination ) or, if such a rate does not appear on the Dow Jones Telerate Screen (or any successor page), the offered quotations to first-class banks in the London interbank market by JP Morgan Chase Bank for deposits in the relevant currency of amounts in same day funds comparable to the outstanding principal amount of such Loan with maturities comparable to such Interest Period (or other period for determination) determined as of 11:00 A.M. (London time) on the date which is two Business Days prior to the commencement of such Interest Period (or other period for determination).

“Lien” shall mean, with respect to any asset, any mortgage, deed to secure debt, deed of trust, lien, pledge, charge, security interest, security title, preferential arrangement which has the practical effect of constituting a security interest or encumbrance, servitude or encumbrance of any kind in respect of such asset to secure or assure payment of a Debt or a Guarantee, whether by consensual agreement or by operation of statute or other law, or by any agreement, contingent or otherwise, to provide any of the foregoing. For the purposes of this Agreement, the Company or any Subsidiary shall be deemed to own subject to a Lien any asset which they have acquired or hold subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset.

“Loan” or “Loans” shall mean each Revolving Loan and each Competitive Bid Loan.

“Margin Stock” shall have the meaning provided in Regulation U.

“Material Adverse Effect” shall mean, (i) a material adverse effect on the business, operations, property or financial condition of the Company and its Subsidiaries taken as a whole or (ii) a material adverse effect on (x) the rights and remedies of the Administrative Agent or the Lenders under the Credit Documents, (y) the ability of any Borrower to perform its obligations under the Credit Documents to which it is a party, as applicable, or (z) the legality, validity or enforceability of any Credit Document.

“Material Subsidiary” shall mean any Subsidiary of the Company whose total assets or total revenues exceed 2.5% of the total assets or gross revenues, respectively, of the

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Company and its Subsidiaries on a consolidated basis as of the most recent fiscal quarter end and for the most recent fiscal quarter period, respectively, determined in accordance with GAAP.

“Minimum Borrowing Amount” shall mean (i) for any Revolving Loans that are Dollar denominated, $2,500,000, (ii) for any Revolving Loans that are Alternate Currency Loans, an amount in the respective Approved Currency having a Dollar Equivalent determined at the time a Notice of Borrowing is received or a prepayment made of $2,500,000 (iii) for any Competitive Bid Loans that are Dollar denominated, $2,500,000 and (iv) for any Competitive Bid Loans that are Alternate Currency Loans, an amount in the respective Alternate Currency having a Dollar Equivalent (determined at the time a Notice of Competitive Bid Borrowing is received) of $2,500,000.

“Moody’s” shall mean Moody’s Investor Services Inc. and it successors.

“Moody’s Credit Rating” shall mean the rating level (it being understood that a rating level shall include numerical modifiers and (+) and (-) modifiers) assigned by Moody’s to the senior unsecured long-term debt of the Company. If the foregoing rating shall be changed by Moody’s, such change shall be effective for purposes of this definition on the Business Day following the day on which Moody’s announces such change.

“Multiemployer Plan” shall mean any multiemployer plan as defined in Section 4001(a)(3) of ERISA, which is maintained or contributed to by (or to which there is an obligation to contribute of) a Borrower, any of its Subsidiaries or any of its ERISA Affiliates, and each such plan for the five year period immediately following the latest date on which such Borrower, such Subsidiary or such ERISA Affiliate maintained, contributed to or had an obligation to contribute to such plan.

“Net Worth” shall mean, as to any Person, the sum of its capital stock, capital in excess of par or stated value of shares of its capital stock, retained earnings and any other account which, in accordance with GAAP, constitutes stockholders equity, excluding any treasury stock.

“New Solutions” shall mean PartnerRe New Solutions Inc., a Delaware corporation and a Wholly-Owned Subsidiary of the Borrower.

“90%-Owned Subsidiary” of any Person shall mean any other Person to the extent at least 90% of each class of the capital stock or other ownership interests are owned directly or indirectly by such first Person.

“Non-Continuing Lender Agreement” shall mean the Non-Continuing Lender Agreement substantially in the form of Exhibit J (appropriately completed).

“Non-Defaulting Lender” shall mean each Lender other than a Defaulting Lender.

“Note” shall mean each Revolving Note and each Competitive Bid Note.

“Notice of Borrowing” shall have the meaning provided in Section 1.03(a).

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“Notice of Competitive Bid Borrowing” shall have the meaning provided in Section 1.04(a).

“Notice of Conversion” shall have the meaning provided in Section 1.07.

“Notice of Non-Extension” shall have the meaning specified in Section 2.05.

“Notice Office” shall mean (a) except as provided in clause (b) below, the office of the Administrative Agent at 1111 Fannin 10^th Floor, Houston, Texas 77002, Attention: Jeremy Jones, Telephone: 713-750-3507, Facsimile: 713-750-2223 and (b) in the case of Notices of Borrowing in respect of Eurodollar Loans constituting Alternate Currency Loans, the office of the Administrative Agent at 125 London Wall, London, U.K. EC2Y5; or in each case such other office as the Administrative Agent may designate to the Borrowers from time to time.

“Obligations” shall mean all amounts, direct or indirect, contingent or absolute, of every type or description, and at any time existing, owing to the Administrative Agent or any Lender pursuant to the terms of this Agreement or any other Credit Document.

“Obligation Currency” shall have the meaning provided in Section 12.16(a).

“Other Alternate Currency” shall mean any freely transferable currency other than any Primary Alternate Currency, to the extent such currency is approved by the Administrative Agent and each of the Lenders.

“Participant” shall have the meaning provided in Section 2.09.

“Participating Member State” shall mean any member state of the European Communities that adopts or has adopted the Euro as its lawful currency in accordance with the legislation of the European Union relating to European Monetary Union.

“Partner Reinsurance Company Ltd.” shall mean Partner Reinsurance Company Ltd., a company organized under the laws of Bermuda.

“PartnerRe Insurance Company of New York” shall mean PartnerRe Insurance Company of New York, a corporation organized under the laws of the State of New York.

“PartnerRe S.A.” shall mean PartnerRe S.A., a company organized under the laws of France.

“Partner Reinsurance Company of the US” shall mean Partner Reinsurance Company of the U.S., a corporation organized under the laws of the State of New York.

“Patriot Act” shall have the meaning provided in Section 12.19.

“Payment Office” shall mean the office of the Administrative Agent at 1111 Fannin 10^th Floor, Houston, Texas 77002, Jeremy Jones, Telephone: 713-750-3507, Facsimile: 713-750-2223, or such other office or offices as the Administrative Agent may designate to the Borrowers from time to time.

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“PBGC” shall mean the Pension Benefit Guaranty Corporation established pursuant to Section 4002 of ERISA, or any successor thereto.

“Percentage” shall mean, at any time for each Lender, the percentage obtained by dividing such Lender’s Commitment at such time by the Total Commitment then in effect, provided that if the Total Commitment has been terminated, the Percentage of each Lender shall be determined by dividing such Lender’s Commitment as in effect immediately prior to such termination by the Total Commitment as in effect immediately prior to such termination (but also giving effect to any assignments made in accordance with Section 12.04(b) after the date on which the Total Commitment has terminated).

“Person” shall mean any individual, partnership, limited liability company, joint venture, firm, corporation, association, trust or other enterprise or business entity or any government or political subdivision or any agency, department or instrumentality thereof.

“Plan” shall mean any pension plan as defined in Section 3(2) of ERISA and subject to Title IV of ERISA, which is maintained or contributed to by (or to which there is an obligation to contribute of) a Borrower, any of its Subsidiaries or any of its ERISA Affiliates, and each such plan for the five year period immediately following the latest date on which each such Borrower, its Subsidiaries or ERISA Affiliates maintained, contributed to or had an obligation to contribute to such plan.

“Pounds Sterling” shall mean freely transferable lawful money of the United Kingdom.

“Pounds Sterling Equivalent” shall mean, at any time for the determination thereof, the amount of Pounds Sterling which could be purchased with the amount of Dollars involved in such computation at the spot exchange rate therefor as quoted by JPMorgan Chase Bank as of 11:00 A.M. (London time) on the date two Business Days prior to the date of any determination thereof for purchase on such date.

“Primary Alternate Currency” shall mean each of Euros, Pounds Sterling, Swiss Francs and Canadian Dollars.

“Prime Lending Rate” shall mean the rate which JPMorgan Chase Bank announces from time to time as its prime commercial lending rate, the Prime Lending Rate to change when and as such prime lending rate changes. The Prime Lending Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. JPMorgan Chase Bank may make commercial loans or other loans at rates of interest at, above or below the Prime Lending Rate.

“Principal Amount” shall mean (i) the outstanding principal amount of each Loan denominated in Dollars, and/or (ii) the Dollar Equivalent of the outstanding principal amount of each Alternate Currency Loan, as the context may require.

“Private Act” shall mean separate legislation enacted in Bermuda with the intention that such legislation apply specifically to a Borrower, in whole or in part.

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“Qualified Mandatorily Convertible Preferred Securities” shall mean (without duplication) (a) the 8% Premium Equity Participating Security Units issued by the Company; and (b) other units comprised of (i) preferred shares of the Company and (ii) a contract for the sale of ordinary common shares of the Company so long as the holder of such unit is obligated to purchase such ordinary common shares with cash or the proceeds from remarketing such preferred shares.

“Qualified Trust Preferred Securities” shall mean (a) the 7.90% Preferred Securities issued by PartnerRe Capital Trust I and guaranteed by the Company; and (b) other preferred securities issued by a Special Purpose Trust which shall provide, among other things, that dividends shall be payable only out of proceeds of interest payments on the Debentures, so long as such preferred securities do not constitute Redeemable Preferred Stock.

“Rating Agency” shall mean S&P or Moody’s, as the case may be.

“Redeemable Preferred Stock” of any Person shall mean any preferred stock issued by such Person which (a) is either (i) mandatorily redeemable (by sinking fund or similar payments or otherwise) prior to the fifth anniversary of the Final Maturity Date or (ii) redeemable at the option of the holder thereof or (b) contains any financial performance related covenants or incurrence covenants which restrict the operations of the issuer thereof; provided that any preferred stock that such Person has the right or obligation to redeem at such time with Capital Stock that is not Redeemable Preferred Stock, shall not constitute Redeemable Preferred Stock.

“Register” shall have the meaning provided in Section 12.15.

“Regulated Insurance Company” shall mean each Subsidiary of the Company, whether now owned or hereafter acquired, that is authorized or admitted to carry on or transact Insurance Business in any jurisdiction (domestic or foreign) and is regulated by any Applicable Insurance Regulatory Authority.

“Regulation U” shall mean Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing margin requirements.

“Regulation X” shall mean Regulation X of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing margin requirements.

“Relevant Currency Equivalent” shall mean the Dollar Equivalent, the Canadian Dollar Equivalent, the Euro Equivalent, the Pounds Sterling Equivalent or the Swiss Franc Equivalent.

“Replaced Lender” shall have the meaning provided in Section 1.14.

“Replacement Lender” shall have the meaning provided in Section 1.14.

“Reply Date” shall have the meaning specified in Section 1.04(a).

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“Required Lenders” shall mean at any time Non-Defaulting Lenders having at least a majority of the aggregate Commitments of all Non-Defaulting Lenders; provided that if the Total Commitment has been terminated, then the Required Lenders shall mean Lenders whose outstanding Loans equal or exceed a majority of the aggregate outstanding Loans at such time.

“Retroactive Period” shall have the meaning provided in Section 1.11.

“Revolving Loan” shall have the meaning specified in Section 1.01(a).

“Revolving Note” shall have the meaning provided in Section 1.06(a).

“S&P” shall mean Standard & Poor’s Ratings Group and its successors.

“S&P Credit Rating” shall mean the rating level (it being understood that a rating level shall include numerical modifiers and (+) and (-) modifiers) assigned by S&P to the senior unsecured long-term debt of the Company. If the foregoing rating shall be changed by S&P, such change shall be effective for purposes of this definition on the Business Day following the day on which S&P announces such change.

“Section 4.04 Certificate” shall have the meaning provided in Section 4.04(b)(ii).

“Service of Process Agent” means Partner Reinsurance Company of the U.S., with offices on the date hereof located at 1 Greenwich Plaza, Greenwich, CT 06830.

“Special Purpose Trust” shall mean a special purpose business trust established by the Company or any Subsidiary of which the Company or any Subsidiary will hold all the common securities, which will be the issuer of Qualified Trust Preferred Securities, and which will loan to the Company or any Subsidiary (such loan being evidenced by the Debentures) the net proceeds of the issuance and sale of the Qualified Trust Preferred Securities and common securities of such Special Purpose Trust.

“Spread” shall mean a percentage per annum in excess of, or less than, an Interest Rate Basis.

“Spread Borrowing” shall mean a Competitive Bid Borrowing with respect to which a Borrower has requested the Bidder Lenders to make Competitive Bid Loans at a Spread over or under a specified Interest Rate Basis.

“Stated Amount” shall mean at, any time, (i) if the Letter of Credit is denominated in Dollars, the maximum amount available to be drawn thereunder (regardless of whether any conditions for drawing could then be met) and (ii) if the Letter of Credit is an Alternative Currency Letter of Credit, the Dollar Equivalent of the maximum amount available to be drawn under the Letter of Credit (regardless of whether any conditions for drawing could then be met).

“Subsidiary” of any Person shall mean and include (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time

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stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through Subsidiaries and (ii) any partnership, association, joint venture or other entity in which such Person directly or indirectly through Subsidiaries, has more than a 50% equity interest at the time. Unless otherwise expressly provided, all references herein to “Subsidiary” shall mean a Subsidiary of the Company.

“Swiss Franc Equivalent” shall mean, at any time for the determination thereof, the amount of Swiss Francs which could be purchased with the amount of Dollars involved in such computation at the spot exchange rate therefor as quoted by JPMorgan Chase Bank as of 11:00 A.M. (London time) on the date two Business Days prior to the date of any determination thereof for purchase on such date.

“Swiss Francs” shall mean freely transferable lawful money of Switzerland.

“Tax Refund” shall have the meaning provided in Section 4.4(d).

“Taxes” shall have the meaning provided in Section 4.04(a).

“TEG Letter” shall mean the letter dated as of the date hereof addressed to PartnerRe S.A. from the Administrative Agent setting forth the effective overall interest rate in respect of the Loans to be made available to PartnerRe S.A. and the basis therefor.

“Total Commitment” shall mean, at any time, the sum of the Commitments of each of the Lenders at such time.

“Total Unutilized Commitment” shall mean, at any time, the Total Commitment at such time minus the sum of the aggregate outstanding Principal Amount of Loans at such time and the Letter of Credit Outstandings at such time.

“Type” shall mean any type of Loan determined with respect to the interest option applicable thereto.

“Unpaid Drawings” shall have the meaning provided in Section 2.03(a).

“U.S. Borrower” shall mean a Borrower organized under the laws of the United States.

“Utilization Fee” shall have the meaning provided for in Section 3.01(b).

“Wholly-Owned Subsidiary” of any Person shall mean any other Person to the extent all of the capital stock or other ownership interests in such other Person, other than directors’ qualifying shares, is owned directly or indirectly by such first Person.

“Written” or “in writing” shall mean any form of written communication or a communication by means of facsimile transmission, telegraph or cable.

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SECTION 11. The Administrative Agent.

11.01 Appointment. The Lenders hereby designate JPMorgan Chase Bank as Administrative Agent (such term as used in this Section 11 to include JPMorgan Chase Bank, acting as Issuing Agent under this Agreement and each Letter of Credit), to act as specified herein and in the other Credit Documents. Each Lender hereby irrevocably authorizes, and each holder of any Note by the acceptance of such Note shall be deemed irrevocably to authorize, the Administrative Agent to take such action on its behalf under the provisions of this Agreement, the other Credit Documents and any other instruments and agreements referred to herein or therein and to exercise such powers and to perform such duties hereunder and thereunder as are specifically delegated to or required of the Administrative Agent by the terms hereof and thereof and such other powers as are reasonably incidental thereto. The Agents may perform any of their duties hereunder by or through their respective officers, directors, agents, employees or affiliates.

11.02 Nature of Duties. The Administrative Agent shall not have any duties or responsibilities except those expressly set forth in this Agreement and the other Credit Documents. Neither the Administrative Agent nor any of its respective officers, directors, agents, employees or affiliates shall be liable for any action taken or omitted by them hereunder or under any other Credit Document or in connection herewith or therewith, unless caused by their gross negligence or willful misconduct. The duties of the Administrative Agent shall be mechanical and administrative in nature; the Administrative Agent shall not have by reason of this Agreement or any other Credit Document a fiduciary relationship in respect of any Lender or the holder of any Note; and nothing in this Agreement or any other Credit Document, expressed or implied, is intended to or shall be so construed as to impose upon either Agent any obligations in respect of this Agreement or any other Credit Document except as expressly set forth herein or therein with respect to the Administrative Agent.

11.03 Lack of Reliance on the Administrative Agent. Independently and without reliance upon the Administrative Agent, each Lender and the holder of each Note, to the extent it deems appropriate, has made and shall continue to make (i) its own independent investigation of the financial condition and affairs of the Borrowers and their Subsidiaries in connection with the making and the continuance of the Loans and the taking or not taking of any action in connection herewith and (ii) its own appraisal of the creditworthiness of the Borrowers and their Subsidiaries and, except as expressly provided in this Agreement, the Administrative Agent shall not have any duty or responsibility, either initially or on a continuing basis, to provide any Lender or the holder of any Note with any credit or other information with respect thereto, whether coming into its possession before the making of the Loans or at any time or times thereafter. The Administrative Agent shall not be responsible to any Lender or the holder of any Note for any recitals, statements, information, representations or warranties herein or in any document, certificate or other writing delivered in connection herewith or for the execution, effectiveness, genuineness, validity, enforceability, perfection, collectibility, priority or sufficiency of this Agreement or any other Credit Document or the financial condition of the Borrowers and their Subsidiaries be required to make any inquiry concerning either the performance or observance of any of the terms, provisions or conditions of this Agreement or any other Credit Document, or the financial condition of the Borrowers and their Subsidiaries or the existence or possible existence of any Default or Event of Default.

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11.04 Certain Rights of the Administrative Agent. If any Administrative Agent shall request instructions from the Required Lenders with respect to any act or action (including failure to act) in connection with this Agreement or any other Credit Document, the Administrative Agent shall be entitled to refrain from such act or taking such action unless and until the Administrative Agent shall have received instructions from the Required Lenders; and the Administrative Agent shall not incur liability to any Person by reason of so refraining. Without limiting the foregoing, neither any Lender nor the holder of any Note shall have any right of action whatsoever against the Administrative Agent as a result of the Administrative Agent acting or refraining from acting hereunder or under any other Credit Document in accordance with the instructions of the Required Lenders.

11.05 Reliance. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, statement, certificate, telex, teletype, facsimile or telecopier message, cablegram, radiogram, order or other document or telephone message signed, sent or made by any Person that such Agent believed to be the proper Person, and, with respect to all legal matters pertaining to this Agreement and any other Credit Document and its duties hereunder and thereunder, upon advice of counsel selected by the Administrative Agent.

11.06 Indemnification. To the extent the Administrative Agent is not reimbursed and indemnified by the Borrowers, the Lenders will reimburse and indemnify the Administrative Agent, in proportion to their respective “percentages” as used in determining the Required Lenders, for and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, judgments, costs, expenses or disbursements of whatsoever kind or nature which may be imposed on, asserted against or incurred by the Administrative Agent in performing its respective duties hereunder or under any other Credit Document, in any way relating to or arising out of this Agreement or any other Credit Document provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or willful misconduct of the Administrative Agent.

11.07 The Administrative Agent’s Individual Capacities. With respect to its obligation to make Loans under this Agreement, the Administrative Agent shall have the rights and powers specified herein for a “Lender” and may exercise the same rights and powers as though it were not performing the duties specified herein; and the term “Lenders,” “Required Lenders,” “holders of Notes” or any similar terms shall, unless the context clearly otherwise indicates, include the Administrative Agent in its individual capacities. The Administrative Agent may accept deposits from, lend money to, and generally engage in any kind of banking, trust or other business with each Borrower or any Affiliate of each Borrower as if they were not performing the duties specified herein, and may accept fees and other consideration from each Borrower for services in connection with this Agreement and otherwise without having to account for the same to the Lenders.

11.08 Holders. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Administrative Agent. Any request, authority or consent of any Person who, at the time of making

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such request or giving such authority or consent, is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee, assignee or indorsee, as the case may be, of such Note or of any Note or Notes issued in exchange therefor.

11.09 Resignation by the Administrative Agent. (a) The Administrative Agent may resign from the performance of all its functions and duties hereunder and/or under the other Credit Documents at any time by giving 15 Business Days’ prior written notice to the Borrowers and the Lenders. Such resignation shall take effect upon (i) the appointment of a successor Administrative Agent pursuant to clauses (b) and (c) below or as otherwise provided below and (ii) notice by the Administrative Agent to each beneficiary of each then outstanding Letter of Credit of the change in Administrative Agent. Upon the effectiveness of such resignation, the resigning Administrative Agent shall return to the Company a pro-rated portion of any administrative fee that has been paid in advance for the period following the effectiveness of its resignation.

(b) Upon any such notice of resignation, the Required Lenders shall appoint a successor Administrative Agent hereunder who shall be a Lender, commercial bank or trust company reasonably acceptable to the Company.

(c) If a successor Administrative Agent shall not have been so appointed within such 15 Business Day period, the Administrative Agent, with the consent of the Company shall then appoint a successor Administrative Agent who shall serve as Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided above.

SECTION 12. Miscellaneous.

12.01 Payment of Expenses, etc. The Borrowers jointly and severally agree to: (i) pay all reasonable out-of-pocket costs and expenses (1) of the Administrative Agent and the Issuing Agent in connection with the negotiation, syndication, preparation, execution, delivery and administration of the Credit Documents, Letters of Credit or the documents and instruments referred to therein and any amendment, waiver or consent relating thereto (including, without limitation, the reasonable fees and disbursements of White & Case LLP and of consultants and advisors to the Administrative Agent and its counsel) and (2) of the Administrative Agent, the Issuing Agent and each of the Lenders in connection with the enforcement of the Credit Documents, Letters of Credit or the documents and instruments referred to therein (including, without limitation, the reasonable fees and disbursements of counsel for each of the Lenders); (ii) pay and hold the Administrative Agent, the Issuing Agent and each Lender harmless from and against any and all present and future stamp, VAT and other similar taxes with respect to the foregoing matters and/or fees and save each of the Lenders harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Lender) to pay such taxes; and (iii) indemnify each Lender (including in its capacity as an Administrative Agent and Issuing Agent), its officers, directors, employees, representatives and agents from and hold each of them harmless against any and all losses, liabilities, claims, damages or expenses incurred by any of them as a result of, or arising out of, or in any way related to, or by reason of, an investigation (other than an investigation commenced by such Lender), litigation or other proceeding (whether or not the Administrative

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Agent or any Lender is a party thereto and whether or not any such investigation, litigation or other proceeding is between or among the Administrative Agent, any Lender, or any other third Person) related to the entering into and/or performance of any Credit Document, Letters of Credit or the use of the proceeds of any Loans hereunder or the consummation of any transactions contemplated in any Credit Document, and in each case, including, without limitation, the reasonable fees and disbursements of counsel incurred in connection with any such investigation, litigation or other proceeding (but excluding any such losses, liabilities, claims, damages or expenses to the extent incurred by reason of the gross negligence or willful misconduct of the Person to be indemnified). All expenses paid by the Borrowers pursuant to this Section 12.01 shall be paid in the currency in which such expenses were incurred by the Administrative Agent, Issuing Agent or Lenders, as the case may be.

12.02 Right of Setoff. In addition to any rights or remedies (including other rights of set off) which any Lender may have, now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence and continuance of an Event of Default, each Lender is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to any Borrower or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits in whatever currency (general or special, time or demand, provisional or final) at any time held and any other indebtedness at any time held or owing by such Lender (including, without limitation, by branches and agencies of such Lender wherever located, but excluding any assets in securities custody accounts) to or for the credit or the account of any Borrower against and on account of the Obligations and liabilities of any such Borrower, now or hereafter existing, to such Lender or any other Lender under this Agreement or under any of the other Credit Documents, including, without limitation, all interests in Obligations of any such Borrower purchased by such Lender or any other Lender pursuant to Section 12.06(b), and all other claims of any nature or description arising out of or connected with this Agreement or any other Credit Document, irrespective of whether or not such Lender shall have made any demand hereunder and although said Obligations, liabilities or claims, or any of them, shall be contingent or unmatured. Each Lender is hereby designated the agent of all other Lenders for purposes of effecting set off pursuant to this Section 12.02.

12.03 Notices. Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including telecopier or facsimile) and mailed, telecopied, faxed or delivered, if to a Borrower, at the address specified opposite its signature below or in the other relevant Credit Documents, as the case may be; if to any Lender or the Administrative Agent, at its address specified for such Lender or the Administrative Agent on Annex II hereto; or, at such other address as shall be designated by any party in a written notice to the other parties hereto. All such notices and communications shall be mailed, telecopied or sent by overnight courier, and shall be effective when received.

12.04 Benefit of Agreement. (a) This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto, provided that no Borrower may assign or transfer any of its rights or obligations hereunder without the prior written consent of the Lenders. Each Lender may, without the consent of the Borrowers, at any time grant participations in any of its rights hereunder or under any of the Notes to any Person, provided that (x) in the case of any such participation, the

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participant shall not have any rights under this Agreement or any of the other Credit Documents (the participant’s rights against such Lender in respect of such participation to be those set forth in the agreement executed by such Lender in favor of the participant relating thereto) and all amounts payable by the Borrowers hereunder shall be determined as if such Lender had not sold such participation, except that the participant shall be entitled to the benefits of Sections 1.11 and 4.04 of this Agreement to the extent that such Lender would be entitled to such benefits if the participation had not been entered into or sold and (y) no Lender shall transfer, grant or assign any participation under which the participant shall have rights to approve any amendment to or waiver of this Agreement or any other Credit Document except to the extent such amendment or waiver would extend the final scheduled maturity of any Loan or Note in which such participant is participating, or reduce the rate or extend the time of payment of interest or Fees thereon (except in connection with a waiver of the applicability of any post-default increase in interest rates), or reduce the principal amount thereof, or increase such participant’s participating interest in any Commitment over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of a mandatory reduction in the Total Commitment, or a mandatory prepayment, shall not constitute a change in the terms of any Commitment).

(b) Notwithstanding the foregoing, (x) any Lender may assign all or a portion of and its rights and obligations hereunder to another Lender (or an Affiliate of such assigning Lender), and (y) with the consent of the Administrative Agent and, so long as no Default or Event of Default exists, the Company (which consent shall not be unreasonably withheld), any Lender may assign all or a portion of its rights and obligations hereunder to one or more Persons. No assignment pursuant to the immediately preceding sentence by a Lender (or by Lenders which are Affiliates of each other) shall to the extent such assignment represents an assignment to an institution other than one or more Lenders hereunder (or to an Affiliate of an assigning Lender), be in an aggregate amount less than $5,000,000 unless all of the rights and obligations of the assigning Lender (or group of Lenders which are Affiliates) is so assigned and no assignment shall be effective until all of the then outstanding Letters of Credit are returned by each respective beneficiary to the Issuing Agent for cancellation in exchange for new or amended Letters of Credit which give effect to such assignment (it being understood and agreed that if the beneficiaries of all then outstanding Letters of Credit do not consent to such amendment or exchange, such assignment cannot occur). If any Lender so sells or assigns all or a part of its rights hereunder or under the Notes, any reference in this Agreement or the Notes to such assigning Lender shall thereafter refer to such Lender and to the respective assignee to the extent of their respective interests and the respective assignee shall have, to the extent of such assignment (unless otherwise provided therein), the same rights and benefits as it would if it were such assigning Lender. Each assignment pursuant to this Section 12.04(b) shall be effected by the assigning Lender and the assignee Lender executing an Assignment Agreement (appropriately completed). At the time of any such assignment, (i) either the assigning or the assignee Lender shall pay to the Administrative Agent a nonrefundable assignment fee of $3,500, (ii) Annex I shall be deemed to be amended to reflect the Commitment of the respective assignee (which shall result in a direct reduction to the Commitment of the assigning Lender) and of the other Lenders, (iii) the Borrowers at such time will issue new Notes to the respective assignee and to the assigning Lender in conformity with the requirements of Section 1.06 and (iv) all then outstanding Letters of Credit (if the beneficiaries thereof have agreed) shall be amended or returned to the Issuing Agent for cancellation and reissued to reflect such assignment. To the extent any assignment pursuant to this Section 12.04(b) is to a Person which is not already a

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Lender hereunder and which is not a United States Person (as such term is defined in Section 7701(a)(30) of the Code) for Federal income tax purposes, the respective assignee Lender shall provide to the Company and the Administrative Agent the appropriate Internal Revenue Service Forms (and, if applicable, a Section 4.04(b)(ii) Certificate) described in Section 4.04(b). To the extent that an assignment of all or any portion of a Lender’s Commitments and related outstanding obligations pursuant to this Section 12.04(b) would, at the time of such assignment, result in increased costs under Section 1.11 or 4.04 from those being charged by the respective assigning bank prior to such assignment, then the Borrowers shall not be obligated to pay such increased costs (although the Borrowers shall be obligated to pay any other increased costs of the type described above resulting from changes specified in said Section 1.11 or 4.04 occurring after the date of the respective assignment). Each Lender and each of the Borrowers agree to execute such documents (including without limitation amendments to this Agreement and the other Credit Documents) as shall be necessary to effect the foregoing. Nothing in this clause (b) shall prevent or prohibit any Lender from pledging its Notes or Loans to a Federal Reserve Bank in support of borrowings made by such Lender from such Federal Reserve Bank.

(c) Notwithstanding any other provisions of this Section 12.04, no transfer or assignment of the interests or obligations of any Lender hereunder or any grant of participation therein shall be permitted if such transfer, assignment or grant would require any Borrower to file a registration statement with the Securities and Exchange Commission or to qualify the Loans under the “Blue Sky” laws of any State.

12.05 No Waiver; Remedies Cumulative. No failure or delay on the part of any Administrative Agent or any Lender in exercising any right, power or privilege hereunder or under any other Credit Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies which any Agent or any Lender would otherwise have.

12.06 Payments Pro Rata. (a) The Administrative Agent agrees that promptly after its receipt of each payment from or on behalf of each Borrower in respect of any Obligations of such Borrower hereunder, it shall distribute such payment to the Lenders (other than any Lender that has expressly waived its right to receive its pro rata share thereof) pro rata based upon their respective shares, if any, of the Obligations with respect to which such payment was received.

(b) Each of the Lenders agrees that, if it should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or banker’s lien, by counterclaim or cross action, by the enforcement of any right under the Credit Documents, or otherwise) which is applicable to the payment of the principal of, or interest on, the Loans or Fees, of a sum which with respect to the related sum or sums received by other Lenders is in a greater proportion than the total of such Obligation then owed and due to such Lender bears to the total of such Obligation then owed and due to all of the Lenders immediately prior to such receipt, then such Lender receiving such excess payment shall purchase for cash without recourse or warranty from the other Lenders an interest in the Obligations of the respective Borrower to such Lenders in such amount as shall result in a

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proportional participation by all of the Lenders in such amount, provided that if all or any portion of such excess amount is thereafter recovered from such Lender, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest.

(c) Notwithstanding anything to the contrary contained herein, the provisions of the preceding Sections 12.06(a) and (b) shall be subject to the express provisions of this Agreement which require, or permit, differing payments to be made to Non-Defaulting Lenders as opposed to Defaulting Lenders.

12.07 Calculations; Computations. (a) The financial statements to be furnished to the Lenders pursuant hereto shall be made and prepared in conformity with GAAP, consistently applied throughout the periods involved (except as set forth in the notes thereto or as otherwise disclosed in writing by the Borrowers to the Lenders and with respect to any interim financial statements, subject to changes resulting from audit and normal year-end audit adjustments), provided that (x) except as otherwise specifically provided herein, all computations determining compliance with Sections 8.10 and 8.11, including definitions used therein, shall utilize accounting principles and policies in effect at the time of the preparation of, and in conformity with those used to prepare, the December 31, 2003 financial statements delivered to the Lenders pursuant to Section 6.04(a) and (y) if at any time the computations determining compliance with Sections 8.10 and 8.11 utilize accounting principles different from those utilized in the financial statements furnished to the Lenders, such financial statements shall be accompanied by reconciliation work-sheets.

(b) All computations of interest and Fees hereunder shall be made on the actual number of days elapsed over a year of 360 days (365-366 days for interest on Base Rate Loans when the Base Rate is based on the Prime Lending Rate).

(c) For purposes of this Agreement, the Dollar Equivalent of each Loan that is an Alternate Currency Loan and the Dollar Equivalent of the Stated Amount of each Letter of Credit that is an Alternate Currency Letter of Credit shall be calculated on the date when any such Loan is made, such Letter of Credit is issued, on the first Business Day of each month and at such other times as designated by the Administrative Agent. Such Dollar Equivalent shall remain in effect until the same is recalculated by the Administrative Agent as provided above and notice of such recalculation is received by the Borrowers, it being understood that until such notice of such recalculation is received, the Dollar Equivalent shall be that Dollar Equivalent as last reported to the Borrowers by the Administrative Agent. The Administrative Agent shall promptly notify the Borrowers and the Lenders of each such determination of the Dollar Equivalent.

12.08 Governing Law; Submission to Jurisdiction; Venue; Waiver of Jury Trial. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding with respect to this Agreement or any other Credit Document may be brought in the courts of the State of New York or of the United States for the Southern District of New York, and, by execution and delivery of this Agreement, each Borrower hereby irrevocably accepts for itself and in respect of its property, generally and

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unconditionally, the jurisdiction of the aforesaid courts. Each Borrower further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to it, to the extent located outside New York City, or by hand, to the extent located within New York City, at its address for notices pursuant to Section 12.03, such service to become effective 30 days after such mailing. Nothing herein shall affect the right of the Administrative Agent or any Lender to serve process in any manner permitted by law or to commence legal proceedings or otherwise proceed against each Borrower in any other jurisdiction.

(b) Each Borrower hereby irrevocably and unconditionally waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement or any other Credit Document brought in the courts referred to in clause (a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum.

(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

(d) Each Borrower hereby irrevocably designates, appoints and empowers the Service of Process Agent, as its designee, appointee and agent to receive, accept and acknowledge for and on its behalf, and in respect of its property, service of any and all legal process, summons, notices and documents which may be served in any such action or proceeding referred to in clause (a) above. If for any reason such designee, appointee and agent shall cease to be available to act as such, each Borrower agrees to designate a new designee, appointee and agent on the terms and for the purposes of this provision reasonably satisfactory to the Administrative Agent under this agreement.

12.09 Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Company and the Administrative Agent.

12.10 Headings Descriptive. The headings of the several sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement.

12.11 Amendment or Waiver. Neither this Agreement nor any other Credit Document nor any terms hereof or thereof may be changed, waived, discharged or terminated unless such change, waiver, discharge or termination is in writing signed by the Borrowers and the Required Lenders, provided that no such change, waiver, discharge or termination shall, without the consent of each Lender (other than a Defaulting Lender) directly affected thereby, (i) extend the Final Maturity Date or reduce the rate or extend the time of payment of interest (other

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than as a result of waiving the applicability of any post-default increase in interest rates) or Fees or other amounts payable hereunder, or reduce the principal amount thereof, or increase the Commitment of any Lender over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default shall not constitute a change in the terms of any Commitment of any Lender), (ii) amend, modify or waive any provision of this Section 12.11, (iii) reduce the percentage specified in, or (except to give effect to any additional facilities hereunder) otherwise modify, the definition of Required Lenders, (iv) release the Company from its obligations under Company Guaranty or (v) consent to the assignment or transfer by each Borrower of any of its rights and obligations under this Agreement.

12.12 Survival. All indemnities set forth herein including, without limitation, in Section 1.11, 1.12, 4.04, 12.01 or 12.16 shall survive the execution and delivery of this Agreement and the making and repayment of the Loans.

12.13 Domicile of Loans. Each Lender may transfer and carry its Loans at, to or for the account of any branch office, Subsidiary or affiliate of such Lender, provided that the Borrowers shall not be responsible for costs arising under Section 1.11 or 4.04 resulting from any such transfer (other than a transfer pursuant to Section 1.13 or 1.14) to the extent not otherwise applicable to such Lender prior to such transfer.

12.14 Confidentiality. Subject to Section 12.04, the Lenders shall hold all non-public information obtained pursuant to the requirements of this Agreement in accordance with its customary procedure for handling confidential information of this nature and in accordance with safe and sound banking practices and in any event may make disclosure to its Affiliates, employees, auditors, advisors or counsel or as reasonably required by any bona fide transferee or participant in connection with the contemplated transfer of any Loans or participation therein (so long as such transferee or participant agrees to be bound by the provisions of this Section 12.14) or as required or requested by any governmental agency or representative thereof or pursuant to legal process, provided that, unless specifically prohibited by applicable law or court order, each Lender shall notify the Company of any request by any governmental agency or representative thereof (other than any such request in connection with an examination of the financial condition of such Lender by such governmental agency) for disclosure of any such non-public information prior to disclosure of such information, and provided further that in no event shall any Lender be obligated or required to return any materials furnished by the Company or any of its Subsidiaries. Notwithstanding anything herein to the contrary, any Lender (and any employee, representative or other agent of such Lender) may disclose to any and all persons, without limitation of any kind, such Lender’s U.S. federal income tax treatment and the U.S. federal income tax structure of the transactions contemplated hereby relating to such Lender and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure. However, no disclosure of any information relating to such tax treatment or tax structure may be made to the extent nondisclosure is reasonably necessary in order to comply with applicable securities laws.

12.15 Registry. Each Borrower hereby designates the Administrative Agent to serve as the Borrower’s agent, solely for purposes of this Section 12.15, to maintain a register (the “Register”) on which it will record the Commitments from time to time of each of the Lenders, the Loans made by each of the Lenders and each repayment in respect of the principal

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amount of the Loans of each Lender. Failure to make any such recordation, or any error in such recordation shall not affect the Borrower’s obligations in respect of such Loans. With respect to any Lender, the transfer of the Commitments of such Lender and the rights to the principal of, and interest on, any Loan made pursuant to such Commitments shall not be effective until such transfer is recorded on the Register maintained by the Administrative Agent with respect to ownership of such Commitments and Loans and prior to such recordation all amounts owing to the transferor with respect to such Commitments and Loans shall remain owing to the transferor. The registration of assignment or transfer of all or part of any Commitments and Loans shall be recorded by the Administrative Agent on the Register only upon the acceptance by the Administrative Agent of a properly executed and delivered Assignment and Assumption Agreement pursuant to Section 12.04(b). Coincident with the delivery of such an Assignment and Assumption Agreement to the Administrative Agent for acceptance and registration of assignment or transfer of all or part of a Loan, or as soon thereafter as practicable, the assigning or transferor Lender shall surrender the Note evidencing such Loan, and thereupon one or more new Notes in the same aggregate principal amount shall be issued to the assigning or transferor Lender and/or the new Lender. The Borrower agrees to indemnify the Administrative Agent from and against any and all losses, claims, damages and liabilities of whatsoever nature which may be imposed on, asserted against or incurred by the Administrative Agent in performing its duties under this Section 12.15.

12.16 Judgment Currency. (a) The Borrowers’ obligations hereunder and under the other Credit Documents to make payments in the applicable Approved Currency (pursuant to such Obligation, the “Obligation Currency”) shall not be discharged or satisfied by any tender or recovery pursuant to any judgment expressed in or converted into any currency other than the Obligation Currency, except to the extent that such tender or recovery results in the effective receipt by the Administrative Agent or the respective Lender of the full amount of the Obligation Currency expressed to be payable to the Administrative Agent or such Lender under this Agreement or the other Credit Documents. If, for the purpose of obtaining or enforcing judgment against each Borrowers in any court or in any jurisdiction, it becomes necessary to convert into or from any currency other than the Obligation Currency (such other currency being hereinafter referred to as the “Judgment Currency”) an amount due in the Obligation Currency, the conversion shall be made at the Relevant Currency Equivalent, and, in the case of other currencies, the rate of exchange (as quoted by the Administrative Agent or if the Administrative Agent does not quote a rate of exchange on such currency, by a known dealer in such currency designated by the Administrative Agent) determined, in each case, as of the Business Day immediately preceding the day on which the judgment is given (such Business Day being hereinafter referred to as the “Judgment Currency Conversion Date”).

(b) If there is a change in the rate of exchange prevailing between the Judgment Currency Conversion Date and the date of actual payment of the amount due, the Borrowers covenant and agree to pay, or cause to be paid, such additional amounts, if any (but in any event not a lesser amount) as may be necessary to ensure that the amount paid in the Judgment Currency, when converted at the rate of exchange prevailing on the date of payment, will produce the amount of the Obligation Currency which could have been purchased with the amount of Judgment Currency stipulated in the judgment or judicial award at the rate of exchange prevailing on the Judgment Currency Conversion Date.

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(c) For purposes of determining the Relevant Currency Equivalent or any other rate of exchange for this Section, such amounts shall include any premium and costs payable in connection with the purchase of the Obligation Currency.

12.17 Euro. (a) If at any time that an Alternate Currency Loan is outstanding, the relevant Alternate Currency is fully replaced as the lawful currency of the country that issued such Alternate Currency (the “Issuing Country”) by the Euro so that all payments are to be made in the Issuing Country in Euros and not in the Alternate Currency previously the lawful currency of such country, then such Alternate Currency Loan shall be automatically converted into a Loan denominated in Euros in a principal amount equal to the amount of Euros into which the principal amount of such Alternate Currency Loan would be converted pursuant to the EMU Legislation and thereafter no further Loans will be available in such Alternate Currency, with the basis of accrual of interest, notices requirements and payment offices with respect to such converted Loans to be that consistent with the convention and practices in the London interbank market for Euro denominated Loans.

(b) The applicable Borrowers shall from time to time, at the request of any Lender, pay to such Lender the amount of any losses, damages, liabilities, claims, reduction in yield, additional expense, increased cost, reduction in any amount payable, reduction in the effective return of its capital, the decrease or delay in the payment of interest or any other return forgone by such Lender or its affiliates as a result of the tax or currency exchange resulting from the introduction, changeover to or operation of the Euro in any applicable nation or eurocurrency market.

12.18 Effective Overall Rate. In accordance with Article L 313-1 of the Code de la Consommation of the French Republic (former law nº 66-1010 of December 28, 1996) and with Decree nº 85-944 of September 4, 1985, an estimate of the Effective Overall Rate of each Loan to be made to PartnerRe S.A. is set forth in the TEG Letter, which is incorporated herein by reference and forms part of this Agreement.

12.19 USA Patriot Act. Each Lender hereby notifies each Borrower that pursuant to the requirements of the USA Patriot Act (“Title III of Pub. L 107-56 (signed into law October 26, 2001)) (the “Patriot Act”), it is required to obtain, verify and record information that identifies each Borrower, which information includes the name and address of each Borrower and other information that will allow such Lender to identify each such Borrower in accordance with the Patriot Act.

12.20 Return of Notes. Each Lender hereby agrees to return to the Company each of the Notes previously delivered to such Lender by any Borrower in connection with the Existing Credit Agreement. To the extent any Lender does not return all such Notes such Lender hereby indemnifies and holds harmless each Borrower that has not received such Notes from and against any liability which each such Borrower may sustain by reason of the loss, misplacement, destruction, theft or the failure of such Lender to return such Notes.

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SECTION 13. Company Guaranty.

13.01 The Guaranty. In order to induce the Lenders to enter into this Agreement and to extend credit hereunder and in recognition of the direct benefits to be received by the Company from the proceeds of the Loans and the issuance of the Letters of Credit, the Company hereby agrees with the Lenders as follows: the Company hereby unconditionally and irrevocably guarantees, as primary obligor and not merely as surety, the full and prompt payment when due, whether upon maturity, acceleration or otherwise, of any and all of the Guaranteed Obligations of each Designated Subsidiary Borrower to the Guaranteed Creditors. If any or all of the Guaranteed Obligations of any Designated Subsidiary Borrower to the Guaranteed Creditors becomes due and payable hereunder, the Company unconditionally promises to pay such indebtedness to the Guaranteed Creditors, or order, on demand, together with any and all expenses which may be incurred by the Guaranteed Creditors in collecting any of the Guaranteed Obligations. This Guaranty is a guaranty of payment and not of collection. If a claim is ever made upon any Guaranteed Creditor for repayment or recovery of any amount or amounts received in payment or on account of any of the Guaranteed Obligations and any of the aforesaid payees repays all or part of said amount by reason of (i) any judgment, decree or order of any court or administrative body having jurisdiction over such payee or any of its property or (ii) any settlement or compromise of any such claim effected by such payee with any such claimant, then and in such event the Company agrees that any such judgment, decree, order, settlement or compromise shall be binding upon the Company, notwithstanding any revocation of this Guaranty or any other instrument evidencing any liability of each Designated Subsidiary Borrower, and the Company shall be and remain liable to the aforesaid payees hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by any such payee.

13.02 Bankruptcy. Additionally, the Company unconditionally and irrevocably guarantees the payment of any and all of the Guaranteed Obligations of each Designated Subsidiary Borrower hereunder to the Guaranteed Creditors whether or not due or payable by each Designated Subsidiary Borrower upon the occurrence of any of the events specified in Section 9.01(g) and Section 9.01(h) with respect to such Designated Subsidiary Borrower, and unconditionally promises to pay such indebtedness to the Guaranteed Creditors, or order, on demand, in lawful money of the United States.

13.03 Nature of Liability. The liability of the Company hereunder is exclusive and independent of any security for or other guaranty of the Guaranteed Obligations of each Designated Subsidiary Borrower whether executed by the Company, any other guarantor or by any other party, and the liability of the Company hereunder is not affected or impaired by (a) any direction as to application of payment by each Designated Subsidiary Borrower or by any other party (other than a direction by the Guaranteed Creditor receiving such payment), or (b) any other continuing or other guaranty, undertaking or maximum liability of a guarantor or of any other party as to the Guaranteed Obligations of each Designated Subsidiary Borrower, or (c) any payment on or in reduction of any such other guaranty or undertaking, or (d) any dissolution, termination or increase, decrease or change in personnel by each Designated Subsidiary Borrower, or (e) any payment made to the Guaranteed Creditors on the Guaranteed Obligations which any such Guaranteed Creditor repays to each Designated Subsidiary Borrower pursuant to court order in any bankruptcy, reorganization, arrangement, moratorium or other debtor relief

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proceeding, and the Company waives any right to the deferral or modification of its obligations hereunder by reason of any such proceeding or (f) any action or inaction of the type described in Section 13.05.

13.04 Independent Obligation. The obligations of the Company under this Section 13 are independent of the obligations of any other guarantor, any other party or each Designated Subsidiary Borrower, and a separate action or actions may be brought and prosecuted against the Company whether or not action is brought against any other guarantor, any other party or each Designated Subsidiary Borrower and whether or not any other guarantor, any other party or each Designated Subsidiary Borrower be joined in any such action or actions. The Company waives, to the full extent permitted by law, the benefit of any statute of limitations affecting its liability under this Section 13 or the enforcement thereof. Any payment by a Designated Subsidiary Borrower or other circumstance which operates to toll any statute of limitations as to a Designated Subsidiary Borrower shall operate to toll the statute of limitations as to the Company.

13.05 Authorization. The obligations of the Company under this Section 13 shall be unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by any action taken by any Guaranteed Creditor to:

(a) change the manner, place or terms of payment of, and/or change or extend the time of payment of, renew, increase, accelerate or alter, any of the Guaranteed Obligations (including any increase or decrease in the rate of interest thereon), any security therefor, or any liability incurred directly or indirectly in respect thereof, and the Guaranty herein made shall apply to the Guaranteed Obligations as so changed, extended, renewed or altered;

(b) take and hold security for the payment of the Guaranteed Obligations and sell, exchange, release, impair, surrender, realize upon or otherwise deal with in any manner and in any order any property by whomsoever at any time pledged or mortgaged to secure, or howsoever securing, the Guaranteed Obligations or any liabilities (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and/or any offset thereagainst;

(c) exercise or refrain from exercising any rights against each Designated Subsidiary Borrower or others or otherwise act or refrain from acting;

(d) release or substitute any one or more endorsers, guarantors, each Designated Subsidiary Borrower or other obligors;

(e) settle or compromise any of the Guaranteed Obligations, any security therefor or any liability (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and may subordinate the payment of all or any part thereof to the payment of any liability (whether due or not) of each Designated Subsidiary Borrower to its creditors other than the Guaranteed Creditors;

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(f) apply any sums by whomsoever paid or howsoever realized to any liability or liabilities of each Designated Subsidiary Borrower to the Guaranteed Creditors regardless of what liability or liabilities of each Designated Subsidiary Borrower remain unpaid;

(g) consent to or waive any breach of, or any act, omission or default under, this Agreement or any other Credit Document or any of the instruments or agreements referred to herein or therein, or otherwise amend, modify or supplement this Agreement, any other Credit Document or any of such other instruments or agreements; and/or

(h) take any other action which would, under otherwise applicable principles of common law, give rise to a legal or equitable discharge of the Company from its liabilities under this Guaranty.

13.06 Reliance. It is not necessary for the Guaranteed Creditors to inquire into the capacity or powers of each Designated Subsidiary Borrower or the officers, directors, partners or agents acting or purporting to act on their behalf, and any Guaranteed Obligations made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder.

13.07 Subordination. Any indebtedness of each Designated Subsidiary Borrower now or hereafter owing to the Company is hereby subordinated to the Guaranteed Obligations of each Designated Subsidiary Borrower owing to the Guaranteed Creditors; and if the Administrative Agent so requests at a time when an Event of Default exists, no Designated Subsidiary Borrower shall make, or be permitted to make, any payment to the Company in respect of such indebtedness owed to the Company, but without affecting or impairing in any manner the liability of the Company under the other provisions of this Guaranty. Prior to the transfer by the Company of any note or negotiable instrument evidencing any of the indebtedness of each Designated Subsidiary Borrower to the Company, the Company shall mark such note or negotiable instrument with a legend that the same is subject to this subordination. Without limiting the generality of the foregoing, the Company hereby agrees with the Guaranteed Creditors that it will not exercise any right of subrogation which it may at any time otherwise have as a result of this Guaranty (whether contractual, under Section 509 of the Bankruptcy Code or otherwise) until all Guaranteed Obligations have been irrevocably paid in full in cash.

13.08 Waiver. (a) The Company waives any right (except as shall be required by applicable statute and cannot be waived) to require any Guaranteed Creditor to (i) proceed against each Designated Subsidiary Borrower, any other guarantor or any other party, (ii) proceed against or exhaust any security held from each Designated Subsidiary Borrower, any other guarantor or any other party or (iii) pursue any other remedy in any Guaranteed Creditor’s power whatsoever. The Company waives any defense based on or arising out of any defense of each Designated Subsidiary Borrower, any other guarantor or any other party, other than payment in full of the Guaranteed Obligations, based on or arising out of the disability of each Designated Subsidiary Borrower, any other guarantor or any other party, or the unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of each Designated Subsidiary Borrower other than payment in full of the Guaranteed Obligations. The Guaranteed Creditors may, at their election, foreclose on any

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security held by the Administrative Agent or any other Guaranteed Creditor by one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable (to the extent such sale is permitted by applicable law), or exercise any other right or remedy the Guaranteed Creditors may have against the Designated Subsidiary Borrower or any other party, or any security, without affecting or impairing in any way the liability of the Company hereunder except to the extent the Guaranteed Obligations have been paid. The Company waives any defense arising out of any such election by the Guaranteed Creditors, even though such election operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of the Company against each Designated Subsidiary Borrower or any other party or any security.

(b) The Company waives all presentments, demands for performance, protests and notices, including, without limitation, notices of nonperformance, notices of protest, notices of dishonor, notices of acceptance of this Guaranty, and notices of the existence, creation or incurring of new or additional Guaranteed Obligations. The Company assumes all responsibility for being and keeping itself informed of each Designated Subsidiary Borrower’s financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks which the Company assumes and incurs hereunder, and agrees that the Guaranteed Creditors shall have no duty to advise the Company of information known to them regarding such circumstances or risks.

The Company warrants and agrees that each of the waivers set forth above is made with full knowledge of its significance and consequences, and such waivers shall be effective to the maximum extent permitted by law.

* * *

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IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of this Agreement to be duly executed and delivered as of the date first above written.

PartnerRe Ltd. Chesney House	PARTNERRE LTD., as a Borrower
96 Pitts Bay Road Pembroke HM 08
Bermuda	By
Attention: Joe Barbosa		Name:
		Title:

with a copy to:

PartnerRe Ltd.

Chesney House

96 Pitts Bay Road

Pembroke HM 08

Bermuda

Attention: Amanda Sodergren

Partner Reinsurance Company Ltd. Chesney House	PARTNER REINSURANCE COMPANY LTD., as a Borrower
96 Pitts Bay Road Pembroke HM 08 Bermuda
Attention: Joe Barbosa	By
		Name:
		Title:

with a copy to:

PartnerRe Ltd.

Chesney House

96 Pitts Bay Road

Pembroke HM 08

Bermuda

Attention: Amanda Sodergren

PartnerRe S.A. 153, rue de Courcelles	PARTNERRE S.A., as a Borrower
75817 Paris, Cedex 17 Tel: 33(0)1 44 01 17 17
Fax: 33(0)1 44 01 17 80	By
Attention: Antoine Pin		Name:
		Title:

Partner Reinsurance Company of the U.S. 1 Greenwich Plaza	PARTNER REINSURANCE COMPANY OF THE U.S., as a Borrower
Greenwich, CT 06830 Tel: (203) 485-4200 Fax: (203) 485-4300
Attention: John B. Wong	By
		Name:
		Title:

with a copy to:
Partner Reinsurance Company of the U.S.
1 Greenwich Plaza	By
Greenwich, CT 06830		Name:
Attention: Cathy A. Hauck		Title:

Partnerre Insurance Company of New York 1 Greenwich Plaza	PARTNERRE INSURANCE COMPANY OF NEW YORK, as a Borrower
Greenwich, CT 06830 Tel: (203) 485-4200 Fax: (203) 485-4300
Attention: John B. Wong	By
		Name:
		Title:

with a copy to:
Partner Reinsurance Company of New York
1 Greenwich Plaza	By
Greenwich, CT 06830		Name:
Attention: Cathy A. Hauck		Title:

JPMORGAN CHASE BANK,
	Individually, as Issuing Agent and as Administrative Agent
By
	Name:
	Title:

[NAME OF LENDER]
By
	Name:
	Title:

ANNEX I

COMMITMENTS

Lender	Commitment
JPMorgan Chase Bank	$	60,000,000
Wachovia Bank, National Association	$	55,000,000
Barclays Bank Plc	$	55,000,000
Credit Suisse	$	55,000,000
HSBC Bank USA	$	55,000,000
ABN AMRO Bank N.V.	$	40,000,000
Bank of America, N.A.	$	40,000,000
Citibank, N.A.	$	40,000,000
Calyon, New York Branch	$	40,000,000
Lloyds TSB Bank Plc	$	40,000,000
National Australia Bank Limited	$	40,000,000
The Bank of Nova Scotia	$	40,000,000
The Royal Bank of Scotland	$	40,000,000
Deutsche Bank AG, New York Branch	$	25,000,000
Mellon Bank, N.A.	$	25,000,000
Standard Chartered Bank	$	25,000,000
UBS AG, Stamford Branch	$	25,000,000
Total:	$	700,000,000

ANNEX II

LENDER ADDRESSES

Barclays Bank Plc	54 Lombard Street London, EC3V 9EX Attention: Paul Johnson Tel: 44-207-699-3121 Fax: 44-207-699-2407
HSBC Bank USA	452 Fifth Avenue New York, New York 10018 Attention: Nair Raghu Tel: 212-525-1039 Fax: 212-525-8937
Wachovia Bank, National Association	301 South College Street, 5th Floor Charlotte, N.C. 28227 Attention: Greg Wilcox Tel: 704-374-4413 Fax: 704-383-7611
ABN AMRO Bank N.V.	55 East 52nd Street, 33rd Floor New York, NY 10055 Attention: Neil Stein Tel: 212-409-1489 Fax: 212-409-1718
Bank of America, N.A.	231 South LaSalle Street 10th Floor Chicago, IL 60697 Attention: Debra Basler Tel: 312-828-3734 Fax: 312-828-3600
Caylon, New York Branch	1301 Avenue of the Americas, 18th Floor New York, NY 10019 Attention: Peter Rasmussen Tel: 212-261-7718 Fax: 212-261-3438
Citibank, N.A.	388 Greenwich St. 23rd Floor New York, NY 10013 Attention: Michael Taylor Tel: 212-816-4033 Fax: 212-816-4144

Credit Suisse	Corporate & Retail Banking BACN 5 Bleicherweg 72 P.O. Box 100 CH-8070, Zurich Attention: Damian Hodel Tel: 41-1-333-23-79 Fax: 41-1-333-40-41
Deutsche Bank AG, New York Branch	60 Wall Street New York, NY 10005 Ruth Leung Tel: 212-250-8650 Fax: 212-797-0270
JPMorgan Chase Bank	270 Park Avenue New York, NY 10017 Attention: Helen Newcomb Tel: 212-270-3604 Fax: 212-270-1063
Lloyds TSB Bank Plc	1251 Avenue of the Americas, 39th Floor New York, NY 10020 Attention: Pat Kilian Tel: 212-930-8914 Fax: 212-930-5098
Mellon Bank, N.A.	One Mellon Center, Room 4505 Pittsburgh, PA 15258-0001 Attention: Maria Totin Tel: 412-236-1625 Fax: 412-234-8087
National Australia Bank Limited [ABN 12004044937]	88 Wood Street London EC2V7QQ Attention: Ray Catt Tel: 44-207-710-2139 Fax: 44-207-410-0237
The Royal Bank of Scotland	Floors 8 & 9 280 Bishopsgate London EC2M 4RB Attention: Jon Bowring Tel: 44-207-672-1041 Fax: 44-207-7672-1073

(ii)

Standard Chartered Bank	One Madison Avenue New York, NY 10010 Attention: Robert Gilbert Tel: 212-667-0493 or Attention: James Conti Tel: (212) 667-0644 Fax: 212-667-0273
The Bank of Nova Scotia	1 Liberty Plaza, 26th Floor New York, NY 10006 Attention: John Campbell Tel: 212-506-2257 Fax: 212-506-6995
UBS AG, Stamford Branch	677 Washington Blvd 6-South Stamford, CT 06901 Attention: Denise Conzo Tel: 203-719-3853 Fax: 203-719-3888

(iii)

ANNEX III

SUBSIDIARIES

	% Beneficial Ownership by Immediate Parent	Jurisdiction of Incorporation
PartnerRe Ltd.	—	Bermuda
Partner Reinsurance Company Ltd	100	Bermuda
PartnerRe Servicios Y Compania Limitada (1)	99	Chile
PARC GmbH & Co KG	100	Germany
PARC Service GmbH	100	Germany
PartnerRe Services Ltd	100	Bermuda
PartnerRe UK Holdings Limited	100	United Kingdom
PartnerRe (Curacao) N.V	100	Netherlands Antilles
PartnerRe Holdings B.V	100	Netherlands
PartnerRe Holdings SA	100	France
PartnerRe SA	100	France
PartnerRe U.S. Corporation(3)	66	United States
Partner Reinsurance Company of the U.S	100	United States
PartnerRe Insurance Company of New York	100	United States
Transat Madison Corp.	100	United States
PartnerRe Asset Management Corporation	100	United States
PartnerRe New Solutions Inc	100	United States
PartnerRe Finance I Inc	100	United States
PartnerRe Capital Trust I	100	United States
PartnerRe Finance II Inc	100	United States
PartnerRe Capital Trust II	100	United States
PartnerRe Capital Trust III	100	United States
Gesser SARL	100	France
SCI Francoreas	100	France
Coresa (2)	91	Luxembourg

⁽¹⁾ Partner Reinsurance Company Ltd holds 99% of PartnerRe Servicios Y Compania Limitada shares and PartnerRe Services Ltd holds the remaining 1%.

⁽²⁾ SCI Francoreas holds 90% of Coresa shares and PartnerRe SA holds the remaining 10%.

⁽³⁾ PartnerRe SA holds 66% of PartnerRe U.S. Corporation and PartnerRe Ltd. holds the remaining 34%.

ANNEX IV

INDEBTEDNESS

(in US$ millions)

Long term debt consisting of a fully collateralized fixed rate loan repayable in 2008. $ 220.0

ANNEX V

LIENS

(in US$ millions)

New York State Reg. 114 Trusts supporting reinsurance obligations to:
Unrelated third party U.S. ceding company clients	$	132.8
PartnerRe Ltd.’s wholly-owned U.S. reinsurance subsidiaries		344.3
Invested assets pledged in favor of ceding company clients		634.2
Statutory deposits held with U.S. state insurance regulators		20.7
Collateral supporting long term debt (see Annex IV)		260.7
	$	1,392.7

TABLE OF CONTENTS

		Page
SECTION 1.	Amount and Terms of Credit	1
1.01	Commitment	1
1.02	Minimum Borrowing Amounts, etc.	1
1.03	Notice of Borrowing of Revolving Loans	2
1.04	Competitive Bid Borrowings	2
1.05	Disbursement of Funds	4
1.06	Notes	5
1.07	Conversions	5
1.08	Pro Rata Borrowings, etc.	6
1.09	Interest	6
1.10	Interest Periods	7
1.11	Increased Costs, Illegality, etc.	8
1.12	Compensation	11
1.13	Change of Lending Office	11
1.14	Replacement of Lenders	11
1.15	Designated Subsidiary Borrowers	12
SECTION 2.	Letters of Credit	13
2.01	Letters of Credit	13
2.02	Letter of Credit Requests	15
2.03	Agreement to Repay Letter of Credit Drawings	15
2.04	Increased Costs	16
2.05	Letter of Credit Expiration Extensions	16
2.06	Changes to Stated Amount	17
2.07	Representations and Warranties of Lenders	17
2.08	Confirming Letters of Credit	17
2.09	Existing Letters of Credit	17
SECTION 3.	Fees; Commitments	19
3.01	Fees	19
3.02	Voluntary Reduction of Commitments	20
3.03	Mandatory Reduction of Commitments	21
SECTION 4.	Payments	21
4.01	Voluntary Prepayments	21
4.02	Mandatory Prepayments	21
4.03	Method and Place of Payment	22
4.04	Net Payments	23

(i)

SECTION 5.	Conditions Precedent	25
5.01	Conditions Precedent to Effective Date	25
5.02	Conditions Precedent to All Loans and Letters of Credit	27
SECTION 6.	Representations, Warranties and Agreements	28
6.01	Corporate Existence and Power	28
6.02	Corporate and Governmental Authorization; No Contravention	28
6.03	Enforceability	28
6.04	Financial Information	28
6.05	Litigation	29
6.06	Tax Returns and Payments	29
6.07	Indebtedness	29
6.08	Insurance Licenses	29
6.09	Intellectual Property	30
6.10	Not an Investment Company	30
6.11	Public Utility Holding Company Act	30
6.12	Ownership of Property; Liens	30
6.13	No Default	30
6.14	Full Disclosure	30
6.15	Compliance with Laws	30
6.16	Capital Stock	30
6.17	Compliance with ERISA	31
6.18	Margin Stock	31
6.19	Subsidiaries	31
6.20	Use of Proceeds	31
SECTION 7.	Affirmative Covenants	31
7.01	Information Covenants	31
7.02	Books, Records and Inspections	33
7.03	Maintenance of Existence	33
7.04	ERISA	33
7.05	Insurance	34
7.06	Maintenance of Property	34
7.07	Payment of Taxes	34
SECTION 8.	Negative Covenants	35
8.01	Liens	35
8.02	Dissolution	36
8.03	Consolidations, Mergers, Sales of Assets and Acquisitions	36
8.04	Use of Proceeds	37
8.05	Transactions with Affiliates	37
8.06	Indebtedness	37
8.07	Private Act	37
8.08	Restricted Payments	37
8.09	Business	37

(ii)

8.10	Leverage Ratio	38
8.11	Minimum Consolidated Tangible Net Worth	38
8.12	Claims Paying Ratings	38
SECTION 9.	Defaults	38
9.01	Events of Default	38
9.02	Notice of Default	40
SECTION 10.	Definitions	40
SECTION 11.	The Administrative Agent	58
11.01	Appointment	58
11.02	Nature of Duties	58
11.03	Lack of Reliance on the Administrative Agent	58
11.04	Certain Rights of the Administrative Agent	59
11.05	Reliance	59
11.06	Indemnification	59
11.07	The Administrative Agent’s Individual Capacities	59
11.08	Holders	59
11.09	Resignation by the Administrative Agent	60
SECTION 12.	Miscellaneous	60
12.01	Payment of Expenses, etc	60
12.02	Right of Setoff	61
12.03	Notices	61
12.04	Benefit of Agreement	61
12.05	No Waiver; Remedies Cumulative	63
12.06	Payments Pro Rata	63
12.07	Calculations; Computations	64
12.08	Governing Law; Submission to Jurisdiction; Venue; Waiver of Jury Trial	64
12.09	Counterparts	65
12.10	Headings Descriptive	65
12.11	Amendment or Waiver	65
12.12	Survival	66
12.13	Domicile of Loans	66
12.14	Confidentiality	66
12.15	Registry	66
12.16	Judgment Currency	67
12.17	Euro	68
12.18	Effective Overall Rate	68
12.19	USA Patriot Act	68
12.20	Return of Notes	68
SECTION 13.	Company Guaranty	69
13.01	The Guaranty	69

(iii)

13.02	Bankruptcy	69
13.03	Nature of Liability	69
13.04	Independent Obligation	70
13.05	Authorization	70
13.06	Reliance	71
13.07	Subordination	71
13.08	Waiver	71

ANNEX I	Commitments
ANNEX II	Lender Addresses
ANNEX III	Subsidiaries
ANNEX IV	Debt
ANNEX V	Liens
ANNEX VI	Letters of Credit Outstanding

EXHIBIT A-1	—	Form of Notice of Borrowing
EXHIBIT A-2	—	Form of Notice of Competitive Bid Borrowing
EXHIBIT B-1	—	Form of Revolving Note
EXHIBIT B-2	—	Form of Competitive Bid Note
EXHIBIT C	—	Form of Section 4.04(b)(ii) Certificate
EXHIBIT D-1	—	Form of Opinion of Christine Patton, Esq.
EXHIBIT D-2	—	Form of Opinion of Cathy A. Hauck, Esq.
EXHIBIT D-3	—	Form of Opinion of Davis Polk & Wardwell
EXHIBIT D-4	—	Form of Opinion of Bredin Prat
EXHIBIT E	—	Form of Officers’ Certificate
EXHIBIT F	—	Form of Assignment Agreement
EXHIBIT G	—	Form of DSB Assumption Agreement
EXHIBIT H	—	Form of Opinion of Designated Subsidiary Borrowers’ Counsel
EXHIBIT I	—	Form of Letter of Credit Request
EXHIBIT J	—	Form of Non-Continuing Lender Agreement
EXHIBIT K	—	Form of Compliance Certificate

(iv)

EX-10.2

Exhibit 10.2

CAPITAL MANAGEMENT MAINTENANCE AGREEMENT

BETWEEN

PARTNERRE LTD.

(Pembroke, Bermuda)

AND

PARTNERRE U.S. CORPORATION

(Wilmington, Delaware)

AND

PARTNER REINSURANCE COMPANY OF THE U.S.

(New York, New York)

This Capital Management Maintenance Agreement (“Agreement”), effective February 20, 2004, is entered into by and between PARTNERRE LTD. (“PRE”), a holding company domiciled in Pembroke, Bermuda, with its principal place of business located at Chesney House, 96 Pitts Bay Road, Pembroke HM 089 Bermuda, PARTNERRE U.S. CORPORATION (the “Holding Company”) and its subsidiary PARTNER REINSURANCE COMPANY OF THE U.S. (“the “Subsidiary”),a reinsurance company domiciled in the State of New York, U.S.A., with principal offices located at One Greenwich Plaza, Greenwich, Connecticut 06830.

WITNESSETH:

WHEREAS, PRE is the ultimate owner of 100% of the outstanding common stock of Subsidiary;

WHEREAS, the Holding Company is the penultimate owner of 100% of the outstanding common stock of Subsidiary;

WHEREAS, Subsidiary has issued and intends to issue reinsurance contracts (“Contracts”) to third parties;

WHEREAS, Subsidiary depends, in part, on favorable consideration from reinsurance buyers, who place great emphasis on the financial solidity of reinsurers;

WHEREAS, PRE wishes to provide certain assurances with respect to the maintenance of the net worth of Subsidiary;

WHEREAS, PRE and Subsidiary desire to take certain actions to enhance and maintain the financial condition of Subsidiary as hereinafter set forth in order to enable Subsidiary to issue such Contracts; and

1

WHEREAS, PRE, Holding Company, and Subsidiary are companies regulated in the public interest by governmental agencies in their respective domiciles;

NOW, THEREFORE, in consideration of the mutual promises herein contained, the parties hereto agree as follows:

1. NETWORTH. PRE agrees that it shall financially support Subsidiary as provided herein during the term of this Agreement, and each year thereafter in which this Agreement is in effect, to enable Subsidiary to maintain surplus as regards policyholders equal to the greater of: (i) $500 million of surplus as regards policyholders as reported in its Annual Statement for the current calendar year in which this Agreement is in effect; or (ii) an amount equal to 205% of the Authorized Control Level for Risk Based Capital, as calculated for the current calendar year in which this Agreement is in effect, and as prescribed by the National Association of Insurance Commissioners (hereinafter referred to as the “Capital Margin”).

2. ANNUAL CALCULATION. Prior to December 31^st of each calendar year in which this Agreement is in effect, the Subsidiary shall calculate the estimated Capital Margin to be maintained in accordance with the rules and procedures contained herein (hereinafter referred to as the “Annual Calculation”).

In the event that the Annual Calculation is less than the required Capital Margin and after proper notification to the Superintendent of Insurance of the State of New York, PRE or one of its designated subsidiaries within the PartnerRe Group shall make a contribution (“Contribution”) to the Holding Company’s capital to the extent necessary to increase the Subsidiary’s surplus as regards policyholders to the Capital Margin as provided in Article 1 herein. PRE or such designated subsidiary will make such Contribution within ninety (90) days after the determination that the Annual Calculation is less than the required Capital Margin and proper notice has been provided to PRE.

3. CONSIDERATION. In consideration for any Contribution made by PRE or one of its designated subsidiaries (hereinafter to referred as the “Contributing Party”) under Article 2 herein, the Holding Company shall issue to such Contributing Party, at the time such Contribution is made, shares of its common stock which shall be equal in value to such Contribution made, subject to the appropriate approval from the Holding Company’s Board of Directors and Shareholders’ as applicable.

The shares of common stock issued by the Holding Company in consideration for any Contribution made, shall be valued at the fair market value of the Holding Company at the time such Contribution is made.

4. AGGREGATE LIMIT. The sum of all Contributions made by PRE or any of its designated subsidiaries under this Agreement shall not exceed a total of $500 million during the entire period in which this Agreement is in effect.

5. WAIVERS. PRE hereby waives any failure or delay on the part of either the Holding Company or the Subsidiary in asserting or enforcing any of its rights or in making any claims or demands hereunder.

2

6. TERMINATION; AMENDMENT. Notwithstanding any provision to the contrary pursuant to this Agreement, this Agreement shall continue in full force and effect until the earlier of: (i) mutual agreement is reached between the parties to terminate the Agreement; (ii) PRE or any of its designated subsidiaries contributes to the Holding Company the full Aggregate Limit as provided in Article 4 herein; or (iii) PRE terminates this Agreement immediately upon written notice to the Holding Company and the Subsidiary in the event of the sale or transfer of a majority of either the Holding Company’s or Subsidiary’s stock to an entity not affiliated with PRE.

This Agreement may be amended at any time by written amendment or agreement signed by all of the parties hereto.

In the event PRE decides to either amend or terminate this Agreement as provided herein, PRE shall provide written notice to the Holding Company’s and the Subsidiary’s General Counsel within ten (10) days, at the address set forth below:

7. NOTICES. Any notice, instruction, request, consent, demand, or other communication required or contemplated by this Agreement shall be communicated in writing, and addressed as follows:

If to PRE:	PartnerRe Ltd.
	Wellesley House South, 5th Floor
	90 Pitts Bay Road
	Pembroke HM 08
	Bermuda
If to Holding	Partner Reinsurance Company of the U.S.
Company/	One Greenwich Plaza
Subsidiary:	Greenwich, CT 06830

8. ARBITRATION. All unresolved differences of opinion between PRE and the Holding Company and Subsidiary relating to this Agreement, including its formation and validity, shall be submitted to arbitration consisting of one arbitrator chosen by PRE, one arbitrator chosen by the Holding Company and Subsidiary, and an umpire chosen by the first two arbitrators.

The party(ies) demanding arbitration shall communicate its (their) demand for arbitration to the other party by registered or certified mail, identifying the nature of the dispute and the name of its arbitrator, and the other party(ies) shall then be bound to name its (their) arbitrator within 30 days after receipt of the demand.

3

Failure or refusal of the other party(ies) to so name its (their) arbitrator shall empower the demanding party(ies) to name the second arbitrator. If the first two arbitrators are unable to agree upon an umpire within thirty days after the second arbitrator is named, each arbitrator shall name three candidates, two of whom shall be declined by the other arbitrator, and the choice shall be made between the two remaining candidates by drawing lots. The arbitrators and the umpire shall be impartial and shall be active or retired officers of property or casualty insurance or reinsurance companies.

The arbitrators and the umpire shall adopt their own rules and procedures and are relieved from judicial formalities. In addition to considering the rules of law and the customs and practices of the insurance and reinsurance business, the arbitrators shall make their award with a view to effecting the intent of this Agreement.

The decision of the majority of the arbitrators and the umpire shall be in writing and shall be final and binding upon the parties.

Each party(ies) shall bear the cost of its (their) own arbitrator and shall jointly and equally bear with the other party(ies) the expense of the umpire and other costs of the arbitration. In the event both arbitrators are chosen by one party, the fees of all arbitrators shall be equally divided between the parties.

The arbitration shall be held at the times and places agreed mutually upon by the arbitrators.

9. GOVERNING LAW. This Agreement shall be governed by the laws of the State of New York of the United States of America.

	PartnerRe Ltd.
Attest:
Name:	By:
Title:	Name:
	Title:

4

(Seal)

	PartnerRe U.S. Corp.
Attest:
Name:	By:
Title:	Name:
	Title:

(Seal)

	Partner Reinsurance Company of the U.S.
Attest:
Name:	By:
Title:	Name:
	Title:

(Seal)

5

EX-11.1

Exhibit 11.1

PartnerRe Ltd.

Computation of Net Income per Common and Common Equivalent Share

For the Six Months and Three Months Ended June 30, 2004 and 2003

(in thousands of U.S. dollars, except per-share amounts)

	For the Six Months Ended June 30, 2004					For the Six Months Ended June 30, 2003
	Income (Numerator)		Shares (Denominator)	Per-Share Amount		Income (Numerator)		Shares (Denominator)	Per-Share Amount
Net income	$	265,479				$	246,284
Less: preferred dividends		9,788					19,567
Net income available to common shareholders/Weighted average number of common shares outstanding/ Basic net income per share		255,691	53,737.5	$	4.76		226,717	52,810.3	$	4.29
Effect of dilutive securities:
Class B warrants			—					449.3
Stock options			568.4					456.8
Net income available to common shareholders/Weighted average number of common and common equivalent shares outstanding/Diluted net income per share	$	255,691	54,305.9	$	4.71	$	226,717	53,716.4	$	4.22

	For the Three Months Ended June 30, 2004					For the Three Months Ended June 30, 2003
	Income (Numerator)		Shares (Denominator)	Per-Share Amount		Income (Numerator)		Shares (Denominator)	Per-Share Amount
Net income	$	119,835				$	121,915
Less: preferred dividends		4,894					14,567
Net income available to common shareholders/Weighted average number of common shares outstanding/ Basic net income per share		114,941	53,791.5	$	2.14		107,348	53,221.8	$	2.02
Effect of dilutive securities:
Stock options			547.8					476.9
Net income available to common shareholders/Weighted average number of common and common equivalent shares outstanding/Diluted net income per share	$	114,941	54,339.3	$	2.12	$	107,348	53,698.7	$	2.00

EX-15

Exhibit 15

July 26, 2004

PartnerRe Ltd.

Chesney House

96 Pitts Bay Road

Pembroke HM 08

We have made a review, in accordance with standards of the Public Company Accounting Oversight Board (United States), of the unaudited interim financial information of PartnerRe Ltd. and subsidiaries for the periods ended June 30, 2004 and 2003, as indicated in our report dated July 26, 2004; because we did not perform an audit, we expressed no opinion on that information.

We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, is incorporated by reference in Registration Statements Nos. 333-11998 and 333-107242 on Form S-8, and in Registration Statements Nos. 333-101486 and 333-109326 on Form S-3.

We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.

Deloitte & Touche

Hamilton, Bermuda

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Patrick A. Thiele, certify that:

1. I have reviewed this quarterly report on Form 10-Q of PartnerRe Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) reserved

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 6, 2004

	/s/ Patrick A. Thiele
Name:	Patrick A. Thiele
Title:	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Albert A. Benchimol, certify that:

1. I have reviewed this quarterly report on Form 10-Q of PartnerRe Ltd.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-(15(e) and 15d-15(e)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) reserved

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 6, 2004

	/s/     Albert A. Benchimol
Name:	Albert A. Benchimol
Title:	Executive Vice President & Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION

The certification set forth below is being submitted in connection with Form 10-Q (the “Report”) for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

Patrick A. Thiele, the Chief Executive Officer and Albert A. Benchimol, the Chief Financial Officer, of PartnerRe Ltd., each certifies that, to the best of his knowledge:

the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of PartnerRe Ltd.

/s/     PATRICK A. THIELE

Patrick A. Thiele

Chief Executive Officer

/s/     ALBERT A. BENCHIMOL

Albert A. Benchimol

Executive Vice President & Chief Financial Officer

Date: August 6, 2004